Tag: business

FBI and DHS Warn of Russian Cyberattacks Against Critical Infrastructure

U.S. officials this week warned government agencies, cybersecurity personnel, and operators of critical infrastructure that Russia might launch cyber-attacks against Ukrainian and U.S. networks at the same time it launches its military offensive against Ukraine.

The FBI and the Department of Homeland Security (DHS) warned law enforcement, military personnel, and operators of critical infrastructure to be vigilant in searching for Russian activity on their networks and to report any suspicious activity, as they are seeing an increase in Russian scanning of U.S. networks. U.S. officials are also seeing increased disinformation and misinformation generated by Russia about Ukraine.

The FBI and DHS urged timely patching of systems and reporting of any Russian activity on networks, so U.S. officials can assess the threat, assist with a response, and prevent further activity.

For more information on cyber incident reporting, click here.

Even though a war may be starting halfway across the world, Russia’s cyber capabilities are global. Russia has the capability to bring us all into its war by attacking U.S. government agencies and companies. We are all an important part of preventing attacks and assisting others from becoming a victim of Russia’s attacks. Closely watch your network for any suspicious activity and report it, no matter how small you think it is.

Article By Linn F. Freedman of Robinson & Cole LLP

For more cybersecurity legal news, click here to visit the National Law Review. 

Copyright © 2022 Robinson & Cole LLP. All rights reserved.

Red States Move to Penalize Companies That Consider Climate Change When Making Investments

A number of conservative-leaning states, particularly those with a significant fossil fuel industry (e.g., Texas, West Virginia), have begun implementing polices and enacting laws that penalize companies which “pull away from the fossil fuel industry.”  Most of these laws focus on precluding state governmental entities, including pension funds, from doing business with companies that have adopted policies that take climate change into account, whether divesting from fossil fuels or simply considering climate change metrics when evaluating investments.

This trend is a troubling development for the American economy.  Irrespective of the merits of the policy, or fossil fuel investments generally, there are now an array of state governments and associated entities, reflecting a significant portion of the economy, that have adopted policies explicitly designed to remove climate change or other similar concerns from consideration when companies decide upon a course of action.  But there are other states (typically coastal “blue” states) that have enacted diametrically opposed policies, including mandatory divestments from fossil fuel investments (e.g., Maine).  This patchwork of contradictory state regulation has created a labyrinth of different concerns for companies to navigate.  And these same companies are also facing pressure from significant institutional investors, such as BlackRock, to consider ESG concerns when making investments.

Likely the most effective way to resolve these inconsistent regulations and guidance, and to alleviate the impact on the American economy, would be for the federal government to issue a clear set of policy guidelines and regulatory requirements.  (Even if these were subject to legal challenge, it would at least set a benchmark and provide general guidance.)  But the SEC, the most likely source of such regulations, has failed to meet its own deadlines for promulgating such regulations, and it is unclear when such guidance will be issued.

In the absence of a clear federal mandate, the contradictory policies adopted by different state governments will only apply additional burdens to companies doing business across multiple state jurisdictions, and by extension, to the economy of the United States.

“Republicans and right-leaning groups fighting climate-conscious policies that target fossil fuel companies are increasingly taking their battle to state capitals. Texas, West Virginia and Oklahoma are among states moving to bar officials from dealing with businesses that are moving to ditch fossil fuels or considering climate change in their own investments. Those steps come as major financial firms and other corporations adopt policies aligned with efforts to reduce greenhouse gas emissions.”

Article By Jacob H. Hupart of Mintz

For more environmental legal news, click here to visit the National Law Review.

©1994-2022 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

Texas AG Sues Meta Over Collection and Use of Biometric Data

On February 14, 2022, Texas Attorney General Ken Paxton brought suit against Meta, the parent company of Facebook and Instagram, over the company’s collection and use of biometric data. The suit alleges that Meta collected and used Texans’ facial geometry data in violation of the Texas Capture or Use of Biometric Identifier Act (“CUBI”) and the Texas Deceptive Trade Practices Act (“DTPA”). The lawsuit is significant because it represents the first time the Texas Attorney General’s Office has brought suit under CUBI.

The suit focuses on Meta’s “tag suggestions” feature, which the company has since retired. The feature scanned faces in users’ photos and videos to suggest “tagging” (i.e., identify by name) users who appeared in the photos and videos. In the complaint, Attorney General Ken Paxton alleged that Meta,  collected and analyzed individuals’ facial geometry data (which constitutes biometric data under CUBI) without their consent, shared the data with third parties, and failed to destroy the data in a timely matter, all in violation of CUBI and the DTPA. CUBI regulates the collection and use of biometric data for commercial purposes, and the DTPA prohibits false, misleading, or deceptive acts or practices in the conduct of any trade or commerce.

Among other forms of relief, the complaint seeks an injunction enjoining Meta from violating these laws, a $25,000 civil penalty for each violation of CUBI, and a $10,000 civil penalty for each violation of the DTPA. The suit follows Facebook’s $650 million class-action settlement over alleged violations of Illinois’ Biometric Privacy Act and the company’s discontinuance of the tag suggestions feature last year.

Article By Hunton Andrews Kurth’s Privacy and Cybersecurity Practice Group

For more privacy and cybersecurity legal news, click here to visit the National Law Review.

Copyright © 2022, Hunton Andrews Kurth LLP. All Rights Reserved.

Ongoing Canadian Protests Shine Spotlight on Ripple Effect of Supply Chain Disruptions

Although the last two years have seen a nearly never-ending line of supply chain impacts for manufacturers, the latest disruption is also serving to shine a spotlight on the broader impact that relatively small disruptions in the supply chain can have on the global economy.  We all know that trucking is a critical component of the economy.  The U.S. estimates seventy two percent of goods in the U.S. travel by truck.  Trucking has become even more important in this era of increased deliveries and backlogs at ports and other logistics hubs.

In Canada, what began as protests by truckers regarding certain pandemic-related restrictions and mandates have snowballed into broader protests and blockages of roads, bridges, and border crossings.

Protesters have been blocking various bridges and roads in Canada in protest of certain pandemic-related restrictions and mandates.  On Tuesday, the bridge connecting Windsor, Ontario to Detroit (a critical linkage for cross-border travel) was largely blocked, with traffic stopped going into Canada and slowed to a trickle going into the United States. The blockades are now leading U.S. automakers to begin trimming shifts and pausing certain operations in their Michigan and Canadian plants. The bridge protests and automakers’ reduction in capacity continued on Thursday without an end in sight.

The ongoing protests in Canada have also served as a reminder of how seemingly local trucking disruptions in one country can cascade through the supply chain.  This is not the first time that trucking strikes and blockages have rippled through the supply chain and economy.  In 1996, a truckers’ strike in France lasted 12 days, barricading major highways and ultimately leading to concessions from the French government over certain worker benefits and hours.  The resulting agreement led to heightened tensions with Spain, Portugal, and Great Britain due to the impact felt across borders.  In 2008, truckers went on strike in Spain and blocked roads and border crossings, protesting fuel prices.  In 2018, truckers in Brazil staged a large strike and protest that lasted for 10 days, blocking roads, disrupting food and fuel distribution, canceling flights, and causing certain part shortages for automakers.

The ongoing protests in Canada have similarly expanded from Ottawa to the current blockage of border crossings, further raising their profile internationally as they begin to impact global trade.  It remains to be seen how the blockades and protests will resolve, as leaders call for de-escalation and re-opening of roads and crossings.  However, the ripple effects of what started as a localized protest will continue to be felt far beyond Canada’s borders.

Article By Lauren M. Loew of Foley & Lardner LLP

For more COVID-19 and supply chain legal news, click here to visit the National Law Review.

© 2022 Foley & Lardner LLP

Federal Cannabis Reform – Is 2022 the Year?

Hope soared with the possibility of federal cannabis reform in 2021.  And for good reason –  the induction of a new, more liberal administration, rapid state-level legalization, broad support by Americans,[1] and growing bipartisan backing led many to believe that 2021 was going to be the year where federal decriminalization of cannabis would become a reality.  But, as 2021 continued on, optimism dwindled as any advancement in federal cannabis reform was hobbled by the inability of Congress to agree on the appropriate level of reform  and the proper mechanics for passage.  Specifically, tension rose amongst the elected Democrats on whether to support incremental reform (like access to banks or removal of cannabis from the list of Schedule 1 drugs) or comprehensive legalization with provisions to address social inequities stemming from the legacy of the War on Drugs.  And so 2021 came to an end, and the cannabis industry saw yet another year of failed meaningful change on the federal level.

Still, momentum for reform has not been lost.  If anything, last year saw more bills introduced into Congress (including two new federal legalization proposals) than ever before – clearly indicating its import to our nation’s leaders.  Justice Clarence Thomas from the Supreme Court even subtly advised Congress to address legalization, noting that the Federal Government’s current “half in, half out regime” on cannabis strained the principles of federalism.

And so, as we move forward in 2022 with hope, we review the bills before Congress and their progresses to assess which of these may have some traction for passage during this upcoming year.

Secure and Fair Enforcement (“SAFE”) Banking Act of 2021[2]

Considered modest reform, the SAFE Banking Act of 2021 mainly focused on granting cannabis-related businesses access to federally-backed financial institutions.  The bill was introduced early in 2021,[3] and passed in the U.S. House of Representatives on April 20, 2021 by a vote of 321 to 101.  At the time of the House’s passage, many believed the SAFE Banking Act of 2021 would easily move its way through the Senate, due – in part – to its demonstrated bipartisan appeal with 106 Republican votes in the House.  Congressman Ed Pearlman, one of its drafters, even remarked:

After years of bringing up this issue, I’m thrilled to see overwhelming support for this bipartisan, commonsense legislation in the U.S. House once again. I feel optimistic about the path forward for the SAFE Banking Act and, more broadly, reforms to our federal cannabis laws.[4]

However, after its passage in the House, the SAFE Banking Act of 2021 languished in the Senate’s Committee on Banking, Housing and Urban Affairs.  Momentum for the bill slowed, with those opposing it campaigning for more comprehensive legalization.  In late September 2021, fervor for the SAFE Banking Act of 2021 arose again when the House passed, by voice vote, an amendment to the National Defense Authorization Act for Fiscal Year 2022 (“NDAA”) to add the SAFE Banking Act of 2021.  Many hoped that by couching the SAFE Banking Act of 2021 in the NDAA, it would make it easier to pass through the Senate.  On November 23, 2021, 4 Senators[5] penned a letter to the Senate’s Armed Services Committee urging them to retain the SAFE Banking Act of 2021 in the NDAA.  Despite these efforts, the SAFE Banking Act of 2021 was stripped from the NDAA on December 10, 2021 – stalling its progress once more.

The Marijuana Opportunity Reinvestment & Expungement (“MORE”) Act

The MORE Act is the oldest comprehensive legislative proposal.  It was passed in the House in December 2020, during a lame-duck session, but never made any headway in the Senate.[6]  On May 28, 2021, Representative Jerrold Nadler reintroduced the MORE Act into the House and much of its substance provided the legislative stepping stones for the Cannabis Administrative and Opportunity Act (“CAO”).

The MORE Act aimed to end criminalization of cannabis by removing it from the list of controlled  substances, eliminate related past criminal penalties and convictions, and provide essential criminal justice reform, social justice and economic development for those affected by the War on Drugs.  The MORE Act also would tax cannabis products starting at 5% to 8% (increasing by 1% over 5 years) to help fund social reform projects, make Small Business Administration loans and services available to cannabis-related businesses, and prohibit denial of federal public benefits (like housing) and protections under immigration law on the basis of cannabis-related conduct or conviction.

After sitting in the House Judiciary Committee, the bill was finally approved in the Committee on September 30, 2021, with 2 Republican Representatives voting yes.  This act sent the measure to the House floor for another vote before it could make its way to the Senate.

The Cannabis Administrative and Opportunity Act

Embracing the MORE Act’s goals for comprehensive reform, Senate Majority Leader Chuck Schumer (along with Senators Cory Booker  and Ron Wyden) introduced the long awaited draft of the CAO into the Senate on July 14, 2021.  Considered a historic and ambitious bill, the CAO aimed to implement a full-scale federal scheme for cannabis reform that reaches beyond just decriminalization.  It hopes to provide restorative measures “to lift up people and communities who were unfairly targeted in the War on Drugs.”[7] Specifically, the CAO seeks to do the following:

  • Decriminalize cannabis by removing it from the Controlled Substances Act and automatically expunge any arrests and convictions for non-violent federal cannabis offenses;
  • Transfer primary agency jurisdiction over cannabis to the Food and Drug Administration (“FDA”), the Alcohol and Tobacco Tax and Trade Bureau (“TTB”), and the Bureau of Alcohol, Tobacco and Firearms (“ATF”) so that cannabis can be federally regulated similar to alcohol and tobacco;
  • Establish a Center for Cannabis Products responsible for regulating the “cannabis aspect of all products containing cannabis,” and implementing requirements related to cannabis products (g., good manufacturing practice, product standards, product labeling, product distribution and recall, etc.) within the FDA;
  • Mandate federal research and studies regarding the impact of cannabis (including any benefits and/or impairments) on the human brain and health conditions and its impact on drivers under its influence;
  • Permit movement of cannabis products through channels of interstate commerce;
  • Establish Opportunity Trust Fund Programs funded by federal cannabis tax revenue to restore and reinvest in communities greatly impacted by the War on Drugs (including funds for job training, reentry services, legal aid, and youth recreation/mentoring programs) and to help level the playing field by granting entrepreneurs of color access to the cannabis industry through small business loans;
  • Prohibit denial of federal benefits or immigration protection due to a past cannabis-related offense; and
  • Impose federal excise tax on sale of cannabis products, starting at 10% and increasing up to 25% in a span of 5 years, with certain favorable tax credit for cannabis producers with less than $20 million sales.

Though the CAO has lofty goals, it does not force states to legalize cannabis, emphasizing the integrity of state-specific cannabis law.

As a draft bill, the CAO was subject to a review period in which its authors requested public comments by September 1, 2021.  At the expiration of this review period, the drafters of the bill received numerous comments from both supporters and those criticizing the CAO as overly ambitious and a big-government approach.  In particular, many critics take issue with the bill’s tax structure, calling the imposition of an ultimate 25% federal excise tax burdensome.  Indeed, the CAO – as it stands – implements the highest tax structure for cannabis products of all the bills proposed in 2021.  Many allege that the high federal tax in addition to any state-imposed tax could promote the illicit cannabis market rather than encourage business owners to engage legally.  Additionally, the high federal tax could force states to reduce their own tax requirements, negatively affecting their own ability to fund state-run social equity and education initiatives.

For now, the public comments have been taken under advisement as the cannabis industry waits to see what the drafters decide to incorporate.  Once formally filed, the CAO will be sent to a committee for continued discussions and revisions before it can be advanced to the Senate floor for a vote.

The States Reform Act

The States Reform Act (“SRA”) is the latest comprehensive reform bill led by Republican Representative Nancy Mace and introduced in the House in November 15, 2021.  Like the MORE Act and the CAO, the SRA also seeks to decriminalize cannabis and provides retroactive expungement for non-violent federal cannabis offense, except for any person involved in a drug cartel.  However, the SRA differentiates itself by limiting federal social equity reform programs.  Instead, the SRA vests the authority  to determine what level of cannabis reform, including outright prohibition, in the individual states.  States will also retain authority to regulate the use, distribution, sale and manufacturing of cannabis, with some general federal oversight by the FDA, TTB, ATF and the Department of Agriculture.  Specifically, the SRA aims to regulate cannabis like alcohol (and alcohol alone) – another substantial difference from the CAO.  The SRA permits each state to determine the appropriate age limit for purchase of cannabis products, but incentivizes states to implement a 21+ limit by eliminating funding for highways for any state with an age limit of under 21 years of age and prohibiting advertisements directed at any person under the age of 21.  The bill also seeks to provide veterans with access to medical cannabis without fear of discrimination or denial of Veteran Affairs benefits.  The SRA also generally requires that medical cannabis be permitted for treatment of arthritis, cancer and chronic pain.  Similar to the CAO, the SRA will also allow the interstate cannabis transportation.

Notably, the SRA provides the lowest tax structure for cannabis products in comparison to other reform proposals, with the proposed imposition of a single tax rate of 3% that cannot be increased for at least 10 years.  Revenues from the tax would be used to support SBA programs for cannabis businesses, law enforcement initiatives including reentry programs, and veteran mental health programs.

Given its recency, little is known about the bill’s reception in the House and any progress that has been made.  However, the SRA does carry potential bipartisan appeal, particularly because it is sponsored by 4 Republican Representatives.  Additionally, it is anticipated that the Congressional Republicans will appreciate the SRA’s straight forward tax structure capped at a low rate for at least 10 years and its stance on states’ sovereignty regarding cannabis reform.  The real issue for the SRA is its lack of restorative justice and social equity efforts, which may be its death knell in the current Democrat-controlled House.

Implications for 2022

There are now 4 bills (3 with comprehensive legislation) circulating Capitol Hill that could provide much needed cannabis reform in 2022.  Congress will likely continue debating, revising and attempting to compromise on the terms in the MORE Act, the CAO and the SRA.  Potentially, if the 3 comprehensive bills remain on the discussion table, they will compete with one another, potentially dividing the Legislators’ support.  Congress should thus focus on forging a compromise or middle ground on these reforms to increase bipartisan support and avoid competing and inconsistent bills floating around, resulting in another year of unwanted (and unnecessary) deadlock.  Indeed, the CAO could be an example of such needed compromise – especially if the drafters seriously heed the criticisms and comments provided during the bill’s review period and consider incorporating certain bipartisan elements of the SRA, like a more stream-lined and lower rate tax structure.  With that said, the status of these cannabis reform bills, particularly the CAO and the MORE Act, face potential change should this year’s mid-term elections change the makeup of who controls the Senate, House or both.

Regardless, until Congress can iron out the kinks on comprehensive cannabis reform, the SAFE Banking Act of 2021 remains a practical law to pass in the interim.  The SAFE Banking Act of 2021 is currently the least controversial of all the cannabis-reform bills, has substantial bipartisan appeal, and will provide immediate financial resources and relief to the largely cash-based cannabis industry.  Though a small reform, it is still a necessary one that is long overdue.  The SAFE Banking Act of 2021 (and its predecessors) has already made its way through the House 6 times, proving that federal lawmakers believe it will help cannabis businessmen.  It may not resolve the issue of prohibition on cannabis, but its passage will likely be a great victory for the cannabis industry, signal federal de-stigmatization of cannabis, promote public safety by discouraging participation in the illicit cannabis market, and help cannabis-related businesses comply with tax laws.

Footnotes

[1] https://news.gallup.com/poll/356939/support-legal-marijuana-holds-record…

[2] On February 4, 2022, the SAFE Banking Act passed again in the House – this time, as an included amendment to the America COMPLETES Act.

[3] The bill is the successor to the previously introduced SAFE Banking Act of 2019.  See https://www.cannabislawblog.com/2021/09/safe-banking-act-2021/

[4] https://perlmutter.house.gov/news/documentsingle.aspx?DocumentID=5486

[5] Gary Peters, Angus King, Kevin Cramer, and Mark Kelly

[6] https://www.cannabislawblog.com/2020/12/house-representatives-passes-bil…

[7] https://www.democrats.senate.gov/imo/media/doc/CAOA%20Detailed%20Summary

 

Article By Jennifer N. Le of Sheppard, Mullin, Richter & Hampton LLP

For more cannabis legal news, click here to visit the National Law Review.

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.

Mississippi Enacts Medical Marijuana Law

Mississippi Governor Tate Reeves signed legislation legalizing medical cannabis on February 2, 2022. Known as the “Mississippi Medical Cannabis Act”, the law permits the use of medical cannabis to treat certain debilitating medical conditions including cancer, Parkinson’s disease, Huntington’s disease, muscular dystrophy, HIV/AIDS, hepatitis, ALS, Crohn’s disease, ulcerative colitis, sickle-cell anemia, Alzheimer’s disease, dementia, post-traumatic stress disorder, autism,  cachexia or wasting syndrome, chronic pain, severe or intractable nausea, seizures, severe and persistent muscle spasms, among others.  The law was effective immediately upon signing by the Governor, although medical cannabis will not become available for months.

Medical cannabis products will include cannabis flower, cannabis extracts, edible cannabis products, beverages, topical products, ointments, oils, tinctures and suppositories.

The medical cannabis law contains many favorable provisions for employers.  Specifically:

  1. Employers are not required to permit or accommodate the medical use of medical cannabis, or to modify any job or working conditions or any employee who engages in the medical use of cannabis, or seeks to engage in the medical use of cannabis;
  2. Employers are not prohibited from refusing to hire, discharging, disciplining, or otherwise taking adverse employment action against an individual with respect to hiring, discharging, tenure, terms, conditions or privileges of employment as a result, in whole or in part, of that individual’s medical use of medical cannabis, regardless of the individual’s impairment or lack of impairment resulting from the medical use of medical cannabis;
  3. Employers are not prohibited from establishing or enforcing a drug testing policy;
  4. Employers may discipline employees who use medical cannabis in the workplace or who work while under the influence of medical cannabis.
  5. The law does not interfere with, impair or impede any federal requirements or regulations such as the U.S. Department of Transportation’s drug and alcohol testing regulations;
  6. The law does not permit, authorize or establish an individual’s right to commence or undertake any legal action against an employer for refusing to hire, discharging, disciplining or otherwise taking an adverse employment action against an individual with respect to hiring, discharging, tenure, terms, conditions or privileges or employment due to the individual’s medical use of medical cannabis;
  7. Employers and their workers’ compensation carriers are not required to pay for or to reimburse an individual for the costs associated with the medical use of cannabis;
  8. The law does not affect, alter or otherwise impact the workers’ compensation premium discount available to employers who establish a drug-free workplace program in accordance with Miss. Code Section 71-3-201 et seq.;
  9. The law does not affect, alter or otherwise impact an employer’s right to deny or establish legal defenses to the payment of workers’ compensation benefits to an employee on the basis of a positive drug test or refusal to submit to or cooperate with a drug test, as provided under Miss. Code Sections 71-3-7 and 71-3-121;
  10. The law does not authorize an individual to act with negligence, gross negligence, recklessness, in breach of any applicable professional or occupational standard of care, or to effect an intentional wrong, as a result, in whole or in part, of that individual’s medical use of medical cannabis;
  11. The law prohibits smoking and vaping medical cannabis in a public place or in a motor vehicle;
  12. The law prohibits operating, navigating, or being in actual physical control of any motor vehicle, aircraft, train, motor boat or other conveyance in a manner that would violate state or federal law as a result, in whole or in part, of that individual’s medical use of medical cannabis; and,
  13. The law does not create a private right of action by an employee against an employer.

Mississippi employers should review the law to determine whether any revisions to drug and alcohol testing policies or other workplace policies will be necessary.

Article By Kathryn J. Russo of Jackson Lewis P.C.

For more cannabis legal news, click here to visit the National Law Review.

Jackson Lewis P.C. © 2022

To Search or To Sink: The Importance of Clearing Your Brand

So many times in my three decades of practice I’ve shaken my head at the perils a trademark owner can so easily avoid by searching and clearing a mark. The litigations! The unnecessary attorneys’ fees! The time and resources lost! All because my client (or adversary) didn’t conduct a proper trademark search.

Adopting a Trademark

So what’s all the fuss about? Well, before adopting a trademark (that is, a brand name for goods or services) you should have an attorney commission a proper clearance search, review it, and provide you with a well-reasoned opinion as to the availability of the brand for “use” and “registration.” (Yes, they are different things, as explained below.) I’m not talking about an Internet search or an online search of U.S. Trademark Office records, though both can be useful to make sure there aren’t any easily found barriers to use or registration of a mark before a full search is commissioned.

I’m talking about a full clearance search done by a reputable vendor the attorney commissions to uncover all uses (registered and not) of the same or similar marks for the same or similar goods/services as you want to use your brand for. The resulting vendor’s report sent to the attorney is typically anywhere from 300 pages up to 1000 pages. Then the (experienced trademark) attorney reviews it and lets you know in a detailed opinion if the mark is free for you to use and register without entangling you in the risk of a dispute/lawsuit. If it’s not available, you pick another brand, and search again.

Using a Brand and Registering It

So what’s the difference between freedom to use a brand and freedom to register it? In the U.S., “common law” trademark rights can exist based solely upon use (that is use of a trademark without registration). That’s because consumers can associate a brand with a single source (the trademark owner/producer of goods/services) even if it’s not registered. (It’s different in other countries, and searches should be done in every country for which you want to use your brand.)

So it’s possible that there’s a barrier to use but not to registration, because a common law (unregistered) trademark is too similar to the brand you want to use, and is being used in connection with identical or related goods/services as your proposed brand. That’s why you want clearance to both use and register a mark. (Registration is important because it provides you with nationwide rights in your brand; common law trademarks cover only the geographic territory where sales under the brand occur.)

So please clear your mark. It’s pennies on the dollar compared to what you will spend in a dispute or (heaven forbid) litigation. Here’s to happy searching!

Article By Jeanne Hamburg of Norris McLaughlin P.A.

For more intellectual property legal news, click here to visit the National Law Review.

©2022 Norris McLaughlin P.A., All Rights Reserved

Electrification of the Fleet is on the Horizon, Preparing Now is Key

While we often hear how EVs will revolutionize the lives of the average consumer, commercial fleet owners are starting to take note of the impact these new powertrain systems will have on their own business and operations. As OEMs find creative ways to increase aerodynamics, extend battery range, and increase charging speeds, the zero emission and lower long-term cost of EVs compared to ICE (internal combustion engine) vehicles makes a compelling argument for adoption, at least on paper. What really matters is how those factors play out as the rubber hits the road, which OEMs are starting to see play out in real time. Over the past few years, there has been an explosion of commercial fleet platforms from existing and new entrants in the commercial vehicle space. From light to heavy trucking to fleet platform automobiles, EV technology is looking to capture every corner of the commercial fleet sector. Coupled with a slow reduction in the number of ICE vehicles produced in future years, the market may start pushing fleet operations towards EVs, whether they like it or not.

According to the Department of Transportation, over eight million vehicles made up commercial fleets in the US in 2020, which includes a mix of trucks and automobiles used in commercial and government operations. Even more make up commercial vehicles on the road that are not considered part of a fleet. As consumer demand drives most traditional OEMs toward EV dominated fleets, commercial fleet owners and operators need to start to prepare now for the same shift in their vehicle suppliers, or risk playing catchup once the market does turn from ICE to EV. This isn’t to say that failure to be an early adopter will be the death-knell to commercial fleet businesses; it likely won’t be. What businesses with commercial fleets should consider is their own business needs and their timeline for their own fleet replacement as EV technology and infrastructure support continues to evolve. Establishing a process and plan for upgrading existing fleets, training personnel, upgrading infrastructure, and understanding available programs for conversion will be key.

The switch from an ICE to EV fleet isn’t as simple as flipping a switch or plugging in a car – EVs bring a new powertrain and new sources of information. EVs in their current state are expensive, new vehicle supply is constantly in question, current operators are unaware of the nuances involved with operating an EV, and the infrastructure necessary to support a commercial fleet of EVs isn’t universally robust. For the average fleet operator, there also is a need to focus on route optimization, installing and maintaining new hardware capable to supporting charging on-site, revamping their maintenance and care procedures, and working with their local energy providers to understand how power demands in their local market may impact their own energy costs and needs. Additionally, although data analytics has improved existing fleet operations over the past few years, expect to see more nuanced data availability to the benefit of fleet operators.  As commercial and consumer EVs come out with ever more connectivity to the web and each other, coupled with the ability for “smart cities” to increase data available to drivers and vehicles, expect future fleet operators to get even more granular and predictive understanding of traffic patterns to optimize commercial routes. Managing these dynamics and capitalizing on new sources of information will better enable operators to adapt to the changing landscape. The ability to adapt to this new frontier will be a key trait for successful fleet operations in the Auto-2.0 operated environment.

Article By Christopher R. Boll of Foley & Lardner LLP

For more infrastructure and transportation legal news, click here to visit the National Law Review.

© 2022 Foley & Lardner LLP

Cannabis and District Courts: Are Those Courthouse Doors Closed Too?

We have written many times over the past few years about how the bankruptcy courts are off-limits to state-legalized cannabis businesses.  This past year brought no new relief to the cannabis industry, and the doors to the bankruptcy courts remain shut.  Are the other federal courts off-limits as well?  A recent district court decision from the Southern District of California sheds some light on this issue, and indicates that the district courts are at least partially open to participants in legal cannabis businesses.

Factual Background

The facts of Indian Hills Holdings, LLC v. Frye are relatively straightforward.  Plaintiff Indian Hills Holdings (“IHH”), Construction & Design Professional Corp. (“CDP”) and its principal Christopher Frye (“Frye” and, together with CDP, the “Defendants”) entered into a contract whereby IHH paid Defendants to purchase Cultivation “Adult” Extreme Cubes (the “Cubes”).  Defendants in turn contracted with ICT Centurion Investments, LLC (“ICT”) to purchase the Cubes.   The Cubes were marketed as a “fully integrated growing container system” used in indoor cannabis cultivation.  When ICT sold the Cubes to another party, Defendants were unable to deliver the Cubes to IHH.  Defendants refused to return the money, and IHH sued, asserting breach of contract, unjust enrichment and fraud claims.

A default judgment was entered against CDP for failing to respond to IHH’s complaint.  Frye, however, filed a motion to dismiss the complaint, arguing in part that IHH did not have standing to bring its claims.  Noting that Frye only “cursorily” raised the standing issue and that the “issue is a complex one”, the court reframed Frye’s argument as follows:

  • The contract is illegal under the Controlled Substances Act, 21 U.S.C. §§ 801, et seq.(the “CSA”);
  • Federal district courts will not enforce contracts that violate federal law;
  • Because federal district courts will not enforce contracts that violate federal law, IHH lacks an “actionable injury”; and
  • Because IHH lacks an actionable injury, the district court does not have subject matter jurisdiction.

Legal Analysis

The court began its analysis by considering whether the parties’ contract violated the CSA.  Section 863(a) of the CSA makes it unlawful to sell or offer for sale “drug paraphernalia,” which is defined to include “any equipment, product, or material of any kind which is primarily intended or designed for use in manufacturing … a controlled substance.”  Because the Cubes are used to grow cannabis, and because cannabis is a controlled substance, the sale of the Cubes would seemingly violate section 863(a) of the CSA.  However, the CSA contains an exemption, whereby section 863 does not apply to any person authorized by state law to manufacture, possess or distribute drug paraphernalia.  California allows the manufacturing of drug paraphernalia, which would include the Cubes.  As a result, the court wrote that the contract “may fall within the CSA exemption.” Additionally, the court noted that the U.S. Department of Justice has declined to enforce the CSA’s prohibition on the sale of marijuana when the marijuana is bought or sold in accordance with state law.  For these reasons, the court concluded that enforcing the parties’ contract would likely neither violate the CSA nor public policy.

While the contract may be legal, the court still had to consider whether assuming jurisdiction over the dispute would result in a violation of federal law.  After all, federal courts will not assume jurisdiction over a dispute where the court will be required to order a legal violation.  The question therefore became whether a plausible remedy existed for IHH that would not require the court to order such a legal violation.   The court held that it could fashion a remedy without violating the law by simply awarding IHH monetary damages.  A judgment for money damages, unlike an award of specific performance, would not result in IHH obtaining the Cubes and growing cannabis.  Instead, the result would be a return of the monies paid by IHH to Defendants for the Cubes.  The court’s ruling was consistent with prior cases involving state-legalized cannabis business, where the courts found ways to provide relief without violating the CSA.  E.g., Polk v. Gontmakher, 2021 U.S. Dist. LEXIS 53569 (W.D. Wash. Mar. 22, 2021) (noting that “recent case law involving cannabis-related business contracts does not espouse an absolute bar to the enforcement of such contracts”); Mann v. Gullickson, 2016 U.S. Dist. LEXIS 152125 (N.D. Cal. Nov. 2, 2016) (court may consider breach of contract claim arising from sale of cannabis business when “it is possible for the court to enforce [the] contract in a way that does not require illegal conduct”).

Takeaways

As the legalized cannabis industry continues to grow and develop, market participants will undoubtedly need access to courts.  The bankruptcy courts remain off-limit, thus requiring distressed cannabis businesses and their creditors to turn to state-law insolvency proceedings (e.g., assignments for the benefit of creditors; receiverships).  To those in the industry, it may be a welcome relief to know that at least some federal district courts have made themselves available to these parties and that these courts thus far have shown a willingness to adjudicate disputes arising from the cannabis industry.  However, any party seeking their day in federal court needs to ensure that they are not asking the court to grant relief that would violate federal law, including the CSA.  This means that while money damages should be available, specific performance of the contract is likely off the table.

Article By Mark A. Salzberg of Squire Patton Boggs (US) LLP

For more cannabis legal news, click here to visit the National Law Review.

© Copyright 2022 Squire Patton Boggs (US) LLP

Organizational Use of Social Media: Boon or Burden?

Organizational use of social media has evolved precipitously from the early days when social media was viewed as little more than a novel marketing concept on the fringe of broader traditional advertising campaigns.

However, with the increase in innovation comes concern over the extent to which increased organizational activities on social media may expose the organization to potential civil liability. Indeed, organizational use of social media has been described by some as a “virtual Pandora’s Box,” which is at once an exciting boon for business but filled to the brim with the potential for legal exposure.1 This article explores some of the most common insurance coverage issues organizations are likely to experience as their use of social media continues to expand and evolve. Although the article focuses on organizational issues, many of the principles described are equally applicable to coverage issues which may arise from an individual’s use of social media under consumer-focused policies.

As social media has become increasingly ingrained in the average consumer’s life, organizations and commercial entities have developed innovative ways to leverage their own social media presence as a marketing tool and as a means by which they can communicate directly with the consumer. For many organizations, this evolution means nothing more than using social media as an analogue to traditional advertising concepts, such as banner and sidebar ads, audio and video spots, product placement, and endorsement deals. For others, social media is at the core of the organization’s operations. Indeed, it is not uncommon for the world’s leading corporations to devote entire teams to the development and use of social media. Organizations running the gamut from national governments and major religious institutions, to startup social activist groups and mom-and-pop shops have found creative ways to use social media for endeavors ranging from disaster and emergency response, security at major events, breaking news coverage, broadscale organizational efforts, get out the word efforts, and customer service response centers.2

But as is all too often the case with innovation, the increase in organizational use of social media has been accompanied by litigation presenting novel legal questions on a variety of social media-related issues. And with the increase in litigation have come questions over the degree to which Commercial General Liability (“CGL”) insurance—the principles of which were developed decades before pioneering social media platforms such as MySpace and Friendster emerged—can keep up with ever evolving trends in the social media landscape. Fortunately, the legal theories under which social media-related lawsuits most typically arise are quite familiar. Libel, slander, copyright infringement, use of another’s advertising idea, and invasion of privacy all remain the stalwarts of the industry.3 Though courts throughout the nation have struggled at times to apply CGL’s pre-internet principles to modern day realities, traditional common law principles remain at the core of resolving these seemingly novel issues. Accordingly, and because courts have seemed inclined to require CGL carriers to provide coverage where the issues involved resemble otherwise traditional common law principles, organizations seeking to navigate the ever-evolving scope and substance of social-media related claims must keep traditional common law concepts in mind.

As a preliminary matter, social media comes with certain fundamental characteristics about which organizations must remain cognizant when developing their social media strategies. Indeed, the very feature of social media to which organizations are drawn most—the potential for cheap and instant access to 73% of the country4—necessarily implies that when a potentially problematic tweet or post catches steam, it stands to be shared far and wide and memorialized for all to see. Given the inherently “viral” nature of social media, plaintiffs are often well positioned to establish special damages by virtue of the far-reaching consequences of social media exposure alone. This is particularly problematic in libel-based defamation claims, which require proof of special damages as an element of the claim.5 Predictably, lawsuits alleging libel have grown in popularity as organizational use of social media has evolved,6 and given the wide array of theories under which such claims have been successful, they are perhaps the most problematic.7 Indeed, libel claims arising from organizational use of social media have become so common that that the phrase “Twibel”—a portmanteau of “Twitter” and “libel”—has emerged as a new favorite in the legal lexicon.

But claims arising from organizational use of social media are not limited to defamation alone. In jurisdictions that recognize the tort of invasion of privacy, courts have required CGL carriers to provide coverage in causes of action resulting from an insured’s role in the release of a third-party’s confidential information online.8 However, where the invasion of privacy has resulted from intentional conduct on the part of a third-party—such as a data breach—courts are divided on the issue of whether any potential negligence on the part of the insured satisfies the “publication” requirement of the invasion of privacy claim.9

Courts have also found that CGL coverage for so-called “advertising ideas” extends to social media-related claims.10 While these issues commonly resemble traditional trademark and trade dress infringement claims,11 some courts have interpreted Coverage B to encompass claims arising from organizations’ alleged infringement on another’s advertising strategy more broadly.12 Further, courts have used advertising ideas coverage to address publicity rights cases13 and, under certain circumstances, to encompass claims arising from patents related to internet and website functionality.14 Claims alleging intellectual property infringement have also commonly been held to apply to social media conduct under Coverage B’s express coverage for copyright, trade dress, and slogan infringement.15 Such claims are particularly likely to arise where an organization adopts content created by its social media followers without permission to do so.16

Importantly, recent revisions to CGL forms expressly contemplate certain social media conduct as “advertisement” for the purpose of coverage arising from advertising idea and infringement-related claims. Because these forms often set forth specific definitions of what constitutes an advertisement in the context of social media, organizations must pay close attention to what types of social media activity are and are not covered when developing their social media strategies.17

One interesting evolution in advertising in which such definitions have played an important role is the advent of an “influencer” industry, which has raised novel questions as to the degree to which a paid influencer’s representations of a product or infringement upon another’s intellectual property may constitute an advertisement for Coverage B purposes.18

Finally, it is worth noting that while Coverage B has been interpreted to cover a broad variety of claims arising from an organization’s use of social media, evolutions in policy exclusions and coverage limits may in some cases defeat coverage for social media-related claims.19 In particular, exclusions applicable to prior publication, intellectual property, media and internet, electronic chatrooms and bulletin boards, and unauthorized use of another’s name exclusions all stand to be implicated. However, because exclusions vary from policy to policy and are ever-evolving, a detailed examination of their potential broad applicability to social media-related claims generally is outside the scope of this article.

As this article demonstrates, organizational use of social media has emerged as a lucrative means by which organizations can market themselves and connect individually with their market base. However, as the means by which organizations use social media continues to evolve, so too have the legal theories under which social media-related claims are raised. However, with careful planning and an eye toward trends in the industry and the availability of increasingly diverse coverage options, organizations can make the most of the social media boon without falling prey to its potential pitfalls.

  1. Susan Evans Jennings, Justin R. Blount, & M. Gail Weatherly, Social Media—A Virtual Pandora’s Box: Prevalence, Possible  Legal Liabilities, and Policies, 77(1) Business & Professional Communication Quarterly, 96 (2014).

  2. See generally Matteo Tonello, Corporate Use of Social Media, Harvard Law School Forum on Corporate Governance, May 17, 2016.

  3. Although outside the scope of this article, organizational use of social media can under certain circumstances implicate federal regulatory issues. See Lord & Taylor Settles FTC Charges It Deceived Consumers Through Paid Article in an Online Fashion Magazine and Paid Instagram Posts by 50 “Fashion Influencers”, Federal Trade Commission (Mar. 15, 2016) https://www.ftc. gov/news-events/press-releases/2016/03/lord-taylor-settles-ftc-charges-it-deceived-consumers-through.

  4. See Social Media Fact Sheet, Pew Research, https://www.pewresearch.org/internet/fact-sheet/social-media/.

  5. See Restatement (Second) of Torts § 558 (describing the elements of defamation as “(1) a false factual statement concerning the plaintiff (2) published to a third-party (3) that is made either negligently or with malice, and (4) results in special damages”).

  6. See Raymond Placid, Judy Wynekoop, & Roger W. Feicht, Twibel: The Intersection of Twitter & Libel, 90 Fl. Bar J. 8, 32 (Sep./ Oct. 2016).

  7. See, e.g., AIX Specialty Ins. Co. v. Big Limo, Inc., Case No. 3:21-cv-08, 2021 WL 2708902, at *4–5 (S.D. Ohio July 1, 2021) (holding that an insurer had a duty to defend its insured nightclub under a theory of defamation where the nightclub had allegedly used a model’s picture in a Facebook post to promote a cabaret); Jar Labs. v. Great Am. E&S Ins. Co., 945 F. Supp. 2d 937 (N.D. Ill. 2013) (holding that an insurer had a duty to defend its insured under a theory of implied disparagement where the insured had published a Facebook post implicitly representing a competitor’s products in a false and misleading way).

  8. See State Farm Gen Ins. Co. v. JR’s Frames, Inc., 181 Cal. App. 4th 429, 448 (2010); Travelers Indem. Co. of Am. v. Portal Healthcare Sols., LLC, 644 F. App’x 245 (4th Cir. (Va.) 2016).

  9. See, e.g., St. Paul Fire & Marine Ins. Co. v. Rosen Millennium, Inc., 2018 WL 4732718, at *3 (M.D. Fla. Sept. 28, 2018); Innovak Int’l v. Hanover Ins. Co., 280 F. Supp. 3d 1340 (M.D. Fla. 2017); Zurich Am. Ins. Co. v. Sony Corp. of Am., 2014 WL 8382554 (N.Y. Sup. Ct. Feb. 21, 2014) (denying claims for invasion of privacy where the publication at issue arose from intentional third-party conduct); but see Landry’s Inc. v. Ins. Co. of the State of Penn., 4 4th 366, 270 (5th Cir. (Tex.) 2021) (requiring an insurer to defend against publication of personally identifiable information resulting from a data breach).

  10. See Atlantic Mut. Ins. Co. v. Badger Medical Supply Co., 528 N.W.2d 486, 490 (Wis. App. 1995) (defining “advertising idea” as “an idea for calling public attention to a product or business, especially by proclaiming desirable qualities so as to increase sales or patronage”).

  11. See Cat Internet Servs., Inc. v. Providence Washington Ins. Co., 333 F.3d 138, 142 (3rd Cir. (Penn.) 2003).

  12. See Great American Inc. Co. v. Beyond Gravity Media, Inc., Case No. 3:20-cv-53, 2021 WL 4192738 (S.D. Tex. Sept. 15, 2021) (finding that an insured’s use of the claimant’s martial arts-themed advertising strategy was subject to CGL coverage); See also Native Am. Arts, Inc. v. Hartford Cas. Ins. Co., 435 F.3d 729 (7th Cir. 2006); Gustafson v. Am. Family Mut. Ins. Co., 901 F. Supp. 2d 1289 (D. Colo. 2012).

  13. See Air Eng., Inc. v. Industrial Air Power, LLC, 828 N.W.2d 565 (Wis. App. 2013); Hyundai Motor Am. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA., 600 F.3d 1092 (9th Cir. (Cal.) 2010); but see Holyoke Mut’l Ins. Co. in Salem v. Vibram USA Inc., 106 N.E.3d 572 (Mass. 2018) (rejecting claim that Coverage B provides coverage for traditional patent infringement claim).

  14. See Gencor Indus, Inc. v. Wausau Underwriters Ins. Co., 857 F. Supp. 1560 (M.D. Fla. 1994).

  15. See generally Daniel I. Graham Jr. & Thomas W. Arvanitis, Social Media Risks & “Personal & Advertising Injury” Coverage Issues, DRI Insurance Coverage & Practice Symposium, December 9–10, 2021. A special thanks to the authors for their extensive research, from which this article benefits considerably.

  16. See Stross v. Redfin Corp., 730 Fed. App’x 198 (5th Cir. 2018).

  17. See Graham & Arvanitis, supra, at 10–11.

  18. Michael B. Rush, Social Media Advertising Under CGL Coverage B, The National Law Review, May 21, 2019.

  19. See Graham & Arvanitis, supra, at 11.

This article was written by Christopher S. Etheredge of Steptoe & Johnson law firm. For more articles about social media use, please click here.