Category: Antitrust & Trade Regulation

United States Expands Sanctions in Response to Activities in Ukraine, Names First SDNs (Specially Designated Nationals)

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Early March 18, 2014, President Obama signed an Executive Order (E.O.) expanding on E.O. 13660, which was issued on March 10, 2014.  In addition to naming specific persons subject to the restrictions of E.O. 13660, including former Ukrainian President Viktor Yanukovych, the new E.O. expands the sanctions previously announced in response to recent actions of the Government of the Russian Federation in Crimea to include any person who is determined to:

  • Be an official of the Government of the Russian Federation;
  • Operate in the arms or related materiel in the Russian Federation;
  • Be owned or controlled by, or to have acted or purported to act for or on behalf of, directly of indirectly:
    • a senior official of the Government of the Russian Federation; or
    • a person whose property and interests in property are blocked pursuant to this order; or
  • Have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of:
    • a senior official of the Government of the Russian Federation; or
    • a person whose property and interests in property are blocked pursuant to this order.

Effective immediately, all property and interests in property that are in the control of U.S. persons (including foreign branches) will be blocked, and subject persons will be prohibited from entry to the United States.  The complete list of blocked persons is available here.

As the situation in Ukraine continues to unfold and sanctions are expanded, U.S. companies should be particularly cautious in screening transactions in the region and maintaining records.  In addition, companies with affiliates in the European Union should be mindful of changes to EU sanctions that could impact business in the region.

Article by:

Of:

Drinker Biddle & Reath LLP

EEOC & FTC Issue Joint Background Check Guidance

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The U.S. Equal Employment Opportunity Commission (EEOC) and the Federal Trade Commission (FTC) issued joint informal guidance concerning the legal pitfalls employers may face when consulting background checks into a worker’s criminal record, financial history, medical history or use of social media.  The FTC enforces the Fair Credit Reporting Act, the law that protects the privacy and accuracy of the information in credit reports. The EEOC enforces laws against employment discrimination.

The two short guides, Background Checks: What Employers Need to Know andBackground Checks: What Job Applicants and Employees Should Know, explain the rights and responsibilities of both employers and employees.

The agency press releases state that the FTC and the EEOC want employers to know that they need written permission from job applicants before getting background reports about them from a company in the business of compiling background information. Employers also should know that it’s illegal to discriminate based on a person’s race, national origin, sex, religion, disability, or age (40 or older) when requesting or using background information for employment.

Additionally, the agencies want job applicants to know that it’s not illegal for potential employers to ask someone about their background as long as the employer does not unlawfully discriminate. Job applicants also should know that if they’ve been turned down for a job or denied a promotion based on information in a background report, they have a right to review the report for accuracy.

According to EEOC Legal Counsel Peggy Mastroianni, “The No. 1 goal here is to ensure that people on both sides of the desk understand their rights and responsibilities.”

Article by:

Jason C. Gavejian

Of:

Jackson Lewis P.C.

2nd Conflict Minerals Reporting and Supply Chain Transparency – 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!

Bittersweet Ending for Plaintiffs in Chocolate Price-Fixing Litigation

In a February 26, 2014 Memorandum, Chief Judge Christopher C. Conner of the United States District Court for the Middle District of Pennsylvania granted summary judgment for three defendants Mars, Inc., Nestlé USA, Inc., and The Hershey Company in a detailed opinion. The plaintiffs filed suit against chocolate manufacturers nearly six years ago, claiming that they conspired to fix the prices of various chocolate products. The decision is helpful for defendants as precedent that even lock-step price increases are not enough to survive summary judgment in a price-fixing case, at least in a market with few competitors. Judge Conner’s decision also demonstrates for defendants the value of developing and shepherding a comprehensive record to support the argument that their decisions were independent and economically and rationally defensible.

The plaintiffs relied on circumstantial evidence and an inference that parallel price increases were the result of a tacit agreement to engage in collusive behavior, “actuated” by a conspiracy in Canada that resulted in at least one guilty plea by a Canadian chocolate manufacturer. Judge Conner relied in part on a finding that the Canadian conspiracy made a similar conspiracy in the United States more plausible in denying the defendants’ motion to dismiss the complaint. In re Chocolate Confectionary Antitrust Litig., 602 F. Supp. 2d 538 (M.D. Pa. 2009).

Judge Conner found at the summary judgment stage, however, that there was no evidence that executives responsible for pricing in the United States were aware of any anticompetitive activity in Canada, and concluded that the rest of the plaintiffs’ evidence was insufficient to preclude summary judgment for the defendants. The plaintiffs had no direct evidence of conspiracy, so they were required to show both that the defendants consciously raised prices in parallel as well as sufficient evidence of “plus factors.” In this case, the court considered three plus factors: (1) the defendants’ motive and market factors; (2) whether the defendants’ behavior was against their self-interest; and (3) traditional conspiracy evidence. The plaintiffs’ evidence of parallel pricing was the strongest part of their case. The court concluded that Mars, Nestle, and Hershey raised prices in parallel because¾three times over the course of five years¾Mars initiated a price increase, and both Hershey and Nestle followed in quick succession (within one to two weeks) with nearly identical price increases (varying only once, and even then only by two-tenths of a penny).

The court recognized, however, that parallel price increases were not sufficient, especially in a market controlled by a few competitors (or an oligopoly) to support an inference of antitrust liability. The court concluded that the plaintiffs failed to demonstrate that the defendants acted against their own self-interest as required by the second plus factor. In reaching this conclusion, the court first pointed to evidence that the defendants increased prices in anticipation of cost increases, stating “it is rational, competitive, and self-interest motivated behavior to increase prices for the purpose of mitigating the effect of anticipated cost increases.” Judge Conner also cited to what he described as “extensive” internal communications before each increase in which each defendant unilaterally discussed whether they could raise prices as evidence of “independent and fiercely competitive business conduct,” not collusion. Finally, the court agreed with Nestle’s argument that widely supported economic principles supported its decision as the defendant with the smallest market share to follow the price increases of its competitors. In doing so, the court likely rejected an argument¾often made by plaintiffs¾that it was in Nestle’s best interest to cut prices and gain market share.

The court also concluded that the plaintiffs’ traditional evidence of conspiracy was insufficient to satisfy the third plus factor. The plaintiffs relied on three pieces of evidence to satisfy this factor: (1) the Canadian conspiracy; (2) the defendants’ possession of competitors’ pricing information; and (3) the defendants’ opportunity to conspire at trade association meetings. While the court accepted that the Canadian conspiracy could, in theory, facilitate a conspiracy in the United States, it found the facts did not support the application of the theory in this case because there was no evidence that U.S. decision-makers had knowledge of the Canadian conspiracy and there was no tie between the pricing activities in the two countries. From the court’s opinion, it appears the plaintiffs had little traditional conspiracy evidence beyond the supposed connection to Canada. The court rejected an argument that a “handful” of documents suggesting that the defendants were aware of competitors’ price increases before they were made public supported an inference of conspiracy. There was no evidence that the pricing information came from competitors, and the court concluded that this exchange of advance price information was as consistent with independent competitive behavior as it was with collusion. Finally, the court ruled that the presence of company officers at trade meetings¾without any evidence that they discussed prices there¾was insufficient to permit an inference that the price increases were the result of collusive behavior. Reviewing the record as a whole, the court concluded that the plaintiffs had produced no evidence tending to exclude the possibility that the defendants acted independently.

Judge Conner’s opinion is a relatively straightforward application of the standard for ruling on summary judgment in antitrust cases set forth in the Supreme Court’s Matsushita decision and for parallel pricing cases as set forth in the Third Circuit’s Baby Food and Flat Glass opinions. If appealed, Chocolate Confectionary is unlikely to result in a decision changing these standards significantly.

On the bright side for the plaintiffs, they reached a settlement with at least one defendant, Cadbury, before the summary judgment motion was ruled upon, so they will not be left empty handed.

Article by:

of:

Drinker Biddle & Reath LLP

Clash Of Titans over Biosimilars at Federal Trade Commission (FTC) Workshop

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On Tuesday, February 4, the Federal Trade Commission (FTC) conducted an all-day public workshop at its headquarters in Washington, D.C. on competition issues involving biologics and biosimilars.1 During highly informative presentations and roundtable discussions, the FTC and various stakeholders, including top-level representatives from originators of biologics (Pfizer and Amgen), biosimilars developers (Sandoz, Momenta and Hospira), payors (Aetna), prescribers (CVS and Express Scripts) and academia (Harvard Medical School), analyzed the likely impact of recent state substitution laws and naming conventions on biosimilars.

No one denied nor debated that the future of the drug industry lies in the robust and dynamic area of biologics. In 2010, 4 of the top 10 drugs were biologics and it is anticipated that in 2016 biologics will account for 7 of the top 10 drugs worldwide.2 At the same time, all panelists were concerned that the costs associated with biologics are rising at a staggering rate and are therefore not sustainable for patients nor payors, and that many patients will be unable to afford biologics if competition is not introduced.

According to Harry Travis, Vice President at Aetna, patients currently spend about $1 a day on non-specialty medication (traditional drugs) whereas they spend roughly $100 a day for specialty medication (biologics).3 He stated that only 1% of Aetna’s customers use specialty products, which account for 50% of Aetna’s total drug spending. This trend was confirmed by Steve Miller, Chief Medical Officer at Express Scripts, who underlined that specialty products (biologics) currently account for 30% of total drug spending, but this number will rise to 50% in 5 years.

It is thus not surprising that all participants urged for FDA-approved biosimilars in order to improve access to biologics while at the same time protecting public health and safety. Participants were also virtually unanimous in their recommendations that fostering public confidence in biosimilars will be crucial to their success and that unnecessary obstacles to substitution may restrict competition.4

The following points were discussed, relying on a large amount of data and comparative studies between countries:

  • Competition between originators of biologics and biosimilars developers: Panelists agreed that competition is not expected to have the same effects on the biologics industry as it has had in the small-molecule drugs space when generics penetrated the latter. Because the dynamics are completely different, the entry of biosimilars is unlikely to result in either steep price discounting or rapid acquisition of market share by manufacturers of biosimilars.5
  • Premature state biosimilar substitution laws: 18 states have already decided to introduce bills to regulate biosimilars, and 4 of them have enacted laws, all of which may seem slightly premature given that the FDA has yet to approve a biosimilar. Certain provisions of these substitution laws appear controversial as they place onerous requirements on the substitution of biosimilars for branded biologics. Of particular concern are certain substitutions laws requiring pharmacists to promptly notify patients and/or prescribers when dispensing a biosimilar, and to keep special records. These state-level restrictions not only deter substitution by imposing on pharmacists burdensome recordkeeping and additional communications with the physician, they also contradict federal law, namely the Biologics Price Competition and Innovation Act (BPCIA), which expressly provides for substitution.6 These state laws are arguably inconsistent with the BPCIA and could undermine the attractiveness and access to more affordable biologics.
  • Impact of naming on biosimilars: There was debate as to whether biosimilars should bear different non-proprietary names and whether such a requirement would have anticompetitive effects. Some argued that requiring distinct non-proprietary names is simply an effort to cause doubt and distrust among physicians and patients by making biosimilars appear different from biologics. As noted by Bruce Leicher, General Counsel at Momenta, the Biotechnology Industry Organization opposes GMO labelling on genetically modified foods precisely for the same reason – requiring a different name for biosimilars would communicate a different (and perhaps suspicious) product and would therefore grant a competitive advantage to branded biologics. Other panelists argued that names and other types of identifiers were justified by the need for an effective pharmacovigilance system, while some speakers expressed the need for distinguishable naming or other identifiers for purposes of linking a responsible product to a specific adverse event in the event of product liability.

The FTC did not express its own views on the effect of state-level restrictions and naming conventions on competition in the biosimilars market, but did note that securing more prescribing physicians on the panel might have added to the debate.

We will continue to monitor federal and state activities in the regulation of biosimilars.

1 The Food and Drug Administration defines biologics as medical products made from a variety of natural sources (human, animal or microorganism).  Moreover, a biological product may be demonstrated to be “biosimilar” if data show that, among other things, the product is “highly similar” to an already-approved biological product.

2 As presented by Steve Miller, Senior Vice President and Chief Medical Officer at Express Scripts.

3 More alarming to Mr. Travis is that the cost of biologics increased by approximately 15% annually, as compared to the approximately 5% increase in the cost of small molecule drugs.

4 Substitution, by allowing the pharmacist to automatically substitute an interchangeable biosimilar for the branded biologic without the intervention of the physician, provides a strong incentive to use biosimilars.

5 According to Dr. Sumant Ramachandra, Hospira’s Senior Vice President and Chief Scientific Officer, it takes approximately $5 million and 2-3 years for a generic manufacturer to bring a small molecule drug to market, whereas it takes over $100 million and 8-10 years for a biosimilar manufacturer to bring a biosimilar to market.

6 The BPCI provides that “the [interchangeable] biological product may be substituted for the reference product without the intervention of the health care provider who prescribed the reference product.”

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Of:

Bracewell & Giuliani LLP

Just the TTIP (Transatlantic Trade and Investment Partnership): A Review of the Transatlantic Partnership Agreement One Year After It Is Introduced to America

Sheppard Mullin 2012

 

Next week will mark one year since President Obama introduced the Transatlantic Trade and Investment Partnership (TTIP) to the nation in his State of the Union Address.  Although the TTIP received only a brief nod in the President’s speech, the TTIP initiative has moved forward at a stunning pace . . . well, a stunning pace for an international trade negotiation, a process that normally crawls along.  As discussed in this blog, the U.S. and European parties to this proposed partnership set an ambitious goal of finalizing an agreement by the end of 2014.  A year into the process, we take a look at the progress to date and the challenges to come.

TTIP Background

We often hear news of trade agreements and other arrangements designed to increase business between the United States and one or more partner countries.

TTIP is different. It’s bigger.

The European Union and the United States comprise the largest and wealthiest market in the world, accounting for over 54% of the world’s GDP and 40% of the world’s purchasing power.  It follows that even the slightest reduction in marketplace barriers on a scale that large could result in sizeable trade increases and economic benefits.  The European Centre for Economic Policy Research estimates that TTIP could boost U.S. exports to the EU by $300 billion annually and add $125 billion to U.S. GDP each year.

Tariffs between the trading partners are already some of the lowest in the global market.  Accordingly, TTIP focuses on reducing non-tariff-barriers (NTBs) to trade between the United States and Europe.  The proposed NTB reductions include aligning domestic standards, cutting costs imposed by bureaucracy and regulations, and liberalizing trade in services and public procurement.

TTIP Negotiations Thus Far

Over the past year, U.S. and EU representatives have met for three rounds of negotiations – the first round was primarily introductory and the other two were more substantive.  The most recent of these negotiation rounds, completed in December, left the U.S. Trade Representative sanguine.  The USTR stated on its website that, “it is a measure of progress that we are firmly in the phase of discussing proposals on core elements of each of the main negotiating areas, as well as beginning to confront and reconcile our differences on many important issues. We have a lot of work to do in 2014, but I am optimistic about what we’ll be able to accomplish in the coming year.”

TTIP in the Coming Year

The next round of TTIP negotiations will be held in Washington, D.C. from March 16 – 20, 2014.  In this fourth round, negotiators expect to work on the wording of provisions designed to ease compliance with existing rules.  Negotiators also expect to draft agreement language to enable U.S. and EU regulators to work together as they draft their respective domestic regulations in the future.  Specific provisions to be addressed in this fourth round will include rules on food safety and animal and plant health, as well as technical regulations, product standards, and testing and certification procedures.  Taken together, these items are often referred to as “Technical Barriers to Trade” (TBTs).

The Chief Negotiator for the EU made clear that, although this set of negotiations will focus on the reduction of TBTs, “TTIP is not and will not be a deregulation agenda.”

This statement exemplifies the numerous conflicts that the negotiators will face in the coming year.  They will have a mandate to harmonize two regulatory systems, reducing the NTBs and TBTs without overly compromising or placing inordinate burdens on either system.  In other words, the negotiators must aim to reduce regulatory barriers without having a deregulation agenda – a tough target to hit.

From that conundrum, potential snares for the negotiating team only multiply.  Interest groups and protectionist factions from both sides of the Atlantic will continue to actively oppose the partnership.  Some Europeans will raise an objection that the deal gives away too much to American business interests.  Further, the voices of labor unions, consumer advocates, environmental groups and other skeptics in opposition to TTIP may grow louder as the parties get closer to a final agreement.  Finally, political sways – a backlash against NSA monitoring of European communications as well as elections in the U.S. and EU in 2014 – may adversely affect the ongoing negotiations.

TTIP proponents remain optimistic, however, confident that a deal can be completed by the end of 2014.  We will keep an eye on developments and report on how nimbly these negotiators can manage the myriad concerns to achieve a useful partnership for the economies on both sides of the Atlantic.

Article by:

Reid Whitten

Of:

Sheppard, Mullin, Richter & Hampton LLP

The New gTLD Program: Latest Updates on Brand Protection and the Trademark Clearinghouse


Katten Muchin

The most significant development in the Internet space in recent years is the ongoing generic top-level domain (gTLD) expansion. (As a reminder, a TLD is what appears to the right of the “dot” in a domain name (i.e., .COM, .ORG, .GOV).) The Internet Corporation for Assigned Names and Numbers (ICANN) has embarked on an aggressive plan to expand the Internet from just 23 gTLDs to more than a thousand gTLDs, culminating in an application process in 2012 that allowed any organization with an interest in running a registry to apply for a new gTLD, provided it could meet the designated technical, operational and financial criteria. After this lengthy application and vetting process, ICANN has now delegated the first 44 gTLDs, with additional gTLDs launching each week. Over the next couple of years ICANN expects to delegate nearly 1,400 new gTLDs – including .CLOTHING, .COMPANY, .EDUCATION, .GURU, .HOSPITAL, .INC, .INVESTMENTS, .LAND, .MENU, .MOVIE, .NEWS, .PHOTOS, .SCIENCE, .SPORTS and .WEBSITE.

ICANN’s new gTLD program presents an opportunity for brand owners to utilize the Internet in ways not previously possible, but also raises new enforcement challenges for brand owners. For the first time ever, brand owners can register their trademarks on domain registries tailored to their target industries. On the other hand, brand owners may also be required to monitor 1,400 additional registries to prevent misuse and abuse of their trademarks. With that in mind, in order to ensure that trademark and brand owners’ rights are protected as the Internet expands, ICANN has devised a Trademark Clearinghouse (TMCH), one of the key new gTLD enforcement tools for brand owners, which now serves as a repository for information regarding trademark rights.

A very important step in developing a TMCH strategy is understanding the benefits of participating in the TMCH. The TMCH offers brand owners two separate services for protecting their brands online:

  • Participation in the Sunrise Period. The Sunrise Period is an initial period of at least 30 days before domain names are offered to the general public. Companies that participate in the TMCH have priority in registering domain names that match their trademarks on any of the new gTLDs to protect them from cybersquatting or to actively use them for strategic business and marketing purposes.
    • To take advantage of the Sunrise Period, brand owners can enter registered trademarks for which they can provide proof of use of the mark.
    • For example, by entering KATTEN MUCHIN ROSENMAN in the TMCH for .LAW, our firm can later register the domain namewww.kattenmuchinrosenman.law to prevent a third party from obtaining that domain name. Alternatively, the firm may choose to redirect its current website to the new domain name and drop the .COM altogether.
    • Opting not to participate in the Sunrise Period does not preclude brand owners from registering domain names matching their trademarks on the new gTLDs. However, once the Sunrise Period expires, brand owners will be competing with the general public on a first-come, first-served basis.
  • Trademark Claims Service. This is a mandatory service that must be available for at least 90 days during the initial launch of a new gTLD (some registries are opting for longer periods). When attempting to register a domain name, the potential registrant receives a warning notice that the domain name exactly matches a verified trademark record in the TMCH. If a potentially infringing domain name registration proceeds, the trademark owner is notified, and the owner can take appropriate action.
    • To take advantage of the Trademark Claims Service, companies can enter registered trademarks in the TMCH (proof of use not required) and be notified of up to 50 domain labels that were found to be abusive by a court under the Anti-Cybersquatting Consumer Protection Act (ACPA) or under the Uniform Domain-Name Dispute-Resolution Policy (UDRP).
    • For example, by entering KATTEN MUCHIN ROSENMAN in the TMCH for Claims Service, our firm would receive a notification upon the registration of the domain name www.kattenmuchinrosenman.fail. The firm can take immediate action against the domain name registrant, and transfer or suspend the infringing domain.
    • Deloitte, ICANN’s TMCH provider, recently announced plans for a free Extended Claims Service wherein the TMCH will offer notification to trademark owners of marks listed in the TMCH of domain names registered in any of the new gTLDs that match their marks or abused labels for an indefinite time period after each new gTLD registry’s Claims Period. Brand owners must opt-in for the service.
    • However, unlike the standard mandatory Claims Service, the Extended Claims Service will not provide a warning notice to prospective domain name registrants that an applied-for domain name matches marks listed in the TMCH or their abused labels prior to their registration, thus providing less deterrent effect than the Trademark Claims Service.

There is no deadline to enter marks into the TMCH. However, as of January 3, 2014, ICANN has already launched 44 new gTLDs, and it is anticipated that ICANN will continue to announce the start-up information for additional TLDs on a weekly basis until all 1,400 new gTLDs are delegated. As such, it is recommended to submit your trademarks as soon as possible to allow sufficient time for processing and to avoid missing out on Sunrise registration opportunities.

Article by:

Of:
Katten Muchin Rosenman LLP

Supreme Court Will Rule on Whether Agency-Approved Beverage Label Can Be Challenged as ‘False Advertising’ in Federal Court

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On January 10, 2014, the U.S. Supreme Court agreed to hear an appeal by Pom Wonderful LLC against The Coca-Cola Company.  The Court will examine whether Pom can bring a federal Lanham Act false advertising claim against a Minute Maid juice product label that had been approved by the U.S. Food and Drug Administration (FDA).  (Pom Wonderful LLC v. The Coca-Cola Co., U.S. Supreme Court case no. 12-761).

At issue in the lawsuit is a Minute Maid label for “Pomegranate Blueberry Flavored Blend of 5 Juices.”  The label presents the words “Pomegranate Blueberry” in larger type than the remainder of the phrase.  Pom claimed that the label was misleading because the product contains 0.3 percent pomegranate juice and 0.2 percent blueberry juice.

A California federal trial court and the 9th Circuit federal appeals court in California both ruled that Pom could not bring a Lanham Act false advertising claim against the label, since it had been specifically examined and approved by the FDA.  Pom has argued that the decisions were contrary to established law in other U.S. courts, and that federal regulations establish a floor –but not a ceiling — on what an advertiser is required to do to avoid a claim that the advertising is false and misleading.  Coca-Cola has argued that product labeling that is specifically authorized by the Food, Drug and Cosmetic Act (FDCA) and approved by the FDA cannot be charged as false or misleading under another federal statute such as the Lanham Act.

Although the question before the Supreme Court is whether a private party can bring a Lanham Act claim challenging a product label regulated under the FDCA, the Supreme Court’s decision could potentially have significant implications for the alcohol beverage industry.  For example:

  • If the Supreme Court rules that a competitor cannot bring a Lanham Act claim against a label that has been approved by the FDA, a natural question is whether the same rule will apply with regard to alcohol beverage labels that have been reviewed and approved by the Alcohol and Tobacco Tax and Trade Bureau (TTB) (by its terms, the Federal Alcohol Administration Act does not preempt the Lanham Act); and
  • If a Lanham Act claim would be barred against labels approved by TTB, a question may arise about whether a Lanham Act claim would be barred on elements of the label that TTB does not specifically review as a matter of policy – such as contrast, size and placement of label elements.

The Supreme Court is expected to hear argument this spring and decide the case by June 2014.  Depending on the decision, alcohol beverage industry members could find they have additional insulation against a federal false advertising claim, but they may likewise be limited in bringing a federal false advertising lawsuit against a competitor’s label that has been approved by TTB.

Article by:

Robert W. Zelnick

Of:

McDermott Will & Emery

New Export Control Changes Affect Naval Warfare and Ground Vehicles

Morgan Lewis

 

Second phase of the Export Control Reform Initiative allows certain U.S. industries to fall into categories that may make them more attractive to foreign buyers.

On January 6, the Obama administration reached another important milestone of the president’s Export Control Reform (ECR) Initiative, with the second phase of revised export control lists and regulations taking effect.[1] These second phase changes significantly affect naval warfare, ground vehicle, and other industries as they present an opportunity for manufacturers and exporters to reclassify certain items under a more flexible and beneficial regulatory system.

The New Rules

The new lists and regulations continue the process of fundamentally updating the United States’ export control regimes and include revisions to U.S. Munitions List (USML) Categories VI (Vessels of War and Special Naval Equipment), VII (Tanks and Military Vehicles), XIII (Auxiliary Military Equipment), and XX (Submersible Vessels). The revisions transition many less sensitive items from the U.S. Department of State’s International Traffic in Arms Regulations (ITAR) USML to the more flexible Department of Commerce’s Export Administration Regulations (EAR) Commerce Control List (CCL).

The new USML controls in these four categories are no longer broad and generic controls that capture everything. They are now detailed, enumerated lists that impose controls based on the sensitivity of an item.

Category VI (Vessels of War and Special Naval Equipment)

“Surface vessels of war” remain in USML Category VI and are now positively defined in new ITAR section 121.15 as the following: battleships, aircraft carriers, destroyers, frigates, cruisers, corvettes, littoral combat ships, mine sweepers, mine hunters, mine countermeasure ships, dock landing ships, amphibious assault ships, or cutters. Less sensitive items—such as generic parts, components, accessories, or attachments—are now subject to the more flexible authorities of the EAR and will transition to the CCL under Export Control Classification Number (ECCN) 8A609.

The key to determining whether an item will transition from USML Category VI to the CCL under ECCN 8A609 or another ECCN in the CCL will depend on the application of the new ITAR and EAR definitions of “specially designed.” The revised USML Category VI does not contain controls on all general parts, components, accessories, and attachments specifically designed or modified for a defense article, regardless of their significance to maintaining a military advantage for the United States. Rather, it now contains a positive list of specific types of parts, components, accessories, and attachments that continue to warrant control on the USML. All other parts, components, accessories, and attachments are subject to the new “600 series” controls in Category 8 of the CCL.

Category VII (Tanks and Military Vehicles)

The revision narrows the types of ground vehicles controlled on the USML to only those that warrant control. Changes include the removal of most unarmored and unarmed military vehicles, trucks, trailers, and trains (unless specially designed as firing platforms for weapons above .50 caliber) and armored vehicles (either unarmed or with inoperable weapons) manufactured before 1956. Engines are now covered in revised USML Category XIX.

A significant aspect of the revised USML Category VII is that it does not contain controls on all generic parts, components, accessories, and attachments that are specifically designed or modified for a defense article, regardless of their significance to maintaining a military advantage for the United States. Rather, it contains a positive list of specific types of parts, components, accessories, and attachments that continue to warrant control on the USML. All other parts, components, accessories, and attachments are subject to the new 600 series controls in Category 0 of the CCL.

USML Categories XIII (Auxiliary Military Equipment) and XX (Submersible Vessel) also have been revised similarly. Category XIII continues to control certain cameras and encryption/information security items. Category XX will now control all submersible vessels in a single category, including submarines, as they have been moved from Category VI.

Definition of “Specially Designed”

The definition has a two-part approach. Part one “catches” things that are “specially designed,” and part two releases many types of items from the definition of “specially designed” so that they become not “specially designed.” Assuming an item is caught by part one, the exporter should focus on part two of the definition, i.e., the six separate “releases.”

Under part two, there are six possible ways an item can be released from being specially designed. For example, a part, component, accessory, attachment, or software is not considered to be specially designed if it is, regardless of form or fit, “a fastener (e.g., screws, bolts, nuts, nut plates, studs, inserts, clips, rivets, pins), washer, spacer, insulator, grommet, bushing, spring, wire, or solder.”

Also under part two, a part, component, accessory, attachment, or software is not deemed to be specially designed if it has the same function and performance capabilities and the same or equivalent form and fit as a commodity or software used in or with an item that (i) is or was in production (i.e., not in development) and (ii) is either not enumerated on the CCL or USML or is described in an ECCN controlled only for antiterrorism reasons.

Therefore, exporters and manufacturers should review the new definition of “specially designed” to ascertain if any items pending sale are released from the definition.

Implications

These changes will significantly affect exporters and manufacturers of naval warfare, ground vehicles, and other items as these items may no longer fall under ITAR jurisdiction, making the products more attractive to foreign buyers. Exporters and manufacturers will no longer need a manufacturing license agreement document for foreign manufacture of CCL items. Additionally, because there is no concept of “defense service” under the EAR, providing services related to CCL products will not require any technical assistance agreement documents. Items that become classified as EAR99 generally do not require a license to be exported or reexported to most destinations, and there is no annual registration fee paid to the Commerce Department, unlike under the ITAR. Furthermore, there is no “brokering” registration or licensing under the EAR.

In addition, many of the items moved to the CCL are now eligible for export without specific licenses under EAR license exceptions. One such EAR license exception is strategic trade authorization (STA), which is used when the item is intended for the ultimate end use by the governments of 36 U.S. allies and partners (although such exports carry with them additional compliance requirements). Failure to comply with STA requirements may result in an unlicensed export, opening up the exporter to significant penalties and fines.

On July 1, 2014, five more USML categories are scheduled to transition to the CCL in the third phase of ECR:

  • Category IV (Launch Vehicles, Guided Missiles, Ballistic Missiles, Rockets, Torpedoes, Bombs, and Mines)
  • Category V (Explosives and Energetic Materials, Propellants, Incendiary Agents, and Their Constituents)
  • Category IX (Military Training Equipment)
  • Category X (Personal Protective Equipment)
  • Category XVI (Nuclear Weapons Related Articles)

Marynell DeVaughn also contributed to this article.

[1]. For more information on the first phase that occurred in October 2013, view our November 14, 2013 LawFlash, “Export Control Changes Affecting Aircraft Industry Take Effect,” available here. 

Article by:

Of:

Morgan, Lewis & Bockius LLP

Registering Your Trademark with the Trademark Clearinghouse – Is Your House in Order?

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“It’s happening – the biggest change to the Internet since its inception” is how the president of ICANN’s Generic Domains Division has described the new gTLD Program being implemented by The Internet Corporation for Assigned Names and Numbers (ICANN), and rightfully so. The new program will result in the expansion of available generic Top-Level Domains (gTLDs), such as .COM, .NET or .ORG, from the list of 22 that we’ve all become familiar with through the years, to a list of possibly 1,400 generic Top-Level Domains.

On October 23, 2013, the first new gTLDs were “delegated”. This means they were introduced into the Internet’s “Root Zone”, the central authoritative database for the Internet. As a result, the domain name Registries, the organizations approved to operate these and other soon-to-be-delegated gTLDs, can execute the final processes required to make their domain names available to Internet users. ICANN claims that the purpose of this unprecedented expansion of domain name extensions is to enhance competition, innovation and choice in the Domain Name space, providing a wider variety of organizations, communities and brands new ways to communicate with their audiences. As available real estate in the “.com” territory has become increasingly scarce, it is hoped that the new gTLDs will provide additional space for entities and individuals to set up an online presence. While it is true that virtually every two or three letter combination seems to have already been registered in the “.com” Top-Level Domain, this explosion of new generic top-level domains also means big bucks for domain name registrars and additional costs for trademark owners who properly protect their marks.

While 4 new gTLDs were delegated in October, the delegation has been a rolling process, with new generic Top-Level Domains being released in November, December and January. Below are just a few of some the gTLDs that have successfully completed the process. The list will continue to be expanded as the measured rollout of the new gTLDs progresses over the coming years:

.equipment

.kitchen

.diamonds

.bike

.shoes

.technology

.enterprises

.gallery

.education

.graphics

.ceo

.ventures

As the new gTLD program is rolled out, many trademark owners are wisely looking for ways to protect their brands from being registered by third parties as domain names in the new gTLD space without their knowledge or consent. In view of the rapidly changing gTLD landscape, owners need to be aware of how to protect their marks, sooner rather than later.

What Does All This Mean for Brand Owners?

Over the past year, there has been significant discussion and concern in the legal community regarding the potential for trademark infringement by third parties seeking to register domain names that incorporate the brands of others under these newly released gTLDs.

In light of the potential for infringement, ICANN has established certain mechanisms for the new gTLD program in order to try and protect the rights of brand owners. The main tool for doing so is the Trademark Clearinghouse (TMCH), an entity created by ICANN with which trademark owners can register their marks in advance of the new gTLD launches.

Brand owners who register their trademarks with the TMCH can take advantage of a priority, or “sunrise”, period during which they are entitled to register domain names that are identical to their marks, before registration opens to the general public. In addition, the TMCH provides the brand owner with automatic notification of any third-party attempts to register domain names that are identical to their marks, enabling the mark owner to then take appropriate legal action. To be clear, this mechanism does not stop third-parties from registering domain names identical to marks registered with the TMCH, but does notify the brand owner, or its representative, of such registration. These devices provide brand owners with help against cyber squatters seeking to register infringing domain names under the new gTLDs.

Registration of a trademark with the TMCH is available for registered trademarks, marks protected by statute or treaty, or court-validated marks. Registration is also available for any other marks protectable under the new gTLD registry’s policies and that meet the eligibility requirements of the TMCH. Registration with the TMCH is encouraged for brand owners in order to combat infringement of their brands in cyberspace and registration costs currently are $150 per mark for a one-year term of registration, $435 for a three-year term, and $725 for a five-year term. Such registration with the TMCH does not include fees that will be charged by the new gTLD registrars to register domain names during the “sunrise” or general public registration periods.

The biggest change to the Internet since its inception is happening now…make sure your marks are protected!

Article by:

Nicole M. Meyer

Of:

Dickinson Wright PLLC