• IP BLAWG

    Divorce, Trade Secret Style

    Beverly A. Berneman
    Tuesday, 20 February 2018

    Trade secrets can be an asset in a divorce. Donald Bailey and his ex-wife, Geraldine Bailey, were in the midst of a very messy divorce. As part of the proceedings, Geraldine wanted to determine the value of their marital assets. So Geraldine’s law firm sought discovery against Donald’s two companies, Zegato Solutions Inc. and Aldmyr Systems, Inc. The two companies had trade secrets that were worth about $350 million, according to Donald. Donald then brought a suit against the attorneys claiming that they stole and copied the trade secrets. Dismissal of the suit was affirmed by the Fourth Circuit Court of Appeals. The Fourth Circuit agreed with the lower court that the law firm was entitled to explore Donald’s assets on behalf of Geraldine.

    WHY YOU SHOULD KNOW THIS. When a couple decides to cut ties with each other, a host of issues are involved. One of the primary issues is who gets what from the assets that the couple acquired during the marriage. In this case, the court had to balance Donald’s companies’ right to protect their trade secrets and Geraldine’s right to know the value of Donald’s assets. Since access to the trade secrets had nothing to do with actually using them, Geraldine’s right to discovery won.

  • IP BLAWG

    I’ve Been Framed

    Beverly A. Berneman
    Wednesday, 14 February 2018

    Website framing can be copyright infringement. “Framing” is the display of content on a website that is independent of the original content creator. In Leader’s Institute LLC v. Jackson, Robert Jackson left Leader’s Institute to work for a competitor, Magnovo Training Group. Leader’s Institute sued claiming misappropriation of trade secrets and trademark infringement. Magnovo brought a counterclaim alleging that Leader’s Institute had committed copyright infringement by framing Magnovo’s copyrighted content on Leader’s Institute’s website. The court granted partial summary judgment to Magnovo on the copyright infringement claim. The court held that programming its website to display Magnovo’s copyrighted works is considered an unauthorized public display of a work of authorship under Copyright Law.

    WHY YOU SHOULD KNOW THIS. Many websites are designed to provide access to another’s website content. In some cases, it can be done without resulting in copyright infringement. For instance, a hyperlink that directs the user to the original website is probably ok. But in this case, Leader’s Institute did more. It programmed its website to incorporate the copyrighted work belonging to its competitor. Leader’s Institute was held to have infringed by an act of public display through an automated process.

  • Benefits Bulletin

    Coach Will Cost Alabama $2 Million More Under Tax Reform

    Andrew S. Williams
    Wednesday, 07 February 2018

    Nick Saban is the highest paid college football coach in the country. In 2017, he was reportedly paid $11 million by the University of Alabama. If he is paid that amount in 2018, the recently passed Tax Cuts and Jobs Act (the “Act”) will impose an excise tax on Alabama, his employer, of over $2 million!

    Why is Congress picking on Alabama?

    Well, the Act applies not only to Alabama but also to other tax-exempt organizations. In order to level the playing field between tax-exempt and for-profit entities, the Act imposes a 21 percent excise tax on compensation in excess of $1 million paid to “covered employees” (the organization’s top five earners for the current and any preceding tax year). This excise tax also applies to excess “parachute payments” made to covered employees upon separation from employment. In the for-profit realm, such payments are penalized with a loss of the employer’s corresponding income tax deduction.

    So, who are the likely targets of the new tax? In addition to football coaches, college presidents and highly paid executives of public charities come to mind. However, there is an exception for compensation paid to doctors, nurses, veterinarians and other licensed professionals for providing medical services. So, superstar physicians may not subject their tax-exempt employers to the new excise tax.

    Takeaway:

    Tax-exempt employers may want to consider deferred compensation arrangements for executives in order to reduce current compensation. Medical service providers like public hospitals that pay compensation primarily for medical services may want to revise physician employment agreements to separate compensation paid for administrative and teaching services from compensation paid directly for medical services. In any event, there is no grandfather provision so the excise tax will apply to existing compensation arrangements for taxable years beginning after December 31, 2017 (that’s January 1, 2018 for employers with calendar tax years).

  • IP BLAWG

    Lawyers Can Have Problems Crafting Trademarks

    Beverly A. Berneman
    Wednesday, 07 February 2018

    A trademark can’t block competitors from using descriptive words. Attorney, Candace L. Moon, wanted to become the “on-stop shop” for the legal issues in the craft beer industry. So she tried to register “The Craft Beer Attorney APC” as a trademark. The uproar from other attorneys was deafening. No less than 10 other law firms filed oppositions to registration of the trademark. They argued that the words “Craft Beer Attorney” were generic because other attorneys need to use those words to describe their services. One firm wrote: “Such use is and would be in derogation and violation of the First Amendment rights of third parties, who have a bona fide need to use such a generic term or phrase to accurately describe and reference their own similar services.” Candace withdrew her application and the TTAB entered judgment in favor of the opposers.

    WHY YOU SHOULD KNOW THIS. Candace’s experience is a good example of the problems with choosing a descriptive mark. Candace had a bright idea to brand herself by describing her services. But, her competitors needed to use those words to describe their services too.

  • IP BLAWG

    An Oracle’s Prophecy of Infringement

    Beverly A. Berneman
    Tuesday, 30 January 2018

    You don’t need an Oracle to predict the outcome of working outside the scope of a license. Rimini Street, Inc. was hired by one of Oracle USA, Inc.’s licensees to develop and test updates for the licensee’s customers. But Rimini started using Oracle’s software to develop products for its other clients who didn’t have a license from Oracle. Oracle sued and won a copyright infringement judgment. Rimini appealed and lost at the 9th Circuit Court of Appeals. Rimini had two interesting affirmative defenses that were rejected by the court. First, Rimini said it had an express license. While it had an express license with respect to a single licensee, it didn’t have a blanket express license to use the software for anyone else. Second, Rimini argued that Oracle was misusing the copyright. Copyright misuse is an equitable defense against copyright infringement allowing copyright infringers to avoid infringement liability if the copyright holder has engaged in abusive or improper conduct in exploiting or enforcing the copyright. In other words, Rimini was accusing Oracle of being a copyright bully because Oracle wasn’t allowing Rimini to get a head start with Oracle’s future software licensees. The court rejected this argument. As the owner of the software, Oracle had every right to control the use of its software by potential future licensees.

    WHY YOU SHOULD KNOW THIS. Rimini had an uphill battle. It went beyond the scope of a license. And Rimini’s copyright misuse argument was misguided. Classic copyright misuse involves elements of fraud and extortion. Oracle wasn’t doing that. It was only protecting its software in a specific case. That isn’t copyright misuse.

  • IP BLAWG

    First Sale Can Make You Feel Nauseous

    Beverly A. Berneman
    Tuesday, 23 January 2018

    If you want a patent, be careful about when you make your first sale. Helsinn Healthcare S.A. applied to patent a formula that would reduce nausea and vomiting resulting from chemotherapy. When it sued Teva Pharmaceuticals USA Inc. for patent infringement, Teva argued that the patent was barred because Helsinn sold the formula more than a year before it applied for the patent. The Patent Act bars the patentability of an “invention [that] was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.” An invention is made available to the public when there is a commercial offer or contract to sell a product embodying the invention and that sale is made public. There was no question that Helsinn had entered into a distribution agreement more than a year before the patent application. So the issue was whether the agreement between Helsinn and its distributor was a “sale” which would bar the patent. The Federal Circuit Court of Appeals ruled that the sale to the distributor qualified as a commercial sale that would bar the application.

    WHY YOU SHOULD KNOW THIS. Although this case involves big pharma, every inventor can benefit from Helsinn’s sad experience. There is some discussion among the Patent Bar as to whether making the sale “confidential” would mean the sale wasn’t “commercial”. But it may not be an easy fix. The issue involves an analysis of both commercial law as well as patent law. To be safe, a first sale shouldn’t take place before the patent application is filed. Failing that, advice of counsel is absolutely necessary.

  • IP BLAWG

    *!&% Trademarks

    Beverly A. Berneman
    Tuesday, 16 January 2018

    The USPTO can no longer ban scandalous and immoral trademarks. Erik Brunetti wanted to register the word “FUCT” for his apparel line. The USPTO refused registration because the word sounded like a swear word. Erik appealed to the Federal Circuit. The appeals court overturned the ruling saying that the government’s rule against registering profane, sexual and otherwise objectionable language violates the First Amendment. Acknowledging that the government didn’t have a substantial interest in policing offensive speech, the Federal Circuit opined that the First Amendment “protects private expression, even private expression which is offensive to a substantial composite of the general public.”

    **WHY YOU SHOULD KNOW THIS. ** With this decision and the decision in the Slants case (“Bleeping Trademarks” Blawg post of 1/12/2016 and 3/29/2016), the courts have drawn the line in the sand regarding trademark choice. The USPTO is being told not to determine registrability of trademarks based upon whether something is offensive to a certain segment of the population. But the impression a trademark makes is very subjective. A trademark should always take the potential consuming audience into account. In this case, Erik’s market is the skateboarding crowd. To them, the jokey and offensive nature of the mark might be a good selling point. However, the same may not be true if Erik’s market was a more a sedate one, like banking for instance.

  • Benefits Bulletin

    Does your Retirement Plan need a 3(16) Fiduciary?

    Andrew S. Williams
    Thursday, 11 January 2018

    Your retirement plan may have an outside third party administrator (TPA) to assist with plan administration. However, a TPA typically is not a fiduciary to the plan and does not act as “plan administrator” (that’s usually the employer itself as provided in a typical TPA services agreement). This leaves the employer ultimately responsible for the plan’s compliance with all applicable legal requirements. So, even if your TPA makes a mistake, the employer is likely on the hook for any resulting liability because the TPA’s services agreement usually imposes damage limits and employer indemnities that protect the TPA.

    An independent service provider (maybe your current TPA) can be engaged to act as the “plan administrator” pursuant to Section 3(16) of ERISA. As a 3(16) fiduciary, the service provider assumes fiduciary responsibilities in administering the plan. The 3(16) fiduciary is responsible for all compliance activities, including the following:

    • Determining employee eligibility
    • Retaining plan service providers
    • Preparing and filing annual reports
    • Maintaining fidelity bond coverage for employees who handle plan assets
    • Interpreting and applying plan provisions
    • Distributing summary plan descriptions and supplements on a timely basis
    • Preparing an investment policy statement
    • Administration of participant loans, hardship withdrawals, as well as benefit computations and distributions
    • Distributing participant notes such as summary annual reports and, as applicable, annual qualified default investment alternative (QDIA) notices, safe harbor notices and investment fee disclosures
    • Reviewing and acting on reports of plan investment advisors and any private auditor
    • Reviewing and implementing qualified domestic relations orders (QDROs)

    Are your bases covered on all of the above? If your TPA is not involved in these compliance functions, are they adequately performed by your own employees? If not, your plan may need help from an outside service provider or even a 3(16) fiduciary.

    Takeaway:

    Engaging a competent 3(16) fiduciary should provide any retirement plan the maximum compliance protection available. Just bear in mind that the employer still retains a legal obligation to prudently select the 3(16) fiduciary and to monitor the fiduciary’s ongoing performance of its duties.

  • IP BLAWG

    2017 Crippys - The IP Criminals Hall of Fame

    Beverly A. Berneman
    Tuesday, 09 January 2018

    Welcome to the Second Annual Crippys. The Crippys are awarded to those who achieved infamy by committing Intellectual Property crimes during the previous year. In other words, an IP Criminals Hall of Fame. The field of candidates was crowded last year. But the award winners rose to the top. The 2017 Crippys go to:

    Second Runner Up Crippy Goes to David Nosel: David was an executive with Korn/Ferry International. After he left, his ex-assistant gave him a password with which he could access his former employer’s computer system. He used the password to hack into the system and steal trade secrets. David’s conviction for violating the Computer Fraud and Abuse Act (“CFAA”) was affirmed by the Ninth Circuit Court of Appeals. The CFAA criminalizes accessing a computer without authorization or exceeding authorization to obtain anything of value from a protected computer. David argued that it wasn’t hacking because he had a valid password. Somehow, David missed the point. David didn’t have authorization to use the password. So his actions fell squarely within the prohibited acts in the CFFA.

    First Runner Up Crippy Goes to Walid Jamil: Walid pled guilty to conspiracy to commit criminal copyright infringement and conspiracy to introduce misbranded food into interstate commerce. A predecessor of Walid’s company, Midwest Wholesale Distributors, was a legitimate exporter of the 5-Hour Energy drink to Mexico. Jamil and his cohorts replaced the Spanish labels with fake English ones so they could sell to the U.S. market. When the stock ran out, Walid switched to fully counterfeit drinks made in a filthy factory. He distributed more than 4 million bottles putting the health of millions of customers into jeopardy. And if that weren’t enough, Walid is also alleged to have been involved in similar schemes involving Equal, Splenda, Truvia, Uncle Ben’s Rice and Pillsbury products. Walid has been sentenced to 7 years in jail plus payment of criminal restitution in the amount of $555,800.00. Walid wins this award for shear audacity and tenacity. He’ll need those skills in prison.

    Grand Prize Crippy Goes to Gregory David Justice: Gregory (whose last name has a good sense of irony), a former employee of a defense contractor, pled guilty to one count of economic espionage and one count of attempting to violate the Arms Export Control Act. He tried to sell information about his (now former) employer’s satellite security systems which included trade secrets. Unfortunately for Gregory, he offered the sale to an undercover agent who was posing as a Russian spy. He told the ersatz Russian spy that he loved spy movies and television shows like “Jason Bourne” and “James Bond” and “The Americans”. He sold the secrets for $3,500.00 telling the undercover agent that he needed it for his wife’s medical expenses. Actually, he sent the money to his on-line girlfriend, an alleged European model named Chay. Actually, the “girlfriend” wasn’t named Chay nor was she a model. She was some woman who lived in Florida with her boyfriend and son. Gregory was sentenced to 60 months in jail. U.S. Attorney Sandra R. Brown said, “This defendant sold out his employer and betrayed his country in exchange for a few thousand dollars. His actions posed an imminent threat to our national security.”

    WHY YOU SHOULD KNOW THIS. Criminal Intellectual Property activity is no laughing matter. Those who criminally interfere with the Intellectual Property of others cause damage, endanger public health and harm national security. They justly face jail time and fines. So no one should strive to be awarded a Crippy for 2018.

  • IP BLAWG

    You're a Mean One, Dr. Seuss

    Beverly A. Berneman
    Tuesday, 19 December 2017

    Dr. Seuss’ Estate doesn’t have the Christmas spirit. Matthew Lombardo wrote a play called “Who’s Holiday”. It’s a sort of sequel to Dr. Seuss’ “How the Grinch Stole Christmas” in which Cindy-Lou Who is all grown up and has issues. Dr. Seuss’ estate is aggressive about protecting the original works (See more below). So, of course, the Estate sued for copyright infringement to block Who’s Holiday. The Estate lost. The court held that “Who’s Holiday” falls squarely within the defense of fair use. Using the four prong fair use test, the court found that the nature of the use was obviously parody and weighs in favor of fair use. “The play subverts the expectations of the Seussian genre, and lampoons the Grinch by making Cindy-Lou's naiveté, Who-Ville's endlessly-smiling, problem-free citizens and Dr. Seuss' rhyming innocence all appear ridiculous. . .” The court found the second prong, the nature of the original work, didn’t play a big role in the analysis. For the third prong, the court held that parody gives a long leash to quote and refer to the original. Even though Who’s Holiday used a substantial amount of the original work, it was not excessive in relation to the purpose of parody. The fourth prong determines whether the alleged infringing work supplants the market for the original. The court found that there was virtually no possibility that someone looking to buy a children’s book would buy tickets to an adult themed play about one of the characters instead.

    WHY YOU SHOULD KNOW THIS. As you may remember, Dr. Seuss’ Estate sued ComicMix for copyright infringement. ComicMix had started a Kickstarter campaign to fund the development of a comic mashup between Dr. Seuss’ “Oh, the Places You’ll Go” and Star Trek titled “Oh the Places You’ll Boldly Go.” The Estate’s first complaint was dismissed. (June 27, 2017, “Horton Hears a Vulcan”). The Estate amended its complaint and just defeated a motion to dismiss by ComicMix. So ComicMix’s mission to boldly go to fair use places continues.

    Happy Holidays and see you next year with more IP News for Business.

  • IP BLAWG

    Tipsy and Ugly Fight Over Holiday Sweaters

    Beverly A. Berneman
    Tuesday, 12 December 2017

    Unraveling an ugly holiday sweater Google search could create potential liability. Google AdWords is an advertising service offered by Google that allows a sponsor to pay for advertising and a website link to appear prominently. A problem arose when Ugly Christmas Sweater, Inc. used Tipsy Elves, LLC’s name in its Google AdWords. Tipsy Elves sued Ugly Christmas Sweater for trademark infringement and other related causes of action. Tipsy Elves had a slippery hill to climb to prove its case. The vast majority of trademark infringement cases involving Google AdWords come out against the plaintiff. It appears that the parties settled their differences and Tipsy Elves dismissed its case. Ugly Christmas Sweaters’ Google AdWords no longer come up in a Google search of Tipsy Elves.

    WHY YOU SHOULD KNOW THIS. Google AdWords creates an opportunity for competitive advertising that might not be available in any other medium. Pursuing ad words for trademark infringement has problems, so far. Yet it shouldn’t chill pursuing the issue as the courts knit a remedy for sponsored misleading search engine results.

    This post is in honor of Golan Christie Taglia LLP’s first annual Ugly Holiday Outfit Contest which is coming up on December 15, 2017. The photo shows GCT associate, Anthony J. D’Agostino, modeling his contest entry.

  • Benefits Bulletin

    No Plan Document? No Problem!

    Andrew S. Williams
    Thursday, 07 December 2017

    Many of us have believed that every ERISA plan must have both a plan document and a summary plan description (“SPD”). An SPD is required for all ERISA plans in order to explain them in plain English. ERISA also requires subject plans to have a “written instrument” and it is the usual practice, for retirement plans in particular, to have both a plan document and an SPD.

    In the absence of a separate plan document, can a plan’s SPD itself also satisfy the ERISA “written instrument” requirement? A recent decision of the Firth Circuit Court of Appeals (Rhea v. Alan Ritchey, Inc. Welfare Benefit Plan) says yes.

    Because many insured group health plans have no documentation other than an SPD, this decision may provide a defense to employers who are sued because their group health and other welfare plans are documented only by an SPD and, therefore, are alleged to fail to meet ERISA’s so-called “plan document” requirement.

    In reaching its decision in Rhea, the Fifth Circuit rejected arguments that the defendant’s SPD was deficient because it referenced a separate, non-existent “plan document.” The Court also found that the SPD’s short hand description of procedures for amending the plan and its funding arrangement satisfied applicable ERISA requirements.

    Although the decision in Rhea recognizes the reality that most sponsors of insured group health plans do not have a separate plan document, note that many of those plans do not even have an SPD. This is because their insurance company has provided only an insurance company “certificate of coverage.” That type of documentation as well as SPDs that lack all the required provisions are not covered by the decision of the Court in Rhea.

    Takeaway:

    Sponsors of insured group health plans with only an SPD and not a separate plan document can relax – but only if their SPD’s satisfy the applicable ERISA “written instrument” requirements. Also bear in mind that there are other reasons to have a separate plan document. SPDs are prepared by insurance companies and may not include optional provisions that plan sponsors frequently include in separate plan documents. Also, more employers are adopting “wrap plan” documents that consolidate all of their welfare benefits such as group health, group life and group disability plans into a single plan to allow ERISA annual reporting on just one Form 5500.

  • IP BLAWG

    No Vicarious Thrills Here

    Beverly A. Berneman
    Tuesday, 05 December 2017

    Be careful not to control someone else’s infringing activities. Barcroft Media Ltd. provides a video and image library available for download. Photographer, Jeffrey R. Werner, filed suit against Barcroft alleging that it allowed Valnet Inc. to download his photos without his consent. Jeffrey alleged that Barcroft materially contributed to Valnet’s infringement by granting Valnet a retroactive license. Barcroft brought a motion to dismiss arguing that Jeffrey didn’t state a claim. The court denied the motion deciding that Jeffrey stated a claim for vicarious liability and contributory infringement. Although the court expressed some doubt as to whether Jeffery’s going to be able to prove the facts to support his case.

    **WHY YOU SHOULD KNOW THIS. ** A party that is one step removed from infringing activity can get caught in the litigation net under two theories of secondary liability. One type is vicarious liability which has two elements: (1) the right and ability to supervise or control the infringing activity; and (2) a direct financial benefit from that activity. The other type is "contributory infringement" in which one induces, causes or materially contributes to copyright infringement. To avoid secondary liability, it’s always best to step away and not enable potential copyright infringement.

  • IP BLAWG

    There is no Shame in That

    Beverly A. Berneman
    Tuesday, 28 November 2017

    Submitting an idea doesn’t mean you own it. Author, Dan Rosen, had a screenplay called “Darci’s Walk of Fame”. For those who are not ‘in the know’, the standard elements of a walk of shame are: (1) a one night stand; (2) waking up the next morning in someone else’s bed; and (3) having to walk (or taxi or Uber or Lyft) home in the clothes you wore the night before. Dan was lucky to get a meeting with actress and producer, Elizabeth Banks and her husband to present his screenplay. After discussing the plot line, characters, and themes, Banks and her husband took a pass. Not long after the meeting, Banks starred in the 2014 movie “Walk of Shame” which wasn’t exactly a box office hit. Dan’s assignee, Shame on You Productions, Inc. sued Banks, her husband, and the film’s production based on copyright infringement and an implied contract. The court applied the extrinsic test to determine if infringement occurred. The extrinsic test focuses on specific similarities between two works. Scenes a faire (standard situations that flow naturally from the plot) are disregarded. The two works shared the “walk of shame” premise and some natural elements that flowed from it, but the narratives and characters were different. Shame on You’s case was dismissed and affirmed on appeal.

    WHY YOU SHOULD KNOW THIS. When Dan submitted his idea to Banks and her husband, he believed that his idea would belong to him. But, an idea alone is not protectable by copyright. Only the expression of the idea is. This is a prime example of the problem with idea submission cases. When submitting ideas, there’s a Catch 22. It’s best to make sure that proper protections are in place. But anyone in an industry that is prone to idea submissions is reticent about accepting any unsolicited ideas or signing any idea protection documents such as non-disclosure agreements.

  • IP BLAWG

    Yummy Bread – But It’s a Secret

    Beverly A. Berneman
    Tuesday, 14 November 2017

    Trade secrets are a good way to protect a recipe. Sycamore Family Bakery Inc. sold its assets to Bimbo Bakeries USA. Included in the assets was Sycamore’s secret recipe for Grandma Sycamore’s Home-Maid Bread. When Leland Sycamore went to work for US Bakery, US Bakery started selling bread made from the same recipe. US Bakery also mimicked Bimbo’s packaging. Bimbo sued for trade secret misappropriation and false advertising. A jury awarded Bimbo $2 million.

    WHY YOU SHOULD KNOW THIS. There are two primary lessons here. First, a properly protected trade secret has a lot of value. Trade secrets are pretty much the only way to protect a recipe. Second, when you sell your trade secret, you can’t use it anymore.

  • Benefits Bulletin

    DOL Targets Plans With Missing Participants

    Andrew S. Williams
    Wednesday, 08 November 2017

    It's a Familiar Story

    You or your retirement plan’s third party administrator (TPA) need to make a benefit distribution to an ex-employee. But the employer’s records are out of date and the former employee cannot be located. Worse yet, the missing participant has attained age 70½ so the plan is required to make minimum distributions (RMDs) but cannot do so.

    Can you sit back and wait for the missing ex-employee to come forward and claim their benefits? If they never show up, can you forfeit their benefits?

    The U.S. Department of Labor (DOL) is reported to be targeting retirement plans with missing participants for audit. By examining Form 5500 annual reports, the DOL discovered that some plans were reporting a larger number of terminated vested participants who were not receiving benefits. Worse yet, the DOL was able to contact a significant number of these “missing” participants by simply sending a certified letter to their last known address. As a result, the DOL has reportedly initiated a national audit campaign targeting plans with missing participants with a view towards treating lackadaisical efforts to locate them as a breach of fiduciary duty. And, the IRS can weigh in with additional penalties for failure to make RMDs to those ex-employees who have attained age 70½.

    What to do? Well, the IRS has recently provided a get out of jail card that works if you follow the mandated procedure for finding missing participants. So, what is the secret sauce?

    If the plan has taken all of the following steps, the IRS will not challenge your plan for failure to make RMDs:

    • Searched plan and related plan, sponsor, and publicly-available records or directories for alternative contact information.
    • Used any of the search methods below:
      • A commercial locator service;
      • A credit reporting agency; or
      • A proprietary internet search tool for locating individuals.
    • Attempted contact via United States Postal Service certified mail to the last known mailing address and through appropriate means for any address or contact information (including email addresses and telephone numbers).

    Also bear in mind that the DOL expects employees to be proactive and take steps to locate missing participants before their benefit start dates.

    Takeaway: You or your plan’s TPA need to take appropriate steps to locate missing participants before their plan benefits are payable. This is likely to be successful with a significant number of ex-employees. However, for those who stay missing, you will want to follow the IRS drill set out above before those participants reach age 70½.

  • IP BLAWG

    Trademark Goes Down for the Count

    Beverly A. Berneman
    Tuesday, 07 November 2017

    A licensee can’t knock out a confusingly similar trademark. Julie A. Moreno licensed the Mexican trademark, DEPORTES CASANOVA, for sports equipment. Julie challenged Pro Boxing Supplies, Inc.’s trademark applications and registrations for CASANOVA due to a likelihood of confusion. The TTAB denied Julie’s petitions. While this looked like a priority of use problem, the real problem was that a licensee and not the owner/licensor was claiming priority of use. The TTAB ruled against Julie because: “Allowing a licensee to claim priority for itself in an inter parties proceeding based on the licensor’s use of the mark (whether through the license or otherwise), could result in a licensee being able to claim de facto ownership of the licensed mark.”

    WHY YOU SHOULD KNOW THIS. This was a case of first impression for the Board. The Board had dealt with many cases in which the owner and its licensee jointly enforce the trademarks. But this was the first time the Board had to address whether a licensee alone had standing to enforce a licensor’s trademark rights. The Board said no. So a licensee should always insist that a trademark license either require the owner to challenge confusingly similar marks or join with the licensee to do so.

  • IP BLAWG

    Spooky Banana Halloween

    Beverly A. Berneman
    Tuesday, 31 October 2017

    A banana costume could infringe on a banana costume. If you bought a banana costume for Halloween today, you may have purchased a copyright infringing product. Rasta Imposta sued Kmart for selling alleged knockoffs of Rasta Imposta’s banana costume. Costumes are generally considered clothing which are useful articles and can’t be copyrighted (Whimiscality, Inc. v. Rubie’s Costumes which held a child’s pumpkin costume could not be copyrighted). But masks can be copyrighted because they aren’t considered useful articles. (Masquerade Novelty v. Unique Industries which held that animal nose masks can be copyrighted). But would a banana costume be considered clothing and not copyrightable? We’re going to have to live in limbo because Rasta Imposta and Kmart settled.

    WHY YOU SHOULD KNOW THIS. Happy Halloween.

  • IP BLAWG

    Eleven's Frozen Eggos Are Safe

    Beverly A. Berneman
    Tuesday, 24 October 2017

    We celebrate the premier of Season 2 of Netflix’s hit horror series, Stranger Things, with a not-so-spooky cease and desist letter. The popularity of Stranger Things seeped into the culture. So much so, that in August 2017, Chicago-based Emporium Arcade Bar opened a pop-up location called “The Upside Down” which was designed to look like the sets from the series. The only problem was that they didn’t get permission from Netflix. Netflix’s in-house lawyers sent a cease and desist letter. Netflix took an even-tempered, but effective, approach. The letter could be summarized but it’s much better to see it in its entirety:

    "Danny and Doug,

    My walkie talkie is busted so I had to write this note instead. I heard you launched a Stranger Things pop-up bar at your Logan Square location. Look, I don’t want you to think I’m a total wastoid, and I love how much you guys love the show. (Just wait until you see Season 2!) But unless I’m living in the Upside Down, I don’t think we did a deal with you for this pop-up. You’re obviously creative types, so I’m sure you can appreciate that it’s important to us to have a say in how our fans encounter the worlds we build.

    We’re not going to go full Dr. Brenner on you, but we ask that you please (1) not extend the pop-up beyond its 6 week run ending in September, and (2) reach out to us for permission if you plan to do something like this again. Let me know as soon as possible that you agree to these requests.

    We love our fans more than anything, but you should know the Demogorgon is not always as forgiving. So please don’t make us call your mom."

    The bar owners cooperated and closed down as planned.

    WHY YOU SHOULD KNOW THIS. Owners have a right to shut down infringement of their Intellectual Property. Sending a cease and desist letter to the infringer is a first step. But cease and desist letters come in all shapes and sizes. An aggressive letter may be appropriate for stopping an infringing competitor. But not so much when dealing with a small company who might have infringed unintentionally. Netflix received a lot of good press for its handling of the Stranger Things pop-up bar. It got the point across without hurting the bar’s owners and alienating the fan base.

  • IP BLAWG

    Going Nuclear

    Beverly A. Berneman
    Tuesday, 17 October 2017

    The Defend Trade Secrets Act of 2016 can go nuclear to stop misappropriation. The Defend Trade Secrets Act of 2016 (“DTSA”), which created a federal cause of action for misappropriation, has one amazing feature that’s new to trade secret litigation. It allows the court to order seizure of stolen trade secrets in “extraordinary circumstances” without advance notice. This has been called the “nuclear option”. Because it’s a draconian remedy, courts have been reluctant to enter seizure orders. The recent case of Mission Capital Advisors LLC v. Romaka, gives a clue for determining extraordinary circumstances. According to court documents, Romaka had downloaded Mission Capital’s entire 65,000 person client list while he was receiving employment offers from Mission Capital’s competitors. In granting an order for seizure, the court cited Romaka’s activities such as downloading the files while he was absent from work for several weeks; he said that he deleted the files, when he hadn’t; and he had downloaded other proprietary information and stored it on his computer. Although Romaka was cooperative originally, he didn’t respond to Mission Capital’s attempts to contact him. The court ordered U.S. Marshalls to go to his home, make a forensic copy of his computer and then permanently delete the files.

    WHY YOU SHOULD KNOW THIS. The DTSA nuclear option cannot be invoked in every case. The "nuclear option" in the guise of a seizure order is still being explored by litigants and the courts. But, the Mission Capital test may help shape the appropriateness of the remedy.

  • IP BLAWG

    Click at Your Own Risk

    Beverly A. Berneman
    Tuesday, 10 October 2017

    “I agree” buttons can create obligations you don’t like. When a user signs up for an Uber Technologies Inc. account, the user has to click on a button that says “By creating an Uber account, you agree to the TERMS OF SERVICE & PRIVACY POLICY.” The capitalized phrase has a hyperlink in bright blue and underlined, which links to another screen containing a button that allowed users to view Uber’s Terms of Service and Privacy Policy. Uber’s Terms contain a mandatory arbitration clause. Travis Kalernick signed up for an Uber account. He brought a class action suit in New York District Court against Uber alleging that Uber’s pricing algorithm violated antitrust laws. Kalernick claimed he didn’t recall seeing or following the hyperlink to the Terms and so he shouldn’t be bound by the arbitration clause. Uber brought a motion to dismiss the case to enforce the arbitration clause. Uber lost the motion at the trial level but the Second Circuit Court of Appeals reversed and remanded the case back to the trial court. The problem for Uber is that before it brought the motion, Uber had begun exchanging discovery materials with Kalernick. This means that Uber may have waived the arbitration clause.

    WHY YOU SHOULD KNOW THIS. The enforcement of on-line terms and conditions has been problematic for courts. The amorphous quality of an on-line terms and conditions means there is no signature demonstrating agreement, no version control and no way to verify that a party actually read the terms. So, many courts have come up with a test for enforceability. The primary components are that (1) the terms and conditions have to be easily accessible; and (2) the user has to do something affirmative to show agreement. According to the Second Circuit Court of Appeals, Uber was able to show both components in this case. Of note is that Kalernick couldn’t have created his Uber account without agreeing to the terms. So Kalernick’s faulty memory about it was not an excuse. Alas, Uber may have won the battle and lost the war by participating in the litigation before it sought to enforce the arbitration clause.

  • IP BLAWG

    A Sharp Stick in the Shoulder

    Beverly A. Berneman
    Tuesday, 03 October 2017

    Prior art can stop a patent. Dr. Steven Chudik sought to patent an implant for a portion of the humerus bone that would be utilized as part of shoulder replacement surgery. The Patent Trial and Appeal Board held that a French patent barred issuance of the patent as prior art. The Federal Circuit affirmed. So Dr. Chudik won’t be getting a patent.

    WHY YOU SHOULD KNOW THIS. A patent has to be new, useful and non-obvious. “New” was Dr. Chudik’s problem. An invention isn’t new if there is prior art. The term, “prior art” sounds straightforward but can have a lot of nuances. In a nutshell, prior art is any of the following: (i) a description of the invention in a patent issued anywhere in the world prior to the patent applicant inventing it; (ii) a description of the invention in a printed publication published anywhere in the world prior to the patent applicant inventing it; or (iii) the invention is publicly known in the US, but not necessarily patented or published, prior to the patent applicant inventing it.

    The ultimate question of whether any of these exist is best left to an experienced patent attorney who can do a due diligence search.

  • Benefits Bulletin

    Group Health Plan Audit Requirement: Who Do You Trust?

    Andrew S. Williams
    Thursday, 28 September 2017

    Most larger group health plans are self-funded, which means the employer, not an insurer, is primarily responsible for paying benefits. These plans also are likely to require employee contributions towards the cost of benefits, and those contributions typically are paid to the employer (not a trust) on a pre-tax basis through a cafeteria (Section 125) plan.

    Is a self-funded group health plan with more than 100 participants required to have an annual audit? There seems to be a difference of opinion among professionals on this question. But let’s look at the rules on group health plans and other “welfare plans.”

    The applicable Department of Labor regulations provide certain welfare plans “relief” from the annual audit requirement. The instructions for the annual report (Form 5500) refer to DOL Technical Release 1992-01 for clarification of the exemption. That release bases the availability of relief from the audit requirement for welfare plans with more than 100 participants on whether or not the contributory plan provides benefits “solely from the general assets of the employer.” If employee contributions are used for any purpose other than paying group health or HMO premiums, then benefits are not deemed to be paid solely from the employer’s general assets – and the audit requirement would apply. This is set out in the following extract from the DOL release:

    In accordance with the terms of the regulations, the relief afforded by [the regulations] is not available to any welfare plan with respect to which benefits or premiums are paid from a trust. Moreover, even in the absence of a trust…the exemptive relief would, in the absence of additional relief, be available only to those contributory welfare plans which apply participant contributions toward the payment of premiums in accordance with the terms of the regulations. For example, a welfare plan that applies participant contributions directly to the payment of benefits (or indirectly by way of reimbursement to the employer) would not qualify for exemptive relief because the benefits under such a plan could not be considered as paid solely from the general assets of the employer.

    Despite the above authority, the accounting community has focused on whether or not the subject welfare plan funds benefits through a trust. Of course, if there is a trust, the audit requirement clearly applies as stated in the first sentence of the above extract. However, the above text goes on to deal with the applicability of the exemption to contributory welfare plans that do not use a trust. So it seems clear that the audit requirement does not turn entirely on the question of whether or not the plan is funded through a trust. But note Q&A 18 published by the American Institute of Certified Public Accountants which states that relief from the audit requirement for contributory self-funded welfare plans with more than 100 participants is based on whether or not the plan is funded through a trust:

    Question:

    Assume a partially insured H&W plan where the employer pays claims to a certain level and then reinsurance assumes the liability. There are over 100 participants, and the employer and employees each pay a portion of the premiums. The employee share is paid on a pretax basis through a section 125 plan. There is no trust established, but at year end there may be a minimal payable to the third party administrator for regular monthly charges and a small reinsurance receivable, depending on timing. Does this plan require an audit?

    Answer:

    No, the plan does not require an audit. According to the fact pattern described, no separate trust exists to hold the assets of this plan, and therefore it is not a funded plan for ERISA purposes. ERISA exempts unfunded plans from the requirement to perform an annual audit. Participant contributions made through a section 125 cafeteria plan are not required to be held in trust per DOL Technical Release 92-1, and as long as no trust is being utilized, no audit requirement exists. (Source: AICPA Audit and Accounting Guide, Employee Benefit Plans, March 2004, Appendix A paragraphs A.25 and A.28.)

    So, are the accountants right in saying that self-funded group health plans with more than 100 participants – and no trust – are always exempt from the annual audit requirement? Can that conclusion be sustained by the technical release quoted above? For sponsors of larger self-funded group health plans, the answer spells the difference between ERISA compliance and non-compliance. Remember, any plan annual report that is filed without a required plan audit is not complete and triggers a Department of Labor non-filing penalty of up to $2,063 per day.

    Takeaway: Well, should you trust the accountants on this one? We are open minded, but we’re betting that the larger self-funded group health plans with employee contributions are required to have annual plan audits.

  • IP BLAWG

    A Spoonful of No

    Beverly A. Berneman
    Tuesday, 26 September 2017

    Catchy phrases don’t always function as trademarks. Melissa Benson wanted to trademark her slogan “Still Spooning”. It appeared on her interesting mix of goods, flatware and fishing lures. Milk & Honey LLC, who sells houseware using the same trademark, opposed the registration. The Trademark Trial and Appeal Board didn’t accept Milk & Honey’s objection based on Benson’s mark being merely a descriptive argument. But, the Board accepted Milk & Honey’s second argument that the words didn’t function as a mark. The Board looked at Benson’s specimens of use and determined that the consuming public would perceive the words as ornamental and reference to the engraving on the goods. So the opposition was sustained and the mark wasn’t registered.

    WHY YOU SHOULD KNOW THIS. Look at the photo accompanying this post. This is a good example of an ornamental use that (alone) is not trademark use. Not every designation that is used in connection with goods or services functions as a trademark. Words that are informational in nature, or that express support, admiration or affiliation don’t function as trademarks and so can’t be registered. There can be a fine line between functioning and not functioning as a trademark. So, each trademark has to be evaluated on its own basis.

  • IP BLAWG

    SCOTUS Roundup: 2016 – 2017 Edition

    Beverly A. Berneman
    Tuesday, 19 September 2017

    During the 2016 to 2017 term, the US Supreme Court was able to put in the final word on some disputed areas of the law. But in others, not so much. Here’s a roundup:

    In TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S.Ct. 1514 (2017), SCOUTS held that the Patent Act fixes venue for patent infringement actions (1) in the judicial district where the defendant resides, or (2) where the defendant has committed acts of infringement and has a regular and established place of business. The problem is that the opinion didn’t go into great detail about prong #2.

    In SCA Hygiene Prod. Aktiebolag v. First Quality Baby Prod., LLC, 137 S.Ct. 954, 197 L.Ed.2d 292 (2017), SCOTUS held that laches cannot be used as a defense to an infringement action that was brought within the six-year statute of limitations in the Patent Act.

    In Star Athletica, L.L.C. v. Varsity Brands, Inc., 137 S.Ct. 1002, 197 L.Ed.2d 354 (2017), SCOTUS held that designs appearing on useful objects can be copyrighted as long as the design is separate from the functionality of the useful object. The problem is that the opinion didn’t give any guidance on how to test separatbility.

    In Matal v. Tam, 137 S.Ct. 1744 (2017), SCOTUS held that the US Trademark’s Office could not refuse to register a disparaging trademark because it would violate First Amendment free speech. This may not be the last word. There are other pending cases involving issues that were not directly addressed in this opinion.

    WHY YOU SHOULD KNOW THIS. These decisions were extremely narrow. SCOTUS raised more questions than they answered. Be assured that this Blawg will cover those answers when they happen. For more information about these decisions and their implications, as well as updates in other areas of the law, visit Golan Christie Taglia LLP’s Summer Newsletter at https://gct.law/newsletters/39.