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

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

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

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

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

Here are some of the details:

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

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

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

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

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

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

The Fine Print:

Official guidance available at this time provides the following specifics:

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

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

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

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

Takeaways:

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

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

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

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

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

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

By James W. Chipman

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

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

Exemptions that reduce the assessed value of your home:

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

Special valuation incentives for homes and businesses:

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

Special valuation incentives for businesses only:

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

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

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

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

Great Minds don’t always think alike when it comes to copyright infringement. Great Minds is a company that publishes school books, including a math book. Great Minds licenses use of the book to schools for free as long as it is for strictly non-commercial use. Great Minds uses the Creative Commons non-commercial license for these deals. A school district in New York had FedEx make copies of the book instead of using the school’s copiers and staff. Great Minds sued FedEx for copyright infringement arguing that it licensed the work to the school district and not FedEx. Great Minds tried to distinguish between the school staff making copies and the school ‘jobbing’ out the project to FedEx. In affirming a ruling against Great Minds, the Second Circuit held that there really was no difference between school employees making copies and having FedEx’s copy service making copies. The Court identified FedEx as an agent of the school district. Under pure agency principals, the school district’s license to copy would extend to FedEx.

WHY YOU SHOULD KNOW THIS. Creative Commons is a non-profit organization that acts as a clearing house for copyright licenses. The licenses are standard forms that parties can use. However, there is no requirement that the parties accept the standard language. Parties can always add or delete anything that would better define their licensor/licensee relationship. In this case, the Creative Commons license was silent on whether the license extended to agents of the licensee. To avoid a problem like this, on the licensor side, it’s best to define authorized uses under the license. On the licensee side, it’s best to make sure that the license extends to employees and agents.

By James W. Chipman

As an owner, you’re entitled to your privacy. However, denying a request for an interior inspection could work against you without a property tax attorney to assist.

Township assessors will begin giving all properties in their jurisdiction a look when the 2019 reassessment period begins on January 1. State law requires property in Illinois to be reassessed once every four years, while it’s every three years in Cook County. But just how close of a look are assessors entitled to take?

Assessors often gather data from a variety of sources in order to calculate your property’s market value. If there is not enough information, or in the case of new construction, assessors may ask to inspect the interior of your property.

LET THEM IN? IT’S YOUR CALL

Deciding whether or not to allow access depends on your situation. Letting them in could seem reasonable in order for the assessor to carry out his or her duties. On the other hand, you are entitled to your privacy and might see an interior inspection as unnecessary and intrusive.

There is no law in Illinois that specifically gives assessors a right of entry into your property without permission. The courts made it clear in 1986 that interior inspections are not required for assessment purposes, stating “[t]here is a distinct and palpable difference between inspections necessary for the public’s safety and well-being and an inspection to determine real estate assessments on private property.”*

In other words, your ability to exclude others is a fundamental part of your right to the enjoyment of private property. It can only be infringed upon in very limited circumstances when the government has a legitimate concern for public safety.

DETERMINE WHAT’S BEST FOR YOU

While refusing the assessor access is within your rights, that decision requires them to make certain assumptions about your property that may not work in your favor. For example, without an inspection, the assessor may overestimate your property’s size or miss deferred maintenance issues that affect its condition. If you believe your taxes are too high, it could be because the assessor made prior incorrect assumptions about your property. You can file an appeal based on the erroneous information, but the burden of proof will be on you to show that the assessment is wrong.

Property assessments are intended to reflect market values so equity and uniformity can be maintained. While market values can change dramatically between reassessment periods, once properties are reassessed, assessments typically stay the same until the next cycle, unless there is substantial cause to change them.

If an assessor wants access to your home or business, contact a property tax attorney immediately to determine what approach is in your best interests. It could very well be a situation where your attorney can answer and address any questions or concerns about your property without an interior inspection.

*Source: County of Fulton v. Property Tax Appeal Board of the State of Illinois, #3-86-0125 (1986)

The Patent Office can invalidate a patent even if a court did not. Oils States Energy LLC won a patent infringement judgment against Green Energy Group LLC. But then, the Patent Trial and Appeal Board (“PTAB”) invalidated the patent leaving Oil States emptyhanded. Oil States appealed arguing that the PTAB, an Article III (of the US Constitution) administrative tribunal, couldn’t come out differently from an Article I court. The US Supreme Court decided against Oil States. SCOTUS held that patents are a “public right”. They are a public franchise granted by the government to the owner of the patent for a period of 20 years. So, the administrative body can determine patent validity without paying homage to a different decision by a federal court.

WHY YOU SHOULD KNOW THIS. This decision addresses the fundamental nature of a patent. Patents are different from other types of Intellectual Property. You own a copyright the minute you fix your work in a tangible means of expression. You own your trade secret as long as it’s not generally known and you take reasonable measures to keep it secret. You own a trademark as long as you use it as a source or product identifier. But a patent isn’t a patent until the US Patent Office issues the patent. So, you can win a patent infringement judgment in court and still have your patent invalidated by the PTAB.

Fiduciaries who handle investments for 401(k) and other self-directed retirement plans (such as 403(b) plans for not-for-profit organizations) are increasingly exposed to liability for their investment decisions. Those fiduciaries, including employers and any individuals charged with investment decision making, are being second guessed for the investment funds they select. Plan fiduciaries have been sued for a variety of allegations ranging from excessive fees, self-dealing, lack of transparency and poor investment performance. Some of these actions are filed as class actions, and like other fiduciary claims, they assert personal liability against plan fiduciaries.

A recent decision of the Federal District Court in Chicago, Divane v. Northwestern University, suggests a way to help insulate plan fiduciaries from such claims.

In Divane, Northwestern University and a number of individuals involved with two of its self-directed 403(b) plans were alleged to have breached their fiduciary duty to plan participants by providing too many investment options, providing mutual fund selections with excessive “retail” expense ratios, charging participants too much for record-keeping services funded through “revenue sharing,” and including a fund that had not performed well.

The Court granted the defendants’ Motion to Dismiss because plan participants could select among investment funds that included index funds with expense ratios ranging from .05 percent to .1 percent. The Court held that, as a “matter of law,” these expense ratios were “low.” Because participants had the option of selecting these funds, they were in a position to avoid more expensive funds, a poorly performing fund, and a fund which made revenue sharing payments to the record keepers that were alleged to be “excessive.” Further, the Court added that record-keeping fees were “reasonable as a matter of law.” Based on these conclusions, the Court went on to dismiss the Complaint with prejudice thereby resolving this case in the defendants favor, subject to any possible appeal.

Takeaways:

The decision in Divane suggests that any self-directed retirement plan should include low cost funds (usually index funds) in its investment array. This obviously makes available to participants the desirable features of such funds but it also helps insulate plan fiduciaries from claims that they have not properly performed their duties with respect to the plan’s other investment funds – funds which may not be low cost and may not offer investment results that match the results of index funds. With this in mind, you will want to include a selection of low cost index funds in your 401(k) or 403(b) investment array. These funds may turn out to be profitable investments for plan participants but, based on the Divane opinion, they will also provide a good defense if plan fiduciaries are ever second guessed by a plaintiff’s lawyer – or a government auditor.

A press release doesn’t always amount to trademark use. In the 1980s, Toni Basil had a one hit wonder “Mickey” that included the lyrics, “You’re so fine you blow my mind, Hey Mickey”. She sold the copyright to the recording of the song. When Disney Co., Kohl’s and Forever 21 started using the song in their advertising, they issued press releases and mentioned Toni’s name in connection with the song. Toni sued for various types of Intellectual Property infringement including trademark infringement based on the press releases. Toni argued that the use of her name violated trademark law based on false designation of origin. The judge disagreed and dismissed the trademark claim holding that the use of her name in the press releases as nominative fair use.

WHY YOU SHOULD KNOW THIS. Not every use of someone else’s trademark is trademark infringement. This case is a good example. A press release is an official statement that is issued to give general information to the news media. A press release isn’t considered trademark use because its primary purpose is to provide information for news purposes. The press releases didn’t use Toni’s name in the trademark sense so she couldn’t maintain a cause of action for infringement.

By James W. Chipman

Reviewing your property record card for errors or misjudgments could lead to a reduction in your assessment and overall tax liability.

An easy way to reduce your property’s assessment—and ultimately your tax liability—is to find and correct any inaccuracies that appear on your property record card.

The Illinois Freedom of Information Act makes property tax assessments and other public records subject to inspection and copying, with certain exceptions.* That’s just one more reason to periodically check your property record card for errors, discrepancies or outdated information.

Property record cards are kept locally by either your assessor or the county assessor. Most cards are two-sided and contain details ranging from a property’s age and size to its sales history and other data used to determine the assessment. With that much information, mistakes are bound to happen. Here’s a closer look at what you’ll find on your property record card:

FRONT

• Owner’s name and address
• Legal description
• Parcel identification number (PIN)
• Sales and assessment history of the property
• Picture of improvement(s), if applicable
• Square footage of the site or land, front footage and depth or acreage
• How the land assessment was computed

Adjustments to the land may be made for factors that negatively affect its value, such as location, traffic, topography or aesthetics. Site information may include a “neighborhood” factor commonly used for calculating assessments—land assessments should be uniform for each property within the same neighborhood. Make sure the land dimensions are correct and cross check the assessor’s figures with any other property documents you have in your possession (i.e., real estate contract, deed, title or appraisal).

Finally, one often overlooked situation that can affect the value of your property is the presence of an easement, a legal right to a limited use of another's property. For instance, your neighbor may have an access easement to cross over your property to enter or exit their own property.

BACK

• Drawing of improvement(s) made by an assessor’s employee who visited your property
• Style (one-story, two-story, tri-level, etc.)
• Construction (brick, frame or stone)
• Number of baths, bedrooms and amenities, such as fireplaces, garages (one- or two-car; attached or detached) and basements (crawl, partial or full; finished or unfinished)
• Building class and condition of the improvement(s)

It is critical to review and confirm all of the above elements for veracity.

Generally, for residences, each section of a dwelling is measured from the outside dimensions. The sections separate livable areas from non-livable areas, such as garages, basements, attics, porches and patios. Check each structure’s measurements and the math done to compute a total living area or square footage. This figure plays a key role in the assessment process, as it is used to calculate a unit value or price per square foot for the improvement.

Building class and condition are judgment calls made by the assessor based on the physical age of the improvement and the rating assigned to the structure definitely impacts your assessment.

The assessor takes all of the specific information obtained about the improvement and arrives at a “cost to replace new” based on uniform cost calculations. After current cost conversion and class factors are applied, the replacement cost is then reduced by a net depreciation which determines the building value and the assessment. Cost estimates, while an acceptable approach to valuing property, often times are not representative of the marketplace, and thus, are not the preferred method of valuation.

IMPORTANCE OF ACCURACY

Inaccuracies on your property record card may be the result of a mathematical error or a degree of discretion or judgment. A significant change in any of your property’s characteristics or features will most likely result in some assessment relief.

If there is no plausible explanation for an error, a taxpayer has several remedies. Consulting a property tax attorney is the best way for determining how to resolve the issue.

*Source: 5 ILCS 140/1 through 140/11.6

A better way to build a data center can be protected as a trade secret. BladeRoom developed a technique that allowed it to build data centers. BladeRoom’s system used prefabricated subassemblies that continued systems for air management, fire detection, security and lighting. Under a non-disclosure agreement, BladeRoom disclosed the system to Emerson Electric Co. and Facebook who were about to build a huge data center in Sweden. Emerson and Facebook took a pass on retaining BladeRoom. According to BladeRoom, Emerson and Facebook went ahead and built the data facility using BladeRoom’s system. BladeRoom sued for trade secret misappropriation. Facebook settled but Emerson went to trial and lost. Determining the misappropriation was a substantial factor in causing financial harm to BladeRoom, the jury awarded BladeRoom $10 million in lost profits and $20 million due to Emerson’s “unjust enrichment.” Emerson vows to appeal the verdict.

WHY YOU SHOULD KNOW THIS. Massive data centers are becoming a huge industry (pun intended). Anyone who can find a way to build them faster has major market potential. BladeRoom did the right things in having Emerson and Facebook sign non-disclosure agreements. They must have also identified their trade secrets and taken reasonable measures to keep them secret. Although it took four years of expensive litigation, BladeRoom got a big payoff.

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.

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.

By James W. Chipman

From understanding complicated laws to knowing how to dispute exorbitant assessments, having an expert on your side can ensure you’re not overpaying when it comes to property taxes.

Property taxes affect us all, whether we’re paying them directly or receiving services or benefits covered by the tax. That’s especially true in Illinois, where property taxes are the 2nd highest in the nation, behind only New Jersey.*

As the owner of a home or a business, your taxes help pay for education, public safety, infrastructure, emergency response and a variety of social services. But you don’t want to pay more than necessary, something a real estate tax attorney can ensure by considering the following factors:

1. Illinois reassessment in 2019: Township assessors are required by law to view, inspect and reassess each property in their jurisdiction once every 4 years. In Cook County, property is reassessed every 3 years. Reassessments ensure assessments are fair and equitable on a countywide basis—given there are typically more individual changes made in general assessment years, significant increases often occur.

2. Vague, complex tax laws: Frequent changes in these laws only compound the problem. Different interpretations can create legal uncertainty and possibly result in different tax consequences for property owners.

3. Differences for businesses vs. residential properties: In Cook County, businesses are assessed at 25% of market value, while single-family homes and multi-family properties are assessed at just 10%. Businesses can be singled out and experience higher tax burdens than residences.

4. Inconsistent, subjective and unknown methods of valuation: Some assessing officials use a “mass appraisal” approach in which a large number of properties are valued simultaneously using standardized procedures. However, one size does not fit all. Many properties are not typical and require special individualized attention.

5. Ability to challenge unfair and excessive assessments: Taxpayers who wish to appeal their assessments have several options. Each option, however, comes with its own set of deadlines. One common mistake many taxpayers make is to wait for the tax bill to arrive in the mail. By then, appeal periods have expired and the only recourse is to pay the tax and wait until the following year to file an appeal.

A real estate tax attorney can represent you in all stages of the property tax appeal process, from the research, preparation and filing to representation before the assessor and local and state boards. The benefits of having an expert on your side heavily outweigh the cost of service, or even worse, the potential cost of making a mistake.

Most people and many attorneys are overwhelmed by the complexity of property taxes. Hiring a real estate tax attorney is the best way to make sure you pay your fair share—and no more.

*Source: Chicago Tribune, April 5, 2018

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.

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.

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.

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.

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.

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).

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.

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.