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What Start-ups Need to Know About Intellectual Property

As any entrepreneur is well aware, the early stages of a new business venture are an incredibly busy time. Entrepreneurs must focus on building the core team, structuring the company, attracting investors, developing the product/service, and developing key partnerships, sales channels and marketing plans. These tasks are typically all-consuming for the founders, taxing both their financial and time resources.

During this time, it may be a challenge to simultaneously focus on intellectual property issues.  However, this early time period is also a critical time for ensuring that a business takes steps to protect its core intellectual property and avoids the risk of third party intellectual property issues. Today, more than ever, having a solid understanding of intellectual property and developing an IP strategy that aligns with the business is a crucial part of building a new venture on a solid foundation.

This article includes an overview of the different types of intellectual property and provides advice to start-up companies on how to secure their own intellectual property as well as protect against intellectual property risks from others.

The three basic types of intellectual property that startups should understand are:

  • Patents
  • Trademarks
  • Copyrights

Patents

Not every startup business will be best-served by investing its resources in building a patent portfolio, but the question of whether to pursue patent protection warrants a hard and early look. Knowledge of the role of patents is critical for two reasons:

  • To protect your own business and inventions from your competitors
  • To avoid the risk of being exposed to assertions of patent infringement by competitors and other third parties

It is important for startups to understand the different kinds of patent protection and how they fit into their business.

Utility patents can be obtained for processes, machines, articles of manufacture, or compositions of matter that are deemed new, useful and non-obvious. The traditional subject matter of such utility patents covers tangible, technical inventions, such as improvements to client-server systems, motors, radios, computer chips and various technical product features. For example, Boeing’s US Patent No. 6,227,447 is a patent that covers methods of remotely controlling a vehicle. Patents can also be directed at new product features and functions. As another example, Facebook’s US Patent No. 8,171,128, titled “Communicating a newsfeed of media content based on a member’s interactions in a social network environment,” protects its News Feed feature.

A separate category of patent, the design patent, may be sought to protect ornamental (non-functional) designs. Some examples of notable design patents include Apple’s D 604,305 covering the design of its iPhone interface and Lululemon’s design patent covering its yoga pants.

The role of patents

Although patents are the most expensive and time-consuming type of intellectual property to obtain, they also provide the best scope of protection. A patent provides its holder with the exclusive right to make, use or sell an invention.  This means that it can exclude a competitor from making or selling the patented invention, irrespective of whether or not the competitor copied the invention or even previously knew of the patent.  For this reason, a patent that covers an important feature that drives consumer demand and/or distinguishes one’s product or service from that of competitors, can be very valuable.

Benefits of patents for a young business

Patents may provide a number of benefits to young businesses. For example, a robust patent portfolio or a key patent can help attract investors, since it may serve as barrier to entry by competitors. Furthermore, the filing of a patent application will enable the company to advertise “patent pending” along with its product or service.  In addition to potentially attracting investors, the “patented” or “patent pending” labels may deter would-be competitors, or force those competitors to adopt different designs and technologies.

As indicated above, once a patent issues it may be used to stop competitors from entering the field and allows for recovery of damages for infringement. Patents can also help the finances of a business by providing an opportunity to generate revenue from licensing.

How to obtain a patent

A patent is obtained by filing an application with the United States Patent and Trademark Office. The application includes a description of the invention accompanied by drawings, followed by a list of the elements that form the invention, called the patent claims. The patent claims set out the metes and bounds of the invention.  Third-party products or services that practice the elements of a claim infringe the patent.

When a patent application is first filed, an examiner is assigned to it. The examiner will reject or allow claims based on an assessment of their patentability, and the patent applicant will have an opportunity to respond to the examiner’s decisions. This back-and-forth with the Patent Office, known as prosecution, can take a number of years and is best done by an experienced patent attorney who understands the procedures, the legal requirements and the art of drafting strong patent claims.

Impact of the America Invents Act

Changes in the patent law implemented by the America Invents Act (AIA) half a decade ago have impacted the leading practices for businesses looking to file for patent protection. First, the U.S. is a “first inventor to file” system. This incentivizes early disclosure of inventions and early filing of patent applications.

When two people independently come up with the same invention, the first inventor to file for a patent on his or her invention is awarded the patent, regardless of which actually invented first. For this reason, it is important for businesses to streamline operations to reduce the time from invention to filing of patent applications.

Early and cost-effective filing can be achieved through provisional applications, which are essentially invention disclosures that can be converted to full patent applications within one year.

In addition, the AIA also provides for a prioritized examination procedure, which expedites the patent examination process. While the use of prioritized examination is more costly up-front, it may reduce overall legal expenses, since a patent can be obtained within one year.

Avoiding infringement of other patents

A second important aspect that startups should consider with respect to patents is a defensive one, i.e., avoiding infringement of the patents held by others. As a matter of practice, startups should conduct a patent search to verify that their business is free of patents that could be asserted against their product or service. The up-front cost of performing this search and related analysis is relatively minor and is offset by the potential for huge savings, both in terms of litigation costs and wasted investment in an infringing idea. The cautionary tale of Vlingo underscores this point.

Vlingo spent years developing voice recognition technology that led to talk of partnerships with Google and Apple. However, another voice recognition company, Nuance, which held a patent on voice recognition, sued Vlingo for patent infringement. Although Vlingo ultimately won the lawsuit, by then the company had already lost its potential partnerships, and the cost of defending the suit forced Vlingo to sell its business to Nuance. An early patent search could have revealed the Nuance patent and may have allowed Vlingo to take appropriate strategic steps to address the issue. For example, they might have been able to adopt a different design to avoid a run-in with Nuance.

Trademarks

Trademarks take us into the world of branding.  Trademarks serve to build brand awareness and business goodwill. They can impart consumer confidence in a product by its association with a brand the consumer recognizes and trusts. A trademark can be words, symbols, logos, slogans or product packaging and design that identify the source of goods or services. The Coca-Cola logo is one of the more famous trademarks.

Unlike patents, trademark rights are only acquired through use. Even without registration, the symbols “TM” or “SM” may be used to accompany trademarks or service marks to designate products or services. However, only registered marks may be accompanied by the “®” symbol.

Although registration with the US Patent and Trademark Office is not required to gain trademark rights, registration provides certain important benefits to the trademark holder. For example, without a registration, the trademark rights are limited to the geographic area in which the product or service is marketed and sold, and protection begins only after the product or service is available for sale on the market.

In contrast, federally registered marks provide nationwide rights. Registration also creates a prima facie case of validity of the ownership as well as an exclusive right to use the mark for specified goods or services. Once registered, the owner of a mark can stop importation of infringing products through U.S. Customs.

Clearing and registering key trademarks

Just as with patents, when seeking trademarks, businesses should be aware of whether their desired name, logo or domain name is already in use by others. Searching for existing uses is known as trademark clearance, with the goal being to “clear” a desired mark for use. Clearing the name and brand early on will reduce the likelihood of problems down the road.

Startups should look to protect their brand early by clearing and registering key trademarks. Registration is relatively quick and inexpensive, generally a few thousand dollars for a clearance search and subsequent filing for registration. A trademark application must specify the type of mark — i.e., whether the mark consists of just words or includes a stylized design or even an identifying color or sound. The application must also specify the particular goods or services to which the mark will apply.

As the company grows, it will become increasingly important to police infringing uses of its marks. Such efforts will help ensure that the business is not losing customers due to confusion with knock-offs.

Copyrights

Copyright is a form of intellectual property that protects the expression of ideas. Books, music, art, photographs, architecture and even computer software can be protected by copyright.

However, while copyrights protect the expression of ideas, they do not protect ideas or concepts themselves. For example, a copyright can protect a particular photograph of a bird, but others may still create their own photographs of the same type of bird.

Another requirement for copyright eligibility is that the work must be “an original work of authorship.” Facts, titles, phrases, and forms per se cannot be copyrighted.

Exclusive rights to copyright owners

Like trademarks, copyright registration is optional. As soon as a work is written or recorded or otherwise made “tangible”, it is considered to be copyrighted. US law provides various exclusive rights to copyright owners, including the rights to reproduce the work, prepare derivative works and distribute copies, irrespective of registration.

However, registration provides significant procedural benefits. Critically, registration is necessary in order to file a lawsuit for copyright infringement. It is also necessary to receive certain remedies, such as statutory damages and attorney fees. Registration also provides a presumption of originality and ownership, and it allows US Customs to stop the importation of infringing or counterfeit works.

Businesses should include the “©” symbol or the word “Copyright” on all distributed materials. They should also include the year of first publication, the name of the owner, and the language “All rights reserved.”

Businesses should consider registering any important materials so that the option of filing lawsuits is available to address infringement. Registration can be filed online with the US Copyright Office for a nominal fee.

Startups should also be careful to avoid using third-party photos, music, or writings on their website, marketing materials or products. Such use could lead to a potentially costly infringement dispute with the copyright holder.

Finally, because the author is the copyright owner by default, startups should take steps to ensure that they receive the rights to any copyrightable work created by employees or third-party contractors. The Copyright Act lists specific requirements for works for hire, and employment and third-party contractor agreements should include specific language to address ownership of any copyrightable works.

Conclusion

While intellectual property issues may sometimes get brushed aside during the early stages of a business, developing a diligent and intelligent IP strategy early on is important.

Startups should evaluate the types of intellectual property that can impact their business and strategically consider pursuing patent, trademark and copyright protection as appropriate.

Defensively, startups should also assess the intellectual property landscape of their business. That awareness should include clearance efforts to ensure that the company will not infringe the intellectual property of others, as it develops its products and services.

Learn more about Legal Issues for High-Growth Technology Companies. 

© 1998-2018 Wiggin and Dana LLP

Illinois Adopts A New Remote Seller Nexus Law

We should have a Wayfair decision by then, but IL adopted a South Dakota remote seller nexus rule effective October 1, 2018.

For purposes of the Use Tax Act, the definition of “retailer maintaining a place of business in this state” is amended, and for purposes of the Service Use Tax Act, the definition of “serviceman maintaining a place of business in this state” is amended. Beginning October 1, 2018, such a retailer will include a retailer making sales of tangible personal property and a serviceman making sales of service to purchasers in Illinois from outside of Illinois if the cumulative gross receipts from sales of tangible personal property and sales of service to purchasers in Illinois are $100,000 or more, or the retailer or serviceman enters into 200 or more separate transactions for the sale of tangible personal property or sales of service to purchasers in Illinois. The retailer or serviceman will determine on a quarterly basis, ending on the last day of March, June, September, and December, whether he or she meets this criteria for the preceding 12-month period. If the criteria are met, the individual is considered a retailer or serviceman maintaining a place of business in this state and is required to collect and remit use tax or the service use tax, respectively, and file returns for one year. At the end of the 1-year period, the retailer or serviceman will determine whether he or she met the criteria during the preceding 12-month period, and, if so, the individual is considered a retailer or serviceman maintaining a place of business in this state and is required to collect and remit use tax or the service use tax, respectively, and file returns for the subsequent year. If at the end of a 1-year period a retailer or serviceman that was required to collect and remit use tax or service use tax, respectively, determines that he or she did not meet the criteria during the preceding 12-month period, the retailer or serviceman subsequently will determine on a quarterly basis, ending on the last day of March, June, September, or December, whether he or she meets the criteria for the preceding 12-month period.

 

© Horwood Marcus & Berk Chartered 2018. All Rights Reserved.

Incentive Compensation That is Never Subject to Income Tax – Too Good to Be True?

Clients frequently ask if they can provide incentive compensation to their employees and executives in a manner that gives them flexibility and drives performance, but receives coveted capital gains treatment. This usually sounds too good to be true. In most cases, you can defer or sometimes minimize income tax for employees (retirement plans, deferred compensation arrangements, stock appreciation rights, non-qualified stock options), but there is one tool that enables employees to skip income tax, FICA, and withholding altogether – well-designed and-well managed incentive stock options or “ISOs.”

Incentive stock options – sometimes called statutory options because they are established and governed by Internal Revenue Code 422 – are a kind of stock option that can provide “special” tax treatment to the recipients if certain requirements are satisfied. There are two key differences between incentive stock options and their more common cousin – the non-qualified stock option:

  • First, executives will not recognize any ordinary income tax at exercise of an ISO (as compared to a non-qualified option – which requires executives to recognize ordinary income on the spread – or difference between the exercise price and the value of the option on the date of exercise – and come up with money to pay their withholding on that amount). This can be a big benefit as long as the exercise does not end up triggering the AMT (which has historically been an issue for many incentive stock option holders, but is less likely now in light of changes made to the AMT by the Tax Cuts & Jobs Act).

What is AMT?  At a very high level, the Alternative Minimum Tax (AMT) is simply an alternative tax structure to the more well-understood and more often used regular income tax method. In order to determine which tax to apply, taxpayers must calculate taxes under the regular income tax method and the alternative minimum tax and then pay whichever amount is greater. This does not come up particularly often for most normal taxpayers, but is relevant for most ISO recipients because the value of the spread at exercise is not taken into account under the regular tax method, but it is considered as a preference item in the AMT method. The larger the spread, the more likely ISOs will trigger the AMT.

  • Second, if all of the statutory requirements are satisfied, then the gain – the difference between the incentive stock option’s exercise price (generally, the fair market value of the stock on the date of grant) and the amount the holder will receive when she ultimately sells the stock after exercise – will all be taxed at the lower capital gains rate (currently, 15 percent or 20 percent, depending on income level), rather than income tax (the top tax bracket is currently at 37 percent), and no FICA or withholding obligations will apply. That is a tax savings of more than 17 percent!

The flipside is that ISOs are less tax advantageous to employers because, if all goes as planned, they will never be permitted to take a deduction for the compensation. However, because the corporate tax rate was reduced with the Tax Cuts & Jobs Act, some employers are taking a second look at whether to issue ISOs now, considering that the deduction is now less valuable.

To receive this special treatment, the plan document, award agreement, and management of the incentive stock option award must meet certain requirements:

Plan and Award Agreement

  • Incentive stock options must be issued pursuant to an equity incentive plan.
  • The plan must provide the number of shares reserved for issuance as ISOs.
  • The plan must be approved by the company’s shareholders within 12 months before or after it is adopted by the company, and re-approved at least every 10 years thereafter.
  • The award agreement must provide an exercise price that is no less than the fair market value of the stock underlying the options on the date of grant (100 percent of the fair market value for 10 percent owners). [This will also help with Code Section 409A compliance.]
  • Each award must have a stated term of no more than 10 years (five years for 10 percent owners).

Eligibility and Operation

  • ISOs may only be issued to employees – not to consultants or non-employee directors.
  • ISOs may only be issued by corporations.
  • No more than $100,000 of ISOs may become exercisable in any given calendar year (based on the fair market value on the grant date). [This seems straightforward until companies add fancy features like accelerated vesting on a change in control event.]
  • Certain limits on post-termination exercise apply, notably ISOs must be exercised within three months of a standard termination (longer periods apply in the event of death or disability).
  • After the option is exercised, and stock is actually purchased, the stock must be held until the later of (i) the second anniversary of the grant date or (ii) one year from the exercise date. [This tends to be one of the most difficult requirements to satisfy because many employees want to wait to exercise until a liquidity event – or change in control – but will not satisfy the holding period if they sell their stock shortly after exercise.]
© 2018 Foley & Lardner LLP
This post was written by Casey K Fleming of Foley & Lardner LLP.
Please find more tax legal news on the National Law Review tax type of law page.

Transferring Cybersecurity Risk: Considerations When Obtaining Cyber Insurance

While procuring cyber insurance is an increasingly important business decision, choosing cyber insurance is not a simple process of merely identifying the amount of coverage desired and then paying for the corresponding premium.  Instead, as set forth below, it presents a matrix of considerations to be explored to ensure receipt of appropriate coverage when needed.

The Importance of Cyber Insurance

In the face of continued and more destructive cyber threats and the advent of more demanding statutory and regulatory requirements, it is critical for a company not only to mitigate risk through comprehensive cybersecurity management but also to transfer that risk by obtaining tailored cyber insurance.  Indeed, more rigorous regulations, along with their attendant financial penalties for noncompliance (such as the EU’s General Data Protection Regulation (“GDPR”), which became effective May 25, 2018, or the NY Department of Financial Services (“NYDFS”) cybersecurity regulation, which was instituted in 2017) are likely to become the norm, not the exception.  Violation of these more recent rules and requirements (and potential expenses and related fines) also do not apply only when data is lost through an actual breach, but also when data is destroyed or cannot be accessed (ransomware) and when data is improperly collected.  Moreover, cyber risks and costs are indiscriminate and affect all industries.

To offset these serious risks, cyber insurance usually is necessary.  Third-party cyber liability claims are not covered under most general liability policies including the Insurance Service Organization’s industry standard GL form.  Director & Officer liability policies usually exclude cyber liability claims.  Property policies, including the ISO “All Risk” form, typically exclude first party cyber claims.  Limited first party cyber coverage may be available through crime policies, and some Information Technology Industry Errors & Omissions policies afford third party cyber coverage.  In most cases, however, only a cyber policy can assure a company of the desired coverage.  A company has a much better chance for coverage and a prompt resolution of its claim under a cyber policy without the need to resort to litigation.

While cyber insurance has been available since the late 1990’s, it is rapidly expanding because of the continued need for a holistic approach to cybersecurity protection.  Indeed, insurance companies expect a surge of business as companies rush to purchase cyber insurance following the arrival of tougher regulations like the GDPR.

Cyber security and liability risks also often involve highly-technical, rapidly evolving information technology issues.  A prospective insured should inquire regarding the cyber experience of its broker, particularly if it is not using a large multi-line producer who has access to an IT consultant or cyber specialist.  Some brokers specialize in cyber insurance, and an insured should consider using a broker who possesses cyber experience.  While “bare bones” cyber coverage is available from authorized or “admitted” insurers, more comprehensive niche cyber coverage often is available only in the surplus lines or “non-admitted” market and can be brokered only by surplus lines producers.

The selection of an insurer is even more important.  In addition to issues of Best’s Financial Quality and Size Ratings, many insurers offer low cost, bares bones thirdparty coverage, while other insurers offer broader, albeit more expensive, coverage, and better claim service.

Cost-wise, premiums will be lower for those companies with comprehensive cyber-risk management plans in place with demonstrated levels of security and internal controls, i.e., better security equals lower risk, which equals more competitive pricing.  A company therefore is further incentivized to ensure it has adequate procedures in place to prevent, detect, investigate, and report data breaches.

The Level of Coverage Needed: Initial Considerations

One of the most important steps in the process of obtaining cyber insurance is to determine what type of coverage a company needs based on reasonably anticipated cyber risks inherent to a company’s business and position in the marketplace.  There are multiple considerations a company should undertake in assessing the kind and amount of coverage needed.

What type of company are you?

A company should consider:

>> its industry and the type of services it offers;

>> the type of data it handles (e.g., financial information, health information, credit information);

>> the makeup of its customers (e.g., whether they include EU citizens); and

>> what regulations it must follow.

Depending upon the kind of data it collects and handles, the company will be subject to a different array of regulations, which should inform the company regarding the type of cyber insurance coverage to be sought.  If a company is a financial institution, it must comply with the privacy rules of the Gramm Leach Bliley Act.  If the company handles personal health information, it will be subject to the privacy requirements of the Health Insurance Portability and Accountability Act, HIPAA.  If the company handles the data of EU citizens, it will be subject to the privacy restrictions (and severe potential penalties) of the GDPR.

First-Party and Third-Party Costs

The company also should think about the kinds of costs it may incur to manage a cyber incident/breach and whether cyber insurance coverage to defer or recoup all of those costs is necessary or prudent.  Such first-party costs can include:

>> forensic investigation costs to determine the source of the cyber incident/ breach and the extent of harm caused

>> remediation costs to rectify any network problem or software deficiencies

>> notification costs to customers whose data was compromised

>> data restoration costs of data stolen, lost, or altered

>> business interruption costs to help restore business functions and to maintain business capabilities while responding to a cyber incident

>> legal costs to evaluate regulatory obligations and assess any liability

>> public relation costs to help maintain and/or restore confidence in the company

Considering these first-party costs, however, is not as straightforward as it may seem.  For instance, assuming a company wants a policy to cover notification costs to advise its customers of a data breach, a company still needs to determine the type of notification it envisions.  Does it merely want to comply with statutory notification requirements or might it want to take a more aggressive approach to notification for customer relation purposes?  And how is the company going to notify its customers?  Email?  Regular mail?  First Class mail?  Similarly, when assessing remediation costs, the company also needs to determine if it wants to provide credit monitoring to its customers and have those costs covered under a cyber policy.  A company must think through these issues to help ensure the right cyber insurance coverage is obtained.

Furthermore, a company may also incur third-party costs as a result of a cyber-event, such as defending against a litigation or regulatory action.  Contemplating cyber coverage for these types of third-party costs also compels additional considerations regarding the extent of coverage desired.  For example, legal fees in defending a claim often can approach or even exceed the ultimate cost of settling the claim.  A company should decide if it wants its litigation costs to erode the policy’s limit of liability, sometimes referred to as being “cost-inclusive,” or whether defense costs should be in addition to the limit of liability.  With regard to a regulatory inquiry, while payment of fines and penalties is unlawful in some jurisdictions and is often excluded from coverage, the company must determine if it wants coverage to include investigatory costs in responding to the governmental inquiry.  Some policies cover up to half of the investigatory costs of responding to a governmental inquiry or subpoena, usually subject to a sublimit on liability.

Do the Provisions of the Policy Ensure the Desired Coverage?

Once a company identifies the coverage it hopes to purchase, it then is essential to carefully consider the specific provisions of a cyber policy to ensure receipt of the level of coverage sought for the cyber risk possibilities reasonably envisioned.  Among the questions when analyzing the policy’s provisions are:

>> When is coverage triggered?

>— Is the policy written on an “occurrence” basis, i.e., the breach must occur during the policy period to be covered, or is it written on a claimsmade basis, i.e., the claim must be made and reported during the policy period in order for coverage to be available?

>— If the policy is written on a claims-made basis, does the breach nevertheless have to occur during the policy period, does it merely have to be discovered in the policy period, or both?

— Is intentional conduct required (by a third-party or malicious company insider) or can coverage be triggered by the negligence of an employee?

>— Is the conduct of a malicious insider to the company covered or must the cyber incident be caused by an outside third-party?

>— Must data have been disseminated outside the company (a breach) or will the policy also cover situations where data is destroyed or cannot be accessed (e.g., ransomware)?

>> What kind of information is covered?

>— How is “personal information” defined?

>— Is “confidential corporate information” covered?

>> Does the policy require minimum security requirements be maintained to protect the company’s computer network and data?

>> What devices are covered?

>— Are only the company’s servers and computers covered?

>— How are mobile devices (laptops, mobile phone, thumb drives) treated?

>— If the company allows employees to use personal devices or work remotely (BYOD – Bring Your Own Device policies), are cyber incidents originating on an employee’s personal device covered?

>> Are cyber breaches or incidents caused by vendors assisting the company (e.g., HVAC, data processors, cloud providers) covered?

>— Would coverage only extend to breaches caused by a vendor on the company’s network?

>— Would coverage extend to a breach of a vendor’s network housing the company’s data?

>> What are the policy provisions regarding notice and defense of a claim?

>— How quickly does the policy require a claim to be reported to the carrier?

>— Whose knowledge of a breach is imputed to the company for the purpose of determining whether a claim has been reported late and whether an exclusion applies?

>— Does the definition of “claim” include responding to a subpoena?

— Is the defense obligation of the policy a “duty to defend” where the insurer controls the defense and settlement of a claim or does the policy have a duty to advance defense costs, which permits the policyholder to control the defense and settlement of the claim at the cost of the insurer?

>— If the policy has a duty to advance costs, are there limitations on who the company can retain as outside counsel or as a forensic expert?

>— Are regulatory investigations covered?

>— Does the policy cover investigatory costs in responding to a governmental inquiry?

>— Are fines covered?  If so, is the company domiciled in a jurisdiction where indemnification against fines and penalties is not against public policy?

>— How is regulator defined?  Does it cover EU regulators?

To be sure, disputes between policyholders and insurance carriers are inevitable, and insurers will attempt to strictly construe policies against coverage.  Courts are just beginning to interpret cyber insurance policy provisions, sometimes coming out on opposite sides of the same issue depending upon the jurisdiction.

For instance, courts have disagreed whether cyber insurance policies cover losses resulting from social engineering, i.e., when a company employee is falsely manipulated to wire out company funds based on what is believed to be a legitimate email authorizing the transfer but what is actually an email initiated by a fraudster.  Insurers may assert that a loss caused by social engineering (also known as business email compromise) is not a direct loss under the computer fraud provisions of a cyber insurance policy.  Carriers attempt to distinguish between fraudulently causing a transfer (via social engineering) and causing a fraudulent transfer (via hacking into a company’s computer network to wire out funds).

Insurers also have sought to disclaim coverage by invoking exclusions for a company’s failure to maintain agreed-upon levels of cybersecurity to protect the company’s network and data.  Courts have been asked to construe cyber policy provisions to determine whether the insured satisfied the policy’s security requirements.  Considering that industry cybersecurity measures are constantly updated, a company should attempt to avoid a situation where a court’s interpretation of policy language and evaluation of a company’s cybersecurity efforts will determine whether it can recoup losses from a cyber event.

Conclusion

As criminals find new and more inventive ways to attack computer systems or fraudulently cause the theft of company funds, a company faces the increased risk of loss, which can result from a combination of illegal activity, imperfect network security, and employee negligence.  As such, a company should undertake a complete strategy to combat cybersecurity-related threats, which includes procuring appropriate insurance coverage to manage reasonably anticipated cyber risks.  Carriers may attempt to dispute claims, so a company must give special attention to cyber policy language to avoid the possibility of coverage being denied.  To help negotiate policy provisions to avoid ambiguities and potential grounds for disputes, a company should explore using an insurance professional to help negotiate a policy with the desired coverage, including identifying additional policy endorsements that may be available to cover certain specific cyber threats.  When procuring cyber insurance, considering the questions and issues outlined above may make the difference between receiving expected cyber coverage and not.

 

© Copyright 2018 Sills Cummis & Gross P.C.
This post was written by Joseph B. Shumofsky and Thomas S. Novak from Sills Cummis & Gross P.C.

What Investors Need to Know About the New $6.2 Billion Visa, Mastercard Settlement

Visa, Inc., Mastercard, Inc., and other financial institutions have agreed to pay merchants between $5.56 billion and $6.26 billion to settle a 13-year old antitrust litigation. For years, the case has driven shrewd investors to transact with retailers seeking to monetize their claims against the card companies. With a much-anticipated settlement now on the table, would-be investors should take note.

On September 18, an amended settlement agreement (the “Settlement”) was filed in the US District Court for the Eastern District of New York. The Settlement signals possible resolution of a long-standing lawsuit brought in 2005 by approximately 12 million retailers accusing Visa and Mastercard of improperly inflating interchange fees (also known as swipe fees) charged to retailers. The Settlement modifies a prior settlement agreement approved by the District Court in December 2013.1

The agreement, reached after a year of active mediation, seeks to remedy the flaws of the prior agreement. Notably, the Settlement limits both the scope and duration of the release. Additionally, it addresses only monetary damages associated with the lawsuit and is not contingent on the resolution of injunctive relief claims, which may be pursued separately.

Under the Settlement, the value of a merchant’s claim will be based on the amount of interchange fees attributable to that merchant’s Mastercard and Visa payment card transactions during the time period beginning January 1, 2004 up until the preliminary approval date of the Settlement. Pro rata payments to merchants who file valid claims will be determined by the amount remaining in the monetary fund after deductions for “opt outs” (as described below) and administrative costs, and by the aggregate dollar amount of claims filed.2

Similar to the prior agreement, the Settlement provides that the monetary fund may be reduced based on the number of merchants that opt out of the class. Up to $700 million may be returned to the defendants if more than 15 percent of the merchants opt out. If more than 25 percent of merchants opt out, the Settlement may be terminated.

The Settlement is still subject to approval by US District Judge Margo Brodie. If the Court grants preliminary approval, known class members will receive written notice concerning their legal rights. Claim forms are not available at this time.

Katten will keep you apprised of settlement developments and trading considerations. The case is In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, case number 1:05-md-01720, in the US District Court for the Eastern District of New York.

1 In June 2016, the US Court of Appeals for the Second Circuit invalidated the original settlement on the grounds that certain merchants were not adequately represented because the same counsel had represented separate settlement classes with conflicting interests. The Court of Appeals also took issue with the broad release that would preclude merchants from pursuing certain future claims indefinitely. In March 2017, the Supreme Court declined to hear the case, remanding it back to the District Court for further proceedings.

2 The original settlement of $7.25 billion was, at the time, the largest in history. However, thousands of merchants ultimately opted out, reducing the monetary fund to approximately $5.3 billion.

©2018 Katten Muchin Rosenman LLP

Equal Pay Act Claim Requires Show of Pay Disparity “Based on Sex” as Part of Prima Facie Case, Court Holds

Departing from other federal appeals courts, the U.S. Court of Appeals for the Federal Circuit has held that Equal Pay Act plaintiffs must establish that the pay differential between similarly situated employees is “historically or presently based on sex” to make out a prima facie case.

In Gordon v. U.S., No. 17-1845 (Fed. Cir. Sept. 7, 2018), two female emergency room physicians employed by a Veterans Administration hospital alleged they were underpaid compared to male emergency room physicians. Their pay discrimination claim related primarily to one male physician who was hired at the same time they were hired at the same pay rate in the same position, but he received a pay increase one year after they were hired that the female plaintiffs did not receive.

To state a claim of an EPA violation, an employee must show the employer:

  • Paid employees of opposite sexes different wages;

  • For substantially equal work;

  • In jobs that require substantially equal skill, effort, and responsibility; and

  • That are performed under similar working conditions.

If an employee provides evidence establishing each of these elements, the burden shifts to the employer to prove the pay disparity is justified under one of four affirmative defenses: (1) a seniority system; (2) a merit system; (3) a pay system based on quantity or quality of output; or (4) any factor other than sex.

Here, the employer argued that the plaintiffs had not established a prima facie case and that, even if they had, the pay differential was justified under the “factor other than sex” affirmative defense. The Court, which hears appeals involving federal employee EPA claims, held that the plaintiff doctors must meet an additional requirement to establish their prima facie EPA violation:

To make their prima facie case, however, [the doctors] must also establish that the pay differential between the similarly situated employees is “historically or presently based on sex.”

Id. at 9-10. The Court held that the plaintiffs could not make this showing and that the employer was entitled to summary judgment on this basis alone. Notably, the Court held the employer had not introduced sufficient evidence to establish the “factor other than sex” affirmative defense. Id. at 10 n. 4.

The holding was based on a prior ruling, Yant v. United States, 588 F.3d 1369 (Fed. Cir. 2009). Judge Reyna wrote the panel decision, but also wrote separately to express the view that Yant should be overturned because the additional requirement improperly shifts the burden of proof in a manner inconsistent with the text of the EPA and Supreme Court precedent. Judge Reyna also notes that no other Circuit Court of Appeals requires this additional showing as part of the prima facie case. Id. at 17.

 

Jackson Lewis P.C. © 2018
This post was written by F. Christopher Chrisbens of Jackson Lewis P.C.

Ohio State and Oklahoma Battle It Out Again (Just Not On The Football Field)

In 2016 and 2017, two storied college football programs – the Ohio State Buckeyes and the University of Oklahoma Sooners – battled it out on the football field.  While Ohio State was victorious in 2016, Oklahoma evened things up with a victory in Columbus in 2017. In 2018, these two universities will battle it out again, but this time not on the football field, but rather before the Trademark Trial and Appeal Board.

The Ohio State University owns various registrations for a “Block O” mark.  One of the registered marks appears below:
 

 

The University of Oklahoma has applied to register a design mark consisting of a drum major with a block O across the chest of the drum major’s shirt, for use in connection with live performance by a musical band. Oklahoma claims to have used the mark since 2001.  Oklahoma’s mark appears below:

 

 

 On August 29, 2018, Ohio State opposed Oklahoma’s application, alleging a likelihood of confusion.

Ohio State claims that it has used its “Block O” mark since at least as early as 1898 and alleges:

“Today, the Block O mark is the heart of the branding and image of Ohio State and is used in connection with all products and services offered and provided by Ohio State, including educational, athletic, recreational, and musical. Indeed, the Block O Mark is permanently displayed in the middle of the football field at Ohio Stadium where millions of viewers have seen in Ohio State Buckeyes football team play its home games and have cheered on Ohio State’s marching band as it performs its famous ‘Script Ohio.’”

Further, Ohio State alleges that the “Block O” mark as it appears across the chest of the shirt of the drum major in the “Drum Major” mark is the dominant portion of the “Drum Major” mark, and consumers will naturally gravitate to the lettering on the chest to identify and falsely believe that there is a connection to Ohio State. Moreover, Ohio State notes that the actual uniform currently worn by Oklahoma’s drum majors is inconsistent with the use of the “Block O” appearing on the applied-for mark, such that the likelihood for confusion as to source is exacerbated.

Oklahoma has until October 8, 2018 to respond to the opposition.

This is not the first time Ohio State has tangled with an Oklahoma university regarding trademarks. Last year, Ohio State and Oklahoma State University, after trading legal blows, came to an agreement with regards to their respective “OSU” trademarks. Both schools agreed not to promote, market, license or sell products or services in a way that would cause confusion.  Notably, both schools also agreed not to use their marks to disparage the other. An example from the parties’ agreement states that Oklahoma State will not make T-shirts calling Ohio State a “wannabe OSU,” and Ohio State will not produce T-shirts dubbing Oklahoma State a “copy-cat OSU.”

Instead of a battle between the Buckeyes and Sooners on the football field, a battle between them at the Trademark Trial and Appeal Board will be watched in 2018.   In the words of legendary sports announcer Keith Jackson, “It should be a dandy.”

© Copyright 2018 Brinks, Gilson & Lione

Compliance With Florida’s “Generator” Laws

Earlier this year, Florida Governor Rick Scott signed into law HB7099and SPB7028 (collectively referred to as the “Bills”), ratifying emergency rules that require nursing homes and assisted living facilities to acquire alternative power sources– such as generators- and fuel in preparation of the upcoming hurricane season. See Rule 59A-4.1265 and Rule 58A-5.036. These rules were enacted after 14 residents died from heat-related illnesses and complications during Hurricane Irma last year when a Florida nursing home lost power to its air conditioning units for three days.

The Bills went into effect on March 28, 2018, and required qualifying facilities to come into compliance by June 1, 2018, unless granted an extension by the Governor whereby compliance is expected by January 2019. Facilities that can show delays caused by necessary construction, delivery of ordered equipment, zoning, or other regulatory approval processes are eligible for an extension if the facility can provide residents an area that meets the ambient temperature requirements for 96 hours. Extensions are granted on a case-by-case basis, although so far a majority of Florida facilities have been granted an extension. Indeed, it appears that over 77% of nursing homes received an extension in the first week of June. Additionally, facilities located in an evacuation zone pursuant to Chapter 252, F.S., must either evacuate its residents prior to the arrival of any emergency event, or have an alternative power source and no less than 96 hours of fuel stored onsite at least within 24 hours of the issuance of a state of emergency. Failure to comply with any provision may result in the revocation or suspension of a facility’s license and/or the imposition of administrative fines.

Nursing Homes and Assisted Living Facilities Must Develop Emergency Plans that Provide for Alternative Power Sources and Fuel Capable of Maintaining an Ambient Temperature of No Greater Than 81 Degrees Fahrenheit for At Least 96 Hours.

Nursing Homes and Assisted Living Facilities must prepare a detailed plan (“Plan”) that provides for the acquisition and maintenance of alternative power sources- such as generators- and fuel. The Plan will supplement a facility’s Comprehensive Emergency Management Plan and must be submitted to and approved by the requisite agency. While the Bills do not require facilities to maintain a specific type of power system or equipment; the alternative power sources utilized by a facility must be capable of maintaining an ambient temperature of no greater than 81 degrees Fahrenheit for at least 96 hours after the loss of primary electrical power. This temperature must be maintained in areas of sufficient size to shelter residents safely. Alternative power sources and fuel should be maintained in accordance with local zoning restrictions and the Florida Building Code.

Moreover, the Bills set forth additional requirements for nursing homes and assisted living facilities in evacuation zones, as well as for single campus and multistory facilities.

  • Facilities in Evacuation Zones – A facility in an evacuation zone pursuant to Chapter 252, F.S. must provide in their Plan for the maintenance of an alternative power source and fuel at all times when the facility is occupied but may utilize mobile generators to facilitate evacuation.
  • Single Campus – Single campus facilities under common ownership may share alternative power sources and fuel space if such resources are sufficient to maintain the ambient temperature required under the rules.
  •  Multistory Facilities – Multistory facilities, whose Comprehensive Emergency Management Plan comprises of moving residents to a higher floor during flood or surge events, must place their alternative power source and all additional equipment in a location protected from flooding or storm surge damage.

Fuel Storage Requirements Vary by Facility Size and Location.

The Bills require facilities to provide for storage of a certain amount of fuel based on their size and location. Assisted living facilities with 16 beds or less must store a minimum of 48 hours of fuel, while assisted living facilities with 17 beds or more a required to store a minimum of 72 hours of fuel. All nursing homes must store a minimum of 72 hours of fuel. Nursing homes and assisted living facilities located in a declared state of emergency area pursuant to Section 252.36, F.S., that may impact primary power delivery, must secure 96 hours of fuel; these facilities may utilize portable fuel storage containers for the remaining fuel necessary for 96 hours during the period of a declared state of emergency.

Emily Budicin, a 2018 Summer Associate in the firm’s Washington, DC office, contributed significantly to the preparation of this post.

 

©2018 Epstein Becker & Green, P.C. All rights reserved.

Betting Big on Blockchain

Blockchain and sports gambling seem to be a natural fit. Sports gambling has been at the forefront of the news cycle since the U.S. Supreme Court struck down a federal statute that banned states from authorizing sports gambling in Murphy v. NCAA. Since then, New Jersey, Delaware, Mississippi and West Virginia have passed laws allowing wagering on the results of certain sporting events. New York, Pennsylvania and Rhode Island are quickly moving towards the legalization of sports gambling and a number of other states are expected to follow.

Blockchain has already proven to be a reliable partner for online casino gambling. In the past few years, a fruitful relationship between online casino gambling platforms and blockchain technologies has developed. Satoshi Dice, which first gained popularity in 2012, allows users to gamble their cryptocurrency through a blockchain-based, peer-to-peer dice prediction game. Virtue Poker, a ConsenSys-backed, decentralized poker platform, uses blockchain to ensure that casino operators (the “house”) cannot tamper with the integrity of a wager. And ZeroEdgeuses smart contracts and blockchain to eliminate the “house” fee that is typically passed on to gamblers.

Thus, given the opening for sports gambling, it is easy to imagine a relationship forming between sports betting and blockchain technologies. Blockchain may allow casino operators and other entities to reduce transaction fees, speed up payment processing, increase gambler anonymity and flag problematic transactions. Some sports betting entities, such as daily fantasy sports behemoth FanDuel, have already begun exploring such opportunities.

However, even within states that have already legalized sports gambling, there are still a number of factors to consider for those aiming to utilize blockchain technologies within their sports betting platforms. Such considerations include, for example:

  • Licensing: Companies using blockchain technologies will have to work with the licensed casino operators within each state. For example, in New Jersey, online sports betting may only be conducted by a licensed casino/racetrack. Each individual licensee is limited to working with three individually branded websites, each of which must obtain a separate license from the state. Thus, for blockchain to play a role, incumbent casino operators will likely need to understand blockchain and its functionality.

  • Federal Wire Act: The Federal Wire Act effectively prohibits individuals from using the Internet to transmit sports wagers across state lines, even if the casino operator and the bettor are in separate states that each individually allow sports betting. Such a limitation is in conflict with the distributed nature of blockchain networks. However, even if, as some commentators have hypothesized, Murphy re-interpreted the Federal Wire Act to only prohibit interstate sports betting to the extent that sports betting is illegal under the state or local law of any of the transaction’s participants, it remains unclear how this interpretation applies to actors such as node operators or validators on a blockchain network who may be located across any number of states or foreign jurisdictions.

  • Taxation: While blockchain applications may be able to facilitate trust-minimized peer-to-peer sports betting, there would need to be proper safeguards in place to ensure that each sports bet is properly taxed. In New Jersey, the state charges 13% for online wagers run by casinos and 14.25% for online wagers run by racetracks. While blockchain may enable bettors to avoid the “house” fee, it cannot circumvent state taxation on sports betting. It will be interesting to see if taxing authorities encourage the use of blockchain, on the theory that they, as a “supernode” on the network, could have a window into all winnings. This could potentially result in more complete and efficient tax collections.

  • Anti-Money Laundering: Currently, casino operators must comply with certain federal and state regulatory schemes that aim to prevent money laundering. Given that anti-money laundering laws will be a primary concern as legalized sports gambling proliferates, companies utilizing blockchain technologies must be able to comply with the Bank Secrecy Act and similar state anti-money laundering laws. However, it is also worth noting that blockchain technologies may be able to aid in preventing money laundering and other illicit financial transactions (e.g., through real-time tracking of suspicious betting patterns).

  • Congress & Further Legislation: The Supreme Court was clear that Congress may regulate sports gambling directly if it elects to do so. While the decentralized nature of blockchain technology is typically deemed to be one of its strengths, lawmakers may be wary of the lack of accountability that blockchain-based platforms may present. As a result, it is possible that Congress or individual states could enact additional legislation that impedes the proliferation of blockchain-based sports betting.

© 2018 Proskauer Rose LLP.
This post was written by Brett Schwab of Proskauer Rose LLP.

Nazi-Looted Art: Cranach Paintings to Remain at Norton Simon Museum

Lucas Cranach the Elder’s Adam[1] and Eve[2] have hung in the Norton Simon Museum at Pasadena for nearly 50 years. Since 2007, though, they have been the subject of a dispute between the museum and Marei von Saher. Von Saher is the daughter-in-law and surviving heir of Jacques Goudstikker, a Jewish art dealer who fled the Nazi-occupied Netherlands with his family in 1940. Goudstikker’s gallery and the family’s other assets were then acquired by members of Nazi leadership through a series of forced sales, with the gallery and the family’s residence being purchased by Alois Meidl, and more than 800 of the Goudstikker paintings – including Adam and Eve – being acquired by Hermann Goering.

The story of the Nazi seizure of artworks from public and private art collections in Europe has by now become a commonplace of popular culture.[3] Scholars have noted that “as many works of art were displaced, transported, and stolen as during the entire Thirty Years War or all the Napoleonic Wars.”[4] It has been estimated that “[o]ne-third of all of the art in private hands had been pillaged by the Nazis.”[5] Nazi looting of art took a number of forms: direct confiscation (seized by government officials and agents); “abandoned” objects (seized after being left behind as their owners fled persecution);[6] forced sales;[7] and what are sometimes called “fluchtgut” or “fluchtkunst”[8] (“flight goods” or “flight art,” which are cultural objects sold, generally at a steep discount, by owners desperate to finance their escape from Nazi-occupied or threatened areas). For background on Nazi-looted art, see my previous discussions here and here.

That the Cranach panels were looted by the Nazis is not disputed. Rather, the question for the court was whether the post-war restitution processes properly vested ownership of the paintings in the Dutch government such that its 1966 sale of those paintings to George Stroganoff-Sherbatoff (Stroganoff) (from whom the museum purchased them in 1971) was a valid governmental action, and so is not reviewable by U.S. courts. With a decision issued by the Court of Appeals for the 9th Circuit on July 30, the case may have reached its conclusion.[9]

In 1931 in Berlin, Goudstikker purchased the panels from the Soviet Union at an auction of objects the Soviets had seized from the Stroganoff family (and others).[10] Although the district court, in its 2016 decision, [11] had found that the Stroganoff family never owned the panels, Stroganoff ownership of the panels is unclear from the evidence presented. The question of Stroganoff ownership of the panels was ultimately not germane to the 9th Circuit’s decision. The panels were recovered by U.S. forces at the end of the war and returned to the Dutch government. Rather, the issue was whether the Dutch government had good title to the panels at the time it sold them to Stroganoff.

When the war was over, and the panels were recovered by U.S. forces., it was U.S. policy to return recovered Nazi-looted objects to the governments of the countries from which they had been taken, for ultimate restitution or other disposition.

The 9th Circuit’s analysis focuses on three aspects of Dutch law relating to Nazi agreements and confiscated property: (1) a wartime law nullifying Nazi agreements; (2) the post-war restitution regime; and (3) a post-war law forfeiting to the Dutch government property owned by enemies during the war.

During the war, the Dutch government (then in exile) enacted a law that nullified wartime agreements with the Nazis. After the war, however, that automatic nullification was revoked. The Dutch government instead put in place a formal restitution and restoration of rights process.[12]Claimants had until 1951 to file a petition for restoration of rights, after which the presiding council “could still order restoration of rights of its own accord, but claimants were no longer entitled to demand restitution.”[13] Finally, to compensate the Netherlands for its losses during the war, the government also enacted Royal Decree E133, which forfeited to the Dutch government all property “belonging to an enemy state or to an enemy national.”[14] Under Royal Decree E133, the paintings owned by Goering were forfeited to the Dutch government.

Goudstikker’s widow, Desi, returned to the Netherlands after the war and took on leadership of the firm. She petitioned for restoration of rights for the assets that had been purchased by Meidl, but, on advice, she decided not to petition for return of the paintings purchased by Goering.

In 1961, however, Stroganoff filed a claim for restitution of a number of artworks then owned by the Dutch government, including the Cranach panels, arguing that they had been expropriated from his family by the Soviet Union. The Dutch government and Stroganoff reached an agreement whereby Stroganoff relinquished his claim to certain of the works, and the government agreed to sell him several pieces, including the Cranach panels.

In the 1990s, von Saher filed a petition with the Dutch government for restitution of those Goudstikker works that had been purchased by Goering, but that petition was denied. However, in 2001, the government reevaluated its prior restitution process and, on the basis of “moral policy” turned over to von Saher those paintings from the Goering collection that were still in the Dutch government’s possession. This did not, of course, include the Cranach panels, which were in the museum’s collection in California. In 2007, von Saher commenced the first of her actions for return of the Cranach panels, arguing that the Dutch government could never have taken ownership of the panels, but merely served as custodian of the paintings until the original owners or their heirs claimed them.

Timeliness: Statute of Limitations

From 2007 until 2015, the question of the Cranach panels’ ownership played out in the context of motions to dismiss – first with respect to whether the suit was barred by the expiration of the statute of limitations, and then with respect to whether it was barred by the act of state doctrine.

Concerned that California’s three-year statute of limitations was presenting an unfair burden on claimants with respect to Holocaust and in Nazi-era looting cases, the California legislature extended that statute of limitations, but only for such Holocaust and Nazi-era looting claims. The museum filed a motion to dismiss, arguing that the California statute extending the limitations period unconstitutionally intruded upon the federal government’s “exclusive power to make and resolve war, including the procedure for resolving war claims.”[15] The district court agreed, and dismissed the case; however, the 9th Circuit reversed, finding the California extension of its statute of limitations unconstitutional. The Circuit Court granted leave for von Saher to amend her complaint.[16] The museum amended its motion to dismiss, arguing that the statute of limitations applicable to the Cranach panels had long since expired, since it had begun to run at the time that Goudstikker’s widow, Desi, had discovered the location of the panels after the war. The district court, in a 2015 decision,[17] disagreed with the museum’s position, holding that, under California law, the statute of limitations for the return of stolen property begins to run anew against each subsequent owner of the property. To review an extended discussion of statutes of limitations as they relate to Nazi-looted art (and to the von Saher case specifically), see my previous discussion here.

Foreign State and Finality: Act of State Doctrine

With respect to von Saher’s amended complaint, the district court granted the museum’s second motion to dismiss, holding that von Saher’s claims were preempted by the act of state doctrine.[18] Quoting the Solicitor General’s brief with approval, the district court found that “[w]hen a foreign nation, like the Netherlands here, has conducted bona fide post-war internal restitution proceedings following the return of Nazi-confiscated art to that nation under the external restitution policy, the United States has a substantial interest in respecting the outcome of that nation’s proceedings.”[19] The 9th Circuit, however, reversed that decision, remanding the case for development of the parties’ factual positions via discovery. The court stated that “[t]he Museum has not yet developed its act of state defense, and von Saher has not had the opportunity to establish the existence of an exception to that doctrine should it apply.”[20]

Summary Judgment: Act of State

After the parties had the opportunity to flesh out their factual arguments, the district court once again considered the question of whether the action was barred by the act of state doctrine. On Aug. 9, 2016, the district court issued a decision granting the museum’s motion for summary judgment,[21] finding that after the Goudstikker firm decided not to file a claim for return of the paintings, title passed to the Dutch government, and the Dutch government had good title to the paintings at the time it transferred the paintings to Stroganoff. Stroganoff, in turn, passed good title to the paintings to the museum.

In affirming the district court’s decision granting the museum’s motion for summary judgment, the 9th Circuit relied upon the act of state doctrine, which is “a ‘rule of decision’ requiring that ‘acts of foreign sovereigns taken within their own jurisdictions shall be deemed valid’” and are not to be overturned by U.S. courts.[22] The court explained that “we apply the doctrine here, because ‘the relief sought’ by von Saher would necessitate our ‘declar[ing] invalid’ at least three ‘official act[s] of’ the Dutch government ‘performed within its own territory.’”[23] Von Saher has petitioned the 9th Circuit for a rehearing of the motion for summary judgment. Such rehearing petitions are rarely granted, and von Saher’s previous petitions for rehearing at earlier stages in the case were unsuccessful. Absent a rehearing, von Saher’s likely recourse would be an appeal to the U.S. Supreme Court. Even if the Supreme Court were to grant certiorari, von Saher faces stiff odds against a reversal of the decision on the act of state doctrine.

[1] Lucas Cranach the Elder, Adam (c. 1530), oil on panel, 75 x 27-1/2 in. (190.5 x 69.9 cm), available at https://www.nortonsimon.org/art/detail/M.1971.1.P.

[2] Lucas Cranach the Elder, Eve (c. 1530), oil on panel, 75 x 27-1/2 in. (190.5 x 69.9 cm), available at https://www.nortonsimon.org/art/detail/M.1991.1.P.

[3] See, e.g., “Woman in Gold” (2015), available at https://www.imdb.com/title/tt2404425/; “Monuments Men” (2014), available at https://www.imdb.com/title/tt2177771/.

[4] Hector Feliciano, “The Lost Museum,” p. 23 (1997).

[5] Id. at 4.

[6] See, e.g., Menzel v. List, 267 N.Y.S.2d 804 (N.Y. 1966) (seeking to recover a painting by Marc Chagall that hung in the Menzel’s Brussels apartment when they fled Belgium before the Nazi occupation).

[7] See, e.g., Vineberg v. Bissonette, 529 F.Supp.2d 300, 307 (D.R.I. 2007) (noting that “the Nazi government forced Dr. Stern to liquidate inventory in his art gallery and controlled the manner of the forced sale,” and concluding that “Dr. Stern’s surrender of the painting to [the auction house] for auction was ordered by the Nazi authorities and therefore the equivalent of an official seizure or a theft.”). But see Orkin v. Swiss Confederation, 770 F.Supp.2d 612, 616 (S.D.N.Y. 2011) (dismissing the action for lack of jurisdiction, because “[p]laintiff does not allege that Reinhart acted in any capacity other than as a private individual.” The court noted that “[i]n 1933, [Plaintiff’s grandmother] sold the drawing to Swiss art collector Oskar Reinhart for 8,000 Reichsmarks to help fund her family’s escape from the Nazis’ persecution of German Jews.”).

[8] See, e.g., Florian Weiland, “Ist Fluchtkunst dasselbewie Raubkunst?” (Is flight art the same as looted art?), Sudkurier, Sept. 3, 2014, available at http://www.suedkurier.de/nachrichten/kultur/themensk/Ist-Fluchtkunst-dasselbe-wie-Raubkunst;art410935,7218364.

[9] von Saher v. Norton Simon Museum of Art at Pasadena, 2018 U.S. App. LEXIS 20989, Case No. 16-56308 (9th Cir. July 30, 2018).

[10] Although the district court found that the Stroganoff family never owned the panels, Stroganoff ownership of the panels is unclear from the evidence presented.

[11] von Saher v. Norton Simon Museum at Pasadena, 2016 U.S. Dist. LEXIS 187490, Case No. CV 07-2866 (C.D. Cal. Aug. 9, 2016).

[12] The Dutch restitution and restoration of rights regime was re-assessed in the 2000s, and that reassessment resulted in the Dutch government turning over to von Saher those Goudstikker works that were at that time still held by the Dutch government.

[13] von Saher v. Norton Simon Museum of Art at Pasadena, 2018 U.S. App. LEXIS 20989 at *9.

[14] Id. at *10.

[15] von Saher v. Norton Simon Museum of Art at Pasadena, Case No. CV-07-2866-JFW, 2007 WL 4302726 (C.D. Cal. Oct. 18, 2007).

[16] von Saher v. Norton Simon Museum of Art at Pasadena, 578 F.3d 1016 (9th Cir. 2009), amended by von Saher v. Norton Simon Museum of Art at Pasadena, 592 F.3d 954 (9th Cir. 2010).

[17] von Saher v. Norton Simon Museum of Art at Pasadena, Case No. CV 07-2866-JFW, 2015 U.S. Dist. LEXIS 188627 (C.D. Cal. April 2, 2015).

[18] von Saher v. Norton Simon Museum at Pasadena, 862 F.Supp.2d 1044 (2012).

[19] Id. at 1051.

[20] von Saher v. Norton Simon Museum at Pasadena, 754 F.3d 712, 727 (9th Cir. 2014).

[21] von Saher v. Norton Simon Museum at Pasadena, 2016 U.S. Dist. LEXIS 187490, Case No. CV 07-2866 (C.D. Cal. Aug. 9, 2016).

[22] von Saher v. Norton Simon Museum of Art at Pasadena, 2018 U.S. App. LEXIS 20989, Case No. 16-56308, at *19 (9th Cir. July 30, 2018).

[23] Id.

©2018 Greenberg Traurig, LLP. All rights reserved.

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