International Law Archives - Page 15 of 17

Appeal Against Exclusion From Patentability of Software to Protect Minors Online Allowed

An article regarding Patentability of Monitoring Software was posted recently in The National Law Review. The article was written by Rohan Massey, Francesco Mattina, Hiroshi Sheraton, Vincent Schröder, and Boris Uphoff of McDermott Will & Emery:

In relation to the application by Protecting Kids the World Over (PKTWO) [2011] EWHC 2720 (Pat), the High Court of England and Wales has allowed an appeal against a decision of a Hearing Officer that found that an alarm notification system for monitoring inappropriate electronic communications fell within the computer program exclusion.

BACKGROUND

PKTWO applied to register a system for monitoring the content of electronic communications to ensure that children are not exposed to inappropriate content. The system as claimed analyses data sampled from a communication channel. Where the data is judged to be of concern, the user of the system—the child’s parent—can be notified by email or text message and by reply can send a remote response command either to terminate the electronic communication or to completely shut down the computer.

The Hearing Officer held that the invention was excluded from patentability because it related to a computer program and to a method of performing a mental act as such. PKTWO appealed to the High Court, submitting that the contribution its invention made to the state of the art had been ignored. Just before this hearing, the Comptroller withdrew the mental act exclusion and only put forward the computer program exception.

DECISION

Floyd J began by referring to the exclusion found in Article 54 of the European Patent Convention (and Section 1(2) of the Patents Act 1977) against the patentability of computer programs “as such”. He then turned to the wealth of case law on the interpretation of this exclusion, including the four step approach from Aerotel v Telco/Macrossan’s Patent Application [2007] RPC 7 that should be applied in such cases:

1. Properly construe the claim

2. Identify the actual contribution

3. Ask whether it falls solely within the excluded subject matter

4. Check whether the actual or alleged contribution is actually technical in nature.

In identifying the actual contribution made by the invention, Floyd J observed thatAerotel required that when considering the invention “as a whole”, this contribution had to be to the effect that the invention added something to human knowledge. He then went on to ascertain whether the contribution made was technical, as this had to be the case before the requirements for patentability could be met, by applying the approach set out in AT&T Knowledge Ventures [2009] EWHC 343. Furthermore, Floyd J observed that Gemstar-TV Guide International Inc v Virgin Media Ltd [2010] RPC 10 required this technical contribution to achieve a physical effect or activity as opposed to being abstract, such as simply making something “better” or producing a different display.

Applying these principles, Floyd J held that the contribution made by the claim at issue was that a more rapid and reliable alarm notification was generated. While this was not new, the particular way in which the notification was sent, i.e., sending messages to the user by email or text, was not known in the existing art and was technically superior to other known forms of notification. He held that it therefore contributed to human knowledge. He added that the invention when viewed as a whole improved the way electronic content was monitored and was therefore technical, albeit outside the computer. He held that because of this, the invention had the necessary characteristics of a technical contribution that was superior to that produced by the prior art, and therefore did not fall wholly within the exclusion. The appeal was allowed.

COMMENT

Although there is no shortage of authority on the subject of computer programs, this ruling is a reminder of how difficult it can be to navigate these issues with any certainty. The question of determining whether the contribution is technical is by far the most difficult to answer and each case has to be decided based on its own particular facts and features, using the guidelines in the case law. What this case does not address is the tension between the European Patent Office approach and the UK approach to the exclusion.

Televisual “Communication To The Public” Stays Undefined: The Law Needs to “Catchup” with Technology

Found recently in The National Law Review was an article by Rohan Massey, Francesco Mattina, Hiroshi Sheraton, Vincent Schröder, and Boris Uphoff of McDermott Will & Emery regarding Televisual Definitions:

In ITV Broadcasting Ltd v TVCatchup Ltd [2011] EWHC 2977 (Pat), the High Court of England and Wales decided to maintain its reference to the Court of Justice of the European Union (CJEU) on the issue of “communication to the public”, however the reference on “reproduction of a substantial part” was no longer necessary.

BACKGROUND

TVCatchup operates a website that allows viewers to watch live streams of free-to-air-televisions channels. The Claimants (a number of broadcasters and TV content providers) allege that TVCatchup infringes their copyrights in films and broadcasts by reproduction and by communication to the public.

TVCatchup denied infringement and, alternatively, relied on the transient copying defence under Section 28A of the Copyright Designs and Patents Act 1988(Article 5(1) of the Copyright Directive (2001/29/EC)) and the defence under Section 73 of the 1988 Act that permits cable retransmission of some broadcasts within their intended reception areas.

In July 2011, Mr Justice Floyd proposed references to the CJEU to determine whether live internet streaming of free-to-air TV channels is lawful. A further hearing was convened to consider the impact of the CJEU decisions in Joined Cases C-403/08 and C-429/08 Football Association Premier League Ltd v QC Leisure (FAPL) and in Joined Cases C-431/09 and C-432/09 Airfield NV v Sabamand Airfield NV v Agicoa Belgium (Airfield).

REFERENCES

The Claimants submitted that the decisions in FAPL and Airfield meant that a reference on the issue of “communication to the public” was no longer needed. Floyd J disagreed, stating that the CJEU’s decision in Airfield did not make it easy to distil a clear principle as to what amounts to communication to the public in this context. He therefore maintained the reference on this point.

In particular, Floyd J asked the CJEU to rule on whether, in the circumstances of there being available a free-to-air terrestrial broadcast in a given area, it amounts to communication to the public for a third party to provide the same broadcast by way of retransmission through the internet in the same area.

As for “reproduction of a substantial part”, Floyd J held that FAPL made it clear that the “rolling” approach to reproduction of Berne works was incorrect, and that the question must be asked in relation to “transient fragments”. Floyd J concluded that there was a reproduction of a substantial part of the films in the memory buffers of TVCatchup’s servers. He said that the segments of the films stored in the buffers must be sufficient to satisfy the tests as explained in FAPL. However, reproduction of the films on the screens was not established.

It therefore followed that Floyd J did not consider that this point warranted reference to the CJEU. Further, as regards broadcasts Floyd J said: “I do not see how it can be rational to apply the rolling basis to broadcasts when it does not apply to films”. Floyd J was further convinced of this fact given that: “If the Claimants fail on communication to the public the defence under Article 5(1) succeeds and there will be again no need to determine the point of law raised here”.

A further reference on the construction of Section 73 was also refused: this was a question for the national court.

COMMENT

In general, “communication to the public” has been given a rather wide interpretation by European case law. What is perhaps of most significance is that the communication has to be to a new public, i.e., not the public the broadcasters initially sent their broadcasts to. However, in this case, Floyd J was not persuaded either way: “It is not clear whether the audience reached by these broadcasts is an audience which is additional to the public targeted by the broadcasting organisation concerned”.

All of this is unsatisfactory for a number of reasons, not least because what is meant by the right of communication to the public now languishes somewhere between the ether and cyberspace while Floyd J’s reference wends its way to Luxembourg.

Going Private: U.S. Listed Chinese Companies

An article by Sheppard Mullin’s Shanghai Office of Sheppard, Mullin, Richter & Hampton LLP regarding U.S. Listed Chinese Companies That Want to Go Private was published recently in The National Law Review:

Many U.S. listed Chinese companies have their eye on going private, with a growing number of such transactions having recently closed. This is the combined result of the current weakness of the U.S. capital markets, significant losses in the value of many U.S. listed Chinese companies, and pessimistic market forecasts that have resulted in trading at values below what controlling shareholders, management or private equity firms may think certain companies are worth.

Why Companies May Go Private

To save costs. There are considerable costs associated with being listed on a U.S. exchange, including ongoing regulatory compliance and defending against shareholder lawsuits and other litigation. Further, in the case of leveraged buyouts, acquirers and targets may realize tax and accounting benefits of a more leveraged capital structure, as compared to a public company.
Strategic business reasons and the ability to manage the company. Private companies are not required to publicly disclose competitive information, are provided more flexible corporate governance, and can focus on business objectives rather than investor relations issues and the short-term pressures of appeasing shareholders. Moreover, a going private transaction can allow for the restructuring of a company’s businesses in ways that would adversely affect its stock prices in the short run if it remained a public company.
The ability to realize value. Going private may allow shareholders to realize a better price for their shares then they would otherwise realize from continuing to hold the shares or selling them on an exchange. Further, companies may go public because analysts consider a company’s share valuations to be low when compared to what the company could generate from other equity markets such as Hong Kong or Mainland China.

Challenges

Going private presents companies with challenges as well, including the inability to utilize the public markets to obtain immediate financing, a diminished public profile, and less transparency. Further, the going private process can be arduous and many such transactions are challenged in court.

Structures

A going private transaction may take various forms. Factors that influence the choice of structure include the need for outside financing, the composition of shareholders, and the likelihood of a competing bid for the company. Going private transactions are commonly structured as buyouts (either mergers or tender offers), and in some cases as reverse stock splits.

Special Committees

In order to mitigate litigation risks for the breach of fiduciary duties, boards need to ensure the fairness of a transaction to the company’s shareholders, particularly where transactions involve controlling shareholders. As such, it is common for a board to appoint a special committee of independent directors.

Listing in Mainland China or Hong Kong

Some companies plan subsequent listings in Hong Kong or Mainland China, where they speculate the valuation for their companies may be higher. For companies that were delisted or suspended from U.S. exchanges, the stigma associated with such could pose a challenge with respect to a subsequent listing, as stock exchanges and regulators require issuers to disclose their history.

Conclusion

Some basic questions that the directors and senior management of all U.S. listed Chinese companies should be asking themselves when considering going private, include: what is the most appropriate going private structure? What is a price that is demonstrably fair? Is the special committee of the board sufficiently independent? How should detailed records be maintained of board and special committee meetings, transaction negotiations and other proceedings? How can the risk of litigation be minimized?

Interview with C. David Morris, Senior Counsel International at Northrop Grumman Corporation

Recently postd at the National Law Review by Michele Westergaard of marcus evans an interview with a Senior in house Counsel of Northrop Grumman about FCPA compliance issues:

With the steady increase in enforcement, organizations need to now move beyond FCPA compliance and embrace a global anti-corruption compliance program. Global companies should assess their existing anti-corruption compliance programs and adjust them to meet potentially more stringent requirements.

C. David Morris, Senior Counsel International at Northrop Grumman Corporation is a speaker at the 6th FCPA & Anti-Corruption Compliance Conference taking place on June 22-24, 2011 in Washington, DC.

Mr. Morris is Senior Counsel in the Northrop Grumman Corporation International Law Department located in Linthicum, MD. His practice focuses on international regulatory compliance and cross-border transactions involving the corporation’s domestic and international businesses and joint ventures. David answered a series of questions on how to enhance FCPA and anti-bribery initiatives to adapt to heightened global anti-corruption enforcement.

What is the importance for companies to conduct regular compliance training for FCPA and foreign anti corruption laws?

DM: From a legal perspective, the U.S. Government has made it clear through many Department of Justice and Securities and Exchange Commission settlement agreements and the Federal Sentencing Guidelines that regular training is an essential component of a corporate compliance program for companies that conduct business with foreign government entities. As such, a company’s history of conducting anti-corruption training can be viewed as either a mitigating or aggravating factor should a company find itself in litigation on a FCPA matter. Likewise, the Guidance to the UK Bribery Act also identifies training as a key component to the corporate defense of having adequate compliance procedures. In this regard, the failure to provide training could be detrimental to the statutory defense. From a business perspective, anti-corruption training is a wise investment as part of a preventative law program. Regular anti-corruption training helps to reinforce and shape a corporation’s ethical culture and standards of business conduct. When clear policies and expectations are communicated, a culture for ethical behavior becomes engrained throughout the enterprise.

**How can companies not only meet the minimal expectationsforFCPA compliancebut also exceed them?**

DM: Two features of a robust compliance program that companies can undertake to achieve top tier status are to conduct benchmarking activities relative to their industry peer companies and to regularly conduct comprehensive internal risk assessments on a periodic basis. Collaboration with outside experts on these activities can be particularly helpful because they can bring an independent perspective to aid in the decision making process. In addition, there are numerous webinars, conferences, and bar association committees that provide useful practice tips and networking opportunities to stay abreast of best practices. Finally, the OECD published guidance in this area last year with their Good Practice Guidance on Internal Controls, Ethics, and Compliance, which is often cited by enforcement authorities as a model for companies to embrace.

What are the effects of non-compliance on share price, organizational reputation etc?

DM: The effects of a corruption related enforcement action can be devastating on all of a company’s constituencies. For shareholders, it is fairly common to see a company’s market capitalization decline following the announcement of a government investigation or a financial reserve set aside to cover potential fines and penalties. In 2010 alone, there were five settlements with the DOJ and SEC in excess of $100M. For customers and trading partners, uncertainties about the reliability of a company undergoing an enforcement action can be problematic because of the possibility of suspension, debarment, and/or revocation of export privileges in some cases. For employees, morale can take a hit when they observe their leaders prosecuted for criminal activity. Lastly, the enterprise as a whole can suffer because the lifecycle of a typical enforcement action (investigation, litigation, consent decree, and compliance monitor) can consume management focus for many years.

How can existing anti corruption programs be strengthened to take account of emerging global anti-corruption trends?

DM: Given the extra-territorial reach of the FCPA, the jurisdictional reach of the UK Bribery Act, and the level of inter-country prosecutorial cooperation, companies need to review their policies, procedures, and internal controls to ensure their anti-corruption compliance program is in lock-step with their corporate footprint. As with any business activity, capital, human, and technological resources need to be deployed where they will be most effective and adjusted as the business evolves. An internal risk assessment and procedural gap review are two features of a healthy continuous improvement program. Lastly, I would add that partnering with Internal Auditors, Country Managers, Ethics Officers, Finance personnel and others with an anti-corruption focus can be a beneficial way to leverage and extend the reach of existing resources.

How best can red flags of possible FCPA violations be identified?

DM: The FCPA’s accounting and internal controls provisions require companies to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that transactions are executed in accordance with management’s authorization and are recorded as necessary to maintain accountability for assets. In addition, there are Sarbanes-Oxley requirements for management to provide a statement of the effectiveness of the company’s internal control structure and procedures for financial reporting. As such, procedures and controls should be established for entering into third party commitments, making payments, and cash disbursements to detect red flags which may require additional due diligence. In addition to periodic internal risk assessments and related interviews of key personnel, it is a good practice to provide awareness training on red flags and to require those involved with international transactions to certify if they are aware of red flags or adverse information at milestones throughout a business transaction. The establishment of an anonymous hot line to report ethical concerns is also often cited as a best practice to detect red flags. In terms of identifying red flags of external trading partners, periodic media searches can reveal a wealth of information. The commercial attaché of the US Embassy of the country in question can also be a valuable red flag identification resource, as well as in-country employees and outside counsel.

California and Florida Lead Trend of New State-Level Iran Sanctions

Posted this week at the National Law Review by Reid Whitten of Sheppard, Mullin, Richter & Hampton LLP a good summary of recent state legislation targeting potential contractors that deal with Iran.

On June 2, 2011, Florida Governor Rick Scott signed a new state law prohibiting Florida government entities from contracting with companies invested in Iran’s petroleum energy sector. Florida’s law, and a similar California law that went into effect on June 1, 2011, announce a coming trend of state laws targeting potential contractors that also deal with Iran. These two laws, and several others on the horizon, present pitfalls for unwary companies as well as unique opportunities for informed, well-advised businesses.

On July 1, 2010, President Obama signed the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (“CISADA”) into law. CISADA targets companies invested in Iran’s petroleum sector through provisions prohibiting the U.S. Government from contracting with such companies. CISADA also permits the states to enact similar prohibitions against state contracts with companies invested in the Iranian petroleum sector. Within months of enactment of the U.S. law, California and Florida passed their own laws, citing the desire to put further economic pressure on such companies. The legislatures of Oregon, Kansas, and other states are considering similar actions. Arizona also has a prohibition on contracting with companies invested in Iran that became law as part of a 2008 divestment act. Companies, particularly non-U.S. companies, intending to bid on state government contracts need to pay close attention to individual state statues, and review their own investments for connections to Iran’s petroleum energy sector. U.S.-organized companies are unlikely to have such investments because (except in very narrow circumstances) the pre-existing U.S. economic embargo against Iran prohibits them.

On September 30, 2010, California passed the Iran Contracting Act of 2010 (“California Act”) requiring, among other actions, that the California Department of General Services compile a list of persons or companies involved in business or investment activities in Iran. The California Act also declares that any person identified as having business or investment activities of $20 million dollars or more in the energy sector of Iran “is ineligible to, and shall not bid on, submit a proposal for, or enter into or renew, a contract with a public entity for goods or services of one million dollars ($1,000,000) or more.” See Cal. Pub. Contr. § 2203(a)(1) (West 2010). Companies that are notified of their designation as doing significant business in Iran’s petroleum energy sectors must demonstrate to the government’s satisfaction that they should not be so designated. If they fail to do so, they will be subject to the contracting prohibition.

Similarly, the Florida Scrutinized Companies law (“Florida Act”) will take effect July 1, 2011. Under a 2008 Iran divestment act, Florida’s State Board of Administration maintains a “Scrutinized Companies with Activities in the Iran Petroleum Energy Sector List” (“Scrutinized Companies List”). The Florida Act prohibits a Florida state agency or local governmental entity from contracting for goods and services of more than $1 million dollars or more with any company on the Scrutinized Companies List.

The Florida Act requires contractors to certify that they are not on the Scrutinized Companies List before submitting a bid for, entering into, or renewing a contract with, a state agency or local government entity. In addition, any contract entered into or renewed on or after July 1, 2011 must contain a provision allowing for termination of that contract if the company is found to have submitted a false certification. Further, the bill would require the Florida state government to bring a civil action against any company that does not disprove a determination of false certification within a specified time.

The state laws present both a concern and an opportunity for contracting companies. Concerns, in particular, arise because states lack substantial experience in administering international sanctions policy. As a result, Companies may be mistakenly designated as a business significantly invested in Iran’s energy petroleum industry. Individual state resources, already spread thin, may not provide the means accurately to designate the correct companies falling under the new laws’ prohibitions. States are likely to borrow names of possible target companies from Federal CISADA actions and from one another, sometimes without independently verifying the alleged reasons for designating a company. Additionally, we have seen instances of private groups (such as human rights and anti-nuclear activists groups) distributing inaccurate lists of companies alleged to be violating CISADA.

Contracting companies may be presented with an opportunity, however, to get ahead of this trend of state sanctions in a number of ways. If a company receives notice that it is under scrutiny from one state, that company and its counsel can prepare a response that is both tailored and general; a response that not only answers the initial notice but that can also be repeated to respond to any other notices it might receive from other states in the future. Companies may also have opportunities to communicate with the state administrators of these new laws about their application. Many of these administrators may not have extensive substantive experience with international sanctions policy; therefore, companies and their counsel, particularly counsel with experience in international sanctions work, would be in a strong position to discuss with state officials the laws and the means of implementation.

Companies intending to contract with any state agencies need to pay close attention to the changing landscape of state-level sanctions laws and remain aware of the continuing risks and opportunities that landscape presents.

Category: International Law

Appeal Against Exclusion From Patentability of Software to Protect Minors Online Allowed

BACKGROUND

DECISION

COMMENT

Like this:

Televisual “Communication To The Public” Stays Undefined: The Law Needs to “Catchup” with Technology

BACKGROUND

REFERENCES

COMMENT

Like this:

Going Private: U.S. Listed Chinese Companies

Why Companies May Go Private

Challenges

Structures

Special Committees

Listing in Mainland China or Hong Kong

Conclusion

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BACKGROUND

DECISION

COMMENT

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BACKGROUND

REFERENCES

COMMENT

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Why Companies May Go Private

Challenges

Structures

Special Committees

Listing in Mainland China or Hong Kong

Conclusion

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What is the importance for companies to conduct regular compliance training for FCPA and foreign anti corruption laws?

How can companies not only meet the minimal expectationsforFCPA compliancebut also exceed them?

What are the effects of non-compliance on share price, organizational reputation etc?

How can existing anti corruption programs be strengthened to take account of emerging global anti-corruption trends?

How best can red flags of possible FCPA violations be identified?

Share this:

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**How can companies not only meet the minimal expectationsforFCPA compliancebut also exceed them?**