• IP BLAWG

    Cutting in the Trademark Line

    Beverly A. Berneman
    12/4/18

    Updating a trademark can be risky if someone else gets in ahead of you. Inn at St. Johns, LLC registered its name “5ive Restaurant” in logo form. So far so good. Eleven years later, St. Johns decided to update its trademark to 5ive Steakhouse in logo form. But St. Johns got derailed. Three years after St. Johns registered its first trademark, OTG Management Inc. registered 5Steak. (All 3 mark drawings appear to the left). The United States Patent and Trademark Office (“USPTO”) refused registration of St. Johns’ 5ive Steakhouse due to a likelihood of confusion with the OTG’s 5Steak registration. The Trademark Trial and Appeal Board affirmed the refusal.

    WHY YOU SHOULD KNOW THIS.  What, if anything, could St. Johns have done to avoid this outcome? First, St. Johns could have monitored the USPTO to see if any applications were being filed to register similar trademarks and then oppose the registrations. There are services that will monitor the records for you. Some can be costly; others not so much. Second, St. Johns could have set up an alert on a search engine to let it know if anyone is using a similar mark on a common law basis. This could have given St. Johns a heads up about 5Steak in time to do something about it. Third, before applying to register the updated trademark, St. Johns could have conducted due diligence, discovered 5Steak and perhaps, worked something out with them.

  • IP BLAWG

    Leaky Trade Secrets

    Beverly A. Berneman
    11/27/18

    A trade secret isn’t really a secret without proper measures of protection. Kevin Barker, a vice president of Yellowfin Yachts, left the company to start a competing company, Barker Boatworks. Yellowfin sued Kevin and his new company for trade dress infringement and for trade secret misappropriation. Yellowfin alleged that Kevin downloaded hundreds of files with customer specifications, and drawings. The Eleventh Circuit Court of Appeals affirmed summary judgment in Kevin and Barker’s favor. First, the court disposed of Yellowfin’s trade dress claims because it couldn’t prove any customer confusion between its designs and Barker’s designs. In addressing the trade secret misappropriation claim, the court affirmed the lower court’s ruling that the customer information wasn’t a trade secret because boat owners have to register with the State of Florida. Then the court focused on Yellowfin’s measures of secrecy and found them wanting. While the information was password protected and only certain employees had access, the Eleventh Circuit concluded that “Yellowfin effectively abandoned all oversight in the security” of the information at issue because Yellowfin: (1) encouraged Kevin to store the information on his personal devices and didn’t ask him to delete the information when he left the company; (2) didn’t ask Kevin to use security measures for the information on his personal devices; (3) allowed Kevin access to the information even though he refused to sign a confidentiality agreement; and (4) none of the information was marked ‘confidential’.

    WHY YOU SHOULD KNOW THIS. Trade secrets have two primary attributes. First, they are not generally known or easily ascertainable. Second, they are subject of reasonable measures to keep the information from becoming publically available. It’s the second attribute that tanked Yellowfin’s trade secret misappropriation claims. Yellowfin has learned that reasonable measures of secrecy require procedures that are tailored to the function of the business and require vigilant enforcement. The best way to avoid Yellowfin’s mistakes is to have a written trade secret protection program tailored to your business, prohibit the storage of trade secrets on personal devices, and make sure that departing personnel are cutoff from access to the trade secrets.

  • Property Tax Insights

    What’s next after the Property Tax Appeal Board?

    James W. Chipman
    11/27/18

    By James W. Chipman

    Unfavorable PTAB rulings often lead to an uphill battle in court, but working with an experienced property tax attorney can ensure you are well-positioned for a positive outcome.

    When taking a case to the Property Tax Appeal Board (PTAB), it’s only natural to hope for the best. However, not everyone receives the result they desire. Fortunately, any party dissatisfied with a PTAB decision can appeal it.*

    The PTAB is an independent state agency that hears appeals from boards of reviews on the valuation of assessed property. Appeals are heard “de novo,” which means a fresh start. A new administrative record is made at the PTAB that includes all of the evidence and testimony offered by the taxpayer and the board of review whose decision was appealed. The PTAB operates informally with relaxed rules of evidence and practice.**

    FOOL’S ERRAND?

    A word to the wise is in order for anyone who wishes to appeal their PTAB decision—courts apply strict standards of review to the decision of an administrative agency such as the PTAB.

    The court’s only job on appeal is to look at the administrative record and see if any errors were made by the PTAB. The appealing party has the burden of convincing the court the decision was wrong. No new or additional evidence can be submitted by anyone. There is a rebuttable presumption that the PTAB’s decision was correct, and unless an opposite result is clearly evident to the court, the decision will be upheld.

    Courts won’t reassess witness credibility, reweigh evidence or make an independent determination of facts. PTAB legal interpretations aren’t binding on a court, but they are given great weight and deference.

    Conventional wisdom may tell you that overturning a PTAB decision is an impossible feat, but the truth is, they are reversed more often than you think. Sometimes, the best offense is having the best defense.

    AN OUNCE OF PREVENTION

    Some taxpayers are frustrated after losing their PTAB appeal because they felt like they had the best evidence and made a good presentation at the hearing.

    PTAB decisions are based on the evidence and testimony that was made part of the record. Thus, creating a complete record that accurately reflects arguments is critical—everything filed and discussed at a hearing becomes a permanent part of the record that follows you through the court review process, including the reasons why you lost the appeal. Therefore, building a defensible record is the single most important thing you can do to prepare for a PTAB or future court appeal.

    There are no guarantees in the property tax appeal process. However, if you want to increase your chances of success, consult a property tax attorney who will work with you from start to finish. They’ll ensure that even if you get a negative result from the PTAB, you’ve got a good record upon which to pursue a court challenge.

    Learn more about what follows the Property Tax Appeal Board by contacting Donald T. Rubin at DTRubin@GCT.law or 312.696.2641.

    Sources:
    *35 ILCS 200/16-195
    **35 ILCS 200/16-180

  • Benefits Bulletin

    ERISA Fiduciary Duties: How to Help Your Clients

    Andrew S. Williams
    11/19/18

    Whether you are an accountant, lawyer, banker, business consultant or investment advisor, many of your business clients will have a 401(k) or other qualified retirement plan. You may not specialize in retirement plans, but consider the following as the kinds of things you might do to assist your clients and prospects with their retirement plans:

    • Introduce your client to responsible third party administrators (TPAs), investment advisors, record keepers and, if necessary, ERISA counsel
    • Make sure your client has an investment policy statement and uses it as a basis for investment decisions
    • Your client should meet at least twice a year with an investment advisor to discuss the plan’s investment funds – and document those discussions
    • Encourage your client to maintain fiduciary liability insurance (not to be confused with the plan’s required ERISA fidelity bond!)
    • See that your client has participants sign a release when they receive benefit distributions (see Howell v. Motorola, Inc.)
    • Suggest that your client include low cost index funds as 401(k) investment selections to provide a defense to claims of excessive costs or poor performance on other fund selections (see Divane v. Northwestern University)
    • Encourage your client to use independent ERISA counsel to assure confidentiality of sensitive information (the company’s lawyer has a confidential attorney-client relationship only with the company, not the plan or its fiduciaries)
  • IP BLAWG

    Risky Trade Show Business

    Beverly A. Berneman
    11/13/18

    Trade show materials may be a patent buster. Trade shows are a way to showcase products and innovations in an industry. Materials distributed at a trade show are usually promotional and are designed to get more sales and establish a beacon in the marketplace. But, trade materials that identify inventions could bust a patent. The US Patent Trial and Appeal Board (the “Board”), in an inter parties review (“IPR”) between Nobel Biocare Services AG v. Instradent USA, Inc., held that certain claims in Nobel’s patent for a dental implant screw were not patentable because they were anticipated. “Anticipated” is similar to “prior art” which means that the claimed invention isn’t new. Instradent, the IPR petitioner, argued that Nobel’s invention for a dental implant screw had already been disclosed in a product catalogue from Alpha-Bio Tech Ltd. (“ABT”). Instradent proved that ABT disclosed the product in a catalogue it distributed at a 2003 dental trade show in Cologne, Germany. ABT had a rather small booth at the show and not much of a presence. But people at the trade show had seen the catalogue. So it was considered publication of the prior art. On appeal, the Federal Circuit affirmed the Board’s determination that the ABT catalogue was prior art and so some of Nobel’s claims in the patent were not patentable.

    WHY YOU SHOULD KNOW THIS. Patent protection is limited to inventions that are new, useful and non-obvious. Patents give the patent owner a monopoly on practicing the invention for 20 years. So, the U.S. Patent Office has to determine if claims are really new in order to issue a patent. The Instradent case shows that an invention is not new if there’s publication of prior art; even small publications with a limited distribution at a trade show outside the U.S. are published prior art so inventors should always conduct a prior art search before going through the time and expense of filing a patent application. And, for that matter, inventors should always be careful about disclosing their inventions at a trade show before they file the application.

  • IP BLAWG

    Welcome to My Star Battles Party

    Beverly A. Berneman
    11/6/18

    Captain America, Thor and Iron Man can’t save your party guests without a license. Characters for Hire, LLC (“CFH”) advertises premium entertainment for parties and private events by booking actors dressed like popular characters. CFH offers hero characters and famous characters from popular scifi/fantasy movies. Understanding that Disney, Marvel and LucasFilm own the rights to characters that fall into those categories, CFH used generic names like "Big Green Guy" (Hulk) and “The Dark Lord” (Darth Vader). Similarly, CFH advertised themed parties that referenced Plaintiffs’ movies, such as “Frozen Themed” (Frozen), “Avenging Team” (The Avengers), and “Star Battles” (Star Wars). But CFH used the original images of the characters in its ads (see picture). After CFH ignored several cease and desist letters, Disney, Marvel and LucasFilm sued. The court entered summary judgment against the plaintiffs on trademark infringement. The court appeared to put a lot of weight on the fact that the plaintiffs couldn’t show actual confusion and there was enough notice that CFH was not affiliated with the plaintiffs. But the court will proceed on the other counts of unfair competition, dilution and copyright infringement. So CFH can’t breathe a sigh of relief yet.

    WHY YOU SHOULD KNOW THIS. A themed party is a popular way to entertain at a child’s birthday party, a corporate event or even a brand awareness meeting. Character themed apparel is even more common. The problem arises when one wants to use protected characters and doesn’t have the permission to do so. CFH’s experience on the trademark infringement count is not typical. Whenever contemplating the use of protected characters for any reason, be sure to get the right permissions. And, always respond to a cease and desist letter.

  • IP BLAWG

    Fun IP Facts for Halloween 2018

    Beverly A. Berneman
    10/30/18

    Even Halloween can’t escape copyright.

    Frankenstein: This year is the 200th anniversary of the first edition of Mary Shelley’s Frankenstein which means it’s in the public domain. Here are some other non-copyright fun facts. Mary Shelly’s mother, Mary Wollstonecraft, was a writer, philosopher and is credited as being the first feminist. Mary Shelley was just 17 years old when she wrote Frankenstein. The name “Frankenstein” refers to the creator of the monster and not the monster itself. In the original story, the monster is 8 ft. tall, had beautiful black hair, white teeth, yellow skin and, apparently, was really buff (see picture). 

    Movie Characters: Your favorite horror characters, Freddy, Jason, Pinhead, etc. have been copyrighted by their various studios.

    Halloween Costumes: Most costumes are considered “clothes” and are not subject to copyright. However, a costume that has a creative element unrelated to its function as clothing is copyrightable. See IP News for Business Blawg post Spooky Halloween Banana, http://gct.law/blog/113.

    Halloween Masks: Masks are copyrightable because they aren’t considered useful articles.

    Shameless Plug: I highly recommend Remy Bumppo Theater’s production of Frankenstein. It’s Jeff Recommended and has gotten rave reviews. Now playing until November 17, 2018. Visit https://www.remybumppo.org/ for more info.

    WHY YOU SHOULD KNOW THIS. Happy Halloween.

  • Property Tax Insights

    Did you know your property will be reassessed in 2019?

    James W. Chipman
    10/25/18

    By James W. Chipman

    Beginning on January 1, 2019, every property assessment in Illinois outside of Cook County will be fair game for assessors. Here’s what you need to know.

    Illinois law requires a general assessment of all property in the state to be made every four years, except in Cook County.*

    In less than three months, assessing officials will begin the painstaking process of systemically reviewing each property in their jurisdiction. A general assessment, also known as a “reassessment” or a “quadrennial assessment,” helps ensure that properties are assessed at or near a required level of assessment, which in Illinois is 33 1/3% of market value. Keeping assessments up to date equalizes property values and helps eliminate unfair assessments or “sticker shock” that taxpayers can experience when assessments are not periodically reviewed.

    During general assessment years, assessors must value a large number of properties in a relatively short period of time. That’s why they often rely on “trending” and “mass appraisal” models to assist them. Trending is applying a positive or negative factor to a designated group of properties to reflect changes in market conditions over a period of time, usually the three intervening years between general assessments. Thus, a 10% trending factor would indicate that property values have increased by 10%. Mass appraisal involves developing values for a large group of properties by using current data that is based on one of three accepted approaches to determining value—cost, market or income.

    Relying on these rigid valuation models can often lead to errors in valuing property because of their inability to recognize differences in the physical characteristics of properties in a given area. Additionally, use of either model doesn’t mean that all the properties in a jurisdiction will be uniformly and equitably assessed.

    WHAT TO EXPECT IN 2019

    1. Assessors are required to “actually view” each property in a general assessment year.** This may involve simply driving by your property to document any exterior changes, or making a formal request to take a look inside. If you receive such a request, you have options.
    2. Mailers may be sent asking you to correct or update your property’s information. Accurate information on your property record card is critical and pointing out errors to the assessor can work in your favor.
    3. Finally, you’re entitled to notice. Every four years when property is reassessed outside of Cook County, a complete list of assessments must be published in a local newspaper of general circulation. Publication also serves notice on taxpayers that they have 30 days to challenge their assessments. Taxpayers who don’t file within this time frame must wait until the following year.

    History tells us taxpayers should expect assessment increases in a general assessment year based on market changes that took place three years earlier. Making sure your assessment is fair and equitable in the first year of a general assessment can eliminate the need for appeals in the next three years. If that sounds appealing, talk to a property tax attorney once your 2019 assessment is published because the 30-day clock will be ticking.

    For more information on the how the quadrennial event could impact you and your assessment, contact Donald T. Rubin at DTRubin@GCT.law or 312.696.2641.

    Sources:
    *35 ILCS 200/9-215 & 9-225 (Property in Cook County is assessed triennially under 35 ILCS 200/9-220)
    **35 ILCS 200/9-155

  • Benefits Bulletin

    Are No Fee Funds A No-Brainer?

    Andrew S. Williams
    10/24/18

    No fee mutual funds are here!

    Fidelity recently announced domestic and international “index” funds that would charge no management fees – and no transaction fees when purchased directly from Fidelity.

    The no fee structure appears to be more than a come on, and industry sources report that Fidelity intends to subsidize fund costs in order to provide no fee funds indefinitely. Fidelity’s expectation is that the no fee funds will generate business for Fidelity’s other mutual funds. So, should retirement plan investment fiduciaries rejoice at the potential cost savings and flock to these new mutual funds?

    Well, a word of caution is in order.

    As part of the cost savings for the new funds, Fidelity will not license an index such as the S&P 500 for the new funds. Instead, Fidelity will create its own index. Neither the new funds nor the index will have a track record, so plan investment fiduciaries need to do their homework on both the no cost funds and the new Fidelity index. Then these fiduciaries need to determine if the investment prospects of the new funds outweigh the likely returns of existing index funds which charge management fees as low as three or four basis points.

    Takeaways:

    The no cost mutual funds will attract a lot of attention and likely some new business for Fidelity. Retirement plan investment fiduciaries need to carefully consider the funds’ investment prospects – and, as ever, document their decision making. From an administrative standpoint, plan fiduciaries should also bear in mind that in order to avoid transaction charges on the “no cost” funds, they have to invest directly with Fidelity.

  • IP BLAWG

    If You Ask Me

    Beverly A. Berneman
    10/23/18

    A weak trademark is hard to enforce.  IAC Search U Media Inc. owns the “Ask” trademark for a search engine. IAC brought a petition to cancel the trademark “ASKBOT” for question and answer software. IAC argued that it had priority of the use of the word “ask” with respect to search engines and that ASKBOT is likely to cause confusion with its “Ask” trademark. In the proceeding before the Trademark Trial and Appeal Board, ASKBOT produced ninety-seven news articles from the Lexis/Nexis database for the term “askcom”, third-party registrations of marks using the word “ask”, and excerpts from an unrelated opposition in which IAC opposed registration of the mark ASKVILLE. The Board held that, yes, the two marks were similar, involved the same or similar services and they each were reaching for a similar customer base. But here’s where it went sideways for IAC. The Board held that one must 'ask' a question in order to get an answer. So, the Ask mark is merely suggestive of the services provided and is a weak mark entitled to the barest minimum of protection. Since customers have to pay for IAC’s service and ASKBOT is free, customers will be able to tell the difference between the two and there is little likelihood of confusion. The Board denied the petition to cancel.

    WHY YOU SHOULD KNOW THIS. Choosing a trademark can be really tough. You want to choose something that is easily relatable to your product or service. And yet, in order for it to be protectable, your trademark has to be distinctive. In this case, IAC chose a trademark that really just described an attribute of its services. As ASKBOT demonstrated, a lot of other companies are using “ask” for similar services. So the Board didn’t want to give IAC a total ‘lock’ on the word.

  • IP BLAWG

    It's Not Me, It's Her

    Beverly A. Berneman
    10/16/18

    Those pesky on-line terms and conditions strike again. James May listed his vacation rental property on HomeAway, an online marketplace for vacation rentals. Originally HomeAway only charged the owner and not the traveler. In 2016, HomeAway, which was acquired by Expedia, changed its policy to charge both the owner and the traveler. In 2016, James renewed the HomeAway subscription. Actually he renewed it in his wife’s name and not his own name. Then James brought a class action suit against HomeAway/Expedia for breach of contract, fraud, fraudulent concealment, and Oregon and Texas state law claims based on HomeAway’s imposition of a “traveler fee” and its negative effect on owners who used HomeAway to rent properties. The terms and conditions of the on-line agreement required arbitration for all disputes. So HomeAway/Expedia brought a motion to compel arbitration. James opposed the motion arguing that because he renewed in his wife’s name, he wasn’t bound by the arbitration clause in the terms and conditions. The magistrate judge hearing the case quickly disposed of this argument. First, the terms and conditions didn’t allow assignment of the agreement without HomeAway/Expedia’s permission. Second, the magistrate held that James had notice of the terms and conditions and so he was bound by them. The magistrate judge made a recommendation to the district court judge to enter an order granting the motion to compel arbitration.

    WHY YOU SHOULD KNOW THIS. Online terms and conditions are enforceable as long as the party enforcing them can show consent by the other party. In this case, HomeAway/Expedia showed consent with two things. First, James renewed. Second, James booked a property through HomeAway/Expedia. James initiated the class action lawsuit with both hands tied behind his back. One hand was tied by his failed attempt to get around the terms and conditions. The other hand was tied by the enforceability of online terms and conditions.

  • IP BLAWG

    Hey, That Was My Invention

    Beverly A. Berneman
    10/9/18

    Inventor identification gets lost in the haze of a patent application for a cannabis delivery system. Michael Pappalardo met Samantha Stevins at a pharmaceutical products trade show. Michael told Samantha about his concept for a new product related to liquid and solid cannabis delivery systems. They agreed to work on it together. Samantha, who is an attorney, suggested that they apply for a patent. When Michael found out that Samantha had named herself as the sole inventor on the patent, he brought suit to add his name as an inventor. The Federal Circuit affirmed the district court’s dismissal of Michael’s case. The court held that there is no cause of action to challenge inventorship until a patent issues. So Michael will have to wait until then to file suit.

    WHY YOU SHOULD KNOW THIS. If everything Michael says is true and he is the inventor or at least one of the inventors, then Samantha may have problems beyond cutting Michael out of the deal. Inventors have a duty of candor when filing a patent application. The duty of candor includes disclosing all inventors and anyone else who was substantively involved in developing the invention. The failure to make a full disclosure can compromise the ability to enforce the patent. So Samantha may be putting the viability of the future patent at risk.

  • Property Tax Insights

    Repealed personal property tax can have real consequences for business owners

    James W. Chipman
    10/4/18

    By James W. Chipman

    Although the Illinois tax on personal property was eliminated nearly four decades ago, the approach to classifying real and personal property remains controversial.

    Before Illinois’ personal property tax was abolished, both real and personal property were assessed and taxed the same. Nobody cared if property was called “real” or “personal.” But when the tax on individuals was eliminated in 1970 and its corporate counterpart was phased out nine years later through a constitutional amendment, classifying property as real or personal suddenly became a big deal. Since then, only real property has been taxed.

    BEATING A DEAD HORSE

    The personal property tax, however, has died a very slow death. After its elimination, the courts and Property Tax Appeal Board (PTAB), a quasi-judicial state agency that reviews local assessment disputes, began hearing multi-million dollar appeals where businesses claimed assessors were arbitrarily switching property classifications from personal to real to replace lost tax revenue generated by the old tax. The practice still occurs today.

    A 40-year track record of these appeals suggests a subtle erosion of the personal property exemption and raises the question of whether the tax really was eradicated. Throughout its history, the tax was regarded by many as burdensome, unfair and even scandalous. Personal property returns were often not filed or grossly understated, and little effort was made by assessing officials to verify figures or ensure that all taxable property was accounted for.

    Before the personal property tax on corporations was repealed, lawmakers had to come up with a replacement tax. They chose to impose a corporate income tax surcharge and an invested capital tax on regulated public utilities that would be state collected and, it was thought, have a far greater annual growth rate than its predecessor tax.

    STATUS QUO UNIFORMITY

    The replacement tax, however, only solved part of the problem. Because there was no statewide classification scheme when the personal property tax was eliminated, the legislature decided to preserve or freeze the pre-1979 assessment practices of assessors in each county over time to prevent widespread reclassification of property. Essentially, each county’s 1979 classifications of property as real or personal would control current and future classifications.* This preservation of the status quo meant there would be uniform treatment of property within a county, but not across county lines, meaning it was legal to have different classifications for the same type of property from one county to the next.

    During the past four decades, classification disputes have focused mainly on process machinery and equipment, which were once listed among 36 classes of personal property in an old state law and assessor manuals.

    Litigation over reclassification began shortly after the tax was eliminated in 1979 and continues to this day. Many of the lawsuits were decided based on agreements made by the taxpayer and the assessor** or on the pre-1979 assessment policy of the disputed property in a county.***

    BE VIGILANT

    Today, some assessors may occasionally engage in selective reclassification when a new business locates in their jurisdiction or machinery and equipment are upgraded in an existing manufacturing plant. Whether acting in good faith or not, assessors must interpret and apply the law, however confusing. As time passes, historical classification practices from the 1970s are difficult to ascertain as participants change and business records are destroyed.

    As assessments are reviewed and updated every four years, businesses should be on guard for signs of reclassification, particularly in 2019 when the entire state will experience a reassessment. If your business’s property assessment rises significantly in just one year, call a property tax attorney to help you pinpoint the cause and advise you on how best to proceed.

    Sources:
    *35 ILCS 200/24-5
    **Central Illinois Light Co. v. Johnson, 84 Ill.2d 275 (1981)
    ***Commonwealth Edison Co. v. Property Tax Appeal Board, 219 Ill.App.3d 550 (2d Dist. 1991), appeal denied; Oregon Community Unit School District #220 v. Property Tax Appeal Board, 285 Ill.App.3d 170 (2d Dist. 1996)

  • Benefits Bulletin

    Beyond Investments: The Other 401(k) Responsibilities

    Andrew S. Williams
    9/17/18

    We’ve all read about the lawsuits questioning an employer’s 401(k) investment fund selections and related claims of excessive fund costs. And typically a plan’s professional investment advisor (yes – you should have one unless you have an investment professional on staff) meets with company representatives periodically to discuss a detailed report on fund investment performance and any recommended changes in the plan’s investment fund selections. So, your 401(k) plan files bulge with investment-related materials (and they should!). But what about the rest of an employer’s 401(k) responsibilities?

    As posed by the moderator of the 401(k) panel at the Illinois CPA Society’s recent annual Summit that I had the pleasure of appearing on, what should plan sponsors be paying attention to in addition to monitoring plan investment results?

    Good question – so what can you do to get a leg up on the rest of the 401(k) universe?

    Consider online IRS compliance guides like “A Plan Sponsor’s Responsibilities”. This material covers plan documentation, monitoring plan service providers, internal controls, law changes, payroll data you need to share with plan providers, hardship distributions, participant loans, ERISA fiduciary bonds, as well as eligibility, vesting and benefit payment matters. It also provides links to other IRS compliance resources and is a good starting point to find more detailed information on specific plan administrative requirements such as government filings, participant notices and fiduciary requirements. Also consider articles such as “Your Fiduciary Duty – And What to Do About It”.

    Takeaway:

    There’s more to an employer’s 401(k) responsibilities than selecting and reviewing plan investment funds. Remember, as the “Plan Administrator,” the buck stops with the employer when it comes to all compliance matters. So, consider IRS guidance as a starting point, but do not hesitate to address any resulting concerns with your plan’s investment advisor, third party administrator, accountant or ERISA lawyer.

  • Property Tax Insights

    Corporations need property tax attorneys, too

    James W. Chipman
    9/12/18

    By James W. Chipman

    Any corporate taxpayer contemplating an appeal should call a property tax attorney sooner rather than later.

    A corporation is considered a person under the law, albeit an artificial one. It sounds like an odd concept, but it’s been around for a while. Odder yet is that corporate personal rights exist and are expanding. Pro se or self-representation is a right that’s as old as our Constitution. In the property tax appeal process, an individual can always represent themselves, but does the same rule apply to a corporation? It depends.

    UNSETTLED LAW

    Illinois has a multilevel property tax appeal system. The taxpayer must file locally with the county board of review. They also have the option to go the state Property Tax Appeal Board (PTAB). These two administrative bodies decide most of the appeals that are filed statewide each year. Because administrative agencies are considered quasi-judicial bodies and not courts, they aren’t bound by strict rules of procedure. They can write their own rules of practice and enforce them as long as they comply with the law.

    The PTAB hears appeals from the boards of review and is the final arbitrator in the administrative process before court. The PTAB bans corporations, limited liability companies (LLCs) and other similar entities from appearing on their own behalf at any stage of a board appeal.* That rule was put into effect based on the assertion that the representation of anyone other than themselves constitutes the practice of law that can only be done by a licensed attorney. There’s also the matter of conflicting interests—attorney representation of a corporation ensures that a company’s legal interests come first and don’t conflict with the interests of a director, officer or agent.

    While many boards of review have taken the PTAB’s lead and required a corporate taxpayer to be represented by an attorney, the rules vary from county to county. Some boards allow a corporation to be represented by other parties but may require the company to sign an authorization form. Other boards don’t even address representation in their rules.

    The question of whether corporate representation by an attorney is required in an administrative hearing was considered by the Illinois Supreme Court just last year. The case involved a limited liability corporation represented by a non-attorney in the City of Chicago’s department of hearings over what constitutes due process in an administrative hearing. The court declined to answer the representation question, finding it wasn’t necessary for a resolution of the case.**

    THE SAFE HARBOR APPROACH

    Deciding to appeal your company’s property tax assessment can be a complicated undertaking that requires a great deal of time and expertise. Companies shouldn’t attempt to represent themselves at any board of review hearing, even if the practice is allowed.

    It’s always wise to engage the services of a property tax attorney, whether or not it’s required, because while some mistakes can be fixed, others can’t. Proceeding on your own could mean missing a deadline, not knowing what evidence to submit or lacking a detailed understanding of the rules of practice and procedure. These elements are often challenging for any person—natural or artificial—to navigate, thus having an experienced property tax attorney on your side is the way to go.

    Sources:
    *ILL. ADMIN. CODE tit. 86, §1910.70 (c)
    **Stone Street Partners, LLC, v. The City of Chicago Department of Administrative Hearings, 2017 IL 117720

  • IP BLAWG

    If You See Something

    Beverly A. Berneman
    8/28/18

    Don’t wait too long to protect your trademark. Since the 1990s, Cosmetic Warriors Ltd. sells “Lush” brand personal products like soap, lotions and makeup. For a brief period, Cosmetic Warriors sold a small number of t-shirts. But for the most part, Cosmetic Warriors does not sell clothing. Pinkette Clothing, Inc. started selling clothing using the brand name “Lush” in 2003. In 2009, Pinkette applied to register the trademark and it was registered in 2010. Cosmetic Warriors didn’t contest the registration. Almost 5 years after the registration of Pinkette’s trademark, Cosmetic Warriors sued Pinkette for trademark infringement. Cosmetic Warriors said that it didn’t know about the registration to explain why it waited so long to bring suit. Cosmetic Warriors won the battle but not the war. A jury sided with Cosmetic Warriors on the infringement issue. But then the jury sided with Pinkette on Pinkette’s argument that Cosmetic Warriors was barred by laches because it waited too long to bring suit. The jury’s verdict was upheld on appeal.

    WHY YOU SHOULD KNOW THIS. There are 3 important points to unpack here. First, Trademark Law allows the registrant of a trademark to have the mark deemed uncontestable 5 years after registration. Once it’s declared uncontestable, the registration can only be challenged on the limited grounds of a fraud in the application or abandonment. That brings us to the second important point. The court in this case held that this five year benchmark is not a statute of limitations. So a registrant who is defending a challenge can claim the laches defense; even if the challenge comes before the 5 year benchmark. That’s important because the U.S. Supreme Court has held in patent and copyright cases, that the laches defense is not available before the statute of limitations runs. Third, registration of a trademark is notice of the use of the trademark. So, Cosmetic Warrior couldn’t rely on its argument that it didn’t know about Pinkette’s trademark until it brought suit almost 5 years after Pinkette’s registration.

  • Property Tax Insights

    Leveling the playing field at board of review hearings

    James W. Chipman
    8/24/18

    By James W. Chipman

    While the appeal process now includes more transparency, understanding the best way to proceed and succeed often requires the assistance of a trusted property tax attorney.

    Each county in Illinois has a three-member panel called the board of review, which acts as an intermediary between township assessors and taxpayers. Boards hear and decide assessment complaints after giving taxpayers an opportunity to be heard. They also make rules so that the appeal process is orderly and fair.

    In the past, however, the process might have seemed anything but fair to property owners or attorneys who showed up for a board hearing only to learn that a taxing district had intervened or that the assessor had evidence supporting his value in the appeal. It’s no wonder this practice became widely known as “hearing by ambush.” Fortunately, things have changed.

    FAIR IS FAIR

    Public Act 99-0098, which took effect on January 1, 2016, allows taxpayers to take some comfort in knowing that everyone is now playing by the same set of rules. PA 99-0098 requires taxing districts to file a notice to intervene at least five days prior to a hearing. In addition, if the board of review requires the taxpayer to submit evidence in advance, any evidence supporting the assessor’s or intervenor’s value must be submitted at least five days before the hearing to the board and the property owner or their attorney.

    PA 99-0098 also applies the mailbox rule to boards of review. This is a rule of contract law that says an offer is considered accepted at the time the acceptance is mailed. Under PA 99-0098, documents sent by US mail or another delivery service are considered filed as of the postmark date or the shipper’s tracking label or in the case of email, the date the correspondence is sent. This law, however, does not apply in Cook County.

    FURTHER ROOM FOR IMPROVEMENT

    While PA 99-0098 makes the process more fair and balanced, taxpayers still face additional challenges. Boards of review aren’t obligated to correct an assessment even if the complaining taxpayer has proven their case. All they are required to do is review an assessment and change it “as appears to be just.”* Taxpayers that are denied relief must go one step further and either file a lawsuit in court or appeal to the state Property Tax Appeal Board (PTAB)—but you can’t do both.

    A property tax attorney who is skilled in the appeal process can explain the pros and cons of going either to court or the PTAB. They’ll also have valuable insight about the filing deadlines, burdens of proof, expected turnaround times and the types of evidence that are likely to succeed in each venue.

    * Source: 35 ILCS 200/16-55 (a)

  • IP BLAWG

    Color Me Bright Green

    Beverly A. Berneman
    8/21/18

    Trade dress protects non-functional attributes of a product like color. Moldex-Metric uses a bright green color for its foam earplugs. McKeon Products also uses bright green for foam earplugs. Moldex-Metric sued McKeon for infringement of unregistered trade dress, namely, the color of the earplugs. The trial court granted summary judgment for McKeon holding that the bright green color couldn’t be protected as trade dress because it served the function of making them easier to see during an inspection. The Ninth Circuit Court of Appeals reversed. The court held that the trial court failed to consider whether other colors would be just as visible. So the case is remanded back to the trial court to allow a jury to decide if the green color was not functional because of available alternatives.

    WHY YOU SHOULD KNOW THIS. A distinctive color can be registered as protectable trade dress. Some famous trade dress colors are the Tiffany Blue and the UPS Brown. In each of these cases, the color has nothing to do with the function of the product or service. It just creates a distinctive look. Separating functionality from the look of a product or service isn’t always easy. In the Moldex-Metric case, the Ninth Circuit Court of Appeals gives a helpful test to determine color functionality. The availability of alternative colors to serve the same function could mean that color choice is non-functional and therefore protectable.

  • IP BLAWG

    Fuel for the Game

    Beverly A. Berneman
    8/14/18

    Trademark fair use can win the race.  SportFuel, Inc. sued PepsiCo, Inc. for trademark infringement. SportFuel alleged that PepsiCo’s slogan “Gatorade The Sports Fuel Company” infringed on its trademark. The attached image shows SportFuel’s use of its trademark on the left and PepsiCo’s use of its slogan on the right. The court granted summary judgment to PepsiCo on the basis of trademark fair use. The court cited factors that weighed in favor of fair use. First, the Gatorade house mark appeared more prominently than the tag line which lessens the possibility that the tag line would be seen as an indicator of source. Second, the judge found that the words “sports fuel” were merely descriptive.

    WHY YOU SHOULD KNOW THIS. Descriptive marks have a hard time getting trademark protection. An unprotectable descriptive mark uses identifiers that others in the same industry will need to describe their products or services. Some descriptive marks can achieve trademark status when they are more suggestive than descriptive or they’ve been used long enough for the public to connect the descriptive mark with the goods or services. This case was a close call. The words “sports” and “fuel” do not appear together in any dictionary. Fuel is often used with vitamins and supplements but more often it’s used with either food consumption or energy sources for machinery. So the combination of the words may be more suggestive of vitamin supplements than merely descriptive. There’s no word on whether SportFuel intends to appeal the summary judgment.

  • IP BLAWG

    Percentages Can Sink Copyright Infringement

    Beverly A. Berneman
    8/7/18

    Copyright infringement needs more than ‘sort of’ similarity. Experian Information Solutions, Inc. registered the copyright for a database containing consumer names and addresses. Experian’s employees made some selections in adding data, reconciling discrepancies, and discarding useless information. Experian licenses access to its database to companies for use in marketing campaigns. Nationwide Marketing Services Incorporated is Experian’s competitor. Nationwide is relatively new to the market and much smaller than Experian. Experian got an offer to purchase a Nationwide’s database of names of addresses. Experian tested Nationwide’s database  against its own and came up with a 97% match rate.  Experian brought suit for copyright infringement and trade secret misappropriation against Nationwide. The Ninth Circuit Court of Appeals affirmed the district court’s order for summary judgment in Nationwide’s favor on the copyright claim. The court held that the selection and arrangement process was sufficient to create minimal protection in Experian’s database. But, Experian did not prove infringement. Neither side could produce the databases as they appeared at the time of the alleged infringement. Experian could only show an 80% match rate between the current versions of the two databases. That wasn’t enough for copyright infringement. Experian’s trade secret misappropriation claim was remanded back to the district court.

    WHY YOU SHOULD KNOW THIS. Facts are not copyrightable. However, the arrangement of facts or a compilation is copyrightable. A compilation of facts has only minimal copyright protection. That’s because no matter how you look at it, you can’t own the underlying facts. Copyright infringement occurs when the infringing work is substantially similar to the original work. Now we know that 80% similarity was not enough similarity for infringement. This case also points out that if you’re going to claim copyright infringement, be sure to preserve the copyrighted works as they appeared at the time of the alleged infringement. And be sure to tell your alleged infringer to preserve its version of the works.

  • Benefits Bulletin

    Is Illinois Secure Choice Your Best Option?

    Andrew S. Williams
    8/6/18

    Employers with 25 or more employees in Illinois will be subject to the Secure Choice Savings Program Act (the “Act”) if they do not already have an employer sponsored retirement arrangement like a 401(k) plan. For such employers with 500 or more Illinois employees that have been in business for at least two years, the compliance deadline is November 1, 2018. By that date, these employers must register at the Secure Choice website here and enroll their employees. Subject employers with fewer than 500 Illinois employees have compliance dates deferred until July 1, 2019 (100-499 employees) and November 1, 2019 (25-99 employees).

    Here are some of the details:

    • The required retirement arrangement includes a separate Roth IRA account for each employee that is set up by the employer. Employees are automatically enrolled at a five percent contribution rate but they can elect out of the plan at any time. There are no employer fees to participate in the program and no employer retirement contributions are required or permitted.

    • The program is administered through the Illinois State Treasurer’s Office by a private contractor that will act as the Roth IRA “trustee,” process contributions, manage account records and maintain the website. Program costs are funded through an annual administrative charge not to exceed .75 percent of employee account balances. The Treasurer’s Office also charges employees a fee of .05 percent to cover its costs.

    • Employees may choose between several diversified mutual funds for the investment of their accounts and, if they make no investment direction, their accounts will default into a target date fund. Employee accounts are portable and may be transferred to other Illinois employers.

    • The employer’s role as “facilitator” includes registering as a participating employer, establishing an online “employer portal,” setting up a payroll deduction process, and remitting employee contributions.

    • The program is established with the intent to avoid complication for employers under ERISA, the federal pension law, and it is anticipated that employers will be subject to none of the ERISA responsibilities that apply to sponsors of 401(k) plans.

    • Non-compliant employers are subject to a fine of $250.00 per employee per year.

    The Fine Print:

    Official guidance available at this time provides the following specifics:

    • For purposes of determining program applicability, employers need to count all employees 18 years of age or older who receive wages taxable in Illinois (this includes part-time employees, but some seasonal employees can be excluded).

    • Illinois employers, including not-for-profit organizations, are subject to the Act if: (1) at no time during the prior calendar year they employed fewer than 25 Illinois employees, (2) they have been in business at least two years, and (3) they have not offered an employer sponsored retirement plan in the preceding two years.

    • Employers are required to log on to the Treasurer’s website to create a payroll list and then to input the following information in the employer portal by the applicable deadline: each employee’s address, phone number, email address, legal name, date of birth and social security number or individual tax identification number (undocumented workers are not permitted to participate in the program).

    • For employers with 500 or more Illinois employees, the November 1, 2018 deadline is fast approaching. Employer electronic enrollment of each of its employees may take some time unless data is submitted in bulk form. More important, subject employers may want to give serious consideration to a private retirement plan alternative like a 401(k) plan that also can provide enhanced benefits for management-level employees.

    Takeaways:

    If your company is not among the eighty-eight percent (88%) or so of large Illinois employers that already sponsor a retirement plan under Sections 401(a), 403(b), 408(k), 408(p) or 457(b) of the Internal Revenue Code, then you need to take the steps outlined above to comply with the Illinois Secure Choice Act by November 1, 2018. Also consider the 401(k) and 403(b) options that may work better for you and your work force. Retirement professionals can analyze a census of your current employees to provide specific retirement plan options that might make more sense for you than a Secure Choice arrangement.

  • IP BLAWG

    Empty Tech Value Means Empty Pockets

    Beverly A. Berneman
    7/31/18

    Investing in tech companies with issues can be hazardous to your retirement funds. VirnetX, a publicly traded company, supposedly sells Internet connectivity and security software. By all reports, sales of its products don’t actually generate much revenue. Instead, VirnetX makes a lot of money suing other companies who allegedly infringe on its patents. Although it was successful in suits against Microsoft and Apple, VirnetX saw its heyday dwindle after the Supreme Court’s Alice Corp. v. CLS Bank International that invalidated a lot of software patents. For Dr. Poppell, an eye doctor in Florida, VirnetX’s woes proved to be the downfall in Dr. Poppell’s investment strategy. Despite warnings from financial managers, Dr. Poppell, who had no financial training or background, personally administrated the 401(k) plan for his employees. Using Internet research, Dr. Poppell invested over half of his employees’ 401(k) money in VirnetX. VirnetX stock fell precipitously. As a result, the plan participants lost about 53% of their 401(k) investments. When the good doctor’s employees complained about the large losses, he terminated the 401(k) plan. When they complained about that, he fired them. The plan participants sued Dr. Poppell and he settled for less than a third of the losses. Then the Department of Labor got involved and required Dr. Poppell to make the plan participants whole.

    WHY YOU SHOULD KNOW THIS. Dr. Poppell is surely an example of what not to do when as the administrator of a 401(k) plan. But it all started with a high risk and heavy investment in a company that, by all reports, is a patent troll. A patent troll usually has no real inventions (or real inventions that don’t result in much revenue, are driven by lawyers rather than scientists, don’t develop, sell or license any real products, and assert weak patents to get settlements in cash or through licensing. These types of companies usually fly under the publically held stock radar. But for any publicly traded stock in the tech industry, be sure to check the company out thoroughly before making any type of investment.

  • IP BLAWG

    Photos of Teeth Lack Copyright Bite

    Beverly A. Berneman
    7/24/18

    Every photo doesn’t automatically have the veneer of copyrightability. Dr. Mitchell A. Pohl is a cosmetic dentist who is very proud of his work. He posted before and after pictures of one of his patients on his website. The photos showed the patient’s unfortunate ‘before’ smile (teeth, lips and small area around the mouth) and her ‘after’ beautiful healthy smile. Dr. Pohl registered the photos with the US Copyright Office. Then Dr. Pohl found seven websites that used his photos. He sued the alleged infringer, MH SubI, LLC d/b/a Offcite, for copyright infringement. While Dr. Pohl obviously does fantastic work, his photos didn’t bridge the gap into copyrightable subject matter. The District Court for the Northern District of Florida performed the judicial version of a root canal and granted Offcite’s motion for summary judgment. The court held that Dr. Phol’s self-serving affidavit was as convincing as “plaque on a molar” and no reasonable jury could find that the photos were creative enough for copyright protection. The court later performed another extraction by denying Dr. Pohl’s motion to reconsider.

    WHY YOU SHOULD KNOW THIS. A work has to meet a minimum standard of creativity to be copyrighted. As the court noted in this case, “Meeting the standard for creativity is not like pulling teeth”. Dr. Pohl’s photos didn’t meet that minimum standard. The court noted that Dr. Pohl couldn’t identify any creative elements in the photos such as the type of camera used, decisions regarding the pose of the patient, lighting decisions, etc. Perhaps if Dr. Pohl could have described some creative decisions in taking the photos, the outcome would have been different.

    A shout out to my friend, Matthew Scott Nelles, one of the fine attorneys at Berger Singerman LLP in Ft. Lauderdale, Florida, who represented Offcite in this case.

  • Property Tax Insights

    Are you taking full advantage of your property tax breaks?

    James W. Chipman
    7/23/18

    By James W. Chipman

    No matter where you live or what type of property you own, you may qualify for any number of special tax incentives that could save you hundreds or even thousands of dollars.

    Illinois may be second in the nation when it comes to the highest property tax burden, but the Prairie State offers its fair share of tax breaks too. Here are a few of the laws designed to help homeowners and businesses cut their taxes.

    Exemptions that reduce the assessed value of your home:

    • General Homestead: Taxpayers can receive a maximum exemption of $6,000 for an owner-occupied residence ($10,000 in Cook County).
    • Senior Citizen: Homeowners age 65+ can receive a $5,000 exemption for an owner-occupied property ($8,000 in Cook County). An annual application is required.
    • Senior Freeze: Senior citizens who live in an owner-occupied home and meet certain income levels may have their assessments frozen. An annual application is required.
    • Home Improvement: Owners can make up to $75,000 worth of property improvements without an increase in taxes for at least four years from the date of completion and occupancy, or until the next reassessment, whichever is later.
    • Returning Veterans: Veterans returning from active duty who own and occupy a property as their principal residence are entitled to a $5,000 exemption for two consecutive years.

    Special valuation incentives for homes and businesses:

    • Open Space: Land containing 10+ acres that is used exclusively for maintaining natural or scenic resources or promoting conservation of natural resources for the last three years is eligible for an assessment based on “use value,” which is significantly less than market value. Public and private golf courses qualify. This law can help residential owners with large undeveloped tracts and businesses holding excess land for future expansion.
    • Farmland: Land is eligible for a farmland assessment provided it meets the definition of “farm” and has been in that use for the two preceding years. This can include any property used solely for a variety of agricultural purposes with no acreage requirement. Farming must be the primary use of the land, and like open space, this assessment is based on use value.
    • Solar Heating and Cooling: When a solar energy system is installed on a property, the owner may apply for an alternate assessment. The improvement is then assessed as if heated or cooled by conventional means and with the solar energy system—the alternate valuation is the lesser of these two values.

    Special valuation incentives for businesses only:

    • Model Home: A dwelling, condominium or townhome used as a display or demonstration model for prospective buyers is to be assessed at its value prior to construction or a zoning classification change. The home can be furnished and even used as an office. The lower assessed value remains in effect until the home is sold or leased for use other than a model home.
    • Developer’s Exemption (excludes Cook County): This exemption encourages real estate development by protecting developers from paying higher taxes until a return on investment can be realized. It applies to acreage in transition from vacant land to a residential, commercial or industrial use. The tax break ends when a lot is sold or used for a business or residential purpose, or a habitable structure is built on a lot.

    For more information and to determine whether your property is eligible for an exemption or incentive, contact a property tax attorney today. They’ll take you through each step required to qualify your property for these tax reducing benefits.

  • IP BLAWG

    A Heroic Rescue for a Cocky Word

    Beverly A. Berneman
    7/17/18

    With smoldering eyes, the beautiful and brave romance writers defended their realm. Faleena Hopkins is a self-published romance author of steamy romances with titles like, “Cocky Soldier: A Military Romance” and “Cocky Roomie”. Faleena’s company, Hop Hop Productions, Inc., registered two trademarks for the word “cocky” in relation to a series of romance novels. Faleena sent out cease and desist letters to other romance writers advising them that “cocky” has found its one true love and no one else can use the word in their book titles. In response to this attempt to keep the word “cocky” from its other true loves, a group of romance writers published a collection of short stories titled “Cocktales: The Cocky Collective”. Faleena filed suit to stop the publication. The Author’s Guild and the Romance Writers of America, rescued one of the defendants, author Tara Crescent, by paying the past due taxes on the plantation, I mean, paying her legal bills. The court denied Faleena’s motions for a preliminary and temporary restraining order against the protest work. The court held that the “cocky” marks were weak and customers would not be likely to be confused between Faleena’s books and other books using the word in their titles. On another note, a proceeding to cancel Faleena’s trademarks is now pending before the Trademark Trial and Appeal Board. So there may be a sequel to this romantic tale of the word “cocky”.

    WHY YOU SHOULD KNOW THIS. A weak mark may be meaningful but is common in usage. It usually describes the product or service. Faleena’s experience shows how hard it is to enforce a weak trademark. When choosing a trademark, try to stay away from descriptive, weak marks. Choose fanciful, arbitrary or suggestive words instead.