Category: Uncategorized

The Return of Balance and Proportionality

Oscar Wilde was known for saying “Everything in moderation, including moderation.” For a period of time, we were only confronted with the scary aspects of “Big Data.” Think The Great Hack and the testy congressional hearings that we watched.

But the viral pandemic has thrown privacy absolutism into deeper question, as we are suddenly faced with a problem that in order to be solved must involve finding and tracking people for extended periods of time. We need to decide how to balance the societal need for virus control with the societal good of personal privacy.

Contact tracing is often used as an epidemic control measure. Lawmakers have discussed using the tool in the U.S. as Apple and Google work together to develop an effective contract tracing system. It has been deployed against illnesses such as measles, SARs, typhoid, meningococcal disease, and Ebola. It is currently being implemented in South Korea and China to combat COVID-19.

The Israeli government approved tracking cell phone data of people suspected of having coronavirus, to make sure they self-isolated. This emergency power lasted for 30 days. Israel’s Supreme Court, concerned with the privacy implications of using a military technology to track its own citizens’ daily movements, decided that the government would be required to halt this surveillance technology until or unless the government can pass an extension of that use. Then an oversight group in Israel’s parliament blocked an attempt to extend the emergency measures beyond this week, also due to privacy concerns. A committee member said the harm done to privacy outweighed the benefits.

As I recently wrote, this crisis may be testing sensibilities about privacy. Perhaps I was wrong. Sentiments do not seem to be moving aggressively towards greater data collection, or a sacrifice of consumer rights. Instead there appears to be a return towards measuring the weight of data against the potential for abuse, or grand commodification of personal information. In Israel more than 200 people, some identified through phone location information, had been arrested for violating quarantine. Thirty days of these extreme measures were tolerable. Then the Israelis had second thoughts.

Ulrich Kelber, Germany’s federal data protection commissioner, who recently claimed that the lack of GDPR enforcement was a result of enforcement agencies not receiving enough resources, backed a plan for Germany’s disease prevention agency to use Deutsche Telekom metadata. Considering just a week earlier he deemed tracking individual smartphones to monitor quarantine “totally inappropriate and encroaching measure,” it is apparent that Germany is balancing the harsh reality of the crisis and the immediate need for certain information with this encroachment.

Canada’s Privacy Commissioner released a “Framework for the Government of Canada to Assess Privacy-Impactful Initiatives in Response to COVID-19.” The Commissioner’s Office acknowledged that COVID-19 raised “exceptionally difficult challenges to both privacy and public health.” However, the framework reiterated that “the principles of necessity and proportionality, whether in applying existing measures or in deciding on new actions to address the current crisis,” will govern. Canada too is weighing the need of the information collected against the nature and sensitivity of the information collected.

The European Data Protection Board (EDPB) provided multiple guidance documents regarding COVID-19. Much like its Canadian counterpart, guidance provides that the “general principles of effectiveness, necessity, and proportionality must guide any measures adopted by Member States or EU institutions that involve processing of personal data to fight COVID-19.” These guidelines clarify the conditions and principles for the proportionate use of location data and contact tracing tools. But the EDPB also stressed that the “data protection legal framework was designed to be flexible and as such, is able to achieve both an efficient response in limiting the pandemic and protecting fundamental human rights and freedoms.”

Here in the United States, all eyes have been on the California Attorney General regarding enforcement of the California Consumer Privacy Act, which is set to begin on July 1, 2020. Unlike our neighbors to the North and Europe, there is no significant sentiment of the need for balance or proportionality. Just a reminder that as “the health emergency leads more people to look online to work, shop, connect with family and friends, and be entertained, it is more important than ever for consumers to know their rights under the California Consumer Privacy Act.”

For many sovereigns, this crisis has led enforcement agencies and legislatures to return to the roots of data privacy, which is balance and proportionality. Many privacy laws require a balancing test for entities collecting data. COVID-19 has made these principles re-emerge into the limelight.

Copyright © 2020 Womble Bond Dickinson (US) LLP All Rights Reserved.

Chinese Rail System for Restaurant Meal Delivery Patent Infringed

Perhaps showing the future of restaurants in times of social distancing, defendant Xuansu Company (炫速公司) implemented a restaurant meal delivery system to deliver food to customers using rails from kitchen to customers’ tables thereby avoiding the need for any interaction between customers and restaurant staff.  However, unfortunately for Xuansu, according to the Shanghai Intellectual Property Court , the installed system infringed Chinese patent no. 101282669B and therefore awarded the exclusive licensee, Yunxiao Company (云霄公司), 1 million RMB.

Xuansu’s meal delivery system in operation

The plaintiff argued that the spiral track system installed in the SpaceLab Weightless Restaurant (Space lab失重餐厅) infringed its licensed patent and requested an injunction as well as 8 million RMB.  The defendant countered it was not infringing and used existing technology.

The Court held “Claims 1, 8, 20, 27, 58, and 59 of the patent in question include “the conveyor system transports meals and / or beverages from the back kitchen work area to the customer dining area”, auxiliary transportation devices, rail lines and customer dining areas. The infringing system has all the limitations of the claims including at least one connected dining table, a circular track, and an ordering system,  and therefore falls within the scope of protection of the plaintiff ’s patent rights.”

With respect to the defendant’s existing technology defense, the defendant claimed  US Patent No. 2216357 was prior art. The Shanghai Intellectual Property Court held that the patent publication date was October 1, 1940, which was earlier than the filing date of the patent in question, and it was prior art relative to the patent in question. After comparing the accused infringing technical solution with the prior patent, the Court found that the prior patent does not disclose the technical structure of the parallel track in the accused infringing technical solution, the circular carousel for transferring food to the table, and the guide assembly of the auxiliary conveying device. There are certain differences in the technical structure of the defendant’s system, so the defendant’s defense based on the existing technology cannot be established.

 

A static view of the restaurant meal rail system.
A static view of the restaurant meal rail system in the dining area.
Fig. 35 of the patent at issue owned by HeineMack GmbH and licensed to Yunxiao.

© 2020 Schwegman, Lundberg & Woessner, P.A. All Rights Reserved.

For more Chinese and other nations patent laws, see the National Law Review Intellectual Property law section.

Chicago City Council Introduces COVID-19 Anti-Retaliation Ordinance, Reflecting Growing Trend

On April 22, 2020, Chicago Mayor Lori Lightfoot, with the backing of several Aldermen, introduced the COVID-19 Anti-Retaliation Ordinance (the “Ordinance”), which, if enacted, would prohibit Chicago employers from retaliating against employees for obeying a public health order requiring an employee to remain at home as a consequence of COVID-19.  This reflects a growing trend among states and local governments in enacting protections against retaliation amid the COVID-19 pandemic.

The Ordinance would prohibit employers from demoting or terminating a “Covered Employee”[1] for obeying an order issued by the Mayor, the Governor of Illinois or the Chicago Department of Public Health requiring the Covered Employee to:

(1) Stay at home to minimize the transmission of COVID-19;

(2) Remain at home while experiencing COVID-19 symptoms or sick with COVID-19;

(3) Obey a quarantine order issued to the Covered Employee;

(4) Obey an isolation order issued to the Covered Employee; or

(5) Obey an order issued by the Commissioner of Health regarding the duties of hospitals and other congregate facilities.

An employer would also be prohibited from retaliating against a Covered Employee for obeying an order issued by the employees’ treating healthcare provider relating to subsections (2), (3) and (4) above.

Finally, the anti-retaliation protections would extend to Covered Employees who are caring for an individual who is subject to subsections (1)-(3) above, and would apply even if workers have exhausted any earned sick-leave time available pursuant to Chicago’s Paid Sick Leave Ordinance.

Affirmative Defense

The Ordinance would allow an employer to assert an affirmative defense if it relied upon a reasonable interpretation of the public health order at-issue and, upon learning of the violation of the Ordinance, cured the violation within 30 days.

Penalties/Damages

The Ordinance has teeth:  violations can lead to fines of up to $1,000 per offense per day, and Covered Employees who have been retaliated against may pursue the following recovery in a civil action: (i) reinstatement; (ii) damages equal to three times the full amount of wages that would have been owed had the retaliatory action not taken place; (iii) actual damages caused directly by the retaliatory action; and (iv) costs and reasonable attorneys’ fees.

Next Steps

The Ordinance has been referred to the Chicago Committee on Workforce Development for further deliberation.

A Growing Trend

The protections the Ordinance would afford to employees are consistent with a growing trend among state and local governments in response to the COVID-19 crisis.  Similar protections have been established through emergency orders or rules in New Jersey, Michigan and Washington which prohibit employers from disciplining or terminating employees for requesting or taking time off after contracting or, in some circumstances, being exposed to COVID-19.  Other states, such as New York and California, have issued guidance applying existing federal, state, and local anti-discrimination and anti-retaliation laws to prohibit employers from discriminating against or refusing to provide reasonable accommodations for employees who contract or are otherwise impacted by the virus. As state legislative and executive responses continue to rapidly evolve, employers should ensure that they are familiar with the latest guidance in each state where their employees are located.

[1] “Covered Employee” generally means any employee who, in any particular two-week period, performs at least two hours of work for an employer while physically present within the geographic boundaries of the City of Chicago.  Chicago, Ill., Mun. Code § 1-24-010.

© 2020 Proskauer Rose LLP.
For more on COVID-19 related employment ordinances, see the National Law Review Coronavirus News section.

Class Actions Begin: Plaintiffs Target Banks for PPP Loan Processing

A number of class-action lawsuits have been filed targeting national and community banks for their processing of loans under the Small Business Administration’s Paycheck Protection Program (PPP). It is not surprising that disputes have already arisen, given the swift creation of the vital relief program and equally rapid depletion of the $349 billion in initial funding. The suits allege that banks violated the CARES Act and state law by prioritizing high-value and existing customers over other small businesses.  More suits are likely to follow, whether based on similar theories or new ones that arise out of the next round of funding.

Plaintiffs in these class actions have accused banks of inappropriately processing and funding larger loans for “bigger business” clients and favoring current customers over other applicants who were unable to obtain loans before the funding ran out. One of the first class actions, filed in federal court in Maryland, sought a temporary restraining order and preliminary injunction to prevent banks from prioritizing current bank customers over individuals and businesses that were not current customers of the bank. The court denied plaintiffs’ request for emergency relief, concluded that there is no private right of action under the CARES Act, and found that plaintiffs’ claims were unlikely to survive. See here for a link to the decision. Plaintiffs have appealed to the Fourth Circuit. Two similar class actions have been filed in Texas federal court.

Another class action was filed this week in state court in Texas against a community bank, alleging fraud, breach of contract, breach of fiduciary duty, negligence and violations of the Texas Deceptive Trade Practices Act, all arising out of claims that the bank gave preference to customers eligible for larger loans in order to obtain more lucrative fees. Similarly, several small businesses have filed federal class actions in California and New York, accusing banks of false advertising, fraud, violations of state unfair competition law and deceptive trade practices, among others. Additional disputes are likely to arise as small businesses continue to face unprecedented circumstances; reportedly up to 80% of small businesses were unable to obtain loans during the first round of the program.

© 2020 Bracewell LLP

For more on CARES Act PPP Loans, see the National Law Review Coronavirus News section.

Supreme Court Preserves Availability of Profits Award for Both “Willful” and “Innocent” Trademark Infringement

On April 23, 2020, the U.S. Supreme Court unanimously held in Romag Fasteners, Inc. v. Fossil Group, Inc., 590 U.S. ___ (2020), that the Lanham Act does not impose a “willfulness” prerequisite for awarding profits in trademark infringement actions.

Disgorgement of a defendant’s profits has long been a critical remedy available to brand owners seeking remediation for the infringement of its trademarks.  A profits award can be a proxy for the actual damages suffered by the trademark owner, as actual damages are often very difficult to prove in trademark cases.  Profits awards also serve to deprive infringers of their unjust gains, and can be an important deterrent against infringing activities.  Some federal courts have considered an infringer’s intent as a factor, but not a prerequisite, to awarding a defendant’s profits to the prevailing plaintiff.  Other courts have required proof that the defendant’s infringement was willful before awarding damages measured by its profits, complicating the availability of this important trademark infringement remedy in certain jurisdictions.

The U.S. Supreme Court has resolved this split, finding that a categorical rule requiring a showing of willfulness cannot be reconciled with the statute’s plain language.  Accordingly, prevailing trademark owners do not have to prove willfulness to be awarded the infringer’s profits.

Background

The parties had an agreement allowing Fossil to use Romag’s fasteners in Fossil’s handbags and other products. Romag discovered that the factories Fossil hired in China to make its products were using counterfeit Romag fasteners. Unable to resolve its concerns amicably, Romag sued, alleging that Fossil had infringed its trademark and falsely represented that its fasteners came from Romag.

The U.S. District Court for the District of Connecticut found Fossil liable, and the jury awarded Romag $6.7 million of Fossil’s profits to “deter future trademark infringement.”  The trial court overturned the jury’s damages award because the jury found Fossil acted “callously,” rather than “willfully,” as required by the controlling Second Circuit precedent for a profits award. The U.S. Court of Appeals for the Federal Circuit affirmed the district court’s decision, and the U.S. Supreme Court vacated that judgment and remanded for further proceedings consistent with its opinion.

Overview of Court’s Opinion

Section 15 U.S.C. §1117(a) of the Lanham Act, which governs remedies for trademark violations, states:

When a violation of any right of the registrant of a mark registered in the Patent and Trademark Office, a violation under section 1125(a) or (d) of this title, or a willful violation under section 1125(c) of this title, shall have been established . . . , the plaintiff shall be entitled, subject to the provisions of sections 1111 and 1114 of this title, and subject to the principles of equity, to recover (1) defendant’s profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action. (Underlined emphases added).

Although acknowledging that a defendant’s mental state is a highly important consideration in determining whether a profits award is appropriate, the Court rejected the categorical rule applied in certain lower courts (including controlling Second Circuit precedent) that a plaintiff can win a profits award only after proving that the defendant willfully infringed its trademark.  The Court relied on the plain language in 15 U.S.C. §1117(a) to find that Congress intended to limit such willfulness precondition to a profits award in a suit under Section 1125(c) for trademark dilution. It rejected Fossil’s position that the phrase “subject to the principles of equity” in Section 1117(a) should be read as imposing a willfulness requirement, especially given that Congress prescribed a “willfulness” requirement elsewhere in the very same statutory provision. In no uncertain terms, the Court noted that “the statutory language has never required a showing of willfulness to win a defendant’s profits” in claims under Section 1125(a) for false or misleading use of trademarks (i.e., trademark infringement).

Conclusion

The Court’s decision resolves a split amongst the lower courts and preserves a critical deterrent against trademark infringement by clarifying that Congress intended to allow a trademark owner to recover a defendant’s ill-gotten profits, regardless of whether such infringement was willful.

©2020 Pierce Atwood LLP. All rights reserved.

ARTICLE BY Jonathan M. Gelchinsky and Michael C. Hernandez of Pierce Atwood LLP.

 

For more Trademark Cases, see the National Law Review Intellectual Property Law section.

COVID-19 Update: Don’t Be a Target: What Business Should Know about State Attorney General Reactions to COVID-19

In any time of crisis, there is heightened risk for fraud and scams. While United States Attorney General Barr has warned of scams and other illegal acts on the federal level,1 it is with the state Attorneys General (“AGs”) where the rubber hits the road in enforcing social distancing orders, investigating companies for alleged price gouging, continuing ongoing investigations, and overseeing lending relief efforts. As the economy begins to reopen on a state-by-state and sector-by-sector basis, companies must be vigilant in protecting themselves from the next wave of scrutiny by state AGs.

During normal times, state AGs rely upon their state’s Consumer Protection Act and Unfair or Deceptive Acts or Practices (UDAP) statutes to fight against perceived fraud. During the COVID-19 crisis, state AGs have taken the additional step of issuing Civil Investigative Demands, mostly focused on the issue of price gouging, or an instance in which a company allegedly inflates prices above a perceived acceptable level based not solely on supply and demand, but also on leveraging, in this case, the COVID-19 pandemic to the detriment of the consumer. Allegations of price gouging often appear during or immediately following natural disasters, an example of which would be heightened prices for essential products such as generators and flashlights in historically hard-hit areas such as Florida or New Orleans during the Atlantic hurricane season. In the current environment, state AGs across the country are each receiving literally hundreds of consumer complaints alleging that companies are similarly raising prices on necessities.2 Online platforms for third-party sellers are particularly vulnerable to state AGs in this environment, with most people sheltering in place and fulfilling the majority of their purchasing needs through online retail. In fact, 33 state AGs sent a letter to Amazon.com, Inc., Facebook, Inc., Craigslist, Inc. and eBay Inc. to request enhanced procedures to protect against price gouging on their respective platforms.3 Ironically, companies such as Facebook, Google, Navient, and others that have been targeted by state AGs, often on extremely flimsy legal grounds, are now being asked by those same regulators to continue their efforts to step up to assist in this pandemic. And those companies, and so many others, are doing just that.

However, there are indeed some bad actors. In one well-publicized example, two Tennessee men hoarded over 17,000 bottles of hand sanitizer with the intent to sell them for up to $70 per bottle and was immediately met by an expedited investigation by Tennessee AG Herbert Slatery.4 Other examples have abounded: Massachusetts AG Maura Healey unilaterally expanded her state’s price gouging regulations, which had previously been limited to gasoline and petroleum products, to include “all goods or services necessary for the health, safety or welfare of the public”;5 New York AG Letitia James sent cease and desist letters to merchants that were allegedly engaging in price gouging related to the sale of hand sanitizer and disinfectant;6 New Jersey AG Gurbir Grewal has sent over 80 cease and desist letters after receiving more than 600 complaints of COVID-19-related price gouging and other related consumer protection violations;7 Florida AG Ashley Moody activated a “Price gouging Hotline” and opened an investigation into third-party sellers accused of price gouging on essential goods through accounts on Amazon;8 and finally, 20 state AGs have implored 3M Company to create a database and accounting of the distribution and pricing of 3M’s N95 respirator masks, including urging 3M to publish its policies prohibiting price gouging.

Businesses that remain open should be mindful of the additional steps taken to ensure compliance with social distancing regulations. For example, Vermont AG T.J. Donovan issued a directive for law enforcement outlining guidance for the enforcement of the state’s COVID-19 Executive Order that, among other things, extended authority to the state Department of Public Safety to inspect the premises and records of any employer to ensure compliance with the Executive Order.9 Other state AGs are enforcing their states’ Executive Orders with similar diligence: New York AG James ordered over 70 medical transportation companies to stop providing group rides;10 Michigan AG Dana Nessel sent a letter to home improvement store Menards in the wake of reports that the retailer had engaged in business practices that would endanger consumers and employees contrary to the Executive Order issued by Michigan Governor Gretchen Whitmer;11 and Delaware law enforcement officials even issued cease and desist orders to a barber shop and a tobacco shop.12

As the economy begins to incrementally ‘reopen’ in the weeks and months to come, companies should document every step taken to protect their customers and employees as well as the rationale underlying those measures. The far-reaching effects of the COVID-19 pandemic are unlikely to subside until a vaccine becomes publicly available. Thus, state AGs are likely to continue to probe companies aggressively about safety measures taken to protect their customers and employees; adherence to government policies and interpretative guidance; their definition of essential employees; and whether the company contributed to the spread of the virus.

State AGs are the top law enforcement officers in their states and will continue to act to protect their citizens during, and long after, the COVID-19 crisis is over. Industry should be on the lookout for measures taken by state AGs to identify and prosecute fraud and perceived price gouging during the COVID-19 pandemic, and should comply with laws and Executive Orders as diligently as possible. What constitutes the requisite compliance with social distancing – both now and as the economy begins to reopen – and what constitutes an essential service are often somewhat subjective and may require the consult of counsel. Cadwalader’s state AG practice is regularly in close communication with state AG offices and is well-positioned to provide guidance to clients that may be in receipt of an inquiry from a state AG, and we stand ready to continue to assist clients as they navigate the implications of the COVID-19 pandemic.

1   https://www.justice.gov/opa/pr/attorney-general-william-p-barr-urges-american-public-report-covid-19-fraud

2 https://www.cadwalader.com/state-attorney-general-insider/index.php?nid=6&eid=34

3  https://www.attorneygeneral.gov/wp-content/uploads/2020/03/03_25_2020_Multistate-letter.pdf

4   On April 21, 2020, Tennessee AG Slatery announced that a settlement had been reached with the two men to resolve allegations of price gouging; all supplies were surrendered to a nonprofit organization in Tennessee and a portion of the supplies were distributed to officials in Kentucky, and the two men were prohibited from selling emergency or medical supplies grossly in excess of the price generally charged during any declared state of abnormal economic disruption related to the COVID-19 pandemic.

5  https://www.mass.gov/news/ag-healey-issues-emergency-regulation-prohibiting-price gouging-of-critical-goods-and-services

6  https://ag.ny.gov/press-release/2020/ag-james-price gouging-will-not-be-tolerated

7  https://www.njconsumeraffairs.gov/News/Pages/03172020.aspx

8   http://www.myfloridalegal.com/newsrel.nsf/newsreleases/A32615BF3942B33E8525854300514289?Open&

9  https://www.attorneygeneral.gov/wp-content/uploads/2020/03/03_25_2020_Multistate-letter.pdf

10  https://ag.ny.gov/press-release/2020/attorney-general-james-orders-78-transport-providers-immediately-stop-endangering

11  https://www.michigan.gov/coronavirus/0,9753,7-406-98158-523976–,00.html

12 https://www.delawarepublic.org/post/delaware-flagging-non-essential-businesses-open-during-shutdown

© Copyright 2020 Cadwalader, Wickersham & Taft LLP

For more on AG’s Enforcement Activities around COVID-19 Fraud see the National Law Review Coronavirus News section.

The Court of Appeals for the Federal Circuit Clarifies that Trademark Protection Is Available for “Graduated” and “Undefined” Color Schemes

There are a number of famous colors that are trademark-protected – such as the color brown, which is registered by UPS, and the color “robin egg blue”, which is registered by Tiffany & Co. This protection stems from the fact that such marks are “inherently distinctive”. That is, the colors have become so readily recognized by the purchasing public as being associated with goods or services. However, some color marks that comprise “undefined” multiple colors, including graduated colors (i.e., where one color fades into another) have generally been treated as never being able to rise to the level of being inherently distinctive.

On April 8, 2020, the United States Court of Appeals for the Federal Circuit (CAFC), held that the Trademark Trial and Appeal Board (TTAB) erred in ruling that an “undefined” color trademark on products and product packaging cannot be distinctive enough for registration unless consumers already recognize it as an indicator of product source. In Re: Forney Industries, Inc., Fed. Cir., No. 19-1073, Opinion 4/8/20.

In its federal registration application, Forney Industries, Inc. described its multi-color trademark as “a solid black stripe at the top” and “[b]elow the solid black stripe is the color yellow which fades into the color red” (emphasis added). Early on, the Examining Attorney at the United States Patent and Trademark Office (USPTO), and later the TTAB, decided that Forney multi-color scheme could not be inherently distinctive.

The TTAB cited two Supreme Court decisions supporting its position – that product and packaging marks using color without defined borders or shape also cannot be inherently distinctive. The CAFC found that the board’s decision overstated the Supreme Court precedent and ruled that the TTAB erred by holding that: (1) a multi-color mark can never be inherently distinctive, and (2) product packaging marks that employ color cannot be inherently distinctive in the absence of a well-defined peripheral shape or border.

The CAFC stated that the correct standard to apply in determining inherent distinctiveness is a legal question, which it could review de novo. The CAFC then recognized that neither the Supreme Court nor it, has directly addressed whether a multi-color mark such as described by Forney can ever be inherently distinctive. Recognizing the “Forney is not attempting to preempt the use of the colors red, yellow, and black, but instead seeks to protect only the particular combination of these colors, arranged in a particular design”, the CAFC concluded that there are instances when a multi-color mark, as well as single-color marks, can be inherently distinctive and, therefore, federally protected via the USPTO.

If your products or product packaging is recognizable by your customers, you may want to consider taking the extra step of applying for federal registration of that color, even if the color is not uniform and blends into other colors. Also, consider consulting an attorney who is well-versed in the area of trademark law to make sure that the description of your color mark is worded the best way possible.

There are a number of famous colors that are trademark-protected – such as the color brown, which is registered by UPS, and the color “robin egg blue”, which is registered by Tiffany & Co. This protection stems from the fact that such marks are “inherently distinctive”. That is, the colors have become so readily recognized by the purchasing public as being associated with goods or services. However, some color marks that comprise “undefined” multiple colors, including graduated colors (i.e., where one color fades into another) have generally been treated as never being able to rise to the level of being inherently distinctive.

On April 8, 2020, the United States Court of Appeals for the Federal Circuit (CAFC), held that the Trademark Trial and Appeal Board (TTAB) erred in ruling that an “undefined” color trademark on products and product packaging cannot be distinctive enough for registration unless consumers already recognize it as an indicator of product source. In Re: Forney Industries, Inc., Fed. Cir., No. 19-1073, Opinion 4/8/20.

In its federal registration application, Forney Industries, Inc. described its multi-color trademark as “a solid black stripe at the top” and “[b]elow the solid black stripe is the color yellow which fades into the color red” (emphasis added). Early on, the Examining Attorney at the United States Patent and Trademark Office (USPTO), and later the TTAB, decided that Forney multi-color scheme could not be inherently distinctive.

The TTAB cited two Supreme Court decisions supporting its position – that product and packaging marks using color without defined borders or shape also cannot be inherently distinctive. The CAFC found that the board’s decision overstated the Supreme Court precedent and ruled that the TTAB erred by holding that: (1) a multi-color mark can never be inherently distinctive, and (2) product packaging marks that employ color cannot be inherently distinctive in the absence of a well-defined peripheral shape or border.

The CAFC stated that the correct standard to apply in determining inherent distinctiveness is a legal question, which it could review de novo. The CAFC then recognized that neither the Supreme Court nor it, has directly addressed whether a multi-color mark such as described by Forney can ever be inherently distinctive. Recognizing the “Forney is not attempting to preempt the use of the colors red, yellow, and black, but instead seeks to protect only the particular combination of these colors, arranged in a particular design”, the CAFC concluded that there are instances when a multi-color mark, as well as single-color marks, can be inherently distinctive and, therefore, federally protected via the USPTO.

If your products or product packaging is recognizable by your customers, you may want to consider taking the extra step of applying for federal registration of that color, even if the color is not uniform and blends into other colors. Also, consider consulting an attorney who is well-versed in the area of trademark law to make sure that the description of your color mark is worded the best way possible.

© 2020 Davis|Kuelthau, s.c. All Rights Reserved

For more on trademark enforcement, see the National Law Review Intellectual Property Law section.

What Should You Do About D&I Efforts During a Pandemic? Exactly What You Were Doing Before

The tremendous economic uncertainty emerging in the wake of COVID-19 is forcing law firm leaders to contend with challenges they’ve never faced before. People are scared, and for good reason. Given the enormous financial pressure firms feel, it’s understandable that leaders may opt to push diversity and inclusion efforts to the back burner for a while — or is it?

Let’s review what we know about the business case for creating more diverse firms.

In other words, improving law firm diversity is an imperative for any firm hoping to compete in the marketplace. That was true before the pandemic, and it’s still true today, despite how much more difficult it may be to achieve this goal.

Here’s the good news: expensive, outward-facing diversity and inclusion initiatives that are more about marketing than substance probably are not the best use of constrained law firm resources. Instead, firm leaders should consider simple, effective interventions that will protect the progress they have made in elevating more women and minority attorneys to power, and make it possible for that work to continue:

Help women and minority partners build their profiles remotely. Now that all in-person avenues to developing business are closed, firms are thinking strategically about how their attorneys should move those efforts online. But top-down orders to “leverage LinkedIn” or “keep up with your contacts virtually” are not useful to attorneys who didn’t have robust “old boy” networks to begin with. Online networking is a skill, just like other business development techniques. If your firm was providing coaching support to high-potential attorneys to help them with business development in the real world, that same support is needed now for new kinds of marketing efforts. Attorneys are going to need tutorials that walk them through best practices and provide support by phone or email. Marketing departments can create these resources or contract outside support to do this training work. Then they must oversee the execution to ensure attorneys stay part of the online conversation in their target industries. Is it possible to assign marketing department staff to this task, particular those who typically staff events and may have extra capacity?

Keep the content coming. Social media profiles are only as strong as the content attorneys have to share there. We know that implicit bias can make it more difficult for women and minority attorneys to demonstrate their subject-matter expertise and be considered for the same opportunities as less experienced white men. This makes thought leadership articles and opportunities to be featured as an “expert source” in key media outlets all the more important for building these attorneys’ reputation with prospects. When putting your firm’s experts forward on webinars, thought leadership articles and media pitches, consider who’s being included — and who’s not. If the faces of your firm’s most important expertise are all white men, you’re sending the message that your other attorneys are somehow less qualified to lead in a crisis.

Bear equity in mind when handling award nominations. The earliest and most chaotic weeks of the COVID crisis happened to coincide with an already busy time on many legal marketers’ calendars: award season. Nominations for “rising star” and other programs are typically due in spring, and gathering client testimonials, case examples and other supporting materials can be time consuming and logistically challenging under normal circumstances. And we know that the required effort (which of course comes on top of keeping up with billable work), combined with the often-gendered tendency to be more reticent about self-promotion, means that award nominees can be less than representative of a firm’s diversity anyway. This year, women bearing the brunt of new childcare and homeschooling responsibilities, along with those who care for extended family members, had even less bandwidth and energy to put themselves forward for industry honors. What can your team do to ensure that your award nominees reflect the true diversity of your emerging lawyers, rather than an oversampling of those privileged enough to have more spare time on their hands?

Make evaluations more transparent and consider what “fairness” means right now. In addition to thinking about the intersection of inclusion and business development, firm leaders will need to consider how to evaluate the work attorneys do under these extraordinary circumstances. Obviously it would not be fair to hold attorneys to the standards for billable hours that they would during a normal year, but what should revised standards look like? As noted, women are taking on a greater share of the childcare, homeschooling and household duties under lockdown, which makes it more difficult for them to bill the same number of hours or develop as much new business as men. How can you make sure they won’t be penalized for this when it comes time to make decisions about compensation and promotion? Questions about how to fairly and holistically evaluate attorneys’ work long predate the current crisis, and they are going to become more urgent in the months to come. The current system continues to reward white men above other demographic groups. It’s time for reform.

No question this is a frightening time for firm leaders, and they will want to focus their limited attention on what matters most for the survival of the firm. That shortlist should include a continued commitment to diversity and inclusion. The business case is clear, and hard-won gains for women and minorities are hanging in the balance.

© 2020 Page2 Communications. All rights reserved.

ARTICLE BY Debra Pickett of Page 2 Communications.
For more on continuing normal business operations amid COVID-19, see the National Law Review Coronavirus News section.

Protecting Privilege when Communicating with PR Consultants

In high-profile cases in 2001[1] and 2003,[2] federal courts recognized exceptions to the third-party waiver rule for privileged communications shared with public relations (PR) consultants. Since then, courts have repeatedly been tasked with determining the status of PR firms for purposes of asserted waivers of attorney-client privilege and deciding whether Kovel[3]or the third-party waiver exceptions recognized in In re Copper or In re Grand Jury Subpoenas apply. Recently, multiple courts have rendered decisions on whether a third-party PR consultant falls within the scope of the privilege by virtue of one of the exceptions. These decisions have demonstrated that, as of 2020, the standards for these doctrines remain fluid, if not illusive. By contrast, disclosure of attorney work product to third parties does not so readily waive protection. Below we review recent cases and offer best practices to maintain privilege and work-product protection.

Third-Party Waiver Exception Doctrines Applied to PR Firms

The attorney-client privilege protects communications made in confidence with counsel for the purpose of legal advice, but the privilege is waived if the communication is shared with a third party. Starting in 2001, courts applied two developing exceptions to the third-party waiver rule to PR firms. The court in In re Copper Market Antitrust Litigation[4] held that a PR firm was the functional equivalent of an employee such that the privilege was not waived when counsel shared communications with the firm.[5] In doing so, the court recognized that the PR firm was within the scope of privilege as defined by Upjohn Co. v. United States.[6] Two years later, the court in In re Grand Jury Subpoenas Dated March 24, 2003,[7] applied the Kovel[8]third-party waiver exception to retention of a PR firm and held that the communications of a grand jury target with that PR firm did not waive the privilege because counsel needed to engage in frank discussions of the facts and strategies.

Decisions Finding No Waiver

In NECA-IBEW Pension Trust Fund v. Precision Castparts Corp.,[9] the plaintiffs in a securities action moved to compel documents listed on the privilege log drafted by counsel for Precision Castparts Corp. (PCC) and shared with AMG, PCC’s PR firm, for comments. The defendant asserted that the documents were privileged, arguing that AMG was the functional equivalent of an employee such that disclosure did not constitute a waiver.[10] The court agreed:

AMG is the functional equivalent of an employee under Upjohn and Graff. PCC retained AMG in August 2014 to provide “public relations counsel and other strategic communications services.” AMG’s retainer was not a test run, as the relationship was established by the time Berkshire and PCC began talks in March 2015 and was apparently maintained throughout the acquisition. Under the terms of its engagement, AMG was required to “take instructions from [PCC] and . . . consult with other members of [PCC] management and with [PCC’s] legal and financial advisors as necessary, while PCC promised to “provide AMG with the information and resources necessary to carry out [PCC’s] instructions.”[11]

Significantly, in addition to serving as a functional equivalent of an employee, the court found that AMG was clearly receiving “legal advice from corporate counsel to guide its work for the company.”

In Stardock Systems v. Reiche,[12] a federal trademark action, Reiche’s counsel retained PR firm Singer to provide PR counseling. Reiche withheld communications between its counsel and Singer as privileged.[13] Citing In re Grand Subpoenas,[14] Reiche asserted that Singer had been retained to help present a balanced picture and that the withheld communications related to legal advice about the appropriate response to the lawsuit and making related public statements.

The court found that Reiche’s counsel hired Singer for the purposes of litigation strategy and that the communications between Singer and counsel pertained to “giving and receiving legal advice about the appropriate response to the lawsuit and making related public statements.”[15] The court cited specific examples of privilege log entries that all “relate[d] to Defendants’ counsel’s litigation strategy in dealing with the present suit.”[16] The court also held that the attorney work-product doctrine had not been waived because the work product shared was intended to be kept confidential.

Cases Where Courts Found Waiver

Other courts, however, have reached different conclusions. Following the premiere of “Blackfish,” a film critical of SeaWorld, SeaWorld and its counsel retained two “crisis” PR firms to work with counsel in developing a legal strategy, including considering potential litigation. In Anderson v. SeaWorld Parks & Entertainment, Inc.,[17] the PR firms produced documents regarding their work with SeaWorld, but SeaWorld redacted some documents and withheld others based on attorney-client privilege and attorney work product.

The court, relying on Behunin v. Superior Court, the only California decision addressing the issue as applied to PR firms,[18] held the standard of “reasonably necessary” had not been met:

[I]n order for disclosure to a third party to be “reasonably necessary” for an attorney’s purpose, and thus not to effect a waiver of privilege, it is not enough that the third party weighs in on legal strategy. Instead, the third party must facilitate communication between the attorney and client. Here, the evidence submitted and documents lodged for in camera review show at most that SeaWorld and its counsel sought advice from public relations firms to better predict the public reaction to legal activities and other efforts it considered in response to Blackfish, and to determine how best to present such activities to the public and other entities.[19]

The court rejected SeaWorld’s argument that its PR consultants were functionally equivalent to employees, stating that, even assuming that the remaining elements of the test were satisfied, “there is no evidence that any such consultant “possessed information possessed by no one else at the company,’” [20] one of the factors established by In re Bieter Company,[21] which established the functional equivalent doctrine in the Eighth Circuit.

However, the court held that disclosure of the attorneys’ work product to the PR firms had not waived work-product protection because there can be no waiver “unless it has substantially increased the opportunity for the adverse party to obtain the information.”[22]

In Universal Standard Inc. v. Target Corp.,[23] a trademark infringement and unfair competition case, Target sought to compel production of emails sent among Universal Standard, its attorneys and its PR firm, BrandLink, arguing that privilege had been waived. Universal argued that BrandLink was the functional equivalent of an employee, hired to serve as Universal’s “public relations arm” with independent decision-making authority. The court found no evidence of that, however; the only specific evidence was that BrandLink would monitor and respond to inquiries directed to a PR email address, duties unrelated to legal advice. Further, BrandLink had no independent authority to issue a press release — the email in dispute suggested the Universal overruled BrandLink’s recommendation.

Further, BrandLink did not work exclusively for Universal and provided services for more than a dozen other brands:

It is of no great significance that, as Universal Standard argues, BrandLink has “particular and unique expertise in the area of public relations, whereas Universal Standard does not.” Or that BrandLink “works closely with Universal Standard’s owners on a continuous basis regarding PR issues. To the contrary, the evidence presented by the parties “contradict[s] the picture of [BrandLink] as so fully integrated into the [Universal Standard] hierarchy as to be a de facto employee of [Universal Standard]”[24]

The court also rejected the assertion that the In re Grand Jury Subpoenas exception applied because there was no evidence that the purpose of the communications with BrandLink was to assist counsel in providing legal advice.[25]

Finally, the court in Pipeline Productions, Inc. v. Madison Cos.[26]reached a mixed result. In this case arising out of a failed music festival, the plaintiff moved to compel documents listed on the defendants’ privilege log that involved two third-party contractors — Suzanne Land, hired to negotiate related transactions, and Marcee Rondan, a PR consultant. The court found that Land was the functional equivalent of an employee, citing affidavits from the defendant:

Madison submitted a detailed factual record that establishes Ms. Land was an authorized representative for purposes of seeking and receiving the legal advice at issue. Mr. Gordon’s affidavit explains that he brought Ms. Land on board in the winter of 2014-2015 as his “right hand person” to oversee negotiating certain proposed business transactions, including the dealings with Pipeline that are the subject of this litigation. . . . He authorized and asked Ms. Land to communicate with counsel and other Madison representatives in order to obtain information needed or requested by Madison’s attorneys, he authorized Ms. Land to act in this capacity as Madison’s representative, and he relied upon her to do so.[27]

The court rejected the defendants’ argument that the purpose of communications with Rondan was to guide their counsel relating to PR issues with potential litigation:

These descriptions suggest only that the predominant purpose of the communications was to obtain public relations advice from Ms. Rondan and, even further afield, as they sought to set up a call about that advice. Although Madison argues counsel was included on all communications and that the communications would not have occurred “but for the fact that a lawsuit was filed,” these considerations are insufficient to show that Ms. Rondan provided any information to Madison’s attorneys to enable them to render legal advice or to provide legal services.[28]

Best Practices

While each case will turn on its facts, there are steps counsel can take to best ensure privileged and protected communications with PR firms retain their protection by making a clear record of what role the PR firm will play.

First, it should be counsel who engages a PR firm, and counsel should provide a clear, written description of the PR firm’s role in the litigation in their engagement letter. To the extent that an engagement expands beyond the initial scope, additional engagement letters should make clear what the PR firm’s role will be in each.

Not every communication with PR firms will involve the provision of legal advice and so companies should not try and overreach by copying counsel on routine communications. If a communication is to remain privileged, there must be a legal reason why the PR firm is involved. Communications designed to address nonlegal matters, like public perception, will not be deemed privileged. Privileged communications should only be shared with PR firms to the extent necessary, and only with PR consultants so integrated into the client’s business and structure that the consultant can be qualified as a functional equivalent of an employee.

When challenged, counsel should prepare affidavits that evidence the specific tasks assigned to the PR firm and why its involvement was necessary for the provision of legal advice. If establishing that the consultant is the functional equivalent of an employee, the affidavits should establish the PR firm’s integration into the company’s structure and routine interaction with counsel for legal advice.

Finally, regardless of whether a communication remains privileged, because attorney work-product protection is not so easily waived, counsel should demonstrate that disclosure did not make the information available to their adversaries.

[1] See In re Copper Mkt. Antitrust Litig., 200 F.R.D. 213 (S.D.N.Y. 2001), where the court held that the public relations firm was the functional equivalent of the corporation’s employee and, therefore, the attorney-client privilege was not waived when the corporation’s counsel shared communications with the public relations firm. In so holding, the court rejected the argument that third-party consultants came within the scope of the privilege only when acting as conduits or facilitators of attorney-client communications, the requirements of the original third-party waiver doctrine adopted in United States v. Kovel, 296 F.2d 918 (2nd Cir. 1961).

[2] In In re Grand Jury Subpoenas Dated March 24, 2003, 265 F. Supp. 2d 321 (S.D.N.Y. 2003), a target of a grand jury investigation hired a public relations firm to assist in influencing the outcome of the investigation. When subpoenaed by the government to produce documents and testify before the grand jury regarding communications with the target, the public relations firm asserted the attorney-client privilege on behalf of the target. The court upheld the privilege, recognizing the need for lawyers to be able to engage in frank discussion of facts and strategies with the lawyers’ public relations consultants.

[3]United States v. Kovel, 296 F.2d 918 (2nd Cir. 1961). The Second Circuit held that the privilege could extend to communications between a client and a nonattorney third party if “the communication [is] made in confidence for the purpose of obtaining legal advice from the lawyer.” Id. at 922. In applying this rule, the court found that the privilege could reasonably extend to an accountant assisting a law firm in an investigation into an alleged federal income tax violation.”

[4] 200 F.R.D. 213 (S.D.N.Y. 2001).

[5] Id. at 219-20 (citing In re Bieter, 16 F.3d 929 (1994) (privilege would apply to communications between independent consultants hired by the client and the client’s lawyers if those consultants were the functional equivalents of employees)).

[6]449 U.S. 383, 391 (1981) (Supreme Court rejected that only corporation’s high-level “control group” could communicate with attorneys without the privilege being waived and held that lower-level employees could be used as agents of the corporation when they had relevant information needed by corporate counsel to advise client).

[7] 265 F. Supp. 2d 321 (S.D.N.Y. 2003).

[8] United States v. Kovel, 296 F.2d 918 (2nd Cir. 1961).

[9] No. 3:16-cv-017756, 29019 U.S. Dist. LEXIS 168088 (D. Or. Sep. 27, 2019).

[10] Id. at *14-15 (“The Eighth Circuit . . . applied Upjohn to cover communications between corporate counsel and outside consultants” when the outside consultant “was in all relevant respects the functional equivalent of an employee.”) (citations omitted).

[11] Id. at *17-18, distinguishing Universal Standard Inc. v. Target, 331 F.R.D. 80 (S.D.N.Y. May 6, 2019).

[12] 2018 U.S. Dist. LEXIS 204438 (N.D. Cal. Nov. 30, 2018).

[13] Id. at *5.

[14] 265 F. Supp. 2d 321 (S.D.N.Y. 2003).

[15] Id. at *17.

[16] Id. at *17-18.

[17] 329 F.R.D 628 (N.D. Cal. 2019)

[18] 9 Cal. App. 5th 833, 215 Cal. Rptr. 3d 475 (App. 2d Dist. 2017) (court held Behunin had not proven the communications were reasonably necessary for counsel’s representation and determined the privilege had been waived).

[19] 329 F.R.D. at *634.

[20] Id.

[21] 16 F.3d 929 (8th Circ. 1994).

[22] Id. at *635-36.

[23] 331 F.R.D. 80 (S.D.N.Y. 2019).

[24] Id. at 90 (citations omitted).

[25] Id. at *91-92.

[26] No. 15-4890-KHV, 2019 U.S. DIST Lexis 71601 (D. Kan. Apr. 29, 2019).

[27] Id. at *3-4.

[28] Id. at *5-6.

Copyright © 2020 Pepper Hamilton LLP
For more on protecting privilege, see the National Law Review Law Office Management section.

CARES Act Provider Relief Fund – Acceptance of Funds Comes with Conditions

Healthcare providers are among those financially adversely affected by the COVID-19 pandemic.

A survey conducted by the Medical Group Managers Association (“MGMA”) on April 7 and 8, 2020, found that 97% of medical practices have experienced a negative financial impact directly or indirectly related to COVID-19.  MGMA also indicates that, on average, practices report a 55% decrease in revenue and a 60% decrease in patient volume since the beginning of the COVID-19 crisis.

In response to the financial impact on healthcare providers, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, signed into law on March 27, 2020, appropriated $100 billion in relief funds to hospitals and other healthcare providers under the Public Health and Social Services Emergency Fund, also called the “CARES Act Provider Relief Fund.” On April 10, 2020, the United States Department of Health and Human Services (“HHS”) released the initial terms and conditions related to the distribution of the initial $30 billion of the $100 billion.  Rather than await the submission of applications by healthcare providers, HHS has begun a rapid delivery of relief funding to healthcare providers and suppliers that are enrolled in Medicare and received Medicare fee-for-service reimbursement in 2019.  These eligible healthcare providers are being allotted a portion of the initial $30 billion distribution based upon their proportionate share of the approximately $484 billion of Medicare fee-for-service reimbursements made in 2019.

Healthcare providers identified as eligible to receive funds from this first distribution should have received an email to that effect.  Eligible healthcare providers have begun receiving payments via the Automated Clearing House account information on file used for reimbursements from The Centers for Medicare and Medicaid Services (“CMS”).  Healthcare providers that normally receive a paper check for reimbursement from CMS will receive a paper check in the mail.

These payments are not loans and, if used consistent with the applicable terms and conditions, will not need to be repaid.  Healthcare providers must sign an attestation confirming receipt of the funds and agreeing to the terms and conditions of payment within 30 days via the online payment portal.  Should a healthcare provider choose to reject the funds, the healthcare provider within 30 days of receipt of payment must complete the attestation to indicate this and remit the full payment to HHS.  The portal will guide the healthcare provider through the attestation process to accept or reject the funds.

The healthcare provider is required to certify, among other things, that it provides or provided after January 31, 2020 diagnoses, testing, or care for individuals with possible or actual cases of COVID-19.  In a recent update, HHS clarified that to meet this requirement, care does not have to be specific to treating COVID-19, as “HHS broadly views every patient as a possible case of COVID-19.” HHS also clarified that a healthcare provider’s eligibility is not adversely affected if it ceased operations as a result of the COVID-19 pandemic, so long as the healthcare provider provided diagnoses, testing, or care for individuals with possible or actual cases of COVID-19.

In addition to imposing use restrictions for the funds and recordkeeping requirements, the CARES Act authorizes the HHS Office of Inspector General (“OIG”) to audit both interim and final payments made under the program.  Healthcare providers that elect to accept the funds must be prepared to submit to these OIG audits.  Because the funds are limited to necessary expenses or lost revenues due to the pandemic not otherwise reimbursable from other sources, there may be differences in OIG’s interpretation of whether the funds were used for an appropriate purpose.  At a minimum, this may necessitate returning certain disallowed funds following an audit.

Failure to abide by the terms and conditions could result in False Claims Act liability for healthcare providers that do not make proper use of the funds.  Thus, recipients of the funds should carefully consider their ability to comply with the terms and conditions and should ensure that proper controls are in place for proper use of the funds.

© 2020 Ward and Smith, P.A.. All Rights Reserved.

For more on CARES Act funding, see the Coronavirus News section of the National Law Review.