• IP BLAWG

    Spring/Summer 2018 Update

    Beverly A. Berneman
    6/13/18

    The last word sometimes isn’t really the last word. Here’s what happened after some previous posts:

    3/21/17 – The Intrepid Heroes of Copyright, Photographers. VHT, Inc.’s obtained an $8.3 million judgment against Zillow Group, Inc. for using photos without a license. On appeal the judgment was cut almost in half. The court determined that there was insufficient evidence that anyone actually saw the vast majority of the photos. Still, $4.3 million is a lot of money.

    6/27/17 – Horton Hears a Vulcan. The lower court’s decision that fair use permitted a comic mash up between Dr. Seuss like drawings and Star Trek in “Oh the Places You’ll Boldly Go” was reversed on appeal. The appellate court determined that at least three of the four factors of fair use weighed in favor of the Dr. Seuss estate and against the creators of the parody comic book. In other words, parody is not a golden ticket for fair use.

    10/31/17 – Spooky Banana Halloween. After settling with Kmart for allegedly infringing on its banana costume, Rasta Imposta sued Kangaroo Mfg. Inc. for copyright infringement involving the same banana costume. The court granted a preliminary injunction holding that although the costume is a useful article, it does have some elements that give rise to minimal copyright protection. It appears that Rasta Imposta has peeled off another competitor.

  • IP BLAWG

    Implied License Keeps Electrical Standards Humming

    Beverly A. Berneman
    6/5/18

    An implied copyright license doesn’t need to be in writing. In Intellitech Corp., v. The Institute of Electric & Electronics Engineers, Inc. a/k/a IEEE, IEEE is a non-profit organization that was trying to set standards for electrical engineers. Intellitech contributed to the “Test Access Architecture for Three-Dimensional Stacked Integrated Circuits.” Intellitech sued IEEE for copyright infringement when IEEE tried to use Intellitech’s contributions. The court denied Intellitech’s motion for summary judgment. The court held that even if Intellitech owned the copyright in the work, IEEE had a non-exclusive implied license to use it because the parties always intended that result.

    WHY YOU SHOULD KNOW THIS. It’s always best not to rely on an implied anything, no less an implied copyright license. A written license agreement or work for hire agreement is not only preferable, it’s a must. The documents should be drafted and signed every time someone creates a work for another. In this case, the IEEE had written policies about IEEE's ability to use contributions to the standards. So Intellitech knew from the beginning that its contributions were going to be used by IEEE in its documentation.

  • IP BLAWG

    Myopic View of a Specimen

    Beverly A. Berneman
    5/29/18

    A specimen of use can make or break a trademark application. Pitney Bowes wanted to register its new logo design as a trademark for mailing services among other things. For its specimen of use, Pitney Bowes used a screen shot from its website showing a picture of its “Mail&Go” kiosk that featured the new logo. The examining attorney refused the specimen saying that it showed the sale of products but not mailing services. Pitney Bowes appealed to the Trademark Trial and Appeal Board who reversed the refusal. The Board held that the examining attorney should have given greater deference to Pitney Bowes’ common sense explanation that its mailing services were offered to consumers through the self-service kiosk. Ultimately, Pitney Bowes submitted a substitute specimen of use anyway and the trademark has been registered.

    WHY YOU SHOULD KNOW THIS. A specimen is a real-world example of how you are using your trademark on goods or in the offer of services. The Examining Attorney is going to match the specimen to the description of goods and services. This case shows how technical Examining Attorneys can be in that analysis. If you file a use based application, it might be helpful to create the description of goods and services from the specimen you are going to submit. If you are filing an Intent to Use application, then the specimen should be created from the description in the application. But what happens if you file an Intent to Use application and when it comes time to file the specimen of use, the goods or services have changed from the original description? If the change is material, you might have to file a new application.

  • Benefits Bulletin

    Are You A "Checkbook Fiduciary?"

    Andrew S. Williams
    5/10/18

    There are judicial decisions holding that a business owner can be personally responsible when the owner has control over company finances and exercises such authority by paying company creditors instead of making required payments to a welfare benefit plan. But a recent decision of the U.S. Court of Appeals for the Ninth Circuit holds that an employer does not become an ERISA fiduciary merely because it breaks its contractual obligations to make welfare plan contributions (see Glazing Health & Welfare Fund v. Lamek).

    In the Lamek decision, the Court considered whether or not unpaid contributions could be considered “plan assets” so that parties in control of those assets would be deemed fiduciaries to the plan. The Court found that:

    …even an ERISA plan that treats unpaid contributions as plan assets does not make an employer a fiduciary with respect to those owed funds.

    This is good news to plan sponsors, especially those who contribute to union sponsored health and welfare funds. Under Lamek, parties to an ERISA plan cannot by contract designate unpaid contributions as “plan assets” in order to make employers plan fiduciaries. However, not all circuit courts agree with the Ninth Circuit and employers in the Second Circuit (New York, Connecticut and Vermont) and the Eleventh Circuit (Alabama, Georgia and Florida) should be wary of collective bargaining agreements that define unpaid employer contributions as plan assets. Other circuit courts such as the Court of Appeals for the Seventh Circuit in Chicago have not yet ruled on this issue. It may eventually take a Supreme Court decision to resolve the conflict among the circuit courts. Until then, there will be no nationwide judicial resolution of this matter.

    Takeaway:

    The Ninth Circuit decision is a favorable development for employers in California and the other West Coast states included in the Ninth Circuit. For the rest of the country, it’s wait-and-see what happens in the circuit courts – or the U.S. Supreme Court.

  • IP BLAWG

    There Wasn't a Dry Eye in the PTAB

    Beverly A. Berneman
    5/8/18

    Selling a patent doesn’t extend its limited life. Allergan, Inc. owned the patents for Restasis which treats severe dry eyes by producing tears. The terms of the patents were about to expire. So, Allergan “sold“ the patents to the Saint Regis Mohawk Tribe and who then licensed all of the rights relating to the patents back for millions in upfront and annual royalties. In an IPR between Mylan Pharmaceuticals and Allergan, the Tribe unsuccessfully tried to dismiss the proceedings based on sovereign immunity. The PTAB’s decision had several important points which all seemed to spring from the PTAB’s view that any rights the Tribe had were “illusory”. First, it held that Allergan’s exclusive rights to the patent under the license from the Tribe were irrevocable and lasted only until the patents expired or are invalidated. Second, since Allergan retained the right to sue, the Tribe had no interest in the proceedings. Third, sovereign immunity is not a defense to IPR proceedings.

    WHY YOU SHOULD KNOW THIS. Unlike other types of IP, patents depend upon governmental sanctions in order to exist. The patent gives the owner the right to exclude others from practicing the patent for 20 years. After that, the patent goes into the public domain. Once in the public domain, generic drug manufacturers can manufacture and sell the same pharmaceutical at lower prices. This, of course, poses a problem for the owners of patents like Allergan who would like nothing more than to extend their exclusive rights for longer than 20 years. Allergan and the Tribe tried a tricky maneuver to get around the limited life of a patent. It doesn’t appear to be working.

  • IP BLAWG

    Possession is Nine Tenths of the Law or Is It?

    Beverly A. Berneman
    5/1/18

    You own your domain name, right? Maybe not. While working for the law firm, Trowbridge Sidoti LLP, attorney, Kim Taylor, registered a large number of domain names for the firm, including SyndicationLawyers.com. She registered them in her own name instead of the firm’s, even though they were going to be used by the firm. After she left the firm, Kim refused to transfer the domain names claiming she owned them. Trowbridge Sidoti sued. After 10 hours of deliberation, the jury returned a verdict against Taylor with respect to all of the domain names. The jury found that Taylor’s actions only caused harm with respect to the SyndicationLawyers.com domain name and awarded $7,800.00 in damages.

    WHY YOU SHOULD KNOW THIS. This scenario is not that unusual. An employee or independent contractor is given the task of registering domain names for a company. Wittingly or unwittingly, the employee or independent contractor registers the domain name in their own name. When the relationship is severed, the company finds out that it doesn’t own its own domain name. Getting the domain name transferred to the company becomes an issue if the parties didn’t part on good terms. As this case proves, it even happens to lawyers.

  • IP BLAWG

    Will Assign Doesn’t Mean Did Assign

    Beverly A. Berneman
    4/24/18

    Agreeing to assign a patent in the future isn’t an assignment at all. Three co-inventors of a patent were employed by Company A. The co-inventors signed an employment agreement stating they “will assign” their rights to any patentable invention they created during their employment. Company A transferred its assets to Company B. Only two of the inventors assigned their patent rights to Company B. Based upon the employment agreement between the original company and the third inventor, the USPTO allowed Company B to prosecute the patent without the third inventor actually assigning the patent. Company B dissolved and its assets were transferred to Advanced Video Techs, LLC. Advanced Video then brought a patent infringement suit against HTC Corp. The district court dismissed the case holding that Advanced Video didn’t have standing to bring a patent infringement suit without joining the non-assigning inventor in the suit. On appeal, the Federal Circuit Court of Appeals affirmed the decision that Advanced Video didn’t have standing. The Federal Circuit reasoned that the agreement to assign something in the future, is not an assignment. The third co-inventor only promised to assign a future patent so she still had part ownership of the patent and had to be a party to the infringement suit.

    WHY YOU SHOULD KNOW THIS. Inventors hold the rights to a patentable invention until those rights are assigned. Over the years, employment agreements contemplated that employee-inventors would always be innovating and there’s no way to anticipate which inventions will be patented. So a lot of employment agreements have the employee agree to assign inventions to the employer in the future. According to this decision, just having an agreement to assign something in the future, isn’t a present assignment. So what’s an employer to do? A two prong approach may be required. First, instead of a future assignment, have the employee make a present assignment of all Intellectual Property rights. Second, decide at what point in the research and development process, the employee will assign his or her patent in a particular invention and then follow through with it. One thing that the decision didn’t seem to address is whether the employer would have a cause of action against the employee who breached the employment agreement by failing to assign the patent as agreed.

  • IP BLAWG

    The Long and Winding Road of Tom Brady Photos

    Beverly A. Berneman
    4/17/18

    Embedding a Twitter photo can be copyright infringement. It all started when Justin Goldman took photos of Tom Brady and posted them on Snapchat. Content on Snapchat is supposed to disappear after a while. These photos didn’t. Instead, the photos ended up being reposted on various social media sites, including Twitter. Some media outlets then embedded the third party tweets with the photos in articles on their respective websites. Goldman filed suit against the media outlets for copyright infringement. The defendants brought a motion to dismiss arguing that they aren’t liable because they were protected under the “Server Test”. The Server Test says that images generated by a search engine, like Google, aren’t copyright infringement because search engines don’t store images. The court denied the motion. This wasn’t a case of linking to the origin of the photos. The defendants actively embedded the images which were immediately available upon opening the offending webpage.

    WHY YOU SHOULD KNOW THIS. For now, this case is considered an outlier. But since it’s out there, the best practice is to use extreme caution. The web is full of great content, especially photographs. But there’s a line between linking (which is ok) and embedding without permission (which isn’t ok).

  • IP BLAWG

    The Case of the Disappearing Discount

    Beverly A. Berneman
    4/10/18

    Advertising a discount that disappears at point of purchase is a problem. A customer of Hobby Lobby, wanted to buy a picture frame. She believed she was getting a 50 percent discount on a photo frame due to an in-store sign stating "Photo Frames 50% OFF the Marked price.” Hobby Lobby didn’t honor the discount but instead pointed to disclaimer language that said, "DISCOUNTS PROVIDED EVERY DAY; MARKED PRICES REFLECT GENERAL U.S. MARKET VALUE FOR SIMILAR PRODUCTS." The customer brought a class action suit based on false advertising as well as other causes of action. Hobby Lobby’s motion to dismiss was denied. The court held that a reasonable consumer could have been misled despite the disclaimer language. So the suit will proceed.

    WHY YOU SHOULD KNOW THIS. This is just one example of recent cases and settlements involving phantom discounts. Federal Trade Commission regulations and state laws govern advertising. The basics of proper advertising are pretty standard. Don’t use unfair, deceptive, untrue or misleading advertising. Advertising a price or a discount and then not honoring it falls squarely within prohibited conduct. Hobby Lobby’s disclaimer language didn’t excuse it from complying with the advertising rules.

  • Benefits Bulletin

    DOL Decrees New Rules For ESOP Fiduciaries

    Andrew S. Williams
    4/9/18

    All transactions involving the purchase or redemption of employer stock by an Employee Stock Ownership Plan (“ESOP”) must be conducted at fair market value. This assures that the statutory prohibited transaction exceptions available to compliant ESOPs will apply. Fair market value for private companies must be determined by an independent appraisal. This would include annual valuations and, more important, the valuation of the ESOP’s critical acquisition of the employer stock that it is required to maintain as its “principal investment.”

    ESOP appraisals can be influenced by misleading information provided by company management. Appraisers can even give their approval to ESOP transactions that leave the employer-sponsor insolvent as in the case of the Chicago Tribune ESOP. The resulting litigation was concluded by a settlement agreement with the Department of Labor that charges ESOP fiduciaries with the responsibility of performing their own due diligence investigation of any ESOP appraisal report.

    A recent Department of Labor settlement agreement with First Banker Trust Services (“FBTS”) resolves three separate cases and outlines additional valuation guidelines that ESOP fiduciaries (including the employer-sponsor of an ESOP) should consider any time they deal with a valuation report issued by the ESOP appraiser, or “Valuation Advisor.”

    Each of the three cases alleged that FBTS approved ESOP transactions without undertaking a thorough investigation of the value of the company stock involved. Because the stock valuations were based on unrealistic projections of future company earnings, they overstated the value of the stock of each sponsor. As a result, the three subject ESOPs allegedly overpaid for the stock purchased by each of them. As part of the settlement agreement, FBTS also agreed to pay $15.75 million to the three ESOPs.

    The FBTS settlement agreement sets out the following requirements and, although they technically apply only to FBTS, ESOP trustees and administrative committees should consider them as generally applicable compliance guidelines (these are just highlights of the new requirements):

    • The selection process for any Valuation Advisor must include at least three references and review of any regulatory proceedings involving the Advisor. The Valuation Advisor cannot have previously worked for either the ESOP sponsor or a committee of its employees.

    • Any valuation report must comment on, among other things, the financial impact of a proposed ESOP transaction and related securities acquisition debt on the ESOP sponsor (remember the Tribune ESOP!).

    • Valuation reports should be based on audited financial statements of the sponsor for the prior five year period. If unaudited or qualified financial statements are used, any selling shareholders who are officers, managers or directors of the ESOP sponsor must agree to compensate the ESOP for any losses attributable to inaccuracies in the sponsor’s financial statements.

    • If the ESOP pays a control premium for company stock, ESOP fiduciaries must document that the ESOP is obtaining voting control in fact. Any limitations on such voting control must be identified and valued in terms of amounts paid to the ESOP as “consideration” for those limitations.

    • Valuation reports must consider whether a proposed ESOP loan is at least as favorable to the ESOP as any loan between the ESOP sponsor and any of its executives in the prior two years.

    • The ESOP trustee must provide the Valuation Advisor certain specific information about the sponsor, including offers to purchase or sell its stock in the prior two year period as well as any sponsor defaults under a loan agreement, any management letters from the sponsor’s accountant and information relating to any sponsor valuations provided to the IRS during the prior five years.

    • The ESOP trustee must consider whether or not it is appropriate to include a purchase price adjustment or claw-back provision in any share purchase agreement in order to take into account a future corporate event or other event that might adversely affect the value of the sponsor’s stock.

    • The ESOP trustee must meet certain documentary requirements, including a certification by its employees who participated in decision making with respect to an ESOP transaction that they have read the valuation report and considered the reasonableness of its underlying assumptions and value conclusion. 

    Takeaways:

    ESOP sponsors and financial institutions involved in ESOP transactions should consider the new territory staked out in the FBTS settlement agreement. First of all, note the requirement that company insiders agree to compensate the ESOP for errors in company financial statements if those statements are not audited financial statements. Second, the normal practice of assigning a control premium in the valuation of majority stock interests purchased by ESOPs must now be questioned by ESOP fiduciaries. This means that typical arrangements that leave incumbent management in control of the voting of ESOP stock must not only be investigated by ESOP fiduciaries but also may require the fiduciaries to determine a value for any such limitations on control – and to provide that the ESOP be “compensated” accordingly.

  • IP BLAWG

    Tequila and Cigars

    Beverly A. Berneman
    3/30/18

    Tequila and cigars go together like love and marriage; or maybe not. El Galan Inc. tried to register the word “Ternura” for a brand of cigars. The USPTO refused registration because Don Francisco Spirits LLC had already registered the same word for tequila. The USPTO said that the two products are “related”, meaning that they are complementary and linked in the minds of consumers. El Galan appealed to the TTAB. The TTAB affirmed the refusal. The TTAB reached back into history and cited a 1955 ruling by the Fifth Circuit in favor of the famous Scotch whiskey brand, Johnnie Walker, against a company that wanted to use the name for cigars. Because, after all, everyone connects whiskey and cigars. So according to the USPTO and the TTAB, the same is true for tequila and cigars. The TTAB pulled back a little by saying that the opinion should not be interpreted to mean that cigars and alcoholic beverages will always be considered related.

    **WHY YOU SHOULD KNOW THIS. ** Frankly, this ruling is a stretch. Alcohol and tobacco don’t always go together in the minds of the consuming public. This is the problem with the “relatedness” argument that can form the basis of a refusal to register. There should be some limit on a refusal to register when the same mark is being used for goods or services that don’t actually compete with each other.

  • IP BLAWG

    Peeling the Software Onion Can Cause Tears

    Beverly A. Berneman
    3/20/18

    Software can have lots of layers like an onion which can be trouble for an infringement lawsuit. In CSS, Inc. v. Herrington, CSS complained that the defendants infringed on three of its copyrighted software programs. The programs were made up of a lot of different components, including third party software and abstract ideas. The court’s opinion peeled the layers of CSS’s software onions to get to the decision. First, the court peeled off the function that each program performed because they were "ideas" of the programs and not their expression. Then the court peeled away the client/server architecture used by each of the programs because that was non-copyrightable industry-standard. Next came the third party components because they didn’t belong to either party. Next came the arrangement of the third party components didn’t have enough creativity for copyright protection. Then the court peeled away the layer that was the name/address algorithm because it was unoriginal and not copyrightable. Once the court got to the small onion core of protectable software that was left, the court held that CSS didn’t prove substantially similarity between CSS’s onion core and the defendants’ onion core. CSS may have had something that was protectable, but after peeling away the uncopyrightable components of its software it couldn’t prove infringement.

    WHY YOU SHOULD KNOW THIS. This opinion is a good road map for any pre-litigation due diligence involving software copyright infringement.

  • IP BLAWG

    March Madness Comes in Like a Lion

    Beverly A. Berneman
    3/13/18

    With March Madness upon us, we must remember its bumpy trademark road. March Madness is the uber-famous trademark of the National Collegiate Athletic Association’s championship basketball tournament. But the NCAA was not the first to use the trademark. The Illinois High School Association was. The IHSA unsuccessfully tried to stop the NCAA from using it. The court held that both had the right to use the name. Eventually, the NCAA acquired the IHSA’s rights. Once the NCAA acquired the rights, it aggressively protected the trademark. The NCAA has been able to squelch the unlicensed use of the trademark and anything that comes perilously close such as “April Madness” (for entertainment service), “Markdown Madness” (for auto sales services), “Skate Madness” (for skateboarding competitions) and “Freestyle Madness” (for various entertainment services).

    WHY YOU SHOULD KNOW THIS. It’s so tempting to use “March Madness” in an ad campaign to bring in business; especially at the retail and food industry. But to do so, a business has to be ready to pay the hefty license fees demanded by the NCAA or face the NCAA’s wrath. As the owner of the trademark, the NCAA can protect its trademark from any use that would be likely to cause customer confusion about the source or sponsorship of the product or service. And because the trademark is famous, the NCAA can protect against any use that might dilute its brand. Even if the use has nothing to do with a basketball championship.

  • IP BLAWG

    Trademark Peaceful Coexistence

    Beverly A. Berneman
    2/27/18

    Similar trademarks don’t necessarily result in a likelihood of confusion. Two recent decisions considered whether similar trademarks can coexist without causing customer confusion. In Allstate Insurance Co. v. Kia Motors America Inc., Allstate argued that Kia’s “Drive Wise” brand infringed on its “Drivewise” trademark. Kia’s product was a high end add-on for Kia’s cars. Allstate’s product was a program to reward safe driving by its insurance customers. The court held that the goods offered by the parties were not identical or even related. Customers who wanted an add-on for their car would not be confused by similar words used for an insurance company’s safe driving incentive. And the reverse would be true as well. Another case involved a similar set of facts and came out the same way. In Destileria Serralles Inc. v. Kabushiki Kaisha Donq DBA Donq Co. Ltd., the Trademark Trial and Appeal Board ruled that a Kabushiki’s Japanese bakery chain named “Donq” was not confusingly similar to Destileria’s rum brand “Don Q”. Destileria argued that many brands of liquor cross over into other types of goods and so there would be “overlap” in the minds of the consuming public. The TTAB rejected the argument because Destileria’s brand is marginally famous and purchasers would be less likely to expect expansion into other goods.

    WHY YOU SHOULD KNOW THIS. The goods offered by trademark owners need not be identical or even competitive for a customer to be confused. Even if the goods really have nothing to do with each other. The operative question is whether consumers would assume the different goods would have the same origin. In these two cases, the adjudicating body found that the goods weren’t related enough to cause overlap in the minds of customers.

  • IP BLAWG

    Divorce, Trade Secret Style

    Beverly A. Berneman
    2/20/18

    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
    2/14/18

    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
    2/7/18

    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
    2/7/18

    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
    1/30/18

    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
    1/23/18

    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
    1/16/18

    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
    1/11/18

    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
    1/9/18

    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
    12/19/17

    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
    12/12/17

    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.