The National Law Forum

Supreme Court Nixes "Amorphous" Federal Circuit Indefiniteness Standard

The U.S. Supreme Court yesterday reversed long-standing Federal Circuit precedent, replacing the test used to determine whether a patent is indefinite with a new reasonable certainty standard (NAUTILUS, INC. v. BIOSIG INSTRUMENTS, INC., No. 13–369 (S. Ct. June 2, 2014).

The new reasonable certainty test raises the bar on the “clarity and precision” with whichpatents must be written. As a consequence, the burden on accused infringers attempting to invalidate patents based on ambiguous language is lowered. This new standard will prove especially helpful in the ongoing battle against patent trolls, who often wield portfolios of ambiguous or overly broad patents in an attempt to extract licensing fees. Tech companies, including Google, Inc. and Amazon.com, Inc., which are frequent targets of patent trolls, urged the Supreme Court to adopt the “reasonable certainty” standard.

The new standard will also require more precision in drafting and prosecuting patent applications. Exactly how precise language will need to be remains to be seen, but the Court explained that the old standard incentivized patent applicants and practitioners to “inject ambiguity” into their claims. The new standard was established, in part, to eliminate this incentive. The Court commented that patent practitioners are in the best position to resolve ambiguity in patent claims. In light of the Supreme Court’s admonition, patent applicants and practitioners seeking broad coverage of their inventions should use language no broader than necessary to adequately cover their inventions.

The Supreme Court’s decision stemmed from a dispute between Biosig Instruments and Nautilus, Inc. Biosig sued Nautilus for infringement of a patented heart monitor for exercise machines, which registered electrical waves to estimate a user’s heart rate. Nautilus convinced the trial court that Biosig’s patent was invalid as indefinite. Applying its “insolubly ambiguous” test, the Federal Circuit found the patent valid. Biosig sought review by the Supreme Court.

Justice Ginsberg delivered the opinion for a unanimous Court. As embodied in the Patent Act, a patent must include “one or more claims particularly pointing out and distinctly claiming the subject matter which the applicant claims as his invention.”

This notice requirement is satisfied, the Court held, where the claims of the patent, read in light of the specification and prosecution history, informs with reasonable certainty those skilled in the art about the scope of the invention. Like any property right, the boundaries of the patent monopoly should be clear. The failure to afford the public clear notice of what is claimed, “thereby appris[ing] the public of what is still open to them,” chills innovation by creating a risk of infringement in “zones of uncertainty.”

The High Court remanded the case with instructions that the Federal Circuit should no longer employ the “insolubly ambiguous” or “amenable to construction” tests of patent claim indefiniteness under 35 USC § 112, ¶ 2. These words can “leave courts and the patent bar at sea without a reliable compass.” While noting that the Supreme Court does not “micromanage the Federal Circuit’s particular word choice” in applying patent-law doctrines, Justice Ginsberg wrote, “we must ensure that the Federal Circuit’s test is at least ‘probative of the essential inquiry.’”

The Federal Circuit test, according to the High Court, “invoked a standard more amorphous than the statutory definiteness requirement allows.” In addition to breeding lower court confusion, the discredited “insolubly ambiguous” standard tolerated “some ambiguous claims but not others….” The Court’s new reasonable certainty standard requires more definite claim language.

Article By:

Of:

U.S. Consular Posts in Canada Temporarily Suspend Nonimmigrant Visa Processing for TCNs (Third Country Nationals)

Third Country Nationals may be unable to schedule nonimmigrant visa appointments at U.S. consulates and embassies throughout Canada this summer.

U.S. consular posts in Canada have temporarily suspended nonimmigrant visa processing for Third Country Nationals (TCNs) during June, July, and August because of staffing issues. In this context, “TCN” refers to any non-Canadian national applying for a U.S. nonimmigrant visa in Canada. The status of TCN visa application processing in Canada is as follows:

The only posts with remaining availability during the month of September are Calgary and Vancouver.
The Toronto and Ottawa posts are currently scheduling visa appointments in October and do not plan to release any earlier appointments during the summer months.
Applicants whose appointments have already been scheduled during the summer months will not be affected.
Applicants who reside in Canada with Canadian immigration status will also not be affected.

The Ottawa post may assist in scheduling appointments for applicants who hold senior or executive positions with their U.S. employers.

Article By:

Eric S. Bord

Lisa Stephanian Burton

Tracy Evlogidis

Malcolm K. Goeschl

Eleanor Pelta

A. James Vázquez-Azpiri

Of:

Morgan, Lewis & Bockius LLP

Congress and the President Spar over Immigration Reform Prospects: Tempest in a Teapot

At a recent White House law enforcement event, President Barack Obama took the opportunity to pressure Republicans in the House of Representatives to present an immigration reform bill this summer in advance of the November mid-term elections.

House Speaker John Boehner (R-Ohio) has made comments supportive of immigration reform and issued a “statement of principles” developed by House Republican leadership addressing immigration reform in January. As reported by the Cincinnati Inquirer, the Speaker was careful earlier this month to distinguish that proposed roadmap to legal status for some illegal aliens from an outright amnesty. ”I reject that premise. … If you come in and plead guilty and pay a fine, that’s not amnesty,” he said. Regardless of how reform measures are characterized, though, patience is flagging and significant progress remains stubbornly elusive.

The President’s comments on immigration reform, while also asking his secretary of the Department of Homeland Security, Jeh Johnson, to delay releasing details of a recent study on the country’s deportation system, were seen as giving lawmakers time to propose and debate new legislation, but continuing to hold out the threat of an executive order should Congress fail to act. Activists on the left are pressuring the President to act. They urge an executive order similar to the one issued in 2012 extending temporary status and work authorization to some unauthorized aliens brought to the U.S. as children. The new measure for example, could extend the same type of protection to parents of those children, advocates contend.

Nearly two million illegal immigrants have been deported since the President took office, according to a New York Times review and official records. The President asked the DHS secretary to evaluate how to make the deportation system more humane. Further executive action on immigration may spur additional controversy and make comprehensive immigration reform negotiations in Congress more difficult.

An example of this type of challenge is in seen in the obstacles besetting the bi-partisan “ENLIST Act“(H.R. 2377), a bill designed to extend legal permanent residence to immigrants who were brought to the U.S. illegally as children and who enlist in the U.S. armed forces. Hopes for easy passage have been set back. Contrary to the expectations of many supporters, including the bill’s sponsor, Rep. Jeff Denham (R-Calif.), the measure was not taken up for discussion as part of the annual defense bill. This is discouraging for proponents of reform. Political brinksmanship, rather than a genuine willingness address the nation’s dysfunctional immigration system, appears to be the order of the day.

Article By:

Sean G. Hanagan

Of:

Jackson Lewis P.C.

Settlement Between U.S. Department of Labor and Oregon Blueberry Growers Vacated

Varnum LLP

In 2012, the Department of Labor accused Oregon blueberry growers of employing “ghost workers” resulting in minimum wage violations. The DOL then issued what is known as a “hot goods order” to block shipment of their product to market until the violations were remedied. This, of course, created an untenable situation for the blueberry producers as their products were highly perishable. With no real alternative, the blueberry growers signed consent agreements with the DOL, in which they agreed to substantial fines and waived their rights to contest the allegations.

The blueberry growers later challenged the consent judgment and in January a federal magistrate judge agreed with the growers finding that “the tactic of putting millions of dollars of perishable goods in lock up was unlawfully coercive.” That decision was upheld just last week by the United States district judge. Invaliding consent judgments, particularly those with the federal government, is extremely difficult and rarely happens. But in this case, the combination of over-the-top, coercive of tactics by the DOL, as well as the court’s view that there was little or no evidence of underlying labor violations to begin with, paved the way for the growers in this case.

Article By:

Aaron M. Phelps

Of:

Varnum LLP

Price Comparison Advertising – Massachusetts Law

Retailers doing business in Massachusetts should ensure that their price comparison advertising complies with Massachusetts law, particularly 940 C.M.R. § 6.05 (Section 6.05). Otherwise, they may face a civil enforcement action by the Massachusetts Office of the Attorney General (MA AGO), a putative class action brought by a consumer under the Massachusetts Consumer Protection Act – Chapter 93A, or even a civil action brought by a competitor alleging unfair and deceptive trade practices.

What is price comparison advertising?

As defined in Section 6.05, price comparison advertising “is a form of advertising used in the sale of products whereby current prices are compared with the seller’s former or future prices, the prices of other sellers, or other stated values to demonstrate price reductions or cost savings.” According to the regulation, which was promulgated by the MA AGO, (1) “price comparisons based on false, arbitrary or inflated prices or values deceive or mislead the public” and (2) “[a]buse also occurs when sellers fail to disclose material information which is important to enable consumers to understand the price comparison.” To protect against this alleged deception and abuse, Section 6.05 regulates price comparison advertising.

Which practices does Section 6.05 deem unfair or deceptive?

Section 6.05 is divided into various sections (as more fully described below) that provide retailers with guidance concerning what the MA AGO deems to be unlawful. Violations of Section 6.05 may be enforced by the MA AGO in a civil enforcement action as well as by consumers, who may seek to assert claims individually and on behalf of all those “similarly situated” under Chapter 93A. Massachusetts law even supports civil actions brought by competitors harmed by unlawful advertising practices.

Specifically, Section 6.05 provides that the following are unfair or deceptive acts:

Unidentified Price Comparisons. Sellers cannot state or imply that they are offering any product savings by making a direct or indirect price comparison, unless they “clearly and conspicuously”¹ describe the basis for the comparison; provided, however, that sellers may claim a savings or make such a comparison (without disclosing the basis) if they are making a comparison to their own “former price” (as determined by Section 6.05(3)).
Comparison to Seller’s Own Former Prices. Sellers cannot compare their current price with their own former price for any product, unless such former price is a “bona fide, actual price” that they had offered “openly and in good faith for a reasonably substantial period of time in the recent past” to the public.²
Introductory Offers and Future Price Comparisons. Sellers cannot make an introductory offer or compare their current product price with a future product price unless (i) the future price takes effect immediately after the sale and not later than 60 calendar days after “the dissemination date of the introductory offer or price comparison” and (ii) following the effective date of the future price, the product is offered “openly and in good faith” at that price for at least equal to the period of time offered at the introductory price, but not less than 14 days (except for certain circumstances).³
Use of “Sale” Terminology. Sellers cannot use the words “priced for sale,” “on sale,” “sale,” “selling out,” “clearance,” “reduced,” “liquidation,” “must sell,” “must be sacrificed,” “now only $X,” or other terms which state or imply a price savings unless certain specific factors listed in Section 6.05 are met.⁴
Use of “List Price” or Similar Comparisons. Sellers cannot compare their current product price with a “list price,” “manufacturer’s suggested retail price” or similar term, unless the list or manufacturer’s suggested retail price is the price charged for the advertised product by a reasonable number of sellers in the seller’s trade area as of a particular “measurement date” determined by Section 6.05.⁵
Comparison to Other Seller’s Price for Identical Product. Sellers cannot compare their price with another seller’s price for an identical product, unless the stated higher comparative price is at or below the price at which the identical product is being offered in the seller’s trade area as of the “measurement date” or other specifically identified period under certain circumstances.⁶
Comparison to Seller’s Own or Other Seller’s Price for Comparable Product. Sellers cannot compare their price with their own price or another seller’s price for a comparable product unless the comparable product is being offered for sale as of the “measurement date,” or other specifically identified period, at the stated higher comparative price, unless certain factors are met.⁷
Price Comparisons on Price Tickets or Labels. Sellers cannot imprint or attach any ticket or label to a product that contains a fictitious or inflated price which is capable of being used by sellers as a basis for offering fictitious price reductions.⁸
Range of Savings or Price Reduction Claims. Sellers cannot state or imply that any products are being offered for sale at a range of prices or at a range of percentage or fractional discounts unless various factors are met.⁹
Use of Terms “Wholesale” or “At Cost.” Sellers cannot state or imply that any product is being offered at or near a “wholesale” price or “at cost” (or words of similar meaning) unless the price is, in fact, either at or below the price paid by the seller at wholesale, or, in the case of a service, the seller’s cost for the service excluding overhead and profit.
Use of Terms “Two for the Price of One” or “Buy One – Get One Free.” Sellers cannot state or imply that products are being offered at the usual price of a smaller number of the same or a different product unless (i) they clearly and conspicuously disclose all material sale conditions being imposed; (ii) the price advertised as the usual price for the smaller number of products is their own “former price”; and (iii) the products are of substantially the same quality, grade, material and craftsmanship as the seller offered prior to the advertisement.
Use of Term “If Purchased Separately.” Sellers cannot make any price comparison based on the difference between the price of a system, set or group of products and the price of the products “if purchased separately” (or words of similar meaning) unless: (i) a reasonable number of sellers in the trade area are currently offering the products as separate items at or above the stated separate purchase price as of the “measurement date”; or (ii) they have actually sold or offered the products for sale as separate items at the stated separate purchase price.
Prices for Parts or Units of Sets or Systems. Sellers cannot advertise a price for any product that normally sells as part of a pair, system, or set without clearly and conspicuously disclosing that the price stated is the price per item or unit only, and not the price for the pair, system or set.
Gifts. Sellers cannot state or imply that any product is being offered for free or at a reduced price (“a gift”) in conjunction with the purchase of another product unless various factors are met.¹⁰
Use of Disclaimers. Sellers cannot use a price comparison that is prohibited even if the advertisement contains disclaimers or explanatory language.
Are there any other requirements¹¹ that sellers should consider when assessing their price comparison advertising?
Record Keeping Requirements. Sellers must maintain records for a period of six months after the last dissemination of subject advertisements and provide those records to the MA AGO, upon request, to substantiate the propriety of such advertisements.¹²
Deceptive Pricing Generally, Examples, and Loss Leaders. Although not contained within Section 6.05 itself, the MA AGO has adopted a more general regulation dealing with “Deceptive Pricing” set forth in 940 C.M.R. § 3.13(2).¹³ This subsection describes generally what the MA AGO deems deceptive and provides some examples. In addition, related § 3.13(3) prohibits sellers from selling or offering for sale so-called “loss leaders” to induce a buyer to make a purchase of a product sold only in combination with other merchandise on which the seller recovers such loss.

Article By:

Michael E. Pastore

James P. Ponsetto

David G. Thomas

Of:

Greenberg Traurig, LLP

_{¹ “Clearly and conspicuously” means that “the material representation being disclosed is of such size, color, contrast or audibility and is so presented as to be readily noticed and understood by a reasonable person to whom it is being disclosed.” Section 6.01 provides guidelines for determining if disclosures are proper.}

_{² Section 6.05(3) lists various factors that are considered when determining whether a “former price” is a “bona fide, actual price.” Section 6.05(4) provides certain safe harbors for comparison prices. A complete list of factors and a description of the safe harbors are contained in 940 C.M.R. §§ 6.05(3)(a) and 6.05(4), which are available at http://www.mass.gov/ago/government-resources/ags-regulations/940-cmr-600.html (MA AGO’s Website).}

_{³ These circumstances and exceptions for certain offers limited to certain consumers who are deemed “first time purchasers” as defined in the regulation are contained in 940 C.M.R. § 6.05(5), which is available at the MA AGO’s Website. Also, Section 6.05(5) contains separate requirements for health clubs.}

_{⁴ These factors are contained in 940 C.M.R. § 6.05(6), which is available at the MA AGO’s Website.}

_{⁵ Section 6.05(7) contains separate requirements for manufacturers or franchisors. Also, the “measurement date” is defined in Section 6.01.}

_{⁶ These requirements are contained in 940 C.M.R. § 6.05(8), which is available at the MA AGO’s Website.}

_{⁷ These factors are contained in 940 C.M.R. § 6.05(9), which is available at the MA AGO’s Website.}

_{⁸ There are certain exceptions for prices that are pre-ticketed by manufacturers or other sellers, as contained in 940 C.M.R. § 6.05(10), which is available at the MA AGO’s Website.}

_{⁹ These factors are contained in 940 C.M.R. § 6.05(11), which is available at the MA AGO’s Website.}

_{¹⁰ These factors are contained in 940 C.M.R. § 6.05(16), which is available at the MA AGO’s Website.}

_{¹¹ This advisory does not contain an all-inclusive list of the MA AGO’s advertising regulations and requirements. Sellers, among other things, should be aware of additional requirements set forth in 940 C.M.R. § 3.00 (General Regulations) and 940 C.M.R. § 6.00 (Retail Advertising).}

_{¹² 940 C.M.R. § 6.14 contains specific and detailed record retention requirements for price comparison advertising, which is available at the MA AGO’s Website.}

_{¹³ This more general regulation is available at http://www.mass.gov/ago/government-resources/ags-regulations/940-cmr-3-00/940-cmr-300.html.}

Rights of Job Applicants in Germany

The German Federal Labor Court made a very clear ruling regarding job applicants in Germany who are not offered the position for which such applicants applied. In the Federal Labor Court’s view, a rejected applicant has no right to know whether another applicant was offered or accepted the position. (Federal Labor Court, verdict dated April 25, 2013, case number 8 AZR 287/08)

This case concerned a plaintiff who was born in the former Soviet Union in 1961. She applied for a position that was advertised by a German company, the defendant in this case. Even though the plaintiff fulfilled all required qualifications, she was rejected and did not receive a job offer. The plaintiff presumed that this decision was based on discrimination for her gender, age and origin. The Federal Labor Court submitted the case to the European Court of Justice to determine whether the job applicant had a right to information regarding why she was not selected, or if another applicant was selected for the position. The European Court of Justice rendered its verdict on April 19, 2012 (case number C415/10), and stated that rejected job applicants had no right to this information under European law.

The German Federal Labor Court dismissed the case because it could not detect any evidence of discrimination. The mere refusal of the defendant to disclose any information related to the application process and/or the hiring could not establish the presumption of an inadmissible discrimination, according to Section 7 of the German General Equal Treatment Act.

However, this ruling has to be viewed with great caution. The German decision is not in line with the aforementioned ruling in the same matter of the European Court of Justice. The European judges, in contrast to the German Court, stressed that the complete refusal to give out any information regarding the hiring could actually be evaluated as a presumption of possible discrimination. This remarkable difference in the two verdicts was not explained by the German judges and as long as their reasoning remains unclear, German employers should provide a short explanation to rejected applicants when they ask the reason why they have been rejected for an open position (e.g., the other candidate better satisfies the qualification profile, made a better impression at the job interview, seems to be a more motivated and energetic person, etc.).

Article By:

Dr. Sandra Urban-Crell

Gudrun Germakowski

Of:

McDermott Will & Emery

Misrepresentation of Source Claims Re: Foreign Trademark Registration

Owners of marks that are well- known outside the United States may find that an American company has attempted to take advantage of the renown of the foreign mark by obtaining a trade mark registration for such mark in the United States. While Article 6(bis) of the Paris Convention provides the owner of a famous foreign trade mark with a basis for asserting and sustaining a claim of priority in the US over a US registrant, this provision does not provide a basis for cancelling a US registration absent use of the mark in the US.

In April, however, the US Patent and Trademark Office’s Trademark Trial and Appeal Board (TTAB) issued a precedential decision which extends the ability of the owner of a mark that is famous internationally but not used in the US to enforce rights in their marks. In Bayer Consumer Care AG v Belmora LLC, the TTAB granted Bayer’s petition to cancel Belmora’s Registration for the Flanax mark based upon a misrepresen- tation of source in accordance with Section 14(3) of the Trademark Act even though Bayer was not using, nor had any intention to use, the Flanax mark in the US.

The evidence in Bayer showed that Bayer’s Mexican affiliate had been dis- tributing a naproxen sodium-based analgesic under the Flanax mark in Mexico since 1976 and that Flanax is the top selling pain reliever in Mexico. However, Bayer does not use the Flanax mark in the US and, instead, markets its naproxen sodium-based analgesic in the US under the Aleve mark.

The respondent, Belmora, adopted the Flanax mark in connection with a naproxen sodium-based analgesic that it sold and marketed towards the Hispanic community. The evidence fur- ther established that the initial packag- ing used by Belmora copied the logo and colour scheme used by Bayer for its Flanax product in Mexico and repeat- edly invoked the reputation of Bayer’s Flanax mark when marketing its prod- ucts in the US.

Belmora attacked Bayer’s standing to bring the cancellation proceedings, arguing that Bayer does not own a US registration for the Flanax mark, has not used the Flanax mark in the US and had no plans to use the mark in the US. The TTAB rejected these arguments, stating that “if respondent is using the FLANAX mark in the US to misrepre- sent to US consumers the source of respondent’s products as petitioner’s Mexican products, it is petitioner who loses the ability to control its reputation and thus suffers damage”. Integral to this analysis was the TTAB’s finding that given the size of the Mexican pop- ulation in the US, the “reputation of the Mexican FLANAX mark does not stop at the Mexican border”.

Having held that Bayer had standing to pursue the cancellation, the TTAB turned to its analysis of Section 14(3) which provides that a party may cancel a registration for a mark if the mark “is being used by, or with the permission of, the respondent so as to misrepresent the source of the goods or services on or in connection with which the mark is used”. In doing so, the TTAB held that the evidence established blatant misuse of the Flanax mark by Belmora in a manner calculated to trade on the goodwill and reputation of Bayer. Therefore, the TTAB ordered the can- cellation of Belmora’s Registration for the mark Flanax.

Although typically the ability to claim rights in a trade mark in the US requires that the mark actually be in use in the US, the TTAB’s decision in Bayer indicates that there may be an alternate basis that can be pursued when a foreign trade mark owner that does not use its mark in the US seeks to assert rights in its mark. On the other hand, the standard to satisfy a claim of misrepresentation of source is fairly dif- ficult, as it requires that the petitioner show that the respondent took steps to deliberately pass off its goods as those of petitioner. Therefore, a successful claim of misrepresentation of source will be very fact dependent.

Article By:

Karen Artz Ash

Bret J. Danow

Of:

Katten Muchin Rosenman LLP

EU Sanctions And The International Oil And Gas Industry

The international oil and gas industry is continuously tasked with adapting to an ever evolving sanction-regulated environment. The level of sanction activity and implementation in recent years has been unprecedented, partly as a result of the political events which gave rise to the Arab Spring and the opposition to Iran’s nuclear programme. The recent crisis in the Ukraine, and associated sanctions against Russia, have sparked further debate around the need for effective, targeted punitive measures and the consequences they may have for Europe.

This article considers the EU’s sanction regime, explores the effect it has on international oil and gas companies and addresses the short-comings of the EU’s decentralised system.

What are sanctions?

Sanctions are political policy instruments used to encourage jurisdictions acting in contravention of international law to adopt standards supported by the wider global community. They impose measures designed to cause damage to the targeted government, non-state entity or individual (“Target”) in order to force it to undertake, or prevent it from undertaking, certain behaviour. They may inhibit the Target from accessing foreign markets for trade or deny it from pursuing financial and other forms of commerce. The professed ultimate objective of a sanction is to preserve or restore global peace and security.

What is the source of EU sanctions?

The UN Security Council imposes sanctions through Security Council resolutions which are binding on the EU. The EU implements all sanctions imposed by the UN Security Council through legislation enacted by the European Council. The process typically results in a European Council regulation which has direct effect in EU member states’ separate legal systems, creating rights and obligations for those subject to them, and overrides national law. Additionally, the EU may decide to impose self-directed sanctions or restrictive measures which go further than a UN Security Council resolution in circumstances in which the EU deems such action to be necessary.

Why do EU sanctions affect international oil and gas companies?

Over the past two decades, the EU has engaged in an active use of restrictive measures in the form of economic and financial sanctions, embargoes and restrictions on admission to a country. Economic and financial sanctions typically take the form of asset-freeze measures which involve the use of funds and economic resources by Targets or persons acting for and on behalf of Targets, and the provision of funds and economic resources to designated Targets. Embargoes may prohibit trade in certain goods, and activities relating to such trade, with Targets (including the flow of arms and military equipment). Visa or travel bans can be imposed preventing certain persons from entering the EU or transit through the territory of EU member states. These sanction measures are part of the EU’s strategy to support the specific objectives of the Common Foreign and Security Policy.

At the time of writing, the EU has announced asset freezes and travel bans against around twenty individuals in Russia and the Ukraine. Companies conducting their business in the oil and gas sector should be particularly vigilant to ensure they act in compliance with EU sanctions, as Ukrainian and Russian entities and individuals who operate in this industry may increasingly become sanction targets.

US sanctions are questionable under international law because they apply extra-territorially to third state parties involved in business activities with the Target. Unlike the US, the EU has refrained from adopting legislation with extra-territorial effect. However, the EU’s recent sanctions against Iran displayed a greater resemblance to those levied by the US than had previously been the case. For example, sanctions were imposed prohibiting the provision of key resources to various parts of the Iranian oil and gas industry, as well as the provision of financial services to that sector. As a result of EU financial sanctions most, if not all, banks and other financial institutions have declined from conducting any business relations with the Iranian regime.

It is clear that EU sanctions are wide reaching and their scope has a significant impact on business activities. They will apply to international oil and gas companies in the following situations:

within EU territory, including its airspace;
on board of aircrafts or vessels under the jurisdiction of an EU member state;
to EU nationals, whether or not they are in the EU;
to companies and organisations incorporated under the law of a member state, whether or not they are in the EU (this captures branches of EU companies in non-EU countries); and
to any business done in whole or in part within the EU.

The corporate behaviour, performance and conduct of international companies are powerful channels through which the objectives of sanctions against Targets are achieved. Since an international oil and gas company has little option but to observe EU sanctions to the extent such company falls within the EU’s jurisdiction, these restrictive measures are likely to play a big part in a company’s commercial decision making processes.

Why are EU sanctions difficult to manage?

A principal reason why EU sanctions are difficult for international oil and gas companies based in various EU member states to manage largely stems from the fact that the European Union lacks a centralised licensing body. Instead, the responsibility for implementing and enforcing EU sanctions is delegated to the relevant competent authorities of the EU member states. The potential for variance and discrepancy is rife in a system where there are twenty-eight EU member states, each with their individual national resource constraints and self-centred policy objectives.

Typically, the competent authorities of EU member states are responsible for:

granting exemptions and licences;
establishing penalties for sanction violations;
coordinating with financial institutions; and
reporting upon the implementation of sanctions to the European Commission.

There have been calls for a central EU licensing body which would produce a single licensing and exemption policy for EU member states. Although EU guidelines on sanctions and best practices for the effective implementation of restrictive measures go some way to plug the gap, arguably a more comprehensive regime for implementing sanctions is required to provide a better level of certainty to international businesses operating in the realms of the EU.

Managing the risks

International oil and gas companies have always had to function in politically active climates. As sanctions initiated by multilateral organisations such as the UN and EU become more fashionable, so too does the exposure to political risk that these companies will face. Given the considerable levels of investment that can only be recouped over extended periods of time, and in accordance with pre-determined contractual apportionments, international oil and gas companies need to be able to recognise, assess and manage these political risks effectively.

Oil and gas companies can relieve the risks imposed on them by sanctions through political lobbying, taking pre-emptive measures and by reacting quickly to sanctions once they are implemented. Commercial negotiations will need to focus on the allocation of risk as a result of one party’s failure to perform or withdrawal from the contract on the grounds of applicable sanctions.

International oil and gas companies need to be proactive and consider both the legal solutions and pre-cure safeguards. Time and effort should be spent focusing on drafting and negotiating the relevant contractual documentation, following a careful risk assessment, instead of deferring to dispute resolution provisions. For instance, careful construction of force majeure provisions can allocate each party’s obligations in the circumstance where an event outside of a party’s control causes contractual performance to become impossible. Thus, whilst conventional force majeure clauses relating to physical events afford relief to an affected party from its liabilities under the contract, oil and gas companies should consider expanding such contractual provisions to cover sanctions and other restrictive measures imposed on them by the UN and EU.

To avoid falling foul of existing EU sanctions, oil and gas companies should also consider putting in place comprehensive compliance procedures and systems to implement applicable sanction regimes. Penalties for breach of sanctions can be severe; a person guilty of a sanction-related offence may be liable on conviction to imprisonment and/or a fine. Falling foul of sanctions also means that a transaction can immediately become unlawful.

Conclusion

In view of the economic significance of the EU, the application of economic financial sanctions can be a powerful tool. But like a chain is no stronger than its weakest link, the effectiveness and success of the EU’s sanction regime depends on all EU member states applying, implementing and enforcing EU sanctions in a consistent manner.

The current EU sanction regime warrants a fully integrated approach which would undoubtedly benefit its policy objectives and move some way to reducing the unduly high economic cost that international oil and gas companies face when operating their businesses in the EU.

In voicing the sentiments of Henry Kissinger: “No foreign policy – no matter how ingenious – has any chance of success if it is born in the minds of a few and carried in the hearts of none”, perhaps now, in the dawn of the recent events which have taken place in the EU’s backyard in the Ukraine and Russia, the EU should further global security measures by tightening its ranks and implementing a more centralised, and better monitored, sanction regime.

Article By:

Rebecca Downes

Of:

Andrews Kurth

Colorado’s Cutting Edge Legislation Fosters Clean Fuel Truck Adoption

The State of Colorado recently passed HB 14-1326, the “Clean Trucks Bill,” catapulting itself into the group of cutting edge states that are on the forefront of the clean fuel issue. Recognizing that trucks represent a huge opportunity for emissions reductions by replacing diesel engine trucks with trucks reliant on clean fuels, the Clean Trucks Bill paves the way for improved air quality, reduction in greenhouse gases, promotion ofdomestic energy sources and ultimately, cost savings for industry and for consumers. The bill, which passed the Colorado Senate unamended from the version previously passed by the House, was sent to Governor Hickenlooper on May 12, 2014. The Governor is expected to sign the bill and pass it into law soon.

The Clean Trucks Bill employs several components to promote clean fuels. The bill recognizes that the expense of clean fuel trucks over their traditional fuel counterparts leaves clean fuel trucks at a competitive disadvantage, with clean fuel trucks costing between 25 and 75 percent more. As such, the bill expands the alternative fuel tax credit targeting trucks. While existing tax credits provided incentives for compressed natural gas and propane trucks, the bill broadens the category of eligible fuels by incorporating hydrogen and liquefied natural gas into the credit-eligible fuels. Electric or hybrid-electric vehicles greater than 8,500 pounds in gross vehicle weight ratio (GVWR) also become eligible for the tax credit. Additionally, the bill introduces tax credits for heavy duty trucks (greater than 26,000 GVWR) and expands tax credit eligibility to light and medium-duty trucks.

By promoting broader adoption of clean fuel trucks, eventually market development and economies of scale will cause clean fuel trucks to become more cost competitive. The bill provides an 8-year period to achieve those economies of scale, paring down the percentage of a clean fuel truck purchase or conversion that is eligible for the tax credit over that time period. However, the maximum amount of the credit remains constant over the life of the legislation; heavy-duty trucks are eligible for up to $20,000 in tax credits per income tax year, medium-duty trucks up to $15,000 per income tax year, and light-duty trucks up to $7,500 per income tax year.

But the Clean Trucks Bill didn’t stop at a package of clean fuel truck purchase or conversion tax credits. Aerodynamic technologies proven to improve fuel efficiency and clean fuel refrigerated trailers also gained eligibility for tax credits. (Previously, tax credits were only available for idling reduction technologies.) The importance of the inclusion of clean fuel trailers cannot be understated, as fleets prefer to use the same fuel for the truck as the trailer, and the tax credit provides an incentive for the purchase or conversion of the clean fuel trailer in companion with the clean fuel truck.

The Clean Trucks Bill also updates the sales tax exemption for low-emitting vehicles over 10,000 GVWR. Today, virtually every vehicle over 10,000 GVWR meets the eligibility requirements for the sales tax exemption. The Clean Trucks Bill limits that sales tax exemption to trucks meeting more stringent standards.

The final element of the Clean Trucks Bill eliminates the specific ownership tax penalty for purchasing a clean fuel truck. Because the specific ownership tax is based on the purchase price of a vehicle, clean fuel trucks with their higher purchase price stand at a disadvantage to traditional fuel trucks with a lower purchase price. The Clean Trucks Bill abrogates that penalty by reducing the price at which clean trucks are valued for purposes of the specific ownership tax to an amount comparable to traditional fuel vehicles. By equalizing the tax value of a clean fuel truck with a traditional fuel truck, local government recipients of specific ownership tax revenues are unaffected from a revenue standpoint.

The benefits of the Clean Trucks Bill are many. First, the bill stimulates Colorado’s economy by promoting trucks using clean fuels, of which Colorado is a major producer. The bill also supports reduced emissions and improved air quality by providing an incentive for cleaner fuel trucks. Finally, the bill encourages energy independence through the promotion of domestically-produced clean fuels like natural gas and propane, as well as hydrogen and liquefied natural gas. It’s not often legislation of this magnitude can be widely perceived as a win-win, but Colorado is on the eve of becoming one of few states to accomplish such a feat.

Article By:

Dave McGimpsey

Of:

Lewis Roca Rothgerber LLP

2 more weeks until LMA P3 – Practice Innovation Conference, June 12-13, Chicago, IL

The National Law Review is pleased to bring you information about the LMA P3 Conference to be held in Chicago June 12-13, 2014.

When

Thursday – Friday, June 12-13, 2014

Where

Hyatt Chicago Magnificent Mile
633 N. Saint Clair St.
Chicago, IL 60611

Dig deeper into project management, pricing and process improvement.

The 2013 LMA P3 Conference set the bar high with fantastic breakout sessions, partner presentations and networking opportunities, but this year’s conference looks even more promising.

Join us for P3 – The Practice Innovation Conference, where pricing, project management, and practice innovation experts will discuss the use of various tactics to explore solutions to real issues face by law firms today.

This execution-focused conference will have attendees roll up their sleeves and collectively work out solutions. Click here to view the full conference schedule.

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