Category: Antitrust & Trade Regulation

Misrepresentation of Source Claims Re: Foreign Trademark Registration

Katten Muchin

Owners of marks that are well- known outside the United States may find that an American company has attempted to take advantage of the renown of the foreign mark by obtaining a trade mark registration for such mark in the United States. While Article 6(bis) of the Paris Convention provides the owner of a famous foreign trade mark with a basis for asserting and sustaining a claim of priority in the US over a US registrant, this provision does not provide a basis for cancelling a US registration absent use of the mark in the US.

In April, however, the US Patent and Trademark Office’s Trademark Trial and Appeal Board (TTAB) issued a precedential decision which extends the ability of the owner of a mark that is famous internationally but not used in the US to enforce rights in their marks. In Bayer Consumer Care AG v Belmora LLC, the TTAB granted Bayer’s petition to cancel Belmora’s Registration for the Flanax mark based upon a misrepresen- tation of source in accordance with Section 14(3) of the Trademark Act even though Bayer was not using, nor had any intention to use, the Flanax mark in the US.

The evidence in Bayer showed that Bayer’s Mexican affiliate had been dis- tributing a naproxen sodium-based analgesic under the Flanax mark in Mexico since 1976 and that Flanax is the top selling pain reliever in Mexico. However, Bayer does not use the Flanax mark in the US and, instead, markets its naproxen sodium-based analgesic in the US under the Aleve mark.

The respondent, Belmora, adopted the Flanax mark in connection with a naproxen sodium-based analgesic that it sold and marketed towards the Hispanic community. The evidence fur- ther established that the initial packag- ing used by Belmora copied the logo and colour scheme used by Bayer for its Flanax product in Mexico and repeat- edly invoked the reputation of Bayer’s Flanax mark when marketing its prod- ucts in the US.

Belmora attacked Bayer’s standing to bring the cancellation proceedings, arguing that Bayer does not own a US registration for the Flanax mark, has not used the Flanax mark in the US and had no plans to use the mark in the US. The TTAB rejected these arguments, stating that “if respondent is using the FLANAX mark in the US to misrepre- sent to US consumers the source of respondent’s products as petitioner’s Mexican products, it is petitioner who loses the ability to control its reputation and thus suffers damage”. Integral to this analysis was the TTAB’s finding that given the size of the Mexican pop- ulation in the US, the “reputation of the Mexican FLANAX mark does not stop at the Mexican border”.

Having held that Bayer had standing to pursue the cancellation, the TTAB turned to its analysis of Section 14(3) which provides that a party may cancel a registration for a mark if the mark “is being used by, or with the permission of, the respondent so as to misrepresent the source of the goods or services on or in connection with which the mark is used”. In doing so, the TTAB held that the evidence established blatant misuse of the Flanax mark by Belmora in a manner calculated to trade on the goodwill and reputation of Bayer. Therefore, the TTAB ordered the can- cellation of Belmora’s Registration for the mark Flanax.

Although typically the ability to claim rights in a trade mark in the US requires that the mark actually be in use in the US, the TTAB’s decision in Bayer indicates that there may be an alternate basis that can be pursued when a foreign trade mark owner that does not use its mark in the US seeks to assert rights in its mark. On the other hand, the standard to satisfy a claim of misrepresentation of source is fairly dif- ficult, as it requires that the petitioner show that the respondent took steps to deliberately pass off its goods as those of petitioner. Therefore, a successful claim of misrepresentation of source will be very fact dependent.

Article By:

Karen Artz Ash
Bret J. Danow
Of:
Katten Muchin Rosenman LLP

EU Sanctions And The International Oil And Gas Industry

Andrews Kurth

The international oil and gas industry is continuously tasked with adapting to an ever evolving sanction-regulated environment. The level of sanction activity and implementation in recent years has been unprecedented, partly as a result of the political events which gave rise to the Arab Spring and the opposition to Iran’s nuclear programme. The recent crisis in the Ukraine, and associated sanctions against Russia, have sparked further debate around the need for effective, targeted punitive measures and the consequences they may have for Europe.

This article considers the EU’s sanction regime, explores the effect it has on international oil and gas companies and addresses the short-comings of the EU’s decentralised system.

What are sanctions?

Sanctions are political policy instruments used to encourage jurisdictions acting in contravention of international law to adopt standards supported by the wider global community. They impose measures designed to cause damage to the targeted government, non-state entity or individual (“Target”) in order to force it to undertake, or prevent it from undertaking, certain behaviour. They may inhibit the Target from accessing foreign markets for trade or deny it from pursuing financial and other forms of commerce. The professed ultimate objective of a sanction is to preserve or restore global peace and security.

What is the source of EU sanctions?

The UN Security Council imposes sanctions through Security Council resolutions which are binding on the EU. The EU implements all sanctions imposed by the UN Security Council through legislation enacted by the European Council. The process typically results in a European Council regulation which has direct effect in EU member states’ separate legal systems, creating rights and obligations for those subject to them, and overrides national law. Additionally, the EU may decide to impose self-directed sanctions or restrictive measures which go further than a UN Security Council resolution in circumstances in which the EU deems such action to be necessary.

Why do EU sanctions affect international oil and gas companies?

Over the past two decades, the EU has engaged in an active use of restrictive measures in the form of economic and financial sanctions, embargoes and restrictions on admission to a country. Economic and financial sanctions typically take the form of asset-freeze measures which involve the use of funds and economic resources by Targets or persons acting for and on behalf of Targets, and the provision of funds and economic resources to designated Targets. Embargoes may prohibit trade in certain goods, and activities relating to such trade, with Targets (including the flow of arms and military equipment). Visa or travel bans can be imposed preventing certain persons from entering the EU or transit through the territory of EU member states. These sanction measures are part of the EU’s strategy to support the specific objectives of the Common Foreign and Security Policy.

At the time of writing, the EU has announced asset freezes and travel bans against around twenty individuals in Russia and the Ukraine. Companies conducting their business in the oil and gas sector should be particularly vigilant to ensure they act in compliance with EU sanctions, as Ukrainian and Russian entities and individuals who operate in this industry may increasingly become sanction targets.

US sanctions are questionable under international law because they apply extra-territorially to third state parties involved in business activities with the Target. Unlike the US, the EU has refrained from adopting legislation with extra-territorial effect. However, the EU’s recent sanctions against Iran displayed a greater resemblance to those levied by the US than had previously been the case. For example, sanctions were imposed prohibiting the provision of key resources to various parts of the Iranian oil and gas industry, as well as the provision of financial services to that sector. As a result of EU financial sanctions most, if not all, banks and other financial institutions have declined from conducting any business relations with the Iranian regime.

It is clear that EU sanctions are wide reaching and their scope has a significant impact on business activities. They will apply to international oil and gas companies in the following situations:

  • within EU territory, including its airspace;
  • on board of aircrafts or vessels under the jurisdiction of an EU member state;
  • to EU nationals, whether or not they are in the EU;
  • to companies and organisations incorporated under the law of a member state, whether or not they are in the EU (this captures branches of EU companies in non-EU countries); and
  • to any business done in whole or in part within the EU.

The corporate behaviour, performance and conduct of international companies are powerful channels through which the objectives of sanctions against Targets are achieved. Since an international oil and gas company has little option but to observe EU sanctions to the extent such company falls within the EU’s jurisdiction, these restrictive measures are likely to play a big part in a company’s commercial decision making processes.

Why are EU sanctions difficult to manage?

A principal reason why EU sanctions are difficult for international oil and gas companies based in various EU member states to manage largely stems from the fact that the European Union lacks a centralised licensing body. Instead, the responsibility for implementing and enforcing EU sanctions is delegated to the relevant competent authorities of the EU member states. The potential for variance and discrepancy is rife in a system where there are twenty-eight EU member states, each with their individual national resource constraints and self-centred policy objectives.

Typically, the competent authorities of EU member states are responsible for:

  • granting exemptions and licences;
  • establishing penalties for sanction violations;
  • coordinating with financial institutions; and
  • reporting upon the implementation of sanctions to the European Commission.

There have been calls for a central EU licensing body which would produce a single licensing and exemption policy for EU member states. Although EU guidelines on sanctions and best practices for the effective implementation of restrictive measures go some way to plug the gap, arguably a more comprehensive regime for implementing sanctions is required to provide a better level of certainty to international businesses operating in the realms of the EU.

Managing the risks

International oil and gas companies have always had to function in politically active climates. As sanctions initiated by multilateral organisations such as the UN and EU become more fashionable, so too does the exposure to political risk that these companies will face. Given the considerable levels of investment that can only be recouped over extended periods of time, and in accordance with pre-determined contractual apportionments, international oil and gas companies need to be able to recognise, assess and manage these political risks effectively.

Oil and gas companies can relieve the risks imposed on them by sanctions through political lobbying, taking pre-emptive measures and by reacting quickly to sanctions once they are implemented. Commercial negotiations will need to focus on the allocation of risk as a result of one party’s failure to perform or withdrawal from the contract on the grounds of applicable sanctions.

International oil and gas companies need to be proactive and consider both the legal solutions and pre-cure safeguards. Time and effort should be spent focusing on drafting and negotiating the relevant contractual documentation, following a careful risk assessment, instead of deferring to dispute resolution provisions. For instance, careful construction of force majeure provisions can allocate each party’s obligations in the circumstance where an event outside of a party’s control causes contractual performance to become impossible. Thus, whilst conventional force majeure clauses relating to physical events afford relief to an affected party from its liabilities under the contract, oil and gas companies should consider expanding such contractual provisions to cover sanctions and other restrictive measures imposed on them by the UN and EU.

To avoid falling foul of existing EU sanctions, oil and gas companies should also consider putting in place comprehensive compliance procedures and systems to implement applicable sanction regimes. Penalties for breach of sanctions can be severe; a person guilty of a sanction-related offence may be liable on conviction to imprisonment and/or a fine. Falling foul of sanctions also means that a transaction can immediately become unlawful.

Conclusion

In view of the economic significance of the EU, the application of economic financial sanctions can be a powerful tool. But like a chain is no stronger than its weakest link, the effectiveness and success of the EU’s sanction regime depends on all EU member states applying, implementing and enforcing EU sanctions in a consistent manner.

The current EU sanction regime warrants a fully integrated approach which would undoubtedly benefit its policy objectives and move some way to reducing the unduly high economic cost that international oil and gas companies face when operating their businesses in the EU.

In voicing the sentiments of Henry Kissinger: “No foreign policy – no matter how ingenious – has any chance of success if it is born in the minds of a few and carried in the hearts of none”, perhaps now, in the dawn of the recent events which have taken place in the EU’s backyard in the Ukraine and Russia, the EU should further global security measures by tightening its ranks and implementing a more centralised, and better monitored, sanction regime.

Article By:

Rebecca Downes
Of:
Andrews Kurth

2nd Conflict Minerals Reporting and Supply Chain Transparency Conference- June 23-25, Chicago, IL

The National Law Review is pleased to bring you information about the 2nd Conflict Minerals Reporting and Supply Chain Transparency Conference, June 24-25, 2014, presented by Marcus Evans.Conflict-Minerals-250-x-250

Click here to register.

Where

Chicago, IL

When

June 24-25, 2014

What

The 2nd Sustaining Conflict Minerals Compliance Conference will break down each SEC filing requirement as well as examine direct filing examples from specific companies. Discussions will tackle key issues including refining conflict minerals teams to create a more successful conflict minerals management program, managing and developing consistent communication within the supply chain, and building an IT program that will continue to secure data from the various levels of the supply chain.

This conference will allow organizations to benchmark their conflict minerals management program against their peers to more efficiently meet SEC expectations and amend their program for future filings. Seating is limited to maintain and intimate educational environment that will cultivate the knowledge and experience of all participants.

Key Topics
  • Scrutinize the Securities and Exchange Commission (SEC) requirements and evaluate external resources for a more efficient conflict minerals rule with Newport News Shipbuilding, Huntington Ingalls Industries
  • Engineer a sustainable conflict minerals program for future filings with Alcatel-Lucent
  • Integrate filings and best practices from the first year of reporting with BlackBerry
  • Maintain a strong rapport with all tiers of your supply chain to increase transparency with KEMET
  • Obtain complete responses moving throughout the supply chain with Global Advanced Metals

Register today!

New York Federal Court Rejects Preemption and Primary Jurisdiction Arguments in “All Natural” Case

GT Law

In our February 12, 2014 post, entitled “Consumer Class Actions Trending From Attacking ‘All Natural’ to ‘Raw,’” we addressed whether claims challenging consumer product advertising as “all natural” were preempted in the absence of specific guidance from the FDA and the mixed results the argument has produced.  In Ault v. J.M. Smucker Co. et al., 2014 WL 1998235 (S.D.N.Y. May 15, 2014), the Court denied a motion to dismiss based on preemption and primary jurisdiction where the plaintiff alleged that it was deceived into purchasing Smucker’s Crisco oil by “all natural” advertising where the product contained genetically modified organisms, or GMOs, because the FDA has not addressed the use of the term “all natural” in this context.

All Natural

Smuckers argued that FDA policies regarding the use of the term “natural” preempt state law false advertising claims based on this language, even if those policies are informal.  However, the Court found, “no federal specifications exist here.”  Id. at *3.  And “[e]ven if an informal FDA definition does exist, the term ‘natural’ ‘may be used in numerous contexts and may convey different meanings depending on that context[]” [citation,] [and] “that is one of the reasons the FDA has never adopted a formal definition.”  Id. (citing Pelayo v. Nestle USA, Inc.,<“> No. CV 13–5213, 2013 WL 5764644, at *5 (C.D.Cal. Oct. 25, 2013)).  In addition, “the FDA has declined to consider the specific issue here:  whether and under what circumstances food products containing ingredients produced using genetically engineered ingredients may or may not be labeled ‘natural.’”  Id. (citation and some internal quotation marks omitted).  “As a result,” the Court found, “any general, informal FDA guidance is not controlling.”  Id. (citing In re Frito–Lay N. Am., Inc. All Natural Litig., No. 12–md–2413,2013 WL 4647512, at *10 (E.D.N.Y. Aug. 29, 2013)).

The Court also rejected Smucker’s argument that the FDA’s decision not to impose a labeling requirement for foods with GMOs supports preemption, stating, “[i]n effect, Defendant interprets the FDA’s lack of action as approval for Defendant’s use of the phrase ‘All Natural’ to describe foods containing GMO [but] [i]n reality, the FDA has stayed silent because it ‘operates in a world of limited resources’ where it ‘must prioritize which issues to address.’”  Id. (citation omitted.)

In addition, the Court found Smucker’s primary jurisdiction argument unavailing:  “three federal district judges previously referred the question of whether foods containing GMOs may be labeled ‘natural’ to the FDA under the primary jurisdiction doctrine [and on] January 6, 2014, the FDA responded and explicitly declined to make such a determination.”  Id. at *4 (citing January 6, 2014 FDA Letter).  “The FDA’s refusal to consider the question demonstrates that ‘resort to the agency at this time would be unavailing,’ [citation] and therefore weighs against applying the primary jurisdiction doctrine.”  Id.

This case signals that, until the FDA acts, preemption and primary jurisdiction arguments against “all natural” advertising of products with GMOs may be more and more challenging.

Article By:

Jordan D. Grotzinger
Of:
Greenberg Traurig, LLP

Can the Town Make Me Change My Sign?

Giordano Logo

A business’ signage can be one of the most distinctive characteristics of its brand and one of its most important assets.  This is especially true when the sign display’s the business’ federally registered trademark and color is a feature of the mark.  But what happens when that brand runs afoul of state and local laws?

It is common place for commercial real estate development plans to impose requirements on the characteristics of the signs that tenants may display in the development.  Sometimes, those requirements impose restrictions on the colors that such signs may display.  For owners of federally registered trademarks where color is claimed as a feature of the mark, the last thing they want is to have to change the color of their sign.

For example, imagine telling McDonalds that its famous golden and red sign must be displayed in other colors, say, like this:

McDonalds Logo w Inverted Colors

For most consumers, I suspect this sounds ridiculous.  But that is exactly the obstacle that federal brand owners must overcome when faced with local zoning restrictions on color.

Fortunately, the federal trademark law provides some relief.  Or does it?   The Lanham Act expressly provides that federal law preempts state law by providing (in part):

No State or other jurisdiction of the United States or any political subdivision or any agency thereof may require alteration of a registered mark …. (15 USCA §1121(B))

While this may seem pretty clear on its face, courts are split as to whether towns can lawfully impose color restrictions on signs displaying a federally registered trademark.

Two courts in the 9th Circuit (including the 9th Circuit Court of Appeals) have shot down Tempe, Arizona’s attempts to impose such color restrictions under this section of the Lanham Act.  Blockbuster Videos, Inc. v. City of Tempe, 141 F.3d 1295 (1998); Desert Subway, Inc. v. City of Tempe, 322 F. Supp.2d 1036 (2003).  Conversely, two courts in the 2d Circuit (including  the 2d Circuit Court of Appeals) have upheld town zoning boards’ imposition of signage color restrictions as superior to the rights of federally registered trademark holders.  Payless Shoesource, Inc. v. Town of Penfield, NY, 934 F. Supp. 540 (1996); Lisa’s Party City, Inc. v. Town of Henrietta, 185 F.3d 12 (1999).

According to the 9th Circuit courts, from looking at the legislative history, it is clear that while local governments can prohibit the display of outdoor signs altogether, there is nothing to suggest that local zoning ordinances may require alteration of trademarks.  Looking at the identical legislative history and, in some cases, quoting from the same testimony, the 2d Circuit courts agreed that the law would allow local zoning ordinances to prohibit outdoor signs altogether or even materially restrict their size.  However, the 2d Circuit found that the statute was intended to prohibit state-mandated changes in the trademark  itself since the brand owner would be free to use the unaltered mark in every other aspect of its business.

So who is right?

Like any other situation where courts are split geographically, they both are.  Until the Supreme Court takes up the issue, local ordinances in the 2d Circuit are free to place restrictions on colors used in trademarks displayed on signs, whereas in the 9th Circuit (especially, Tempe, Arizona), local ordinances may not.  For those of us in other circuits, the moral of the story for brand owners is to be mindful of local zoning restrictions before committing to a store location.  Real estate developers should also be mindful of signage restrictions included in their plans when seeking local approvals.

Article By:

Kurt E. Anderson
Of: 
Giordano, Halleran & Ciesla, P.C.

Office of Foreign Assets Control Publishes New Syria and Ukraine Sanctions Regulations; Designates Russian Bank For its Involvement in Syrian Unrest

COV_cmyk_C

The U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) recently published a final rule amending and reissuing in their entirety the Syrian Sanctions Regulations (“SSR”), 31 C.F.R. Part 542. The reissued SSR contain six new general licenses, including one that authorizes the provision by a U.S. person or from the United States of services ordinarily incident to the supply to Syria of non-U.S. food, medicine, and medical devices that are non-sensitive in nature.

In addition, OFAC last week issued new Ukraine-Related Sanctions Regulations to implement executive orders that the Administration issued in March 2014, and designated a Russian bank (Tempbank) and the Chairman of its Management Committee (Mikhail Georgievich Gagloev) for providing material support and services to the Government of Syria.

Background on Syrian Regulations

Syria has been the target of U.S. economic sanctions since it was designated as a state sponsor of terrorism in 1979. The SSR, which first went into effect in April 2005, constitute one of the primary regulatory regimes that implements these sanctions. (The Commerce Department’s Export Administration Regulations (“EAR”) also broadly prohibit, absent licensing, exports and reexports to Syria of most items, other than food and non-sensitive medicines, that are of U.S.-origin or that incorporate more than de minimis U.S.-origin content.) Since the original issuance of the SSR in 2005, the Bush and Obama Administrations have issued executive orders broadening the U.S. sanctions against Syria by imposing new blocking measures and other trade restrictions. OFAC also has issued a number of general licenses authorizing certain otherwise prohibited transactions. These developments had created a complex patchwork of authorities imposing sanctions on Syria. OFAC’s overhaul of the SSR combines many of these authorities into a single, unified, and up-to-date set of regulations.

Incorporated Executive Orders

The reissued SSR, which went into effect on May 2, 2014, incorporate asset-blocking measures and other trade restrictions imposed under six executive orders issued between 2006 and 2012. As a result, Section 542.201 of the SSR now requires the blocking of all property and interests in property of the Government of Syria (including its agencies, instrumentalities, and controlled entities) that are or hereafter come into the United States or the possession or control of a U.S. person, as well as such assets of Specially Designated Nationals (“SDNs”) sanctioned because they were determined to have undertaken activities specified in the executive orders. U.S. persons may not transfer, pay, export, withdraw, or otherwise deal in such blocked property. Consistent with OFAC guidance with respect to numerous sanctions programs, SSR § 542.411 clarifies that if a person whose assets are blocked under Section 542.201 owns, directly or indirectly, a 50 percent or greater interest in an entity, that entity’s assets are also blocked even if that entity is not added to the SDN List.

The SSR also now contain certain other trade restrictions originally imposed by

Executive Order 13582 (effective August 18, 2011), which we discussed in our e-alert of August 19, 2011. These restrictions prohibit:

  • U.S. persons, wherever located, from making new investments in Syria (§ 542.206) ;
  • The export, reexport, sale, or supply, directly or indirectly, by a U.S. person or from the United States of any services to Syria (§ 542.207);
  • The importation into the United States of Syrian-origin petroleum or petroleum products (§ 542.208);
  • U.S. persons from engaging in any transaction or dealing related to Syrian-origin petroleum or petroleum products (§ 542.209); and
  •  U.S. persons from approving, financing, facilitating, or guaranteeing a transaction by a foreign person that would be prohibited if performed by a U.S. person or within the United States (§ 542.210).

General LIcenses and Statements of Licensing Policy

In addition to incorporating prior executive orders, the reissued SSR incorporate (at Sections 542.509 through 542.520 and 542.523) a number of general licenses that were previously posted on OFAC’s website, and add six new general licenses and three new statements of licensing policy. The new general licenses authorize the following transactions:

  • With certain limitations, the receipt of payment of professional fees and reimbursement of incurred expenses for the provision of authorized legal services to or on behalf of the Government of Syria and other blocked parties (§ 542.508);
  • All transactions in the United States between U.S. persons and persons who have been granted certain categories of U.S. visas; services in connection with the filing of applications for such visas; and services provided by accredited U.S. graduate and undergraduate degree-granting institutions for the filing and processing of applications to enroll in the institutions, and the acceptance of payments for submitted applications to enroll and tuition from persons ordinarily resident in Syria (§ 542.521);
  • Otherwise prohibited transactions between blocked SDNs and employees, grantees, or contractors of the U.S. federal government that are for official government business (§ 542.522);
  • The following services provided in the United States to non-Syrian carriers transporting passengers or goods to or from Syria (but not the Government of Syria or blocked parties): bunkers and bunkering services, services supplied or performed in the course of emergency repairs, and services supplied or performed under circumstances which could not be anticipated prior to the carrier’s departure for the United States (§ 542.524);
  • The provision by a U.S. person or from the United States of services ordinarily incident to the supply to Syria of non-U.S.-origin food, medicine, and medical devices that would be classified EAR99 if subject to the EAR (§ 542.525); and
  • Certain services related to conferences, performances, exhibitions, or similar events in the United States or a third country attended by persons who are ordinarily resident in Syria, other than the Government of Syria or blocked parties (§ 542.526).

The new general license found at Section 542.525 is a particularly noteworthy development, as it eliminates an anomaly in the prior sanctions regime’s licensing requirements. Under the general license now found at Section 542.510, U.S. persons are authorized to be involved in and facilitate the supply to Syria of food, medicines and medical devices authorized for supply to Syria by the U.S. Commerce Department. However, because the Commerce Department regulations do not apply to exports to Syria of most non-U.S.-origin items that contain 10 percent or less U.S. content by value, U.S. persons were not permitted by the OFAC general license to facilitate the supply of such non-U.S.-origin items to Syria; rather, a specific OFAC license was required. The new general license authorizes the provision of services by a U.S. person or from the United States related to the export and reexport to Syria of non-U.S.-origin food, medicines, and medical devices that would be classified EAR99 if subject to the EAR.

In addition, three new statements of licensing policy contained in the SSR clarify that specific licenses may be issued by OFAC on a case-by-case basis authorizing: (1) certain transactions involving Syria’s telecommunications sector that are otherwise prohibited by the SSR, in order to enable private persons in Syria to better and more securely access the Internet (§ 542.527); (2) certain transactions involving Syria’s agricultural sector that are otherwise prohibited by the SSR, in order to strengthen that sector in light of Syria’s food “insecur[ity]” (§ 542.528); and (3) certain transactions that are otherwise prohibited by Sections 542.206 through 542.210 of the SSR, including new investment related to Syrian petroleum and petroleum products for the benefit of the National Coalition of Syrian Revolutionary and Opposition Forces (§ 542.529).

New Syria Related Designations

In addition to reissuing the SSR, on May 8, 2014, OFAC announced 10 new Syria-related designations. These designations included six Syrian government officials and two Syrian refineries. OFAC also designated a Russian Bank (Tempbank) and the Chairman of its Management Committee (Mikhail Georgievich Gagloev) pursuant to Executive Order 13582 for providing material support and services to the Government of Syria, including the Central Bank of Syria and SYTROL, Syria’s state oil marketing firm. The Treasury Department statement announcing the designations noted that Tempbank has provided millions of dollars and facilitated the provision of financial services to the Syrian regime, and that Mr. Gagloev personally travelled to Damascus to make deals with the Syrian regime on behalf of Tempbank.

As a result of these designations, U.S. persons are generally prohibited from engaging in any transactions or dealings with these parties, and the property and property interests of these parties that are or come into the United States or the possession or control of a U.S. person are blocked. Further, the sanctions apply to any entity in which any designated person owns a 50 percent or greater interest (regardless of whether such entity is itself designated).

Publication of Ukraine Related Sanction-Regulations

Also on May 8, OFAC issued new Ukraine-Related Sanctions Regulations at 31 C.F.R. Part 589 to implement executive orders issued in March 2014 (EOs 13660, 13661, and 13662, which were the subject of our prior e-alerts on March 6, 2014, March 18, 2014, and March 21, 2014).

The newly issued regulations, which were effective immediately, do not substantively change the scope of the Ukraine-related sanctions program, but do provide directions for management of blocked funds and property, definitions, interpretations, and limited general licenses. The general licenses authorize transactions such as certain transfers of property between blocked accounts in a U.S. financial institution, debits from blocked accounts by a U.S. financial institution for normal service charges, the provision of certain legal services, the receipt of certain payments for the provision of authorized legal services, and the provision of emergency medical services in the United States.

OFAC stated that these regulations were being published in abbreviated form, and that it intends to supplement them with a more comprehensive set of regulations, which may include additional definitions, interpretive guidance, general licenses, and statements of licensing policy.

Article by:

Peter Flanagan
Corrine Goldstein
Peter Lichtenbaum
Kimberly Strosnider
David Addis
Sarah Liebschutz
Of:
Covington & Burling LLP

 

New G-7 Sanctions Against Russia

McDermottLogo_2c_rgb

The United States, in coordination with other G-7 nations, announced on Monday, April 28new sanctions on individuals and entities with ties to the Russian government and President Putin.  The newly announced sanctions build on earlier rounds of U.S. sanctions imposed on March 6, March 17, March 20 and April 11.  The United States also tightened license restrictions for high technology exports to Russia.  In addition to the new U.S. sanctions, the European Union, Canada and Japan also announced new sanctions against Russian individuals and entities.

Reasons cited for the new sanctions were Russia’s failure to abide by commitments it made to de-escalate the crisis during an April 17 meeting in Geneva among Russia, Ukraine, the United States and the European Union (also known as the Geneva accord) and continued Russian-supported efforts to destabilize Eastern Ukraine.  According to an April 25 statement by the G-7 leaders, Russia has failed to take actions required by the Geneva accord and has continued to escalate tensions through its “increasingly concerning rhetoric” and “ongoing threatening military maneuvers on Ukraine’s border.”

New U.S. Sanctions and Export Restrictions

The new U.S. sanctions issued by the Office of Foreign Assets Control of the U.S. Department of the Treasury, target seven individuals and 17 entities, including banks, construction companies and transportation companies, with connections to the Russian government.  These sanctions, like those previously announced, freeze the assets subject to U.S. jurisdiction of all sanctioned individuals and bar those individuals from obtaining visas to enter the United States.  The sanctions also prohibit U.S. persons, including U.S. companies and their overseas branches and divisions, from transacting business with any sanctioned individuals or entities.

In addition, the Bureau of Industry and Security of the U.S. Department of Commerce announced that it added 13 of the newly sanctioned entities to its Entity List (comprised of parties that are prohibited from receiving some or all items subject to the U.S. Export Administration Regulations without a license), and that it will immediately begin denying pending applications for licenses to export or re-export “high technology” items to Russia or Crimea that may enhance Russia’s military capabilities.  Concurrently, the Directorate of Defense Trade Controls of the U.S. Department of State announced that it is placing a hold on all licenses for exports of defense articles and defense services to Russia.

New EU Sanctions

In coordination with the new U.S. sanctions, the new EU sanctions add 15 individuals with ties to the Russian government to the European Union’s existing list of sanctioned individuals.

Other New G-7 Sanctions

The two remaining G-7 member states also imposed new sanctions on Russian individuals this week:  Canada announced sanctions against two Russian banks and nine individuals, and Japan announced visa bans on 23 as-yet-unnamed individuals.

Companies with interests in Russia or Ukraine or doing business with Russian enterprises are advised to ensure appropriate measures are in place to comply with the sanctions, including careful screening of all parties to transactions.

Article By:

Jay L. Eizenstat
Andrea L. Hamilton
David J. Levine
Raymond Paretzky
David Henry
Of:
McDermott Will & Emery

FDA (Food and Drug Administration) Proposes Tobacco Products Rule; E-Cigarettes, Cigars To Be Regulated

Morgan Lewis logo

The rule would ban the sale of e-cigarettes, cigars, pipe tobacco, and other products to those under 18; would require warning statements on product packages and in advertisements; and would require manufacturers to register and list products the with Agency and submit new products for premarket review.

On April 25, the U.S. Food and Drug Administration (FDA or the Agency) published a proposed rule (the Rule) in the Federal Register, establishing, for the first time, federal regulatory authority over electronic cigarettes (e-cigarettes), cigars, pipe tobacco, dissolvable tobacco products, and nicotine gels (deemed tobacco products).[1]

Key Takeaways from the Rule, if Finalized

The following would apply to the newly deemed tobacco products:

  • No sales to those younger than 18 years of age and requirements for verification by means of photographic identification
  • Requirements to include health warnings on product packages and in advertisements
  • Prohibition of vending machine sales unless in an adult-only facility

In addition, per the Rule, manufacturers of newly deemed tobacco products would be subject to the following requirements, among others:

  • Register with, and report product and ingredient listings to, the Agency
  • Market new tobacco products only after FDA review
  • Not make direct and implied claims of reduced risk unless FDA confirms (1) that scientific evidence supports the claim and (2) that marketing the product will benefit public health
  • Not distribute free samples

Background

The Tobacco Control Act provides FDA with the authority to regulate cigarettes, cigarette tobacco, roll-your-own tobacco, and smokeless tobacco. Section 901 of the Federal Food, Drug, and Cosmetic Act (FD&C Act), as amended by the Tobacco Control Act, permits FDA to issue regulations deeming other tobacco products not named in the tobacco control statute (e.g., e-cigarettes) to be subject to the FD&C Act. Section 906(d) provides FDA with the authority to propose restrictions on the sale and distribution of tobacco products, including restrictions on access to, and advertising and promotion of, tobacco products if FDA determines that such regulation would protect public health.

The Rule would extend FDA’s existing authority over cigarettes, cigarette tobacco, roll-your-own tobacco, and smokeless tobacco to include e-cigarettes, cigars, pipe tobacco (including hookah [water pipe] tobacco), dissolvable tobacco products, and nicotine gels. This latter group of tobacco products, deemed by FDA to be subject to the Tobacco Control Act, was not named in such legislation.

Scope of the Rule

Broadly, the Agency has proposed the following two alternatives for the scope of the deeming provisions and, consequently, the application of the Rule:

  • Option 1 would extend the Agency’s authority to all tobacco products not previously regulated by FDA that meet the statutory definition of “tobacco product,”[2] except accessories of such products
  • Option 2 would extend the Agency’s authority to all tobacco products not previously regulated by FDA that meet the statutory definition of “tobacco product,” except premium cigars[3] and the accessories of products not previously regulated by FDA

FDA is seeking comment on the relative merits of Option 1 versus Option 2, based primarily on the public health consequences of adopting one option or the other.

The principal difference between the two options is the scope of cigar regulation. Under Option 1, all cigars would be covered. Under Option 2, only a subset of cigars (i.e., “everything but “premium” cigars) would be covered by the Rule.

As noted above, accessories of proposed deemed tobacco products are outside the scope of the Rule. FDA considers accessories of proposed deemed products to be those items that are not included as part of a finished tobacco product or items that are intended or expected to be used by consumers in the consumption of a tobacco product. For example, FDA considers accessories to be those items that may be used in the storage or personal possession of a proposed deemed product (e.g., hookah tongs, bags, cases, charcoal burners and holders, cigar foil cutters, humidors, carriers, and lighters). However, e-cigarettes, and the components thereof, and hookah pipes are covered by the Rule.

Requirements; Implications for Retailers and Manufacturers

Generally, deemed tobacco products would be subject to the same FD&C Act provisions that apply to cigarettes. These include, but are not limited to the following:

  • Prohibition on selling (at a retail counter or via a vending machine) these products to persons under 18 years of age and verification by means of photographic identification related to the same
  • Enforcement action against products determined to be adulterated and misbranded
  • Required submission of ingredient listing and reporting of harmful and potentially harmful constituents (HPHCs) for all tobacco products
  • Required registration and product listing for all tobacco products
  • Prohibition against use of modified risk descriptors (e.g., “light,” “low,” and “mild” descriptors) and claims unless FDA issues an order permitting their use
  • Prohibition on the distribution of free samples
  • Premarket review requirements

Display of Health Warnings on Deemed Tobacco Product Packages and Advertisements

The Rule would require the following health warning on packages of cigarette tobacco, roll-your-own tobacco, and deemed tobacco products other than cigars sold, distributed, or imported for sale within the United States: “WARNING: This product contains nicotine derived from tobacco. Nicotine is an addictive chemical.” Regarding cigars, the Rule would require that any cigar sold, distributed, or imported for sale within the United States must bear one of the following warning statements on each product package:

  • “WARNING: Cigar smoking can cause cancers of the mouth and throat, even if you do not inhale.”
  • “WARNING: Cigar smoking can cause lung cancer and heart disease.”
  • “WARNING: Cigars are not a safe alternative to cigarettes.”
  • “WARNING: Tobacco smoke increases the risk of lung cancer and heart disease, even in nonsmokers.”
  • “WARNING: This product contains nicotine derived from tobacco. Nicotine is an addictive chemical.”[4]

These warning statement requirements also apply to advertisements of cigarette tobacco, roll-your own tobacco, and deemed tobacco products, regardless of form, which could encompass retail or point-of-sale displays (including functional items, such as clocks or change mats), magazine and newspaper ads, pamphlets, leaflets, brochures, coupons, catalogues, posters, billboards, direct mailers, and Internet advertising (e.g., websites, banner ads, etc.).

New Requirements for Deemed Tobacco Products; Implications for E-Cigarettes and Hookahs

Significantly, the Rule would require manufacturers of deemed tobacco products to meet new additional requirements. In addition to the deemed tobacco products themselves, the scope of the Rule also includes components and parts sold separately or as parts of kits sold or distributed for consumer use or further manufacturing or included as part of a finished tobacco product. Such examples would include, but are not limited to, the following:

  • Air/smoke filters
  • Tubes
  • Papers
  • Pouches
  • Flavorings used for any of the proposed deemed tobacco products (such as flavored hookah charcoals and hookah flavor enhancers)
  • Cartridges for e-cigarettes (including the liquid contained therein)

The Rule would require manufacturers of deemed tobacco products that were not on the market in the United States by February 15, 2007 to only market such products after FDA premarket clearance. The review process adopts a system similar to the medical device regulatory process. Manufacturers may submit either (1) a premarket tobacco product application (PMTA) to, and receive a marketing authorization order from, FDA or (2) a substantial equivalence (SE) report if the new product is substantially equivalent to a predicate product (i.e., a product commercially marketed in the United States as of February 15, 2007) at least 90 days prior to introducing or delivering for introduction into interstate commerce for commercial distribution of the product.[5]

A PMTA may require one or more types of studies, including chemical analysis, nonclinical studies, and clinical studies. To demonstrate substantial equivalence, an SE notice must compare a new product to a predicate product to demonstrate that the products have the same characteristics or, if there are differences between such products, that the differences do not raise different questions of public health.

The Agency intends to continue to allow the marketing of such products pending FDA’s review of either a PMTA or SE notice, presuming such application or notice is submitted within 24 months after publication of the final Rule. It is unclear whether most e-cigarette products commercially marketed in the United States could be eligible for an SE report or if they would be required to go through the PMTA process.

Although the PMTA and SE requirements do not take effect until 24 months after publication of the final Rule, we would expect manufacturers to begin, in the near term, to gather the necessary information and prepare the necessary applications/notifications to come into compliance. Those manufacturers that submit their PMTAs or SE reports early within the 24-month window presumably will receive clearance before the close of the window. Retailers should be aware of supply chain issues and possible disruptions in the marketplace because of the Rule and should work with suppliers to understand the continued availability of deemed tobacco products.

What Is Not in the Rule; No Impact on Internet Sales or Flavored Products

The Rule’s prohibition on sales from vending machines is not intended to impact the sale of any tobacco product via the Internet, and the Rule does not otherwise address Internet sales. Note, however, that state laws would continue to apply to Internet sales.

Moreover, the Rule does not restrict the sale of deemed tobacco products that are flavored. FDA specifically notes in the Rule that the prohibition against the use of characterizing flavors established in the Tobacco Control Act applies to cigarettes only (i.e., it does not apply to e-cigarettes, pipe tobacco, cigars, dissolvable tobacco products, or nicotine gels). However, FDA requests comments on the characteristics or other factors it should consider in determining whether a particular tobacco product is a “cigarette” as defined in section 900(3) of the FD&C Act and, consequently, subject to the prohibition against characterizing flavors. FDA’s request for comments in this area is in response to the proliferation of products marketed as “little cigars” or “cigarillos” (allegedly to get around the flavored cigarette ban), but which the Agency has indicated are truly cigarettes.

Compliance Dates

The age restrictions in the Rule would take effect 30 days after publication of the final Rule, whereas the proposed health warning requirements would take effect 24 months after publication of the same. The PMTA and SE requirements would also take effect 24 months after publication of the final Rule.

Comments on the Rule

Interested parties are encouraged to submit comments on the Rule, identified by Docket No. FDA-2014-N-0189 and/or Regulatory Information Number (RIN) 0910-AG38 by July 9, 2014.

[1]. Deeming Tobacco Products To Be Subject to the Federal Food, Drug, and Cosmetic Act, as Amended by the Family Smoking Prevention and Tobacco Control Act; Regulations on the Sale and Distribution of Tobacco Products and Required Warning Statements for Tobacco Products, 79 Fed. Reg. 23,142 (proposed April 25, 2014) (to be codified at 21 C.F.R. pts. 1100, 1140, 1143), available here.

[2]. Section 201(rr) of the FD&C Act (21 U.S.C. 321(rr)), as amended by the Tobacco Control Act, defines the term “tobacco product” to mean “any product made or derived from tobacco that is intended for human consumption, including any component, part, or accessory of a tobacco product (except for raw materials other than tobacco used in manufacturing a component, part, or accessory of a tobacco product).” FDA notes in the Rule that products falling within the FD&C Act’s definition of “tobacco product” may not be considered tobacco products for federal excise tax purposes. See 26 U.S.C. § 5702(c).

[3]. The Rule defines “premium cigars” as cigars that are wrapped in whole tobacco leaf; contain a 100% leaf tobacco binder; contain primarily long filler tobacco; are made by manually combining the wrapper, filler, and binder; have no filter, tip, or non-tobacco mouthpiece and are capped by hand; do not have a characterizing flavor other than tobacco; weigh more than 6 pounds per 1,000 units; and sell for $10 or more per cigar.

[4]. In 2000, in settlements with the Federal Trade Commission (FTC), the seven largest U.S. cigar manufacturers agreed to include warnings about significant adverse health risks of cigar use in their advertising and packaging. See, e.g., In re Swisher International, Inc., Docket No. C-3964 (FTC Aug. 25, 2000). Under the 2000 FTC consent orders, virtually every cigar package and advertisement is required to clearly and conspicuously display one of several warnings on a rotating basis. FDA is proposing to adopt these four cigar warning statements from the FTC consent orders, which the vast majority of cigars already use.

[5]. FDA states in the Rule that it is aware of new product category entrants into the market after the February 15, 2007 reference date and that the SE pathway may not be available to these newer products.

Article By:

Jonathan A. Havens
Anthony “Tony” Pavel
Kathleen M. Sanzo
Of:
Morgan, Lewis & Bockius LLP

Microsoft-Nokia: China’s MOFCOM Quietly Slips Into the Debate about Injunctive Relief for FRAND (Fair, Reasonable and Nondiscriminatory)-Encumbered SEPs (Standard Essential Patents)

Sheppard Mullin 2012

This past November and December, the US Federal Trade Commission (“FTC”) andEuropean Commission (“EC”) cleared Microsoft Corporation’s (“Microsoft”) acquisition of the bulk of the devices and services business of Nokia Corporation of Finland (“Nokia”) without any conditions. In contrast, on April 8, 2014, the Chinese Ministry of Commerce (“MOFCOM”) approved the acquisition subject to conditions that include an intellectual property issue that is still to be resolved in the US, EU and other countries: whether holders of standard essential patents (“SEPs”) who make licensing commitments under fair, reasonable and nondiscriminatory (“FRAND”) terms should be barred from seeking injunctive relief against alleged infringers of their patents.  MOFCOM’s conditional approval is not controversial for this specific transaction, but raises the question of how MOFCOM’s treatment of this issue will be interpreted in future merger reviews and whether this will affect investigations related to anticompetitive conduct.

Microsoft develops, produces, licenses, and sells computer software, such as its computer operating system and PC-based productivity software, and consumer electronics. Microsoft owns both standard essential patents (“SEPs”) and non-SEPs for Android (smartphone operating system).  In general, the SEPs are important in terms of implementing certain telecommunication standards, such as 2G, 3G and 4G, in smartphones. The target, the devices and services business of Nokia, includes a design team and business units for devices such as mobile phones and smart devices, production facilities, related sales and marketing activities and support functions, as well as design rights related to the devices produced by the devices and services business.  Excluded from this acquisition are Nokia’s reserves of SEPs related to telecom and smartphones (the MOFCOM decision does not specify what these SEPs are for).

MOFCOM determined that Microsoft’s acquisition of Nokia’s design and services business had the effect of eliminating or restricting competition in China’s smartphone market both in terms of what Microsoft could do as a result of the acquisition and in terms of what Nokia could do with the assets that were not part of the acquisition.  MOFCOM conditioned its approval of the acquisition on Microsoft’s and Nokia’s compliance with the following conditions  (an unofficial translation of the MOFCOM decision can be found here).

MICROSOFT must:

1. (a) With regard to SEPs, continue to adhere to the existing FRAND terms of the standard setting organizations (SSOs).

(b) Refrain from seeking injunctions for infringement of such SEPs against smartphones produced by Chinese producers.

(c)  Refrain from demanding cross-licenses when licensing such SEPs except for any patents that the licensees have in the same industry.

(d) Only transfer such SEPs to a third party who agrees to comply with the above limitations. Any potential licensee with Microsoft-related SEPs should also be bound by the same principles.

2. (a) With regard to non-SEPs, continue to offer, at consistent or discounted rates, non-exclusive licenses of its non-SEPs to domestic Chinese smartphone producers

(b) For the next five years, not transfer its SEPs listed in attachment 1 or 2 (Attachment 1 lists Microsoft patents that were reviewed by MOFCOM, Attachment 2 lists Microsoft patents related to Android) to other parties. After this five-year period, Microsoft will transfer these SEPs only to those who agree to be bound by conditions imposed on Microsoft.

MOFCOM is entitled to inspect Microsoft’s compliance with the above conditions and Microsoft is obligated to report its compliance 45 days after the end of each calendar year.

NOKIA must:

  1. Make sure its commitments to license its SEPs continue to comply with the existing FRAND terms of the SSOs.
  2. Refrain from seeking injunctive relief against licensees of SEPs that are subject to FRAND except in the case where a licensee has breached the FRAND terms.
  3. Agree to define licensor or licensee “good faith” as a matter of each party’s willingness to resolve FRAND terms-related disputes through arbitration and to be bound by the arbitration decision.
  4. Agree that licensees are not obligated to accept any license not complying with FRAND terms by Nokia.
  5. Transfer SEPs only to those who agree to be bound by the FRAND terms applicable to those SEPs.
  6. Not change its valuation standards for FRAND licenses.

MOFCOM is entitled to inspect Nokia’s compliance with the above conditions and Nokia is obligated to report its compliance 45 days after the end of each calendar year.

Neither the FTC nor the EC speculated on the likely post-merger licensing conduct of the merged entity or the portion of Nokia that was excluded from the acquisition with respect to SEPs and non-SEPs. The EC noted that concerns related to the licensing of Nokia’s patent portfolio that was not part of the acquisition were beyond the scope of its review, but that it will monitor Nokia’s post-merger licensing practices.

MOFCOM, in contrast, without providing any basis for its conclusion other than speculation on the companies’ motives, stated that:

(a) Microsoft “could” exclude and impede competition in China’s smartphone market based on its patents for Android:  “Microsoft has the motive to raise royalty fees”—MOFCOM provides no basis for this conclusion other than the observation that, before the acquisition, Microsoft was not a player in the smartphone market. Now, with the SEPs and non-SEPs related to the Android system, it has the potential for excluding and restricting competition in the smartphone market because the Android smartphone has an 80% share of the China market.

(b) Nokia “could abuse its reserve of patent licenses” (“the acquisition enhances Nokia’s motive to rely on profits from patent licensing”)—MOFCOM provides no basis for this conclusion. MOFCOM states: “As Nokia will basically exit from downstream market of devices and services, Nokia will not have to obtain cross-licenses for its smartphone business after the acquisition, so its motivation to maintain a low level royalty fee in the smartphone industry will go down. Such lack of need will enhance Nokia’s motive to rely on profits from patent licensing.”

As in the Google-Motorola deal in 2012, this time both the FTC and the EC took a “wait and see” approach:  they will continue to monitor Microsoft’s and Nokia’s post-merger conduct.  MOFCOM took its analysis a step further.  MOFCOM wanted in black and white Microsoft’s and Nokia’s confirmations of what they are obligated to do under the FRAND terms of the standard setting organizations.  MOFCOM also wanted Microsoft to confirm that it would not seek an injunction against Chinese companies; such policy is actually already in Microsoft’s website statement of February 8, 2012, where, in reference to essential patents that are offered under FRAND terms, Microsoft announced that it would not seek an injunction against any firm on the basis of a SEP.

MOFCOM, without any discussion but merely by imposing a condition that the SEP holders, Microsoft and Nokia are barred from seeking injunctive relief against alleged patent infringers, has opened the door for debate in China. The issue of whether a FRAND commitment precludes a patent owner from seeking injunctive relief is still being debated in the US, EU and other jurisdictions. In July, 2013, the FTC lifted the ban against injunctions for FRAND patents in the Google-Motorola Mobility case.  In August, 2013, the US Trade Representative wrote a letter to the US International Trade Commission (“ITC”) stating that it opposed the injunction order of the ITC but included in a footnote when injunctions would be appropriate, including but not limited to when the “putative licensee is unable or refuses to take a FRAND license and is acting outside the scope of the patent holder’s commitment to license on FRAND terms…if a putative licensee is not subject to the jurisdiction of a court that could award damage.”  The bottom line was that public interest considerations must be part of the determination whether or not to grant injunctive relief. The EC’s stance is reflected in the Google/Motorola merger review decision of February, 2012—that competition may be threatened if SEP holders threaten injunctive relief.

MOFCOM’s approach may well have been influenced by Chinese domestic competitors raising concerns about the merger; in the media it has been reported that ZTE and Huawei, among others, raised concerns.  Of course, this is part of the merger review process, so it is not unusual for competitors to influence proceedings, but one must not forget that MOFCOM appears to wear two hats:  supporting China’s industrial policy and antitrust enforcer.  Furthermore, perhaps MOFCOM required these confirmations because it would be more difficult for the enforcement agencies, the National Development and Reform Commission (“NDRC”) and the State Administration of Industry and Commerce (“SAIC”), to monitor the companies’ actions in the future.

The relevance of this decision is the following:

  1. MOFCOM applies the antitrust laws as a regulator:  rather than waiting to see how the parties behave, it micro-manages their conduct (Microsoft and Nokia are already bound by FRAND terms that can include voluntary limitations on seeking injunctive relief).
  2.  How will SAIC use the condition regarding the ban on injunctive relief in abuse of dominance investigations?  Will the condition imposed by MOFCOM be interpreted as the definitive government position even though MOFCOM did not address this issue in its analysis?  If so, then there is the potential that a holder of an SEP may be accused of violating Chinese antitrust law if it seeks injunctive relief against an alleged infringer because it is allegedly abusing its dominant position (assuming that this holder is found to have a dominant position in the relevant market).
  3. Will SAIC include a ban on injunctive relief related to FRAND-encumbered SEPs in its final rules concerning intellectual property rights and the enforcement of Chinese antitrust law?
  4. It may be prudent for holders of SEPs to review their FRAND commitments.
  5. Potential patent infringers might want to check if there are FRAND commitments that would protect them.

This acquisition shows once more that for offshore acquisitions, which have been cleared by other jurisdictions, Chinese antitrust clearance is not to be taken for granted. This time China has quietly stepped into the debate over injunctive relief for FRAND-encumbered SEPs.

Article By:

Yasue (Becky) Nao Koblitz
Of:
Sheppard, Mullin, Richter & Hampton LLP

Federal Trade Commission (FTC) Wins Appeal: ProMedica Merger with St. Luke’s Not Allowed

vonBriesen

On April 22, 2014, the U.S. Court of Appeals for the Sixth Circuit (Sixth Circuit) upheld the Federal Trade Commission’s (FTC) finding that the merger between Ohio-basedProMedica Health System, Inc. (ProMedica) and St. Luke’s Hospital (St. Luke’s), an independent community hospital that operates in the one of the same counties as ProMedica, would adversely affect competition in violation of federal antitrust law. Prior to the merger, ProMedica and St. Luke’s comprised two of the four hospital systems in Lucas County, Ohio. After the two systems merged, ProMedica held more than 50% of the applicable market share.

Accordingly, in 2011 the FTC ordered ProMedica to divest itself of St. Luke’s. ProMedica appealed the FTC’s order to the Sixth Circuit. In a unanimous opinion, the Sixth Circuit denied ProMedica’s petition to overturn the FTC order, citing concerns about anti-competitive behavior and the ability of ProMedica to unduly influence reimbursement rates with healthcare insurance companies.

The full 22-page court opinion may be accessed here.

Article By:

Patrick J. Cannon
Of: 
von Briesen & Roper, S.C.