Category: Antitrust & Trade Regulation

McSweeny Confirmed to Fill Vacancy at Federal Trade Commissions (FTC)

Sheppard Mullin 2012

The Federal Trade Commissions will soon be back to having a full complement of five commissioners.  Today, the U.S. Senate, by a vote of 95 to 1, confirmed Terrell McSweeny to fill a vacancy at the agency created by the departure of Jon D. Leibowitz more than a year ago.  Her term runs through September 26, 2017.

The White House announced the nomination of McSweeny in June 2013.  Although her nomination was not controversial, her confirmation was delayed because the Senate failed to take a vote before year’s end.

McSweeny is currently Chief Counsel for Competition Policy and Intergovernmental Relations at the Department of Justice Antitrust Division.  She has been at the Antitrust Division since 2012.  Prior to that, she served as Deputy Assistant to the President and Domestic Policy Advisor to the Vice President at the White House.  McSweeny received an A.B. from Harvard University and a J.D. from Georgetown University Law School.

McSweeny’s arrival at the FTC will provide the agency with a Democratic majority that should avoid two-to-two deadlocks and enable Chairwoman Edith Ramirez to pursue her agenda.

The FTC recently described itself as “collegial, bipartisan, and consensus-driven.”  However, there has certainly been some disagreement among the four current commissioners.

During questioning by the Commerce Committee last year, McSweeny discussed the need for offering guidance to business.  Noting that the FTC was primarily a law enforcement agency dealing with issues on a case-by-case basis, she said that it was incumbent on agency leaders to clearly articulate their reasoning, to apply the law as written, and to follow the case law.  She committed to doing just that if confirmed.

Article By:
Bruce A. Colbath

Of:
Sheppard, Mullin, Richter & Hampton LLP

McSweeny Joins FTC as Fifth Commissioner as Republican Commissioners Continue to Make Waves – Federal Trade Commission

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On April 9, 2014, Terrell McSweeny was confirmed by the Senate as the fifth and final Federal Trade Commissioner. She joins fellow Democrat appointees Chairwoman Edith Ramirez and Commissioner Julie Brill. It is the two Republican appointees, Commissioners Maureen Ohlhausen and Josh Wright, however, who have been making the most news in the last several months with dissents and speeches. Now that the FTC is at full-strength, clients should be on the lookout for a more active discussion of new FTC initiatives.

McSweeny is a relative newcomer to the antitrust community, serving as Senior Counsel for Competition Policy in the Justice Department’s Antitrust Division since 2012. She held several positions supporting Vice President Joseph Biden, both as Vice President and Senator, and worked on earlier Democratic presidential campaigns. At her confirmation hearing, she pledged to “continue the [FTC’s] tradition of collegiality and consensus-oriented decision making,” but described no specific initiatives she planned to pursue. She received support from the few Senators present at the hearing and her confirmation vote was 95-1.

During the many months when there were two Democrat and two Republican Commissioners, the FTC continued to be very active in clearing mergers, challenging fraudulent activities and issuing rules and guidance for businesses of all types. Almost all those actions that required votes of the Commissioners received unanimous support. The two Republican Commissioners, however, have publicly dissented from some current and past FTC actions involving intellectual property, FTC Act Section 5 and particular mergers. Also, the lack of a fifth vote caused a rare 2-2 split on claims of collusion in the recent McWane case.

On intellectual property, Ohlhausen vigorously dissented to a portion of the Commission’s late 2012 Robert Bosch consent agreement resolving merger issues. She objected only to the finding of an unfair method of competition when the patent holder sought injunctive relief on a standard essential patent over which there was dispute about a fair, reasonable and non-discriminatory license (FRAND). Ohlhausen saw that issue as one better left to courts or standard setting organizations adjudicating contract provisions. She similarly dissented early in 2013 when the FTC obtained a consent agreement in Google/Motorola Mobility that again required a patent holder to forego unrestricted use of injunction actions as part of a FRAND dispute. While Wright took no part in those actions, he reiterated his earlier academic writing in an April 2013 speech that patent and contract law were better than antitrust law in dealing with FRAND disputes involving standard essential patents. In a March 2014 speech, he called those decisions deviations from the principle embedded in past FTC decisions and guidelines that the antitrust analysis should be symmetrical whether the rights were for intellectual property or real property.

Wright has taken the lead on the Section 5 issues. As explained in our earlier alert, FTC Section 5 allows the FTC to go beyond the Sherman Act and prevent “unfair methods of competition,” but opinions about the extent of that power have varied with the identities of the commissioners. Wright proposed specific guidance to be issued by the FTC that would tether the FTC’s power here to modern antitrust’s “harm to competition” concept. In a July 2013 speech, Ohlhausen endorsed the concept of guidance from the FTC and suggested a limited use of Section 5 similar to Wright’s. Brill questioned the need for such guidance, pointing to the limited number of recent Section 5 actions and no groundswell from business for such guidance, and thought it only made sense when the Commission was back to full strength. On several occasions, Chairwoman Ramirez has said that the periodic Commission actions and Commissioners’ speeches were sufficient guidance on the issue.

Finally, Wright dissented (Ohlhausen was recused) from the September 2013 challenge to the Nielsen/Arbitron merger. The Commission was concerned about the effect of the merger on a market that does not now exist. While acknowledging that merger review necessarily involves some level of prediction, he thought the effects of a merger on such a “future market case” beyond the ability of any enforcer to predict. Finally, Wright was the lone dissent from the December 2013 decision to require changes in the Fidelity National/Lender Processing merger before allowing it to proceed. Wright would have allowed the merger to close with no changes, observing that “modern economics” required something more before concluding that the mere reduction in competitors would increase the likelihood of post-merger collusion in the industry.

In the McWane matter, FTC complaint counsel claimed the company excluded some competitors from a slice of the ductile iron pipe fitting market through a loyalty rebate program while also colluding with those same competitors to raise prices in the overall market. The FTC Administrative Law Judge found exclusion but not collusion. The four sitting commissioners missed two deadlines to issue an opinion because, according to media reports, they were deadlocked. Finally, the deadlock was broken but only on exclusion — Wright dissented from a finding that there was sufficient evidence that the rebate program constituted anticompetitive exclusive dealing. The commissioners deadlocked 2-2 on the collusion claims so the ALJ’s finding of insufficient evidence was allowed to stand and those claims were dismissed.

These dissents and deadlocks can overstate the differences among the commissioners. Since Chairwoman Ramirez rose to her current role last year and the Commission was left shorthanded, the FTC’s enforcement and education activities have continued apace, usually supported by unanimity from the four commissioners. Also, Ramirez has not publicly indicated any particular initiatives she had been unable to pursue because of the lack of a third Democratic vote. Still, the McSweeny addition will give her the opportunity to regain the initiative from her Republican colleagues. Clients should be alert for any changes in the debates or new initiatives now that the Commission is back to full strength.

Article By:

Steven J. Cernak
Gregory L. Curtner
Jacob K. Danziger
William M. Hannay
Sondra A. Hemeryck
Richard J. Hoskins
Of:
Schiff Hardin LLP

Supreme Court Inks Uniform Standing Test for Lanham Act False Advertising Claims

Katten Muchin

Key Takeaways

  1. The US Supreme Court created a uniform test for standing for false advertising claims under Section 43(a) of the Lanham Act, resolving a three-way circuit split.
  2. The new standing test requires the plaintiff to allege and prove that it suffered an injury to a commercial interest in sales or business reputation, and that such injury was proximately caused by the defendant’s alleged misrepresentations.
  3. The Court closed the courthouse doors to consumer class action suits under Section 43(a), pointing to the commercial interest requirement.
  4. The decision may prompt speculation regarding uncertainty as to standing for other claims under Section 43(a), including claims for infringement of unregistered trademarks.

Discussion of the Case

In a decision issued March 25, 2014, Lexmark International, Inc. v. Static Control Components, Inc., the US Supreme Court rejected three conflicting tests for standing for false advertising claims under Section 43(a) of the Lanham Act, creating a new test in the process. Specifically, plaintiffs must now “plead (and ultimately prove) an injury to a commercial interest in sales or business reputation proximately caused by the defendant’s misrepresentations.”

Plaintiff Lexmark International, Inc. (Lexmark) sells laser printers and corresponding ink cartridges. The ink cartridges contain a microchip that deactivates them after they run out of ink, which is intended to stop “remanufacturers” from refurbishing and selling the ink cartridges in competition with Lexmark. Defendant Static Control Components, Inc. (Static Control), while not a direct competitor of Lexmark, sells component parts to remanufacturers, including a replacement microchip that allows the remanufacturers to once again refurbish and sell ink cartridges in competition with Lexmark. In response, Lexmark sent letters to the remanufacturers, advising that it was illegal to sell the refurbished ink cartridges and, in particular, that it was illegal to use Static Control’s products to refurbish the ink cartridges.

Lexmark sued Static Control for copyright infringement based on its creation and sale of the microchips. Static Control counterclaimed for false advertising based on, among other things, the letters to the remanufacturers. The US District Court for the Eastern District of Kentucky dismissed Static Control’s counterclaim for lack of “prudential standing,” and the US Court of Appeals for the Sixth Circuit reversed.

The Supreme Court granted certiorari and ultimately held that Static Control satisfied the Court’s new test for standing under Section 43(a) of the Lanham Act. In so holding, the Court swept aside what it called the “misleading” concept of “prudential standing,” which has been applied by courts as an additional hurdle to alleging standing beyond the broad “case or controversy” requirement (i.e., an injury in fact that is fairly traceable to the conduct complained of) of Article III of the US Constitution. The Court held that standing simply flows from traditional statutory interpretation principles. In particular, courts need only look to the at-issue statute to determine (1) whether the plaintiff’s alleged injury falls within the “zone of interest” protected by the statute, and if so, (2) whether such injury was proximately caused by the defendant’s alleged misrepresentations.

The Court’s new standing analysis falls somewhere in the middle of the three rejected tests: one, which conferred standing only on direct competitors of the defendant; the second, which used a multifactor analysis borrowed from antitrust law; and the third, which conferred standing on any plaintiff that demonstrated a “reasonable interest to be protected against” and a “reasonable basis for believing” that such interest was likely to be harmed.

Turning to the interpretation of the “zone of interest” protected by the Lanham Act, the Court looked to the statute’s clear statement of intent in Section 45 regarding protection against “unfair competition.” Citing to a law review article from 1929, the Court found that unfair competition “was generally understood to be concerned with injuries to business reputation and present and future sales.” Thus, the Court concluded that the “zone of interest” of Section 43(a) was limited to injuries to a commercial interest in reputation or sales. The Court then slammed the courthouse doors on consumer class actions under Section 43(a), pointing out that this “zone of interest” excluded a suit based on a “consumer who is hoodwinked into purchasing a disappointing product.”

On the facts at hand, the Court held that Static Control had sufficiently alleged lost sales and damage to its business reputation, easily satisfying the “zone of interest” requirement. Further, the Court found that Static Control’s allegations sufficiently pled that those injuries were proximately caused by Lexmark’s representations that Static Control’s business was illegal. Accordingly, the Court held that Static Control had standing and was thus “entitled to a chance to prove its case.”

While this decision provides some welcome certainty for false advertising litigants, ending the three-way circuit split regarding Section 43(a) false advertising standing, it also opens the door to speculation regarding standing for other “unfair competition” claims under Section 43(a) (e.g., infringement of unregistered trademarks). Specifically, the Court’s holding and analysis were not expressly limited to Section 43(a)(1)(b), which relates to false advertising, but instead apply to all of Section 43(a). It is thus unclear whether, for example, some increased level of “proximate harm” will be required for trademark claims under Section 43(a). Then again, the Court’s formulation of what constitutes proximate harm under Section 43(a)—when “deception of consumers causes them to withhold trade from the plaintiff”—seems to fit nicely with the “likelihood of consumer confusion” standard applied in trademark cases.

Article By:

Roger P. Furey
Doron S. Goldstein
Michael R. Justus
Of:
Katten Muchin Rosenman LLP

Starving the Bear: The United States Restricts Exports to Russia

Sheppard Mullin 2012

The pressure on Russia continues to build.  As we previously reported here and here, throughout March, the United States and other Western powers implemented a series of sanctions against individuals and entities deemed to be involved in the political destabilization of Ukraine.  Those sanctions were restricted to specific parties, including high ranking Russian and Ukrainian officials and – notably – one Russian bank.

The United States has now gone further, implementing restrictions that restrict trade with the entire country of Russia.  These sanctions are bound to have more bite.

Specifically, on March 26, the U.S. Department of Commerce announced that, since March 1, 2014 and until further notice, it had not and will not issue licenses for exports or re-exports to Russia.  Commerce governs exports and re-exports of U.S.-origin commercial and “dual use” items.  While not all such items require a license for Russia, many sensitive items do.

On March 27, the State Department followed suit: it announced that, until further notice, it will not issue any authorizations for exports of defense articles or services to Russia.  This is essentially an absolute embargo on defense exports to Russia and Russian nationals: an export authorization is required for virtually any export of a defense article, technical data, or defense service to Russia (or any other country).

These two actions constitute a significant expansion of U.S. trade restrictions on Russia, particularly because the license restrictions apply to exports of both goods and technology.  Moreover, the restrictions apply to all Russian individuals and entities, as opposed to the very targeted economic sanctions previously imposed by the Treasury Department.

While the United States has acted quickly, it is not alone, as the European Union has also taken action, introducing targeted sanctions, including an asset freeze and visa ban, against designated parties responsible for human rights violations, violence, and use of excessive force with respect to Ukraine.  In addition, EU Member States have agreed to (i) suspend export licenses on equipment that might be used for internal repression and (ii) reconsider export licenses to Ukraine and Russia related to military technology and equipment.

Collectively, the sanctions imposed to date bring with them a host of practical challenges for companies conducting business in or with Russia.  Western banks may scrutinize transactions with Russian banks and other parties especially carefully in light of the new restrictions.  In some cases, a Western bank might hold up a legitimate transaction for further review if a Russian counterparty is involved.

Companies with current business ties in Russia must, therefore, consider the commercial and related risks of continuing that business.  The United States in particular is implementing sanctions rapidly, piecemeal, and often without much warning.  As the landscape of trade restrictions continues to change, companies must perform ongoing diligence with respect to their Russian business.  For example, companies should perform periodic rescreening of Russian business partners to ensure they do not appear on any U.S. prohibited parties lists.

Article By:

Thaddeus Rogers McBride
Cheryl Palmeri
Of:
Sheppard, Mullin, Richter & Hampton LLP

California Proposes Enhanced Prop. 65 Warnings and Possible Online Disclosures – Dietary Supplements and Foods Specially Targeted

GT Law

The California Office of Environmental Health Hazard Assessment (OEHHA)announced on March 7, 2014, that it is considering implementation of the most significant changes to Prop. 65 regulations in more than two decades.  OEHHA has posted the draft regulation and Initial Statement of Reasons on its website.

Passed by voters in 1986, Prop. 65 requires warnings prior to exposures to chemicals listed by OEHHA as “known to the State” to cause cancer or reproductive harm.  The law, which carries the potential penalty of $2,500 for each violation, may be and routinely is enforced by entrepreneurial private plaintiffs who are permitted to bring legal actions against alleged violators with minimal evidence.  OEHHA’s proposed regulations will affect almost every industry subject to Prop. 65 and nearly every aspect of compliance.  In all but a few cases, OEHHA’s changes have the capacity to make compliance with Prop. 65 costlier, riskier, and more disruptive to companies doing business in California.

Four Important Provisions Affecting Food and Dietary Supplements

In its far-reaching proposal, OEHHA aims a number of significant changes directly at food and dietary supplement manufacturers, distributors, and retailers.  Four specific proposals stand out as impactful for the industry:

  1. Chemical Identification: Under OEHHA’s proposal, warning labels would have to specifically identify the chemical in question if it is on a proposed list of 12 “common” substances.  One substance on OEHHA’s list, lead, is sometimes naturally occurring in the ingredients used to produce dietary supplements and has been the source of considerable litigation and expense for the industry.  In OEHHA’s draft regulation, products requiring a warning for lead would have to “conspicuously” state its presence in the product.
  2. Display Requirements: For foods not already subject to a consent judgment, the “safe-harbor” warning language must also be enhanced with specific information about the chemical in question, specific text sizing, and the phrase “Cancer [and/or] Reproductive Hazard.” Even where a food supplier has data showing that the chemical poses no actual health threat, a private plaintiff may still litigate knowing that the costly burden of showing no significant risk is borne by defendants.  Unless modified or declared preempted by federal law, OEHHA’s regulation would virtually ensure that this language will be required for food and supplement packaging in California.
  3. Online Reporting: OEHHA would also mandate reporting of exposure data to the agency for its website if a new Prop. 65 warning does not contain 10 details specified by OEHHA.  The details include, among others, the name of the chemical at issue, anticipated exposure routes, exposure levels, and options for minimizing exposure.  Businesses that fail to provide the required detail, no matter how misleading it might be to the consumer, must disclose the additional information to OEHHA and will likely see such data published online.
  4. More Litigation: Despite statements from the agency to the contrary, OEHHA’s complex rules would encourage even more litigation from an already active community of plaintiffs.  OEHHA’s draft litigation reform, a “cure” or fix-it period for retailers with fewer than 25 employees, would do little to stem the current tide of lawsuits, the vast majority of which are ultimately directed at and defended by suppliers.  Additionally, by replacing the generic safe-harbor warning with specific requirements, a regulatory safe-harbor warning would no longer provide a safe harbor from liability or deter plaintiffs from alleging violations for exposures to unspecified or newly listed chemicals.

What You Can Do

Businesses which stand to be affected by OEHHA’s plans, including those operated out of state, have an opportunity to voice their concerns to the agency.

OEHHA will hold a public workshop on April 14, 2014 to discuss the proposed regulations.  In addition, OEHHA is accepting written comments from the public until May 14, 2014.  Unless OEHHA is convinced to delay or withdraw its plans, formal regulations will likely be proposed in the summer of 2014.

Because OEHHA’s proposals are currently in the preliminary stages, interested parties have a time critical opportunity to engage the agency and encourage it to address specific concerns.  Companies that manufacture distribute, or retail dietary supplements in California should consider retaining experienced counsel to analyze the impact of the proposals on their business and to participate in the public comment period on their behalf.   Given the potentially far-reaching consequences of the proposed changes on the individual companies and the industry at large, interested parties should be diligent in bringing their concerns to OEHHA as early and as persuasively as possible.

Article By:

James Mattesich
Justin J. Prochnow
Anthony J. Cortez
Greg Sperla
Of:
Greenberg Traurig, LLP

Rolex Says "Time is Up" for Alleged Craigslist Counterfeiter

Womble Carlyle

 

On February 5, 2014, Rolex Watch U.S.A.,Inc. (“Rolex”) of New York, New York, filed a complaint against Nicholas Peter Karettis (“the defendant”) of Tyrone, Georgia, allegingTrademark Counterfeiting and Infringement under 15 U.S.C. § 1114.

The complaint alleges Mr. Karettis sold, offered for sale, distributed, promoted, and advertised merchandise that was counterfeit and infringing upon Rolex’s federally registered trademarks.

Rolex owns numerous trademarks and trade names including at least the following:

CROWN DEVICE (design) Registration no. 657,756 Registered on 1/28/1958 for timepieces of all kinds and parts thereof.

DATEJUST Registration no. 674,177 Registered on 2/17/1959 for timepieces and parts thereof.

DAY-DATE Registration no. 831,652 Registered on 7/4/1967 for wrist watches.

DAYTONA Registration no. 2,331,145 Registered on 3/21/2000 for watches.

EXPLORER Registration no. 2,518,894 Registered on 12/18/2001 for watches.

EXPLORER II Registration no. 2,445,357 Registered on 4/24/2001 for watches.

GMT-MASTER Registration no. 683,249 Registered on 8/11/1959 for watches.

GMT-MASTER II Registration no. 2,985,308 Registered on 8/16/2005 for watches and parts thereof.

OYSTER Registration no. 239,383 Registered on 3/6/28 for watches, movements, cases, dials, and other parts of watches.

OYSTER PERPETUAL Registration no. 1,105,602 Registered on 11/7/1978 for watches and parts thereof.

PRESIDENT Registration no. 520,309 Registered on 1/24/1950 for wristbands and bracelets for watches made wholly or in part or plated with precious metals, sold separately from watches.

ROLEX Registration no. 101,819 Registered on 1/12/1915 for watches, clocks, parts of watches and clocks, and their cases.

ROLEX DAYTONA Registration no. 1,960,768 Registered on 3/5/1996 for watches.

ROLEX DEEP SEA Registration no. 3,703,603 Registered on 10/27/2009 for watches.

SEA-DWELLER Registration no. 860,527 Registered on 11/19/1968 for watches, clocks and parts thereof.

SUBMARINER Registration no. 1,782,604 Registered on 7/20/1993 for watches.

TURN-O-GRAPH Registration no. 2,950,028 Registered on 5/10/2005 for watches and parts thereof.

YACHTMASTER Registration no. 1,749,374 Registered on 1/26/1993 for watches.

Rolex Trademark Infringement
The Rolex Crown Device design

According to the complaint, Rolex discovered a classified advertisement appearing on the website “www.craigslist.org” (“Craigslist”) advertising for sale watches bearing counterfeits and infringements of the Rolex Registered Trademarks. These watches were allegedly advertised as “AAA Quality Replica” watches and listed for sale at a price of $200. 

Also according to the complaint, Rolex forwarded the Craigslist add to its private investigator who then called the number provided on the advertisement and arranged a meeting with a man identifying himself as “Nick.”  Rolex’s investigator also arranged for members of the Douglas County Sheriff’s Department to be present at this meeting.  At the meeting, members of the Douglas County Sheriff’s Department arrested the defendant and seized five (5) watches identified by Rolex’s investigator as bearing counterfeits and infringements of the Rolex Registered Trademarks.

Thereafter, the defendant was charged with forged or counterfeited trademarks, service marks, or copyrighted or registered designs, constituting unauthorized reproductions as defined in O.C.G.A. § 10-1-454. Defendant’s vehicle was impounded and the Douglas County Sheriff’s Department seized $14,800.00 in cash found on the defendant’s person at the time of his arrest.

The complaint further alleges irreparable harm, unjust enrichment, willful and malicious infringement, and that the case is exceptional under 15 U.S.C. § 1117(a) because of the defendant’s alleged reckless disregard or willful blindness in connection with unlawful activities.

Rolex seeks an injunction and treble damages or statutory damages under 15 U.S.C. § 1117(c).  Rolex also seeks legal and investigative fees along with any further relief as the court deems just and proper.

The case is Rolex Watch U.S.A., Inc. v. Karettis No. 3:14-cv-12-TCB filed in United States District Court for the Northern District of Georgia, Newnan Division on February 5, 2014, and is assigned to Judge Timothy C. Batten.

 
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New Antitrust Suit Takes Aim at NCAA Model

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The NCAA’s amateurism model is once again under fire — this time in an antitrust lawsuit filed by sports labor attorney Jeffrey Kessler. Kessler, on behalf of four named current men’s basketball and football players (Clemson football player Martin Jenkins, Rutgers basketball player Johnathan Moore, Texas El-Paso football player Kevin Perry, and University of California basketball player William Tyndall), alleges the NCAA and the five major conferences (the Atlantic Coast Conference, the Big 12 Conference, the Big Ten Conference, the Pac-12 Conference, and the Southeastern Conference; these conferences currently include 62 member institutions) have entered into “cartel agreements” that unlawfully cap the compensation paid to student-athletes.

The suit seeks to eliminate current NCAA and conference amateurism regulations and  create a market where institutions compete for the services of men’s basketball and football players in a less regulated way. This would be a major shift from the NCAA’s current amateur model to one similar to free agency in professional sports that would permit student-athletes to attend the highest bidding institution.

“We believe that the business has grown so big in Division I men’s basketball and in the football championship series system that we believe that judges, jurors, the public, the media and many in college sports themselves recognize that change has to come,” Kessler told The Wall Street Journal.

Currently, student-athletes are eligible only to receive tuition, room and board, and course-related books from the institutions they attend. The suit refers to these limitations as “an artificial and unlawful ceiling.”

The current restrictions on student-athlete compensation also are characterized in the suit as a “patently unlawful price-fixing and group boycott arrangement.” The suit alleges the NCAA and its member institutions “have lost their way far down the road of commercialism, signing multi-billion dollar contracts wholly disconnected from the interests of ‘student athletes,’ who are barred from receiving the benefits of competitive markets for their services even though their services generate these massive revenues.”

Valuing the current broadcast rights for the NCAA Tournament at $11 billion and the College Football Playoff at $5.64 billion, the suit alleges student-athletes are not sufficiently rewarded for the financial success of men’s basketball and football.

“The main objective is to strike down permanently the restrictions that prevent athletes in Division I basketball and the top tier of college football from being fairly compensated for the billions of dollars in revenues that they help generate,” Kessler told ESPN. “In no other business — and college sports is big business — would it ever be suggested that the people who are providing the essential services work for free. Only in big-time college sports is that line drawn.”

The suit questions why coaches, and not student-athletes, should benefit from the massive, and growing, revenues of college football and men’s basketball. It says that, “flush with cash and unable to compete for athletes on the basis of financial remuneration, colleges have directed their resources and competitive efforts to, among other things, the hiring of head coaches, instead of players.”

The suit seeks to permanently enjoin the alleged antitrust violations and to recover individual damages for the named plaintiffs.

Michael Ackerstein also contributed to this post.

Article by:

Gregg E. Clifton

Of:

Jackson Lewis P.C.

State Intellectual Property Office of China (SIPO) Announces Graphical User Interface (GUI) Related Design Becomes Patentable Subject Matter as of May 1, 2014

Sterne Kessler Goldstein Fox

 

Recently announced by the State Intellectual Property Office of China (SIPO), graphical user interface (GUI) design patent applications will be accepted beginning on May 1, 2014. Revised on March 17, 2014, the amended Patent Examination Guidelines will now include provision for GUI on an electrified device screen as patentable matter, including dynamic or animated GUI. The new standards will exclude applications not related to human-machine interaction, leaving video game interfaces, decoration wallpapers, and web page layouts unprotected under the revised examination guidelines. This change from SIPO comes as increasingly more devices across numerous industries are relying heavily on GUI innovation.

Article by:

Robert Greene Sterne

Of:

Sterne, Kessler, Goldstein & Fox P.L.L.C.

NCAA Compensation Cartel Allegations Take Center Court – National Collegiate Athletics Association

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On March 17, 2014, a class action lawsuit was filed against the National Collegiate Athletics Association (NCAA), alleging that capping compensation to college athletes violates Sherman Act Section 1.

The lawsuit was filed on behalf of all Division I college football and men’s basketball players, and named five major conferences within the NCAA as co-defendants:  the Atlantic Coast (ACC), Big Ten, Big 12, Pacific-12, and Southeastern (SEC).  The suit alleges that “Defendants have entered into what amounts to cartel agreements with the avowed purpose and effect of placing a ceiling on the compensation that may be paid to these athletes for their services.”  Currently under NCAA rules, colleges may only compensate student athletes with a “full grant-in-aid” (the amount of tuition, room and board, and textbooks).

The complaint goes on to state that the NCAA “rules constitute horizontal agreements” among the defendants who drafted and agreed upon the rules, yet “compete with each other for the services of top-tier college football and men’s basketball players.”  In addition to monetary damages, the plaintiffs are seeking injunctive relief that would allow colleges to freely negotiate with and compensate student athletes.  The case is filed in the U.S. District Court of New Jersey.

Article By:

 
Of:

Drinker Biddle & Reath LLP

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Quiznos, the toasted sandwich chain based out of Denver, CO, filed for prepackaged bankruptcy protection within days of Sbarro. The company foresees this restructuring cutting $400 million of debt.  In its bankruptcy protection the company listed liabilities between $500 million and $1 billion.

In recent years, Quiznos has faced stiff competition from long-time rivals such as Subway as well as from new entrants to the market like Potbelly Corp.  Subway has over 41,000 restaurants in more than 100 countries, while Quiznos has only 2,100 locations.  All but seven of these restaurants are owned by franchisees.  There are over a dozen locations in New Jersey.  Similar to Sbarro’s bankruptcy, Quiznos franchise locations should not be directly affected by the bankruptcy.

Quiznos’ senior lenders have committed $15 million in debtor-in-possession financing to support ongoing operations during the bankruptcy.

The company plans to implement a franchisee rebate program as part of its restructuring. This program will include investments in advertising, new technology at the restaurants and new incentives for prospective franchisees.  The company has requested that the locations honor all outstanding gift cards.

Though the bankruptcy may not directly impact Quiznos’ franchisees, this is a sign of things to come.  Landlords and franchisees alike should brace themselves for a bumpy road if Quiznos cannot turn operations around.

The case is In re: The Quiznos Global LLC, U.S. Bankruptcy Court, District of Delaware No. 14-10557.

Article by:

Donald F. Campbell Jr.

Of:

Giordano, Halleran & Ciesla, P.C.