Troutman Pepper Locke partners examine ambiguities in the Department of Justice’s compliance guidance for its new data security program.

The U.S. Court of Appeals for the D.C. Circuit on May 16, 2025, clarified the conditions under which a state waives its Clean Water Act (CWA) Section 401 water quality certification (WQC) authority. In Village of Morrisville v. Federal Energy Regulatory Commission, the D.C. Circuit rejected arguments by a hydropower licensee that Vermont waived its certification authority under Section 401 by failing to issue a WQC within one year from receipt of a certification request. The applicant unilaterally withdrew and refiled its WQC application twice in an effort to avoid unfavorable certification conditions. Because the applicant withdrew its WQC application to further its own interests, the court held that the applicant could not claim that Vermont waived its Section 401 conditioning authority by not issuing a WQC within a year from the original application.

Section 401 of the CWA requires any applicant for a federal license or permit that may result in a discharge to navigable waters to obtain a WQC from the appropriate state or tribal authority in which the discharge will originate. Common examples of licenses or permits that may be subject to Section 401 certification include hydropower licenses and natural gas pipeline certificates issued by the Federal Energy Regulatory Commission (FERC) under the Federal Power Act and Natural Gas Act, respectively, permits for the discharge of dredged or fill material under CWA Section 404, permits issued by the U.S. Army Corps of Engineers under Rivers and Harbor Act Sections 9 and 10, and National Pollutant Discharge Elimination System permits under CWA Section 402 where EPA administers the permitting program.

Under the CWA, a state or tribe waives its Section 401 certification authority if it refuses or fails to act on a WQC application “within a reasonable period of time (which shall not exceed one year).” 33 U.S.C. § 1341(a)(1).

Until 2019, some states would attempt to extend this maximum one-year period by reaching an arrangement (formal or otherwise) with the applicant, who would withdraw and resubmit its certification request, thereby resetting the one-year clock and giving states more time to issue a WQC. The D.C. Circuit invalidated that approach in Hoopa Valley Tribe v. FERC, 913 F.3d 1099 (D.C. Cir. 2019). The court in Hoopa Valley Tribe held that a state waives its Section 401 certification authority when, “pursuant to an agreement between the State and applicant, an applicant repeatedly withdraws-and resubmits its request for water quality certification,” thereby extending the one year limit provided for in the CWA. The court found that a “coordinated withdrawal-and-resubmission scheme” between the state and applicant would “readily consume” the one-year limit found in the CWA’s plain language.

In Village of Morrisville, the D.C. Circuit provided additional clarity on state waiver of Section 401 certification authority. That case involved the Village of Morrisville’s efforts to relicense the Morrisville Hydroelectric Project in Vermont. Morrisville filed a relicensing application with FERC in April 2013. The following year, it filed a WQC request with the Vermont Agency of Natural Resources (Vermont ANR). Morrisville unilaterally withdrew and resubmitted its WQC request on two occasions in order to develop additional information and negotiate more favorable WQC conditions with Vermont ANR.

Vermont ANR eventually issued a WQC. Morrisville sought to nullify the unfavorable conditions in the WQC by arguing before FERC that Vermont ANR waived its Section 401 authority when it allowed Morrisville to withdraw and resubmit its WQC request twice. FERC rejected those arguments on grounds that Morrisville had withdrawn and resubmitted its application “unilaterally and in its own interest,” rather than “at the behest of the state.”

The D.C. Circuit affirmed FERC’s decision, agreeing that “the record contains no evidence of … an agreement” similar to the coordinated withdrawal-and-resubmission arrangement invalidated in Hoopa Valley Tribe. The court affirmed that the record contained no evidence demonstrating that the state was “engaged in a scheme to ‘circumvent’ the [one-year] statutory deadline.” Instead, the court agreed with FERC that Morrisville “acted unilaterally and out of its own self-interest to obtain more favorable conditions, rather than in coordination with the State.” Accordingly, the court found that Vermont had not waived its certification authority.

The Village of Morrisville makes clear that a WQC applicant cannot engage in unilateral “gamesmanship” by attempting to buy itself more time to negotiate favorable conditions with the state via withdrawal-and-resubmission, and then claim waiver if those efforts are unsuccessful.

The D.C. Circuit’s opinion in Village of Morrisville, Vermont v. Federal Energy Regulatory Commission can be found here.

The essence of a Chapter 7 business bankruptcy is the orderly liquidation of the business debtor’s assets by a bankruptcy trustee and the distribution of funds to creditors.

This article will discuss the key differences between a Chapter 11 case and a Chapter 7 case that creditors should understand. To access this article and read other insights from our Creditor’s Rights Toolkit, please click here.

This article was republished in Pratt’s Energy Law Report, Vol. 25-10, November-December 2025.

I.  General Background

On December 17, 2024, the Railroad Commission of Texas (RRC) adopted new comprehensive regulations governing the handling, storage, treatment, and disposal of oil and gas waste. The rules were published January 3, 2025, in the Texas Register and become effective on July 1, 2025. They codify formerly informal guidance and ad hoc permitting practices and also update existing oil and gas waste regulations to align with technological advancements.

Oil and gas waste is generally exempt from federal regulation under the Resource Conservation and Recovery Act (RCRA), though states retain the authority to regulate these materials. In Texas, the RRC has that responsibility. Despite significant changes in industry practices, regulations surrounding oil and gas wastes have not been meaningfully updated since the 1980s.

The new rules update the requirements applicable to waste generated from oil and gas activities, such as drilling, production, completions, treatment, and other field operations, and associated disposal activities, such as recycling, onsite waste treatment, and commercial disposal operations. Additionally, they extend regulatory oversight to waste generated from other operations under the RRC’s jurisdiction that are chemically and physically similar to oil and gas wastes, such as wastes from geothermal energy production, carbon sequestration, and brine mining wells. Though the rules do not affect the RRC’s regulations for injection and disposal wells, they may impact certain waste management and recycling activities conducted at or in conjunction with injection and disposal wells.

II.  Oil and Gas Waste Pits

Significantly, the rules update the requirements for reserve pits, mud circulating pits, completion/workover pits, makeup water pits, and produced water recycling pits, among others — the earthen pits dug next to drilling rigs wherein byproducts of oilfield operations are stored, managed, treated, and frequently permanently buried.

The new rules impose, for the first time, a registration requirement on pits commonly used in the oil and gas exploration and development industry. New qualifying pits must register with the RRC prior to operating beginning on July 1, 2025. An existing qualifying pit that is compliant with pit construction requirements in effect prior to July 1, 2025, has a one-year “grace period,” but must register or be closed by July 1, 2026. Produced water recycling pits will be subject to financial security requirements, triggering the need for performance bonds, letters of credit, or cash deposits to secure pit closure obligations. Existing produced water recycling pits that file required financial security, must register by January 1, 2026. Pits that do not qualify for registration, such as basic sediment pits, and flare pits, also must be permitted or closed by July 1, 2026.

In response to comments to 2023’s draft rules, the RRC eliminated universal pit liner requirements, groundwater monitoring, and closure requirements for authorized pits in the final rules. Pit liners are now only required if (i) groundwater is present within 50 feet or contains fluid with more than 3000mg of total dissolved solids, or (ii) the pit is used to treat and recycle produced water. Siting restrictions are generally limited to a prohibition on construction in a 100-year flood plain, although additional location restrictions apply to produced water recycling pits, including restrictions regarding proximity to water wells or public areas. Produced water recycling pits, upon closure, will be subject to soil sampling and potential release reporting obligations.

A particularly contentious issue during rulemaking involved whether notice to or approval from landowners and/or regulators should be required. Historically, reserve pits have neither been subject to permitting requirements, nor has their use on private property required landowner permission or notification. In its final rules, the RRC declined to impose landowner notice or consent requirements on private property, stating that it lacked the statutory authority to impose such requirements, and that landowner notification is ultimately a matter of private agreement between the surface owner and the operator. Thus, unlike facilities subject to formal permitting, such as commercial disposal or recycling facilities, landowner notice, and publication are not imposed on reserve pit operators.

III.  Commercial Disposal Facilities

The new waste rules include revisions and additions to the standards applicable to commercial waste management facilities, including oil and gas waste landfills. Commercial facilities must now comply with updated siting, design, and operational requirements. Specifically, the rules impose an expanded buffer requirement and prohibit operations in floodplains or near water wells unless they can demonstrate adequate protective measures. Design standards include requirements for engineered liners with low hydraulic conductivity, leachate collection systems, and stormwater controls. Additionally, commercial disposal facilities are now required to provide increased financial security, implement groundwater monitoring programs, maintain detailed records, and submit periodic reports to the RRC. Existing facilities must assess their current operations and make necessary adjustments to comply with the revised requirements related to financial assurance, monitoring and reporting, and operational (e.g., spill prevention) and closure plans. Absent expansion or significant operational changes, existing facilities are not required to demonstrate compliance with the revised siting and design standards.

IV.  Recycling Permitting

The rules expand and clarify the regulatory framework for recycling oil and gas waste, particularly produced water and drill cuttings. The rules categorize recycling operations into five distinct divisions based on the type of waste treated, the location of the recycling activities, and how the treated product will be used. Each division imposes distinct permitting requirements, operational duration maximums, technical standards, product quality standards, monitoring and reporting obligations, and potential financial assurance and public participation requirements.

The rules promote produced water recycling and beneficial reuse of drill cuttings. Operators may recycle produced water on their own lease (a Division 1 activity) without obtaining a specific permit, provided the recycled fluids are reused in permitted oil and gas operations. The new rules provide specific criteria for the reuse of treated drill cuttings, with operational requirements depending on the location of recycling and use (Divisions 2-5).

This is a notable shift from prior regulations, which generally required permits for recycling activities regardless of location and lacked clear standards around permissible reuse. The division-specific approach provides a more predictable regulatory framework for operators and streamlines the process for reuse.

V.  Transportation

The new rules will have significant operational and compliance implications for Texas oil and gas operators. As previously discussed, they introduce a more complex and formalized regulatory structure. In addition to the regulations discussed above, the rules also introduce comprehensive transportation requirements, including waste characterization and documentation requirements, detailed manifesting, special waste authorizations, and enhanced recordkeeping requirements for waste haulers. This program replaces the prior minimal tracking standards.

VI.  Conclusion

Because operators will face increased documentation, tracking, and potential public notice obligations, the industry will need to reassess internal systems to ensure alignment with the new standards. The new public participation provisions require all permit applicants to provide notice to the surface owners of the tracts of land that the facility is located on, adjacent to, or within 500 feet of; commercial waste management facilities — including landfills and recycling operations — must also publish notice in a local newspaper. In addition to the enhanced notice requirements, the rules establish new opportunities for permit protests and hearings, thereby introducing new procedural risks and the potential for delay.

While the additional standards may increase the cost and complexity of permitting for new or expanded commercial facilities, they also reduce regulatory uncertainty and may streamline the review process by clearly defining the RRC’s expectations upfront. These enhanced obligations are likely to have the greatest operational impact on facilities handling higher volumes, operating long-term, or treating waste for off-site reuse — particularly where proximity to groundwater or public interfaces increases regulatory scrutiny.

The real impact of the new waste rules will likely depend on RRC implementation and enforcement. The effective date — July 1 — is rapidly approaching, with no formal phase-in period. The anticipated release dates for draft forms and draft guidance documents, originally anticipated by the end of April, have been postponed. Now, a June timeframe exists for publication of forms, and July 1 is targeted for guidance. The RRC hosted weekly webinar series covering the updated rules that began on April 2. The final two webinar sessions discussed permitting under the updated rules and were scheduled for May 7. Further training sessions on the finalized guidance are to be provided in the following months. In the interim, companies should treat the impending waste rules as both a compliance priority and an opportunity to evaluate their waste management strategies.

On May 8, the Treasury Department announced a plan to introduce a new Known Investor portal as a key component of the “fast-track” process for investments by U.S. allies and partners under review by the Committee on Foreign Investment in the United States (CFIUS). This plan was previewed in the America First Investment Policy Memorandum, discussed in more detail here.

At the American Conference Institute’s (ACI) recent CFIUS conference, Treasury Deputy Secretary Michael Faulkender indicated that the portal would act as a “knowledge base” and would limit the amount of information that needs to be resubmitted with each transaction.

However, a key condition of eligibility for the fast-track process appears to be a commitment by the investor to refrain from partnering with U.S. adversaries. Deputy Secretary Faulkender emphasized the focus on investors’ “distance and independence from foreign adversaries — and being able to verify this,” suggesting that there will be a vetting process regarding investors’ activities in places like China.

Troutman Pepper Locke will continue to monitor developments with the Known Investor portal, which we expect will become a useful tool for repeat CFIUS filers, but may also present new risks with respect to partnerships with companies in China and other “adversary” countries.

Ashley Taylor, Clayton Friedman, Gene Fishel, and Jay Myers of Troutman Pepper Locke LLP discuss actions by state attorneys general under existing and AI-specific laws to address misuse and legal violations of AI.

As generative artificial intelligence (AI) technologies rapidly proliferate and permeate society, state attorneys general (AGs) have warned of potential AI misuse and legal violations. And while only California, Colorado, and Utah have enacted laws governing AI, the dearth of AI-specific laws has not prevented states from advising and taking AI-related action under existing law. Indeed, state AGs have indicated that they will utilize privacy, consumer protection, and anti-discrimination laws to regulate AI.

AGs are focused on how AI systems utilize personal identifying information, potentially facilitate fraud using deepfakes, operate relative to company representations, and could perpetrate bias and discrimination in decision-making processes. In January 2024, a bipartisan group of AGs sent a letter to the Federal Communications Commission (FCC) warning of potential fraud where AI is used to imitate human voices in telemarketing campaigns. See Implications of Artificial Intelligence Technologies on Protecting Consumers from Unwanted Robocalls and Robotexts, Federal Communications Commission, CG Docket No. 23-362 (January 17, 2024).

Read the full article at Reuters and Westlaw Today.

This article was republished in IP Litigator on July 1, 2025.

Patent litigation at the International Trade Commission (ITC) is characterized by its rapid pace, with proceedings for investigations under 19 U.S.C. § 1337 typically concluding within 15 to 18 months after the filing of the initial complaint. While this expedited timeline facilitates swift resolution of disputes, it poses significant practical challenges requiring efficient resource allocation and strategic planning. These challenges are intensified by the additional requirements and considerations unique to the ITC. Beyond proving infringement, complainants must also demonstrate a domestic industry injured by importation and that the public interest would not be adversely affected by the ITC’s remedy. Litigating before the ITC can be effective for asserting patents, and the ITC’s unique requirements can create unique defenses for responding parties. Understanding these intricacies, particularly in view of recent ITC precedent, is the first step.

Navigating Common Challenges

1. Strategic Forum Selection

The first challenge of pursuing Section 337 litigation arises before even filing the complaint. Not everyone can file or be sued in an ITC case.

Under Section 337, the ITC exclusively adjudicates issues related to international trade. To bring a cause of action, a complainant must show an existing or threatened harm to a U.S. industry. For patent-related matters, this involves proving the existence of a domestic industry harmed by the infringer’s activities, in addition to proving infringement. Recent ITC decisions emphasize the importance of demonstrating substantial investment in the domestic industry, which can include investments in plant and equipment, labor, or capital. The Court of Appeals for the Federal Circuit recently clarified what qualifies under these categories in Lashify, Inc. v. International Trade Commission, 130 F.4th 948, 955 (Fed. Cir. 2025). The court explained that the statute does not exclude sales and marketing expenditures, potentially permitting a broader category of complainants that can meet the domestic industry requirements. The Federal Circuit emphasized that Lashify is not a change in the law, but rather a return to the understanding of Section 337 from cases like Schaper Manufacturing Co. v. International Trade Commission, 717 F.2d 1368 (Fed. Cir. 1983).[1] It remains to be seen how this case will impact upcoming ITC decisions.

Regardless of the status of the law, experience shows that domestic industry is nearly always a contested issue. Domestic industry stipulations and summary determination grants on domestic industry are rare. ITC administrative law judges often expect complainants to have their evidence gathered and produced early in discovery. Complainants should have a comprehensive domestic industry theory prepared with supporting evidence at the time of filing. Respondents should pursue that domestic industry discovery early and diligently to give adequate time to prepare one of many defenses.

2. Managing Parallel Litigation

Parallel litigation also may present a significant challenge over the course of pursuing claims at the ITC. Under 28 U.S.C. § 1659, a respondent may request a stay as a matter of right in any district court proceeding. That statute, however, limits the stay to “any claim that involves the same issues involved in the proceeding before the [ITC].” Some district court judges do not extend this stay to cases involving different but related patents or different products.[2] District courts have found a stay is inappropriate even if the patents are from the same family as patents asserted in the ITC and some of the products are the same.[3] Thus, complainants may set up litigation to intentionally proceed in multiple forums simultaneously, despite the provisions of 28 U.S.C. § 1659.

It is important for parties to carefully abide by the requirements of protective orders in parallel cases. ITC protective orders generally proscribe use of confidential business information for any purpose other than the ITC. That precludes use of such information for the preparation of a district court complaint and, without other agreement, likewise precludes its use in discovery in the district court litigation between the same parties. Parties often enter into cross-use agreements as significant cost-saving tools preventing the need to exchange, host, and review the same set of documents and discovery responses multiple times. Both parties should carefully consider the scope of these agreements. There are issues that are unique to one forum (e.g., there is no damages-related discovery in the ITC). Thus, parties may find it efficient and advantageous to limit the scope of what may be used in both forums.

3. The Impact of the PTAB’s Fintiv Guidance

Relatedly, the ITC will generally not stay an investigation pending resolution of inter partes review proceedings at the Patent Trial and Appeal Board (PTAB). This consistent practice should be considered along with the PTAB’s recent guidance on discretionary denials of inter partes review. Specifically, the 2025 Memorandum from Chief Administrative Law Judge Scott Boalick to the PTAB stated the PTAB is “more likely to deny institution where the ITC’s projected final determination date is earlier than the Board’s deadline to issue a final written decision.” In practice, this means that the ITC will likely be the first forum to reach the issue of invalidity in multiforum litigation. Notably, the ITC’s determination on patent validity is not binding on any other forum unless reviewed and adopted by the Federal Circuit.[4] As Boalick also stated, “although an ITC final invalidity determination does not have preclusive effect, it is difficult as a practical matter to assert patent claims that the ITC has determined are invalid.” Accordingly, despite its lack of preclusive effect, the ITC may be the most important forum for invalidity determinations.

4. Adapting to Accelerated Timelines

The expedited timeline is the most significant challenge of ITC litigation. Perhaps the most frequently missed deadlines are those that occur prior to institution. For example, proposed respondents have just eight days from the date that the notice of complaint is published in the Federal Register to submit their comments on public interest.[5] Once the investigation is instituted, it may take the parties some time to get used to the expedited timeline. It necessitates careful management and oversight throughout the case. Unlike district court litigation, which can extend over several years and where extensions are freely granted, ITC litigation must conclude within a much shorter timeframe.[6]

Outside counsel has significantly less time to prepare work-product for review by in-house personnel. For example, the ITC permits just 10 days to respond to discovery requests, regardless of the number.[7] This demands that outside counsel promptly update in-house personnel and that in-house personnel be ready to provide information and revisions much more quickly than required in district court litigation. Similarly, parties are given just 10 days to respond to motions filed by the opposing party at the ITC.[8] Some ITC administrative law judges establish even tighter timelines for discovery disputes. ALJ Moore’s ground rules, for example, require discovery disputes to be raised in a two-page letter that the other party must respond to within one day.[9] This timeline is further shortened by the ITC’s strict enforcement of confidentiality protections. A party may file a motion or dispute letter or a motion with confidentiality designations preventing in-house personnel from seeing the submission until either the opposing party grants permission or a redacted version is prepared. In many cases, this means that in-house personnel do not have a chance to review responses before submission, particularly for discovery letters.

5. The ITC Is Not Limited to Patent Litigation

Even under 19 U.S.C. § 1337, litigation before the ITC is not limited to patent infringement. Patent infringement is the most common basis for ITC litigation. One possible reason for this is that patent infringement is defined as an injury to domestic industry, and thus there is no separate requirement that the complainant prove harm.[10] If injury to a domestic industry can be shown, the ITC can rule on matters concerning other types of intellectual property issues, including trade secrets, gray market goods, trademark infringement, and copyright infringement. Domestic companies experiencing issues in those areas should consider litigation before the ITC.

Taking gray market goods as an example, ITC litigation can be an attractive option. Gray market goods are authentic, branded products that are imported and sold outside of the brand owner’s control. The speed of the ITC, discussed above, is a primary advantage. The ITC can block imports of gray market goods from entry into the U.S. within 12 to 18 months of filing. The time between filing and remedy is much faster than that in the district courts. It is also easier to institute an ITC investigation than a district court case because the ITC does not require judicial service on foreign parties through processes like the Hague Convention on Service Abroad. Another major advantage is that the ITC can issue general exclusion orders in the appropriate circumstances. These orders are injunctive in nature, preventing the importation of relevant products, regardless of who imports them. Such an order applies to the products themselves, not to the importer, meaning the ITC’s remedy cannot be avoided by the simple expedient of the importer changing their name.

Indeed, ITC litigation has been used successfully to exclude gray market goods where the importation of these goods damages the goodwill associated with domestic products.[11] There has been a resurgence of interest in using section 337 in response to gray market goods in recent years, with exclusionary remedies issued against products ranging from replacement car parts to medical treatments.[12]

Nonetheless, the ITC’s ability to address gray market goods remains significantly under-utilized with only a handful of ITC investigations dealing with this issue. Companies looking to prevent importation of such goods as soon as possible should be aware of the ITC’s advantages and consider ITC litigation as part of an overall strategy to protect their domestic reputations.

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[1] Lashify, 130 F.4th at 958.

[2] See, e.g., AGIS Software Dev. LLC v. Samsung Elecs. Co., No. 22-cv-00263-JRG-RSP, 2023 WL 5351963, at *2 (E.D. Tex. Aug. 21, 2023) (denying stay under § 1659 for the same patents because accused products were different); Bell Semiconductor, Inc. v. NXP USA, Inc., No. 22-cv-0594-BAS-KSC, 2023 U.S. Dist. LEXIS 6292, at *16-17 (S.D. Cal. Jan. 11, 2023) (denying stay as to non-ITC patents).

[3] See, e.g., SiOnyx, LLC v. Samsung Elects. Co., Ltd, No. 2:24-CV-00408-JRG, 2024 WL 4007808 (E.D. Tex. Aug. 30, 2024).

[4] See Texas Instruments Inc. v. Cypress Semiconductor Corp., 90 F.3d 1558, 1568-69 (Fed. Cir. 1996) (quoting S.Rep. No. 1298, 93d Cong., 2d Sess. 196 (1974), reprinted in 1974 U.S.C.C.A.N. 7186, 7329).

[5] 19 C.F.R. 210.8(c)(1).

[6] 19 U.S.C. § 1337(b)(1).

[7] See, e.g., 19 C.F.R. § 210.27(b)(1) (interrogatories).

[8] 19 C.F.R. 210.15(c).

[9] ALJ Moore Ground Rules at 5.4.1.1.

[10] Compare 19 U.S.C. § 1337(1)(A) with id. at §1337(1)(B).

[11] See, e.g., Certain Energy Drink Prods., ITC Inv. No. 337-TA-678 (different formulation of product injuring goodwill); Certain Cigarettes and Packaging Thereof, ITC Inv. No. 337-TA-643 (lack of English warning labels injuring goodwill); Certain Industrial Automation Systems and Components Thereof, ITC Inv. No. 337-TA-1074 (lack of warranty availability injuring goodwill).

[12] See Certain Replacement Automotive Service and Collision Parts and Components Thereof, ITC Inv. No. 337-TA-1160; In Vitro Fertilization Products, and Components Thereof, and Products Containing the Same, ITC Inv. No. 337-TA-1196.

Biotechs have faced several challenging years with slumping valuations and a competitive funding environment. However, the latest slew of retirements and layoffs at the FDA could present their greatest challenge yet.

While the new FDA commissioner has promised speedier approvals and shorter drug development timelines, concerns persist that the agency’s reduced headcount will impede approval pathways. Companies are already reporting longer wait times for clinical trial design review and scheduling meetings with FDA personnel. These delays, by necessity, extend the timeline for drug approval, requiring biotech companies to fund operations for a longer period pending commercial product launch.

With biotech companies already pushing their cash runways to the limit, volatility in the public markets, and private funding at a premium, companies are turning to collaborative deal structures as an alternative source of financing and to reduce their burn rate.

Licensing and Collaborations as Alternative Sources of Financing

Out-licensing of noncore assets can provide an alternative financing option to biotech companies encountering fundraising challenges in the current market. Typically, these deals include an upfront cash payment with additional amounts payable upon achieving certain developmental and/or commercial milestones, as well as a royalty on net sales of the resulting products. This cash can then be used to fund development of the company’s core technology(ies).

For early-stage assets, or when the innovator biotech has specific expertise beneficial to the ongoing development of a technology, a development collaboration may be more appropriate. Unlike an out-license, where the innovator company generally cedes control of the development process to the licensee, biotechs entering into a collaboration generally partner on the development of a product or products. Typically, the collaboration agreement allocates responsibility for certain areas to each party and includes a requirement that the parties form a committee comprised of representatives from each to oversee the entirety of the development process and to assist in decision-making and dispute resolution.

The ideal collaboration partner is one who has specific strengths (like research and development, clinical study design, manufacturing, sales force, or market access) that the innovator company does not and that are needed to efficiently advance the project. By partnering, biotechs can tap into these additional resources with no cash outlay, thereby reducing the financial burden and speeding the path to product approval, often getting a cash infusion. In addition, biotechs without an established sales force or physician coverage for their product can leverage their collaboration partner’s network and reduce cash burn related to hiring sales staff at the commercialization stage. In return, the collaboration partner obtains rights to market and sell the resulting product for certain therapeutic indications and/or in certain markets/geography, with the innovator retaining the balance of these rights. Partnerships and collaborations can often lead to the acquisition of the innovator by the collaboration partner as the partner better understands the product and potential upside.

High-demand drug markets are already seeing these types of deals in action. For example, the obesity drug space is anticipated to generate more than $100 billion in revenue by 2030. In a recent move, Zealand Pharma entered into a collaboration with pharmaceutical giant Roche to commercialize an amylin analog that can be used in obesity treatment. This $5.3 billion dollar deal (comprised of upfront and milestone payments) allowed Zealand to avoid having to sell itself, thereby preserving future upside from commercialization of the product to its shareholders. In addition, the transaction allows Zealand to benefit from Roche’s global infrastructure and commercialization expertise. The transaction was on the tails of several other biotech licensing and collaborations in the obesity drug space in 2025.

Hart-Scott-Rodino Filings Could Cause Deal Slowdowns

One potentially countervailing factor is the impact of Hart-Scott-Rodino (HSR) filing obligations.

The HSR Act mandates that parties exceeding certain size thresholds undertaking acquisitions over a certain size notify the government (U.S. Department of Justice (DOJ) and Federal Trade Commission (FTC)) in advance of closing their transaction to allow the government time to review the proposed acquisition transactions for potential anticompetitive effects. HSR can also apply to certain patent licensing arrangements, such as those involving exclusive licenses transferring “all commercially significant rights” with respect to certain medical and botanical products, pharmaceutical preparations, in-vitro diagnostic substances, and biological products. Commercially significant rights include grants of exclusive geographic territories or fields of use.

For these types of license transactions in 2025, HSR filing obligations apply if one of the parties is engaged in U.S. commerce, the parties have annual sales or assets of at least $252.9 million and $25.3 million, respectively, and the transaction is valued at more than $126.4 million. For purposes of calculating the transaction value, the parties are required to estimate the total value of all payments over the life of the arrangement, not just the upfront payment. If the value of the transaction exceeds $505.8 million, it is reportable regardless of the size of the parties.

If the thresholds are met, both parties must file premerger notification forms and observe a 30-day waiting period before completing the transaction. The 30-day period may be extended if the government issues a request for additional information. While many expected the current administration to sideline HSR reforms, new rules went into effect on February 10, which are estimated to extend contractual filing timelines from less than 10 days to at least 30, due to more burdensome reporting requirements. In addition, new leadership at the FTC and DOJ have indicated their intent to focus on deals in the pharmaceutical and health care industries as part of the administration’s broader efforts to lower health care costs and promote competition. For example, the FTC has challenged the acquisition of a manufacturer of coatings for medical devices and continued its litigation against pharmacy benefits managers, while the DOJ has continued its challenge to the combination of two large home health providers. Also, in an April executive order, FTC, DOJ, and Health and Human Services were ordered to conduct joint public listening sessions and issue a report and recommendations to reduce anticompetitive behavior of pharmaceutical manufacturers.

Therefore, licensing arrangements should be assessed for HSR applicability and filing obligations, and strategies for managing competition risk should be built into any deal timeline on the front end.

Conclusion

As biotech companies navigate FDA uncertainties and economic pressures, licensing and collaboration transactions can provide the necessary funding and pathways to advance innovative products. However, the current market and political climate will nonetheless impact deal terms and transaction considerations.

In the recent Supreme Court case, Navellier & Associates, Inc. v. Securities and Exchange Commission (SEC), the petitioners sought a writ of certiorari challenging the decisions of the lower courts regarding the scope of disgorgement and the materiality standard applied in securities fraud cases. On May 5, the SEC filed its brief in opposition to the petition.

Background

The SEC initiated legal action against Navellier & Associates, Inc., a registered investment advisor, alleging violations of § 206 of the Investment Advisers Act of 1940. This section mandates fiduciary standards for investment advisers and prohibits fraudulent activities. The crux of the SEC’s argument was that Navellier & Associates had misrepresented the performance of certain investment strategies. Specifically, in 2009, Navellier & Associates licensed certain investment strategies from another investment adviser and recommended those strategies to clients, touting the data ostensibly showing that the strategies had helped other investors avoid the previous two bear markets. According to the SEC, Navellier & Associates understood that the data did not reflect actual performance, but instead showed, with the benefit of “hindsight,” how “hypothetical” investors would have performed if they had used the strategies.

The district court ruled in favor of the SEC, ordering Navellier & Associates to disgorge profits obtained through these misrepresentations in the amount of $22,734,487 plus pre-judgment interest. The court of appeals affirmed this decision, leading to the petitioners’ appeal to the U.S. Supreme Court.

Questions Presented in Cert Petition

Whether, in seeking an order requiring registered investment advisers to disgorge profits obtained through fraud, the SEC must show that the adviser’s clients suffered pecuniary harm.

Whether the court of appeals applied the correct materiality standard in affirming the district court’s award of summary judgment to the SEC.

SEC’s Brief

The SEC argues that disgorgement is fundamentally an equitable remedy, emphasizing that it is designed to strip wrongdoers of their ill-gotten gains, irrespective of direct financial harm to investors. The brief highlights that “the availability of disgorgement turns on whether the violator has made a profit, not on whether the victim has suffered a loss.” This principle is rooted in the notion that a wrongdoer should not “make a profit out of his own wrong.”

The petitioners, however, challenge this perspective, arguing that the SEC must demonstrate that the adviser’s clients suffered pecuniary harm to justify disgorgement. They assert that without evidence of direct financial loss to investors, the disgorgement award is unwarranted. The petitioners contend that their clients did not lose advisory fees and that there was no evidence of clients being “induced” to pay fees based on the alleged misrepresentations.

The SEC counters this by asserting that the investors did suffer direct financial harm. The brief highlights that the district court found petitioners’ clients had been “induced into paying advisory fees” due to the misrepresentations, resulting in a tangible financial impact. The SEC argues that these advisory fees, totaling $22,775,867, represent a direct harm to the investors, reinforcing the appropriateness of the disgorgement award.

Regarding materiality, the SEC maintains that the misrepresentations made by Navellier & Associates were significant enough to influence a reasonable investor’s decision-making process. The brief argues that the hypothetical nature of the investment performance data was a critical omission, and thus, material under established legal standards. The SEC emphasizes that materiality is determined by the importance a reasonable investor would place on the misrepresented information and asserts that the omission of the hypothetical nature of the data was a substantial factor that would affect investment decisions.

The petitioners, on the other hand, argue that the evidence created a genuine dispute as to the materiality of their misrepresentations, suggesting that the district court should not have granted summary judgment to the SEC. They contend that the court of appeals applied an incorrect materiality standard, which they believe should require proof that investors actually relied on the misrepresentation.

The SEC’s brief ultimately seeks to uphold the lower courts’ decisions, arguing that both the disgorgement and materiality standards were correctly applied in this case. We will continue to monitor this litigation and provide updates.

On May 12, 2025, the Head of the Criminal Division (the Criminal Division or Division) at the Department of Justice (DOJ), Matthew R. Galeotti, issued key memoranda to Criminal Division personnel on the Division’s new priorities and policies for prosecuting corporate and white-collar crimes and for the imposition of monitorships. On the same day, the Criminal Division also issued a revised Corporate Enforcement and Voluntary Self-Disclosure Policy and long-awaited updates to the Corporate Whistleblower Awards Pilot Program. As expected, the Criminal Division’s position is consistent with prior memoranda issued by U.S. Attorney General (AG) Pam Bondi and the new Administration, which we previously discussed here.

These announcements highlight the Division’s commitment to eliminating waste, fraud, and abuse, and its shifting priorities in white-collar enforcement, while providing more clarity and certainty for companies facing federal criminal investigations by the Division.

In short, companies that operate in areas with transnational criminal organizations (TCOs) should carefully review the Criminal Division’s new white-collar priorities and take proactive steps to maintain robust anti-money laundering and OFAC compliance programs. Further, given the Division’s focus on rooting out fraud on government programs, healthcare companies and government contractors should assess internal practices and ensure effective compliance programs and internal reporting mechanisms are functioning as intended. In addition, companies would benefit from close examination of their hiring and employment policies and practices to ensure compliance with federal immigration laws and evolving tariff policies. And with the expansion of the DOJ whistleblower program, now is the time for companies to ensure they maintain effective internal reporting mechanisms and consider the benefits of voluntary self-disclosure of internal issues.

Criminal Division White-Collar Enforcement Plan

Most notable of the new or revised policies was the memorandum setting out the Criminal Division’s White-Collar Enforcement Plan for the new Administration. Overall, the Division’s policies seek to “strike an appropriate balance between the need to effectively identify, investigate, and prosecute corporate and individuals’ criminal wrongdoing while minimizing unnecessary burdens on American enterprise,” noting the need to “avoid overreach that punishes risk-taking and hinders innovation.” Galeotti directs prosecutors to prioritize schemes involving senior-level personnel or other culpable actors, demonstrable loss, and efforts to obstruct justice.

The memorandum outlines the Division’s 10 key areas of focus for prosecuting white-collar crimes, aimed at “corporate crime in areas that will have the greatest impact in protecting American citizens and companies and promoting U.S. interests”:

1. Rooting out exploitation of government programs, such as health care and procurement fraud;

2. Trade and customs fraud like tariff evasion to “ensure that American businesses are competing on a level playing field in global trade and commerce”;

3. Fraud perpetrated through variable interest entities (VIEs), including, offering fraud, “ramp and dumps,” elder fraud, securities fraud, and other market manipulation schemes;

4. Fraud that victimizes U.S. investors, such as Ponzi schemes, investment fraud, elder fraud, servicemember fraud, and fraud that threatens the health and safety of consumers;

5. Threats to national security, such as financial institutions and insiders that commit sanctions violations or allow the laundering of criminal funds to facilitate foreign criminal organizations, the flow of drugs, and terrorist organizations;

6. Material support by corporations to foreign terrorist organizations, including recently designated Cartels and TCOs;

7. Complex money laundering, including Chinese Money Laundering Organizations, and other organizations involved in laundering funds used in the manufacturing of illegal drugs;

8. Violations of the Federal Food, Drug, and Cosmetic Act (FDCA), including the unlawful manufacture and distribution of chemicals and equipment used to create counterfeit pills laced with fentanyl and unlawful distribution of opioids by medical professionals and companies;

9. Bribery and associated money laundering that impact U.S. national interests, undermine U.S. national security, harm the competitiveness of U.S. businesses, and enrich foreign corrupt officials; and

10. Crimes that exploit the monetary systems and undermine economic development and innovation, including offenses that victimize digital asset investors or use digital assets in furtherance of criminal offenses.

Galeotti also announced changes to the Criminal Division’s Corporate Enforcement and Voluntary Self-Disclosure Policy, and notably, that “additional benefits are available to companies that self-disclose and cooperate, including potential shorter terms” of deferred prosecution agreements and/or monitorships. The announcement signals promoting “policies that acknowledge law-abiding companies and companies that are willing to learn from their mistakes and provide those companies with transparency from the Department.”

In addition to laying out the new Administration’s future focus, Galeotti directed the Division Sections to review the length of terms of all existing agreements with companies to determine if they should be terminated early. Factors leading to early termination include:

1. Duration of the post-resolution period,
2. Substantial reduction in the company’s risk profile,
3. Extent of remediation and maturity of the compliance corporate program, and
4. Whether the company self-reported the misconduct.

According to the announcement, the Criminal Division already has determined that certain companies had met the terms of their agreements in multiple matters and ended them early.

Finally, the memorandum directs the Division to maximize efficiency in all corporate investigations. Specifically, Galeotti directs prosecutors to “move expeditiously to investigate cases and make charging decisions” and take all reasonable steps to minimize the length and collateral impact of their investigations. Last, Galeotti announced a new monitor selection memorandum, discussed below, to limit and narrowly tailor the use of monitors.

Revised Corporate Enforcement and Voluntary Self-Disclosure Policy

As Galeotti’s Criminal Division’s White-Collar Enforcement Plan announced, the Criminal Division revised its Corporate Enforcement and Voluntary Self-Disclosure Policy. The revised policy now states that if the relevant factors are met, the Criminal Division will decline to prosecute a company for criminal conduct. This full declination to prosecute is a change from the previous Policy which only created a presumption the Division would not prosecute.

The factors for declination are: (1) the company voluntarily self-discloses misconduct to the Criminal Division; (2) the company fully cooperates with the Criminal Division’s investigation; (3) the company timely and appropriately remediates the misconduct; and (4) there are no aggravating circumstances related to the nature and seriousness of the offense.

In another new change, this Policy creates a new “middle ground” for companies that self-report, but cannot meet all four factors. In these so-called “Near Miss” cases, companies can still receive significant reductions in penalties if at least some of the four factors are met, including a non-prosecution agreement with a term under three years, no corporate monitor, and a 75% reduction of the low end of Sentencing Guidelines fine range.

Selection of Monitors in Criminal Division Matters

As part of Galeotti’s stated goal to maximize efficiency in all corporate investigations, Galeotti also released a memorandum incorporating updates to the 2008 “Selection and Use of Monitors in Deferred Prosecution Agreements and Non-Prosecution Agreements with Corporations,” issued by then-Acting Deputy Attorney General, Craig S. Morford. Specifically, the memorandum provides updates in two primary areas: (1) clarifying factors for determining when a monitor is appropriate and how those factors should be applied; and (2) ensuring that when a monitor is necessary, prosecutors appropriately tailor and scope the monitor’s review and mandate to address the risk of recurrence of the underlying criminal conduct and to reduce unnecessary costs.

The memorandum outlines factors to consider when “strik[ing] the appropriate balance between the need to ensure effective compliance programs with the need to eliminate unnecessary burden.” These factors include the nature and seriousness of the underlying misconduct, whether the company is regulated by other governmental bodies, any steps or remediation the company undertakes before resolution, and whether the corporation has adequately tested its compliance program and internal controls to demonstrate that they would likely detect and prevent similar misconduct in the future.

The memorandum also outlines the qualifications for monitors, noting the selection process should instill public confidence in the process and result in the selection of a highly qualified person or entity, free of any actual or potential conflict of interest or appearance of a potential or actual conflict of interest, and suitable for the assignment at hand.

DOJ Corporate Whistleblower Awards Pilot Program – Revised May 2025

Finally, the Criminal Division also updated its Corporate Whistleblower Awards Pilot Program to account for the administration’s new priorities. Introduced in August 2024, the Pilot Program intends to incentivize reporting corporate crime while also aiming to motivate corporations to create more robust compliance programs that encourage internal reporting of complaints.

Individual whistleblowers may be eligible for an award if they meet certain specific requirements of the program by providing original information, pertaining to specific subject matter areas, voluntarily, and truthfully and the information leads to criminal or civil forfeiture exceeding $1 million. The award and amount are at the discretion of the DOJ.

The original Pilot Program covered violations by financial institutions involving money-laundering and fraud, foreign and domestic bribery and corruption, and certain health care offenses. The revised program includes all prior subject matter areas but also includes new subject matter areas eligible for the program, in line with current priorities. The new subject areas include:

• Violations by corporations related to international cartels or transnational criminal organizations, including money laundering, narcotics, Controlled Substances Act, and other violations.

• Violations by corporations of federal immigration law.

• Violations by corporations involving material support of terrorism.

• Corporate sanctions offenses.

• Trade, tariff, and customs fraud by corporations.

• Corporate procurement fraud.

Key Considerations For Companies

• With the Criminal Division’s increased focus on ending the funding of foreign criminal organizations, cartels, TCOs, and terrorist organizations, it is imperative that financial institutions and digital asset service providers maintain robust anti-money laundering and OFAC compliance programs. In line with broader DOJ policies, the Criminal Division’s focus on eliminating cartels and TCOs means that companies that operate in areas with the strong presence of cartels or TCOs, particularly Mexico and Latin America, should examine and be cautious concerning their interactions and business practices in those countries, including ensuring they have strong compliance programs in place.

• Healthcare companies and government contractors should review practices and ensure effective compliance programs and internal reporting mechanisms, given the Division’s focus on rooting out fraud on government programs, including health care and procurement fraud.

• Companies should examine their hiring and employment policies and practices now to ensure compliance with all federal immigration laws.
  

• Organizations should closely monitor and comply with the new Administration’s complex and evolving tariff policies.

• Due to the expansion of the DOJ whistleblower program, now is the time for companies to ensure they maintain effective internal reporting mechanisms and address any reports of misconduct appropriately. In addition, companies that become aware of potential criminal activity should carefully consider the Criminal Division’s revised Corporate Enforcement and Voluntary Self-Disclosure Policy, and the potential for a more certain path to declination at least in certain instances.

• Any company under a non-prosecution agreement or other agreement with the Criminal Division should review compliance with the agreement closely to determine if they might benefit from Galeotti’s instruction for Sections to review the length of all existing agreements and the more limited and narrowly tailored approach to monitorships.

Troutman Pepper Locke LLP is monitoring the administration and DOJ’s evolving priorities and guidance closely. If you have questions on how these priorities impact your business or wish to begin evaluating existing compliance programs and policies and procedures, contact a member of our White Collar Litigation and Government Investigations team.