SUPREME COURT NOTEBOOK

Severance payments are taxable

WASHINGTON (AP) -- The Supreme Court says employers must pay Social Security and Medicare taxes on severance packages given to workers who were laid off involuntarily.

The justices ruled 8-0 that retailer Quality Stores Inc. was not allowed to receive a tax refund for the payments made to 1,850 former employees let go after the company filed for bankruptcy. Justice Elena Kagan did not take part in the decision.

The decision reverses rulings by the 6th U.S. Circuit Court of Appeals and a federal district court, which found the payments were not considered taxable wages.

The high court's decision is a victory for the Obama administration. Justice Department lawyers argued that the government could face more than $1 billion in tax refund claims from other employers if the lower court decision was upheld.

Company can move forward with Lexmark suit

By Sam Hananel

Associated Press

WASHINGTON (AP) -- The Supreme Court ruled Tuesday that a competitor of printer maker Lexmark International Inc. can move forward with a lawsuit accusing the company of disparaging its business.

The unanimous decision upheld a federal appeals court ruling allowing Static Control Components, Inc., to go ahead with a false advertising complaint against Lexmark, a major producer of printers and printer cartridges.

Static Control makes parts that allow the repair and resale of Lexmark toner cartridges. The two companies have been fighting over Static Control's business, and Static Control says Lexmark falsely told customers their products infringed on Lexmark's intellectual property and that using remanufactured Lexmark toner cartridges was illegal.

A federal judge threw out that complaint, but the 6th U.S. Circuit Court of Appeals reinstated it.

Writing for the high court, Justice Antonin Scalia said Static Control can bring its lawsuit under the federal Lanham Act because the company alleges that it lost sales and had its business reputation damaged by Lexmark's conduct.

The two companies have been wrangling for more than a decade over Lexington, Ky.-based Lexmark's use of microchips in ink toner cartridges. In 2002, Lexmark began placing the chips inside the cartridges to thwart companies such as Sanford, N.C.-based Static Control from refilling and reselling the cartridges to Lexmark customers.

Lexmark later modified its chips to prevent the refurbished cartridges from working with some printers, but Static Control was able to get around the new controls with its own microchips and continued reselling used and refilled toner cartridges to Lexmark's customers.

Lexmark responded by telling its customers that use of Static's microchips would infringe Lexmark's patent. In 2004, Static Control sued Lexmark alleging false advertising and seeking a ruling that its modified chips did not violate Lexmark's patent.

Published: Thu, Mar 27, 2014