• IP BLAWG

    Loose Lips Sink Trade Secret Defense

    Beverly A. Berneman
    8/20/19

    Acacia Communications got tired of paying a license fee to Viasat, Inc. for trade secret protected technology. So Acacia supposedly created replacement technology. The problem? Acacia used Viasat’s trade secrets.

    Viasat sued Acacia for trade secret misappropriation. During the litigation, Acacia’s defenses shifted. Acacia started out denying any copying. But, through discovery, Viasat found a slew of emails between Acacia’s co-founders, Christian Rasmussen and Mehrdad Givehchi, sent via their personal email addresses. They discussed how to give a new Acacia engineer a white paper on the technology. They ultimately decided to give him a USB drive containing Viasat’s trade secrets. In one email, Rasmussen wrote, "... I don't want to mail it from the company account, just in case silly things should happen down the road." Well, $49.3 million of silly things happened. The jury found that Acacia acted willfully and maliciously and awarded the huge judgment to Viasat.

    In a twist of irony, on a counterclaim by Acacia, the jury found that Viasat misappropriated Acacia's trade secrets, but that it was not done willfully. The jury awarded Acacia just $1.

    WHY YOU SHOULD KNOW THIS. Acacia’s solution to getting out of paying license fees was not ideal. In fact, it was exactly the wrong thing to do. To make matters worse, the co-founders heavily ‘papered’ their scheme. Hiding behind personal email accounts only supported the jury’s determination that Acacia’s co-founders acted willfully and maliciously. The end result was a ‘break your company’ judgment (less $1).

  • Benefits Bulletin

    Should 401(k) Fiduciaries Offer In-Plan Annuities?

    Andrew S. Williams
    8/14/19

    Recent legislation passed by both the House and the Senate with substantial bipartisan majorities (the SECURE Act and RESA) is aimed at promoting retirement savings in Section 401(k) plans.

    Legislative concerns about 401(k) participants who are financially unprepared for retirement has resulted in a number of specific provisions intended to encourage participants to save more. Those provisions include tax credits for small businesses that include automatic enrollment provisions in their 401(k) plans, expanded availability of multiple employer plans, 401(k) eligibility for tenured part-time employees, postponed start date for required minimum distributions from age 70½ to 72, and penalty free participant withdraws of up to $5,000.00 upon the birth or adoption of a child.

    The legislation also includes provisions that afford some liability protection for 401(k) fiduciaries who choose to include annuities in the investment options offered to plan participants.

    Annuity investments (or “lifetime income” options) are intended to encourage participants to save more for retirement and provide an income stream in retirement that they (and their beneficiaries) cannot outlive. But even though you cannot outlive an annuity, this protection comes at a cost. There are annuity sales commissions as well as annual maintenance fees, mortality charges, and the risk of forfeiture if you (or your beneficiary) die sooner than expected. There also is a tradeoff from the significant equity investments that many investment advisors suggest as a hedge against your outliving average life expectancies.

    In-plan annuities also offer the prospect of providing a “variable” annuity product which combines a fixed annuity component with investment funds that are intended to provide additional retirement income. But no load mutual funds will be more flexible and definitely less expensive than annuity investment funds in today’s market.

    So, Plan Fiduciary, do you want to add annuity contracts to your investment mix?

    Consider the cost and complication of an annuity product. You, as a fiduciary, need to be able to understand the annuity product before offering it to plan participants. But your participants also need to make an informed choice. Also ask yourself, is your workforce likely to save more for retirement because they can choose to invest in an annuity? Would other measures (such as auto enrollment) work better? And, will annuities appeal to the typical 401(k) participant? You may find that annuities appeal primarily to those sober and sophisticated participants who are best equipped to plan their financial affairs with traditional investment funds.

    Annuities can appeal to participants particularly when they are assessing their financial situation at or near retirement age. But adding variable annuities as an investment option for younger participants seems unduly complicated for both plan fiduciaries who have to evaluate them and participants who have to select them.

    Takeaways:

    Fiduciaries of 401(k) plans should not select an annuity investment for their plans without first thoroughly investigating the product and the financial institution behind it. Also document this investigation.

    Consider limiting any offered annuity to a fixed annuity and not offer any annuity that is bundled with investment products that are not currently cost competitive with traditional mutual funds. And if you do want to offer fixed annuities, consider providing that option only for participants at or near retirement age when they are in a better position to evaluate their income needs in retirement.

  • IP BLAWG

    Dental Supplier Gets a Judicial Root Canal

    Beverly A. Berneman
    8/13/19

    If you needed a crown or root canal lately, your dentist may have used a fancy wand to scan and send a picture of your mouth to the dental lab. Chances are that the scanner was the Itero Element scanner, a computer scanning system that is manufactured by Align Technologies. The Itero scanner requires a disposable sleeve for the wand. One of Align’s competitors, Strauss Diamond Technologies, began selling a competing sleeve, called “MagicSleeve”. In its advertisements, Strauss used Align’s trademarks in hashtags, product descriptions and product images.

    Align brought suit against Strauss and sought a preliminary injunction to stop Strauss from using its trademarks. Strauss argued that its use of the Align trademarks was “nominative fair use”. The nominative fair use defense has 3 parts: (1) the trademark is the only word available to accurately describe the product; (2) the mark is used only as is “reasonably necessary” to identify the product; and (3) the user does nothing that would suggest endorsement by the trademark owner. Putting aside the fact that the first and second elements are contradictory, the court determined that Strauss’ defense was full of cavities. Strauss’ various uses of Align’s trademarks failed at least two out of three of the nominative fair use test. Align’s motion for preliminary injunction was granted.

    WHY YOU SHOULD KNOW THIS. Nominative fair use can be a useful tool in a competitive industry. Sometimes you have to refer to your competitor’s products in order to differentiate yourself in the market. Deciding what crosses the line can be tricky. One thing we know is that Strauss crossed that line.

  • IP BLAWG

    Purple, I Mean, Orange Rain

    Beverly A. Berneman
    8/6/19

    In 1981 the well-known photographer, Lynn Goldsmith, took a series of photographs of the pop star, Prince. Goldsmith interpreted the photographs as describing a vulnerable and uncomfortable person. In 1987, Vanity Fair magazine commissioned Andy Warhol to create illustrations from the Goldsmith photos for their article titled “Purple Fame”. Warhol created “The Prince Series” consisting of 19 paintings of Prince, some of which used an orange wash of color.

    After Prince died, Vanity Fair again published copies of the Warhol works. Goldsmith says that that’s when she learned about the "Prince Series" for the first time. Goldsmith sued the Warhol Foundation, the owner of the works, for copyright infringement. A New York District court entered summary judgment for the Foundation on the basis of fair use. The court described the Warhol paintings as having removed the protectable elements of the photographs to turn Prince into an iconic, larger than life figure.

    WHY YOU SHOULD KNOW THIS. The court used the transformative nature of Warhol’s orange take on the Purple One to find fair use. Although, in this case it might take an art critic’s eye to see the court’s argument.

  • IP BLAWG

    Fraudulent Trademark Ripped Up By Terror Dog

    Beverly A. Berneman
    7/30/19

    You may recall the scene in the Ghostbusters movie where, Rick Moranis’ character begs diners in a swanky Central Park restaurant to save him from a Terror Dog. That restaurant is the famous “Tavern on the Green” that has been owned by New York City since 1934. The Tavern’s trademark has a bit of a complicated history. NYC leased the restaurant to Tavern on the Green LP (TOTG). NYC decided not to renew TOTG’s lease in 2009. That’s when NYC discovered that TOTG registered the trademark in 1978. NYC sued TOTG to cancel the registration because NYC was the owner of the trademark and not TOTG. TOTG and NYC entered into a settlement agreement that allowed TOTG to use the name outside of NYC as long as TOTG didn’t use the words “Central Park”. TOTG went ahead and used the Tavern trademark along with the words “Central Park” thereby breaching the agreement. NYC sued again. And won.

    WHY YOU SHOULD KNOW THIS. When an applicant fills out a trademark application, the applicant has to state under oath that it is the bona fide owner of the trademark. If that isn’t true, the applicant has committed a fraud in the application process. The USPTO will cancel a registration obtained by fraud. TOTG didn’t have the right to register the trademark. And even after getting the right to use the name “Tavern on the Green”, TOTG used the words “Central Park” in breach of the settlement agreement. TOTG couldn’t escape the trademark Terror Dog of its own creation.

  • IP BLAWG

    If You See Something, Say Something Fast

    Beverly A. Berneman
    7/24/19

    CMI Roadbuilding, Inc. is in the business of manufacturing road construction equipment and replacement parts. Through a series of acquisitions and mergers, CMI acquired trade secrets included in engineering documents. CMI sent its engineering documents to vendors without confidentiality notices. Iowa Parts, Inc. is in the business of manufacturing the same kind of replacement parts that CMI manufactured. Over the years, Iowa Parts hired various employees who had worked for companies acquired by CMI. Iowa Parts also reached out to vendors who had CMI’s engineering drawings. In 2002, Iowa Parts began manufacturing competing replacements parts.

    CMI knew (or should have known) that Iowa Parts was manufacturing competing replacement parts. Iowa Parts made no secret of it (pun intended). Then in 2016, Iowa Parts lowered its prices and cut deep into CMI’s revenues. That’s when CMI sued for misappropriation of trade secrets under the Defend Trade Secrets Act (“DTSA”). The Eighth Circuit Court of Appeals affirmed summary judgment in favor of Iowa Parts. The DTSA has a 3 year statute of limitations. CMI waited too long to defend its trade secrets.

    WHY YOU SHOULD KNOW THIS. Trade secrets have two primary attributes. They are (1) something that’s not generally known or readily ascertainable; and (2) subject to reasonable measures of secrecy. Allowing someone to use your trade secrets for over 14 years is not a reasonable measure of secrecy. If a trade secret is being misappropriated, the owner has to be aggressive and take action immediately. Otherwise, the trade secret is lost forever.

  • Benefits Bulletin

    Surprise Billing - And What You Can Do About It

    Andrew S. Williams
    7/22/19

    What happens when you go to an in-network facility (hospital or emergency room) and are treated by a doctor who is not in your insurance company’s PPO network? You get a bill from a specialist like a radiologist or anesthesiologist that exceeds your insurer’s normal reimbursement – and you’re stuck with the balance. Surprise! Or, as the insurers like to say, you’ve been subject to “balance billing.”

    Roughly one in six emergency room or hospital visits results in surprise billing, although the odds vary significantly depending on where you live. Such charges can be significant as the out-of-network doctor typically charges a full “list price” for services. Consumer bankruptcies have resulted because in some cases surprise billing has amounted to tens of thousands of dollars.

    What can you do about surprise billing where your insurer initially refuses to cover charges incurred at an in-network facility?

    The good news: depending on state law, you may have rights that limit your responsibility for surprise billing. In Illinois, the Network Adequacy and Transparency Act protects consumers from balance billing both for services at an in-network facility and for treatment at an out-of-network facility in the event of an emergency. But consumers have to follow the specified claim procedure (see here for details).

    The bad news: state law does not govern the “self-insured” group medical plans typically maintained by larger employers. So, until protective legislation pending in Congress becomes law, there will be no formal restrictions on surprise billing by self-insured medical plans.

    The Takeaway:

    Always appeal any surprise billing by your insurance company. Even those insurance companies that are processing claims for self-funded medical plans may have a uniform surprise billing policy responsive to state law. Also, follow up any surprise billing claim appeal that is denied with your offer to pay only a reasonable fee for the services rendered – you may be able to negotiate a better deal.

  • IP BLAWG

    Strike Out for Cubnoxious

    Beverly A. Berneman
    7/16/19

    After the Chicago Cubs won the World Series in 2016 (breaking a 108 year losing streak), Ronald Mark Huber filed an intent to use trademark application for the word “Cubnoxious”. The Chicago Cubs Baseball Club LLC opposed the application. The Cubs were able to establish that Ronald had no real intent to use the trademark in commerce. All he had was one sheet of paper showing potential imprints on t-shirts. He submitted a conclusory statement that he intended to use it in no specific geographic area and not specifically to target Cubs fans. He had no business plan, no marketing plan, no established business experience and no experience in the sports industry. It could have ended there but the Cubs also opposed the application on the basis of a likelihood of confusion. That’s where the Trademark Trial and Appeal Board’s decision in favor of the Cubs got fun.

    The Board examined the numerous ways that the Cubs use their Cubs trademarks in conjunction with other words. Then the Board found that Cubs fans could perceive “Cubnoxious” as coming from the Cubs and not some other source. The Board conceded that calling fans “obnoxious” isn’t very flattering. But the Cubs submitted compelling evidence that “sports teams or their fans may seek to provoke opposing teams and their fans, thereby embracing an offensive, or obnoxious reputation”. The Cubs argued that Cubs fans are notorious for their undying allegiance to the team and might see being called “obnoxious” as a badge of honor.

    WHY YOU SHOULD KNOW THIS. Putting aside the fun of the likelihood of confusion arguments, Ronald’s loss teaches a valuable lesson about what an ‘intent to use’ trademark application really is. A bona fide intent to use has to be something more than “at some point I’d like to use this trademark” which is all that Ronald proved. Ronald’s evidence (or lack thereof) worked against his alleged bona fide intent to use the trademark. Keep in mind that many intent to use applications are not tested as heavily as Ronald’s was. However, before filing an intent to use application, it’s a good idea to have at least sketched a plan of how the trademark is going to be used.

  • IP BLAWG

    Trade Secret Judgment Crashes in Bankruptcy Court

    Beverly A. Berneman
    7/9/19

    TKC Aerospace, Inc. was justifiably upset when its vice president, Charles Muhs, left and began working closely with Phoenix Heliparts, Inc., a competitor. Then TKC found even more reason to be upset. TKC lost a Department of State contract to Heliparts who used TKC’s trade secrets. TKC sued Heliparts in Arizona. After a 40 day trial, TKC got a $30 million judgment against Heliparts. TKC sued Charles in a concurrent case in Alaska. Based on the Arizona judgment, the district court granted TKC’s motion for summary judgment against Charles in the amount of $20 million. Then Charles filed a Chapter 7 bankruptcy case.

    In the bankruptcy case, TKC used the Alaska judgment to have the $20 million debt held non-dischargeable on summary judgment. Charles appealed to the district court and lost. But the Fourth Circuit Court of Appeals reversed and remanded the case for further hearing. The Fourth Circuit held that a trade secret misappropriation judgment can be held non-dischargeable under the Bankruptcy Code only if the misappropriation is both willful and malicious. The Arizona judgment didn’t make those findings against Charles. The Alaska judgment didn’t make those findings either. So neither the Arizona judgment nor the Alaska judgment could be used to determine if the trade secret misappropriation debt was non-dischargeable.

    WHY YOU SHOULD KNOW THIS. TKC thought it had a slam dunk. It had two judgments for trade secret misappropriation. But, bankruptcy is a whole new world. Bankruptcy is designed to give a debtor a fresh start. So non-dischargeability of a debt is strictly construed. TKC’s result can be avoided. A plaintiff can lay the groundwork for non-dischargeability if the defendant happens to file bankruptcy.

  • Property Tax Insights

    Cook County Assessor Continues to Punish Commercial/Industrial Taxpayers

    Donald T. Rubin
    7/8/19

    The Cook County Assessor continues his relentless vendetta against business properties in north suburban Cook County. Unprecedented assessment increases upward of 200-300% are being mailed to unsuspecting taxpayers. Every property is being treated as institutional grade investment property, from mom and pop storefronts to small apartment buildings. The assumption that all properties are being leased on a triple net basis allows the Assessor to eliminate property taxes as an expense, which results in higher net incomes and allows the use of much lower capitalization rates. These low rates only allow for a return of the investment necessary to cover debt service, not a return on the investment which allows a return on owner equity. This practice is being used to greatly increase the market value of virtually every commercial and industrial property in the north and northwest suburbs. While claiming complete transparency, Freedom of Information Requests filed on behalf of taxpayers by their attorneys to determine the reason for a denial of relief, are taking upwards of 6 weeks to process, while the law requires a response in not more than 10-days. When responses do become available, a review indicates how the Assessor is manipulating data to ensure that virtually every appeal will be denied. The good news is that the Board of Review has opened a month early, in anticipation of a huge increase in the volume of appeals due to the Assessor's refusal to grant relief, even on the most meritorious cases. The Board has also disclosed that it will continue to review cases as it always has, and will grant relief on the merits of each case, without a pre-determined policy intended to find any means to deny relief to property taxpayers who could see their tax bills skyrocket due the Assessor's failure to act in a fair and equitable manner.

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

  • IP BLAWG

    #+*! Trademarks Are Triumphant

    Beverly A. Berneman
    7/2/19

    Erik Brunetti wanted to register the word “FUCT” as a trademark for clothing. The United States Patent and Trademark Office (“USPTO”) refused registration saying it was too “scandalous” because it was “extreme nihilism”, evidence of “anti-social behavior” and “extreme misogyny”. Erik appealed to the Trademark Trial and Appeal Board (“TTAB”), who affirmed the refusal. Erik didn’t give up and appealed to the Federal Circuit Court of Appeals who reversed the refusal (See IP Blawg Post Dated 1/16/18). The director of the USPTO, Andre Iancu, appealed to the U.S. Supreme Court who affirmed the Federal Circuit thus allowing the trademark to proceed to registration.

    Justice Elena Kagan, writing for the majority, adopted the reasoning in Matal v. Tam which held that a disparaging trademark like “The Slants” for an Asian American band is protected free speech (See IP Blawg Post Dated 9/9/17). Like the now-prohibited ban on disparaging trademarks, the USPTO’s ban on scandalous marks was based on the view-point of the observer. Justice Kagan stated that the USPTO allows registration for trademarks that are consistent with society’s sense of rectitude and morality. But the USPTO discriminates against trademarks that, in its viewpoint, don’t fit into a standard of morality. The USPTO’s view-point analysis is not neutral. Therefore, the prohibition against the registration of scandalous trademarks is an unconstitutional violation of First Amendment Free Speech.

    WHY YOU SHOULD KNOW THIS. Erik’s trademark projects a certain sensibility; one that Erik obviously believes his customers share. Trademarks that don’t fit into society norms may be fun, interesting and good marketing tools. But, a trademark reflects the values of the owner of the products or services. So when choosing a trademark, know your customer base and be careful about the impression your trademark makes.

  • IP BLAWG

    Back Off Mr. Postman

    Beverly A. Berneman
    6/18/19

    Return Mail, Inc. obtained a patent for a computerized system of bar coding so that companies can track returned and undelivered mail. The U.S. Postal Service was interested in licensing the technology. Before they could ink a licensing agreement, the Postal Service walked away and developed its own system. And that’s when the litigation began.

    The Postal Service tried to invalidate Return Mail’s patent before the Patent Trial and Appeal Board. The Board held that the patent was valid. Return Mail sued the Postal Service under the Federal Claims Act for using a patented process without a license. Using a proceeding that was created by the America Invents Act (“AIA”), the Postal Service got a ruling that invalidated the patent. Return Mail appealed. The case landed before the U.S. Supreme Court. Justice Sonya Sotomayor, writing for the 6 to 3 majority stated that the AIA proceeding is only available to a “person”. Governmental units such as the Postal Service were not included in the definition of a “person” under AIA. So the Postal Service can’t use the AIA to invalidate the patent.

    WHY YOU SHOULD KNOW THIS. When faced with any dispute, don’t assume anything. In this case, Return Mail, Inc. questioned whether the Postal Service had standing to challenge its patent. Following the 11th Commandment, “Thou shall not assume”, Return Mail, Inc. won the day.

  • IP BLAWG

    Scrambling for Copyright Infringement Defenses

    Beverly A. Berneman
    6/11/19

    Violent Hues Productions published a tourism guide that used a stock photograph depicting the Adams Morgan neighborhood of Washington D.C. The problem is Violent Hues used it without the permission of the photographer, Russell Brammer.

    Russell sued Violent Hues. The District Court originally sided with Violent Hues saying that Violent Hues didn’t infringe because the photograph was used for “informational” purposes. The Fourth Circuit Court of Appeals reversed the decision to the relief of photographers everywhere. The Fourth Circuit rejected all of the defenses brought up by Violent Hues including, some flimsy excuses like, it was an innocent mistake and its use didn’t stop the photographer from licensing it to others. Violent Hues’ fair use defenses didn’t get anywhere. Violent Hues tried to make the case for “transformative use” because it cropped and only used half of the photograph. That doesn’t fit into the definition of transformative use. The Fourth Circuit Court’s opinion was scathing in its rebuke of Violent Hues’ defenses by holding that “fair use is not designed to protect lazy appropriators”.

    **WHY YOU SHOULD KNOW THIS. ** Finding a photograph on the Internet is easy. But using it can have harsh results. When using content from the Internet, the default should always be that the work belongs to someone and you need their permission to use it. If you need stock photographs, there are numerous stock photo websites that will license the use. The license fee is substantially less then expensive and time consuming copyright infringement litigation.

  • IP BLAWG

    The Model T of Anti-Reverse Engineering Clauses

    Beverly A. Berneman
    6/4/19

    Versata Software Inc. licensed its automotive configuration software to Ford Motor Co. The license agreement contained an affirmative acknowledgment that Versata owned the Intellectual Property related to the software, including trade secrets. The license agreement had fairly standard language that prohibited Ford from reverse engineering the software. Ten years later, after updates to the underlying technology for the software, Ford bid Versata adieu and decided not to renew the license. No surprise, Ford developed similar software on its own. No further surprise, Versata sued Ford for violating the anti-reverse engineering clause in the license. In ruling on cross-motions for summary judgment, the court held that the language of the reverse engineering clause was ambiguous when it comes to the current version of the software. So the parties are going to have to go to trial on the interpretation of the clause.

    WHY YOU SHOULD KNOW THIS. The Versata anti-reverse engineering language may have been fine at the beginning of the license agreement. But over time, the underlying technology changed and the language did not. To avoid Versata’s dilemma, license agreements should permit updates to defining the scope of Intellectual Property in software license agreements to reflect updates in the technology.

  • IP BLAWG

    Where’s the Cart?

    Beverly A. Berneman
    5/21/19

    Siny Corp tried to register its trademark “Casalana” for a knit textile used in the manufacture of outerwear, gloves and the like. As its specimen of use in commerce, Siny submitted pages from its website. But the United States Patent and Trademark Office refused the specimen because it was mere advertising and not evidence of use in commerce. Siny appealed the decision all the way up to the Federal Court of Appeals and lost. Where did Siny go wrong?

    In order to claim rights in a trademark, the owner has to use the trademark in commerce. Siny argued that the website showed use in commerce because it had the text “For sales information” followed by a phone number. That wasn’t enough. The website has to provide a means for ordering the goods, such as through a “shop online” or “add to cart” button or link, or through information contained on the page. “For sales information” isn’t the same as “order now” or “to order, call this number”. According to the Federal Court of Appeals, “if virtually all important aspects of the transaction must be determined from information extraneous to the web page, then the web page is not a point of sale.” If it’s not a point of sale, it’s not use in commerce. So Siny has to go back to the website drawing board and make some changes.

    WHY YOU SHOULD KNOW THIS. At first glance, the Siny decision seems like splitting hairs. But it points out an important distinction between mere advertising and use in commerce. A website that shows pictures of a product doesn’t mean that the product is actually being sold. Even having contact information for the seller, doesn’t mean it’s being sold. The consumer visiting the website has to have enough information about how to actually purchase or get the product.

  • IP BLAWG

    The Schrödinger’s Cat of Trademarks

    Beverly A. Berneman
    5/14/19

    Stella McCartney, the fashion designer daughter of former Beatle, Paul McCartney and his late wife, Linda, tried to register the trademark “Fur Free Fur”. The United States Patent and Trademark Office (USPTO) rejected it as being merely descriptive of Stella’s use of fake fur in her fashion designs. The Trademark Trial and Appeal Board (TTAB) disagreed and overturned the decision.

    The TTAB held that the USPTO failed to recognize the multiple meanings of the use of the word “fur” in the trademark. Judge Thomas Shaw, writing for the TTAB described the “Fur Free Fur” trademark as really being two things at once like Schrödinger’s Cat (see below for more information) being dead and alive at the same time. “In the first instance, ‘Fur Free,’ the term ‘fur’ refers exclusively to animal fur. In the second instance, ‘fur’ alone, the term ‘fur’ refers to imitation fur.” The “internal inconsistency” in “Fur Free Fur” would give consumers pause making the trademark distinctive. In other words, the juxtaposition of the words required some imagination on the part of the consumer to recognize the trademark as being connected to the goods and service.

    WHY YOU SHOULD KNOW THIS. The “Fur Free Fur” trademark is a good example of how a trademark can be created from seemingly generic or descriptive words by adjusting word placement. The word placement of “Fur Free Fur” created a play on the words. The key is to make sure the words require some imagination on the part of the consumer when they see the trademark. Note, that this case had a rare dissenting opinion where the judge disagreed that consumers needed any imagination or perception to recognize the words as a trademark. So care must be taken when developing a Schrödinger’s Cat trademark.

    More information about Schrödinger’s Cat: In 1935, Erwin Schrödinger illustrated a problem in quantum physics by presenting a hypothetical scenario where a cat may be alive and dead at the same time. For any further explanation, please consult your friendly neighborhood physicist.

  • Benefits Bulletin

    Court Setback for Association Health Plans

    Andrew S. Williams
    5/8/19

    The Department of Labor issued guidance in mid-2018 which allowed employer associations to adopt a single multiple employer health plan to cover a greater number of employers and their employees. These Association Health Plans (or “AHPs”) were intended to allow more smaller employers and self-employed individuals to band together in order to secure simpler health plan arrangements and cheaper coverage in the marketplace (our February Benefits Bulletin provides some of the details here).

    The U.S. District Court for the District of Columbia recently vacated significant portions of the Department of Labor AHP rule that expanded access to affordable healthcare options for small businesses. Although the Department of Labor disagrees with the Court holding and has filed a notice of appeal, there are still many businesses that have elected AHP healthcare coverage in reliance on the Department of Labor rule in effect prior to this holding. So, what does an employer that has recently signed onto an AHP that now has a questionable legal foundation do to protect itself – and its employees – from the consequences of possible non-compliance?

    The Department of Labor recently issued a statement addressed to these employers advising them that they do not have to terminate or switch their current healthcare coverage until the end of the current plan year or, if later, the expiration of the current contract term (the “transition period”). So for now, employees can rest assured that their AHP coverage will stay in force.

    In accordance with the above policy, the Department of Labor statement provides that it will not during the transition period pursue enforcement actions against parties for violations stemming from actions taken before the recent Court ruling – so long as the actions were taken in good faith and the AHP pays health benefit claims as promised.

    Takeaways:

    Small employers and sole proprietors with AHP coverage should stay the course – for now. If they instead drop AHP coverage, those employers may have to wait for an open enrollment period to obtain replacement coverage, which could create a gap in coverage. In the meantime, the Department of Labor appeal of the Court holding could reverse its holding and reinstate the prior Department of Labor AHP rule.

  • IP BLAWG

    Holes in the Contractual Jurisdiction Net

    Beverly A. Berneman
    5/7/19

    Ahlam Ramzy, a former employee of Perfect Brow Art, Inc., left and started her own Tennessee eyebrow threading salon. Perfect Brow brought suit against Ahlam in Chicago for trademark infringement, trade dress infringement, false designation of origin, trade secret misappropriation and unfair competition.

    Ahlam brought a motion to dismiss the Chicago case for lack of personal jurisdiction. Personal jurisdiction is dictated by the reach of where the court sits. Ahlam had never been to Chicago and hadn’t done any business there. Ahlam argued that the Chicago court only would have personal jurisdiction over her if she was located in Illinois or she had sufficient minimum contacts with Illinois to justify jurisdiction over her. Perfect Brow sought to get around the fact that Ahlam had no contacts with Illinois by pointing to a clause in Ahlam’s employment agreement where the parties agreed that the employment contract would be interpreted under Illinois law. The District Court dismissed the case for lack of personal jurisdiction without prejudice. The court held that the choice of law term in the contract was not sufficient to confer personal jurisdiction over Ahlam. Note that the case was dismissed without prejudice. That means Perfect Brow can still bring suit against Ahlam in Tennessee.

    WHY YOU SHOULD KNOW THIS. Companies often use employment agreements to make sure that an employee won’t take the company’s Intellectual Property with them after the employee leaves. Companies can also use employment agreements to keep any lawsuits in the company’s home state. It’s convenient and tames the costs of litigation. As Perfect Brow learned, getting the benefits of a contractual term is all in how the term is drafted. If the term had specifically stated that any litigation between the parties would take place in Illinois, then the Illinois case would probably not have been dismissed.

  • Property Tax Insights

    Predictability of Cook County Property Taxes

    Donald T. Rubin
    5/3/19

    Has the value of your business property actually increased by 82% in just 3-years?

    In light of the huge assessment increases we are seeing for commercial and industrial properties located in the northern suburbs of Cook County, which are sure to follow in the rest of the county when those reassessment notices go out, 2020 for the southern suburbs and 2021 for all properties located in Chicago, how can businesses that rely on being able to accurately project their future expenses, do so when predicting their potential property tax liability? The answer is, they can't. To address this issue, all property taxpayers must take action to vigorously contest their property tax assessments, while at the same time accruing a higher reserve as a fail safe position. Increases of up to 300% on commercial and industrial properties in Evanston, and increases averaging 82% in Elk Grove, represent a clear message to business that they are being targeted by the Assessor for substantially higher tax bills.

    The Property Tax Group at Golan Christie Taglia, LLP. has the experience necessary to successfully contest your assessments throughout the state. Please get in touch if we can help. Contact us at ptax@gct.law.

  • IP BLAWG

    Selling Tires Isn’t Like Building Bridges

    Beverly A. Berneman
    4/30/19

    Express Oil Change used the service mark “Tire Engineers” for its tire sales, repair and maintenance services. The Mississippi Board of Licensure for Professional Engineers & Surveyors had a problem with that. According to the Board, no one can use the word “engineer” unless they are actually engineers and have registered for a license to practice engineering in Mississippi.

    Express Oil Change brought a declaratory judgment action against the Board. On appeal from summary judgment in the Board’s favor, the Fifth Circuit Court of Appeals reversed. In its opinion, the Court held that commercial speech is protected by the First Amendment. Anyone challenging commercial speech has to justify any restrictions. And the challenger has a heavy burden. The Board didn’t meet that burden. The Board tried to argue that Express Oil Change’s use of the word “engineer” was misleading. The Court rejected the argument for two reasons. First, the word engineer is generally defined as someone having technical skills and does not exclusively refer to a person who designs, builds, or maintains engines, machines, buildings or public works. Second, the essential character of how Express Oil Change used the word is not deceptive or misleading.

    WHY YOU SHOULD KNOW THIS. What the Board failed to understand is that there’s a difference between holding yourself out as an engineer for engineering services and using the word “engineer” for marketing other types of services. Many professions are regulated for public policy reasons. For example, someone can’t call themselves a medical doctor without proper degrees and registrations. But someone can call their clock and watch repair business “The Clock Doctor” without having to register with a medical professional board. The essential character of using “doctor” for fixing clocks isn’t deceiving the public.

  • Property Tax Insights

    2019 North Suburban Cook County Assessments Causing a Crisis

    Donald T. Rubin
    4/24/19

    In the first three townships having a significant commercial and/or industrial tax base, (Norwood Park, Evanston and Elk Grove, the new assessor has been increasing market values by as much 50 to 300%. He claims that properties in the northern suburbs have been grossly underassessed for years, hence a 1-year catch-up was justified. Of course, no consideration was given to the jobs that will be lost as tenants and companies relocate, nor to the investors who will no longer invest in Cook County, nor to the companies that will no longer consider locating in Cook County, nor to the existing companies that will jettison their expansion plans. The same is true for owners of residential income properties that have also experienced significant increases. Who will be able to afford the higher rents that landlords will try to pass on to them? As to the homeowners, many of whom saw only minor increases, what will become of their property values if local jobs disappear and they cannot sell their houses? To date, the assessor has stubbornly refused to grant relief on a vast majority of commercial and industrial appeals, as his property valuations are apparently perfect.

    If you don't think your property valuation is "perfect", contact Donald T. Rubin at DTRubin@GCT.law or 312.696.2641 for a discussion and consultation to fight the insanity and reduce your tax burden.

  • IP BLAWG

    Angels Fall from Grace

    Beverly A. Berneman
    4/23/19

    VidAngel Inc. removed nudity and violence from films and then sold the ‘redacted’ versions. Disney Enterprises, Inc. its subsidiary Lucasfilm Ltd. LLC, Twentieth Century Fox Film Corp. and Warner Bros. Entertainment Inc. sued VidAngel for copyright infringement.

    This case has boomeranged between the District Court in California and the Ninth Circuit Court of Appeals. The courts have consistently rejected VidAngel’s defenses and affirmed injunctions against them. Among VidAngel’s defenses were First Amendment free speech and fair use. The District Court called these arguments “poorly developed” and “convoluted”. VidAngel also argued that an obscure 2005 statute called the “Family Home Movie Act” allowed it to edit dirty material from films and then sell the edited versions. The courts rejected this argument. The act permits the development of technology for consumers to skip content once they’ve purchased a film. The District Court has now entered summary judgment in favor of the Hollywood studios against VidAngel on the issue of liability. The case will proceed to the damages phase.

    WHY YOU SHOULD KNOW THIS. VidAngel’s sanitized versions of popular films were derivative works. Derivative rights belong solely to the owner of the copyright. Without a license to create, copy and distribute those derivative works, VidAngel’s business model had a shaky foundation. Perceiving and acting on a need is a good business model. Infringing on someone else’s copyright is a bad business model.

  • Property Tax Insights

    The Never Ending Battle Between Qualifying Factors for Receiving a Charitable Property Tax Exemption

    Donald T. Rubin
    4/17/19

    In the never ending battle between the qualifying factors for receiving a charitable property tax exemption as first enunciated in the Korzen case, Methodist Old Peoples Home v. Bernard Korzen, County Treasurer, et al, 233 N.E, 2d, 537, 39 Ill.2d 149 (1968), the Illinois Supreme Court initially set forth the following criteria for successfully obtaining a property tax exemption.

    "It has been stated that a charity is a gift to be applied...consistently with existing laws, for the benefit of an indefinite number of persons, persuading them to an educational or religious conviction for their general welfare--or in some way reducing the burdens of government; that the distinctive characteristics of a charitable institution are that it has no capital, capital stock or shareholders, earns no profits or dividends, but rather derives its funds from public and private charity and holds them in trust for the objects and purposes expressed in its charter". The court goes on to say "that a charitable and beneficent institution is one which dispenses charity to all who need and apply for it, does not provide gain or profit in a private sense to any person connected with it, and does not appear to place obstacles of any character in the way of those who need and would avail themselves of the charitable benefits it dispenses."

    In responding to a rather convoluted plurality decision in the Provena Covenant Medical Center v. Department of Revenue case, 236 Ill.2d 368 (2010), which found that Provena failed to meet the requirements for a charitable use exemption from property taxes, the Illinois Legislature hurriedly enacted 35 ILCS 200/186, which appeared to pave the way for hospitals to acquire exempt status simply by proving that the value of the charitable services they provided either met or exceeded their possible property tax liability.

    In the pending case, Plaintiff Carle is arguing that the charitable use requirements as set forth in Korzen, have been reduced to just two factors by the recent decision in Oswald v. Hamer, 2018 IL. Docket No. 122203 (September 20, 2018), because the Supreme Court did not reiterate all of the requirements as set forth in Korzen. The trial court states that Plaintiff, Carle "submits that the new test is outlined in paragraphs 15-17 of Oswald and includes that 1) they provide charity for the benefit of an indefinite number of persons which reduces the burdens of government and 2) their primary purpose is charitable". Defendant, Illinois Department of Revenue alleges the Oswald decision did not change any of the Korzen requirements.

    In the trial court opinion, (Memorandum Opinion on Cross-Motions for Summary Determination of a Major Issue/Case Management Order (11/26/18) the judge states:

    "Would it have been helpful to lower courts, practitioners and property owners had the Illinois Supreme Court been more specific and given greater guidance? Of course. They could have said: "We overrule Korzen" They could have said: "We find that only "use" factors and not "ownership factors from Korzen apply." They could have said" "We find that all of the Korzen factors constitute the constitutional test." They could have said: "We find that all the Korzen factors constitute the constitutional test, however depending on the facts and circumstances of a case, some factors may be inapplicable or can be given greater/lesser weight?" The trial court decision states: "In the end, this Court agrees with the Defendants that Oswald does not eliminate or reduce the Korzen factors."

    TAKEAWAY:

    In this author's opinion, Carle will once again be finding its way back to the Supreme Court for

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

  • IP BLAWG

    Looks Fair to Me

    Beverly A. Berneman
    4/16/19

    Using someone’s trademarks when criticizing their products or services can be tricky. But if you do it the right way, it could be considered nominative fair use.

    Applied Underwriters, Inc. owns the trademark “Equity Comp” for financial services. Providence Publications LLC, which describes itself as a provider of informative journalism, offered a webcast seminar titled: “Applied Underwriters’ Equity Comp Program: Like it, Leave it, or Let it be?” The seminar wasn’t very complimentary. Applied Underwriters sued for trademark infringement and unfair competition. Providence Publications moved to dismiss the complaint arguing that the use of the trademark was permitted as nominative fair use. The motion was granted and affirmed on appeal. Relying on the leading case of New Kids on the Block v. News Am. Publ’g, Inc., the Ninth Circuit Court of Appeals showed that the three factors of nominative fair use existed in this case. Those factors were (1) Applied Underwriter’s products and services could not have been readily identifiable without use of the trademark; (2) Providence Publications only used so much of the trademark as was reasonably necessary to identify Applied Underwriter’s products and services; and (3) Providence Publications did nothing that would suggest Applied Underwriters sponsored or endorsed the seminar.

    WHY YOU SHOULD KNOW THIS. Providence Publications used Applied Underwriter’s trademarks in a non-competitive, public commentary/free speech kind of way. But what happens if a competitor uses another’s trademark? In other words, how far does commentary and free speech go between competitors? The New Kids on the Block factors should help figure out the answers to those questions.

  • Benefits Bulletin

    Court Case Clears the Way for Illinois Secure Choice Program

    Andrew S. Williams
    4/12/19

    The Illinois Secure Choice Savings Program requires employers with at least 25 Illinois employees to set up a state-sponsored IRA based retirement program if they do not already have a retirement plan. Although the program is funded solely by payroll contributions from employees, subject employers must go through an online registration and enrollment process, forward payroll contributions to the program custodian and provide program information to employees (click here for more details).

    A similar program was adopted in California and was challenged in court. Although the U.S. Department of Labor had issued favorable guidance as to the impact on these state programs of ERISA, the federal pension law, Congress rescinded this guidance with the change of administration in 2017. This presented the issue of whether or not ERISA would “pre-exempt” these state programs and impose burdensome federal compliance responsibilities on employers.

    A U.S. District Court in California held in Howard Jarvis Taxpayers Ass’n v. California Secure Choice Ret. Savings Program on March 29, 2019 that the California program was not subject to federal law and could be implemented on its terms. Because the California program is very similar to the Secure Choice Program in Illinois, the California case may remove the Secure Choice Program from legal limbo. Although the California decision is not binding in Illinois (and it could be reversed on appeal), this makes it less likely that ERISA-related litigation will impede the Secure Choice Program.

    Takeaway:

    Employers that do not currently sponsor a retirement program for their Illinois employees need to consider retirement plan options to the Secure Choice Program such as a 401(k) plan. For employers with 100-499 Illinois employees, the Secure Choice compliance deadline is July 1, 2019 (employers with 25-99 employees have until November 1, 2019 to enroll in the Secure Choice Program – or set up an alternative arrangement). Employers with 500 or more Illinois employees who have no retirement plan need to scramble – their Secure Choice compliance deadline, November 1, 2018, has already passed.