Author: National Law Forum

A group of in-house attorneys developed the National Law Review on-line edition to create an easy to use resource to capture legal trends and news as they first start to emerge. We were looking for a better way to organize, vet and easily retrieve all the updates that were being sent to us on a daily basis.In the process, we’ve become one of the highest volume business law websites in the U.S. Today, the National Law Review’s seasoned editors screen and classify breaking news and analysis authored by recognized legal professionals and our own journalists. There is no log in to access the database and new articles are added hourly. The National Law Review revolutionized legal publication in 1888 and this cutting-edge tradition continues today.

Shareholder Disputes: How to Prevent a Corporate Divorce

An article regarding Shareholder Disputes written by David J. Treacy and John M. Spires of Dinsmore & Shohl LLP was recently published in The National Law Review:

Small and medium-sized businesses provide valuable goods, services, and jobs. Often, they are run as corporations in which the controlling officers and directors also are the major shareholders. Frequently, friends and family found these businesses together. But even successful businesses owned by friends and family aren’t immune to problems resulting from circumstances and relationships that change over time.

Shareholders may start the business together, but wish to leave at different times based on life events. New, valuable employees might want to be owners, too. Business deals may be made with companies in which some, but not all, of the directors or shareholders overlap. In situations like these, interests can collide.

Successful businesses last a long time, and change is inevitable. But preparation on the front end may eliminate big problems that could arise down the road. While there are few “one size fits all” rules, we suggest some best practices to consider when forming a business.

  1. Put your agreement in writing. Business relationships founded on a handshake may begin with good intentions, but are unlikely to stand the test of time. Businesspeople who spell out their expectations in written agreements obtain greater security about what their understandings really are – and have a contract to look to if problems arise. Shareholders’ agreements also let you address how to handle major events – like adding shareholders, or an owner’s retirement – before they happen.
  2. Pick your partners wisely. Closely-held corporations are like marriages. When personalities mesh and goals are aligned, the family can prosper. When they don’t, you may end up in a nasty divorce. And when you have a very different idea from your partners in the beginning about what’s fair, or what everyone’s role should be, or what the business will look like in ten years, a divorce is inevitable.
  3. Hold formal meetings and keep good records. Important decisions are made when a business is formed, as well as when it is established and thriving. Your fellow shareholders may seem happy with those decisions, but looks can be deceiving. A good corporate secretary, keeping records of votes and discussion on important decisions in corporate minutes, may prove invaluable later on if someone wasn’t as happy as you thought they were. Good minutes are more than a mere formality.
  4. Know what you signed up for. Board membership is a serious responsibility. Directors owe special duties to the corporation and its shareholders. This fiduciary relationship is sacred in the law, and you are held to a higher standard of conduct as a result. Consider training your board members on their responsibilities so that they know how to discharge them faithfully.
  5. Consider outside voices. Once your corporation is established, hiring an outside director (someone uninvolved in your business) to serve on your board may be advisable. Outside directors with open minds will consider board proposals from a fresh perspective. They also may insulate management’s proposals to the board from second-guessing.
  6. Counseling in-house. In-house attorneys are tremendous resources. With business minds and legal backgrounds, they can help members of your management team navigate through decisions big and small. But business advice can be closely related to legal advice, and only legal advice is protected under the attorney-client privilege. Consider carefully what you ask your in-house lawyers to do.
  7. Keep shareholders informed. Information is power, and it is expected to be imparted to the shareholders, particularly in a closely-held business. Informing shareholders of a major corporate action only after it’s been taken may lead to arguments about the action’s propriety.
  8. Full disclosure. Closely scrutinize transactions between a director or major shareholder (or another business they own) and your corporation. A failure to ensure that a deal is fair to all, and especially to the corporation, invites a claim that the director involved in the transaction breached his fiduciary duty. It also may result in a claim that the other directors let their colleague take advantage of the corporation, and by doing so breached their own fiduciary duties.
  9. Good policies are a good policy. Business records take all forms – monthly accounting data circulated on spreadsheets; emails on a server; individual files in drawers throughout the office. Having a well-thought-out policy on document retention, email usage, and documents that simply shouldn’t be removed from the building helps you manage risk. If a problem arises, you don’t want to have to explain why you have some records dating to your company’s inception, but you’ve permanently purged an email sent ninety days ago, unless you have a written policy on point.
  10. Insure your risks: Internal disagreements may result in claims against directors or officers when they make a decision that a shareholder doesn’t like. While courts afford deference to a board’s decisions under the “business judgment rule,” directors may face personal liability on these claims, and the costs to defend themselves, in the absence of commonly-acquired Director & Officer (“D&O”) insurance. D&O coverage is simply a must.

Avoid the corporate divorce before it happens. A little advance planning can go a long way.

As seen in Business Lexington.

© 2012 Dinsmore & Shohl LLP.

Upcoming Spring 2012 CLE National Institutes

The National Law Review is pleased to bring you information about the ABA’s Upcoming Spring 2012 CLE National Institutes:

 

Learn and network at these in-person,full-day or multi-day seminars held live in various locations across the country that draw lawyers from across the nation.

USPTO Preliminary Guidelines Spread Mayo on Patent-Eligibility

The National Law Review recently published an article by Christopher L. Drymalla, Jeffrey B. Swartz, Jeffrey S. Whittle and Michael R. Samardzija, Ph.D. of Bracewell & Giuliani LLP regarding Patent-Eligibilty:

A day after the United States Supreme Court delivered its decision in Mayo Collaborative Services v. Prometheus Laboratories, Inc.,1 the United States Patent and Trademark Office issued preliminary guidance2 instructing examiners to reject process claims that invoke laws of nature and only add steps which constitute “well-understood, routine, conventional activity” that is described in the most general of terms regardless of whether there is a transformation involved.

According to the Patent Office, although the “machine or transformation test” remains an “important and useful clue,” it is not to be considered “the sole or a determinative test” for eligibility as it does not “trump the ‘law of nature’ exclusion.” Moreover, the Mayo decision reinforces the need for a patent applicant whose claims include a law of nature, a natural phenomenon, or an abstract idea to ensure the “claimed product or process amounts to significantly more than a law of nature, a natural phenomenon, or an abstract idea with conventional steps specified at a high level of generality appended thereto.” (emphasis in original). Although the guidelines put special importance on process claims as were at stake in Mayo, the guidelines appear to indicate this analysis may apply to all claims related to laws of nature, natural phenomena, or abstract ideas.

Neither the guidelines nor Mayo provide specific guidance for what would make a product or process significantly more than a law of nature, a natural phenomenon, or an abstract idea. Nevertheless, the Patent Office sees the claim at issue inMayo as a prime example of one which merely includes a highly general and conventional step of which patent examiners are expected to be more cautious.  As explained in the guidelines, the claims in Mayo emphasize the “law of nature” correlation between the concentration of the drug and its threshold limits for therapeutic effects and harmful side effects.

Simply adding the well-understood, routine, conventional actions of administering the drug and checking its blood concentration in the most general of terms, however, does not confer patent eligibility as the claims themselves are “effectively directed to the [law of nature] exception itself.” Based on the new guidelines, an examiner confronting a similar claim set is directed to reject the claim as non-statutory subject matter under 35 U.S.C. § 101 (utility or patent-eligibility requirement section). The guidelines do specifically note that the applicant in such a case will then have the opportunity to defend the claim and show why it is not drawn to the patentability exception itself. The applicant will have to rely on other claim limitations to support the argument.

The Patent Office’s guidelines suggest that the Mayo decision should be viewed as a cautionary tale for applicants who intend to direct claims to inventions which arguably incorporate the use of laws of nature, natural phenomena, or abstract ideas.

Should you have any questions, please contact your Bracewell & Giuliani LLP patent attorneys. We will, of course, keep you advised as to any new developments in this area.

_______________________________________

1No. 10-1150, 566 U.S. ___, 2012 WL 912952 (S. Ct. Mar. 20, 2012) (for a more thorough discussion of Mayo and the particular facts and determinations involved,see Update: Can’t Touch This – Supreme Court Finds Personalized Medicine Patent Claims Invalid, Bracewell & Giuliani LLP (Mar. 20, 2012).

2See Memorandum: Supreme Court Decision in Mayo Collaborative Services v. Prometheus Laboratories, Inc. (Mar. 21, 2012).

© 2012 Bracewell & Giuliani LLP

Inside Counsel presents the 12th Annual Super Conference in Chicago

The National Law Review  is pleased to bring you information about the upcoming 12th Annual Super Conference in Chicago sponsored by Inside Counsel.

Reasons why you should Attend This Year’s Event:

  1. Who Should Attend – General Counsel and Other Senior Legal Executives from Top Companies Attend SuperConference:Meet with Decision Makers: You’ll meet face-to-face with senior-level in-house counsel
  2. Networking Opportunities: SuperConference offers several networking opportunities, including a cocktail reception, refreshment breaks, and a networking lunch.
  3. Gain Industry Knowledge: You will hear the latest issues facing the industry today with your complimentary full-conference passes.
  • Chief Legal Officers
  • General Counsel
  • Corporate Counsel
  • Associate General Counsel
  • CEOs
  • Senior Counsel
  • Corporate Compliance Officers

The 12th Annual IC SuperConference will be held at the NEW Radisson Blu Chicago.
Radisson Blu Aqua Hotel

221 N. Columbus Drive

Chicago, IL 60601

Don’t forget – The early discount deadline using the NLR discount code is February 24th!

FDA Discloses Method for Classifying Food Facilities as "High Risk" Under FSMA

The National Law Review published an article regarding FDA High Risk Food Facilities Classification Methods written by Lynn C. Tyler, M.S., Nicolette R. Hudson and Hae Park-Suk of Barnes & Thornburg LLP:

The Food Safety Modernization Act (FSMA), signed by President Obama in January 2011, requires FDA to inspect food facilities on different time tables depending on whether a facility is classified as “high risk” or not. High-risk facilities must be inspected at least once within the first five years after the enactment of the FSMA and once every three years thereafter. Non-high risk facilities must be inspected at least once within the first seven years after the enactment of the FSMA and once every five years thereafter.

The U.S. Food and Drug Administration (FDA) recently disclosed the method it intends to follow to classify food facilities as high risk or non-high risk under the FSMA. The agency first noted that the FSMA set forth six risk factors to be considered in making this determination:

  • The known safety risks of the food manufactured, processed, packed or held at the facility
  • The compliance history of the facility
  • The facility’s hazard analysis and risk-based preventive controls (HARBPC)
  • Whether the food at the facility meets the criteria for priority to detect intentional adulteration in imported food
  • Whether the food at the facility has received certain certifications
  • Other criteria identified by Health and Human Services

FDA then noted that for FY 2011-13 the classification decision will be based primarily on the first two factors and according to the following algorithms:

  • If a facility manufactures food categories associated with foodborne outbreaks AND class I recalls (reasonable probability of serious adverse health consequences or death), it is high risk
  • If a facility manufactures food categories associated with foodborne outbreaks OR class I recalls AND it has not been inspected within the last five years, it is high risk
  • Facilities with a checkered compliance history (three or more inspections resulting in Voluntary Action Indicated findings or one or more resulting in Official Action Indicated findings within the last five years) are high risk

FDA stated that it plans to modify and adjust these criteria in the future as it develops data on some of the FSMA criteria and for other reasons. It also reserved the right to inspect a facility more frequently when necessary in its judgment.

© 2012 BARNES & THORNBURG LLP

ICC Conference Cross-Border Sales – April 19, 2012

The National Law Review is pleased to bring you information about the upcoming ICC Conference Cross-Border Sales in London April 19, 2012:

What is the Best Legal Framework for Business-to-Business Contracts?

Thursday, 19 April 2012
London, United Kingdom

Objective

The contract of sale is certainly the most commonly used agreement in international commerce. When drafting a sales contract or general conditions of sale (or purchase) to be used in cross border trade, it is essential to choose the legal framework (applicable law) within which the agreement is to be placed.

Choosing one solution instead of another may have very important effects on the rights and obligations of the parties. Parties therefore need to have the information which is necessary in order to make the best possible choice between the various alternatives.

The speakers will examine and discuss on one side the project of a Common European Sales Law, which has been recently proposed by the European Commission, and on the other side the CISG (Vienna Sales Convention), which is the law applicable to cross-border sales in most countries of the world.

Members of the ICC task force that has been revising the ICC Model International Sales Contract will also take the opportunityto discuss their approach and present issues that have been the subject of relevant discussion.

Who should attend?

Legal directors and corporate counsel from companies involved in international trade, practising lawyers, legal practitioners advising international trading companies, business people involved in international trade and dispute resolution

Handbook of Quality Procedures Before the EPO

Recently The National Law Review published an article by Warren Woessner of Schwegman, Lundberg & Woessner, P.A. regarding EPO Quality Procedures:

The ECP, epi and Business Europe have collaborated to produce a downloadable, fifty page guide to practice before the EPO. While not binding on Examiners, it was issued under the authority of the EPO and is a sort of mini-MPEP, intended for use by both applicants and Examiners. A copy is provided at the end of this post. You can obtain a copy of the guide and read more about it here.

© 2012 Schwegman, Lundberg & Woessner, P.A.

2012 Young Professionals in Energy International Summit

The National Law Review is pleased to bring you information on the 2012 Young Professionals in Energy International Summit:

2012 YOUNG PROFESSIONALS IN ENERGY INTERNATIONAL SUMMIT

April 23-25, 2012
Planet Hollywood Resort & Casino
Las Vegas, Nevada

About the YPE:

Young Professionals in Energy (“YPE”) is the first and only interdisciplinary networking and volunteer organization for people in the global energy industry – a place where bankers can connect with engineers, accountants with geologists and so on. Our mission is to provide a forum for knowledge sharing and camaraderie among future leaders of the energy industry.

The event will feature panel discussions and presentations by YPE members from around the world on such vital energy issues as the world oil supply, shale, renewable energy, career issues and funding new energy projects.

Confirmed speakers include YPE members from the American Petroleum Institute, ExxonMobil, Fulbright & Jaworski L.L.P. the India Ministry of Petroleum and Natural Gas, the Nevada Institute for Renewable Energy Commercialization, Pemex, the University of Southern California and the U.S. Dept. of Commerce.

Highlighting the three-day conference is a keynote speech by Daniel Yergin, author of the best-selling “The Quest: Energy, Security and the Remaking of the Modern World (www.danielyergin.com).

Supreme Court Invalidates Biotech Method Patent in Mayo v. Prometheus

Recently an article by Richard G. Gervase, Jr. and Daniel W. Clarke, Ph.D. of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. regarding Biotech Patents recently appeared in The National Law Review:

On March 20, 2012, the United States Supreme Court handed down a groundbreaking decision in the field of biotechnology; however, the repercussions of this decision will be felt throughout the patent community. In a highly anticipated decision, the Court reversed the United States Court of Appeals for the Federal Circuit in Mayo Collaborative Services and Mayo Clinic Rochester v. Prometheus Laboratories, Inc., unanimously finding that process claims directed to optimizing the dosage of a drug for treatment of an immune-mediated gastrointestinal disorder are invalid because they effectively claim no more than an underlying law of nature.

The two patents at issue are exclusively licensed to Prometheus, who sells diagnostic tests that employ the patented processes. At first, Mayo bought and used these diagnostic tests; however, in 2004, Mayo decided to use and sell a slightly different diagnostic test. Prometheus responded by bringing an infringement action in the United States District Court for the Southern District of California, which found that although Mayo infringed a claim of a Prometheus-licensed patent, the asserted claims were invalid for being drawn to non-statutory subject matter. The District Court reasoned that the patents claimed “natural laws or natural phenomena,” which are not entitled to patent protection. Specifically, the District Court opined that the correlations between metabolite levels and the toxicity and efficacy of drug dosages are patent-ineligible laws of nature. The Federal Circuit reversed, and held that the claims were directed to patent-eligible subject matter because they “transform an article into a different state or thing,” and the transformation was “central to the purpose of the claimed process.” The Federal Circuit subsequently reaffirmed this decision on remand from the Supreme Court for reconsideration in view ofBilski v. Kappos.

The question presented to the Supreme Court in Mayo v. Prometheus was “whether the claimed processes have transformed unpatentable natural laws into patent-eligible applications of those laws.” The Court recognized that the threshold inquiry to determine whether a claim is directed to patent-eligible subject matter is governed by 35 U.S.C. § 101, which provides “[w]hoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”

The representative claim analyzed by the Court was directed to methods of calibrating the optimal dosage of a thiopurine drug by administering the drug, and determining the level of subsequent metabolites, where certain metabolite levels correlate with certain results. The Court relied on case precedent, including Diamond v. Diehr and Gottschalk v. Benson, for the proposition that the meaning of “process” in § 101 has been limited to exclude fundamental principles, such as “laws of nature, natural phenomena, and abstract ideas,” but noted that “an application of a law of nature or mathematical formula to a known structure or process may well be deserving of patent protection.” The Court concluded that the claims were not patent eligible, reasoning that the claims were merely instructions to apply a natural law, i.e., a natural correlation.

Specifically, the Court stated that the additional steps of “administering” and “determining,” along with the “wherein” clauses, “add nothing specific to the laws of nature other than what is well-understood, routine, conventional activity, previously engaged in by those in the field.”

Although the Court recognized that in determining whether additional claim steps are routine or conventional, a § 102 novelty inquiry and a § 101 statutory subject matter inquiry “might sometimes overlap,” Justice Breyer repeatedly emphasized that from a policy perspective, a patent should not preempt natural correlations, thereby improperly inhibiting future innovation. The Court also warned that a non-statutory law of nature cannot be transformed into subject matter that is eligible for patent protection by mere clever claim drafting that amounts to no more than “insignificant post-solution activity.”

How the Supreme Court’s decision will impact medical diagnostic patents and patent applications in the future remains to be seen. We note that the Court declined to opine on the desirability of increased protection for diagnostic correlations, inviting Congress to develop “more finely tailored rules” for patent eligibility should the legislature disagree with the Court’s conclusion.

©1994-2012 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

Retail Law Conference 2012

The National Law Review is pleased to bring you information about the upcoming Retail Law Conference:

at the Westin Galleria in Dallas, Texas

November 7-9, 2012

This event is the perfect opportunity to discuss the latest issues affecting the retail industry while obtaining important continuing legal education (CLE) credits.

Open to retail and consumer product general counsel, senior legal executives and in-house attorneys and their teams, the exceptional dialogue presented at this conference will help your organization navigate the current legal landscape of the industry.