Employers are faced with a broad range of issues associated with their employees’ use of social media. One common question from employers is: “Can we do anything about employees posting on their personal social media accounts on their own time?” As lawyers often say: it depends.

The Windsor Locks (Connecticut) Board of Education was faced with this issue when the Superintendent of Schools (a position earning $150,000 in salary per year) posted the following on his Facebook page:

• He explained that his first day on the job involved “counseling an administrator to retire or face termination,” attaching a smiley face emoticon to the end of his post; and
• He boasted that he slept until 10 a.m. on his first day, and it would be “the best job ever” if that happened every day.

Reaching a compromise, the Board of Education voted to approve a settlement that involved the Superintendent’s resignation in exchange for six months of severance pay. Of course, not all employers would agree to severance under similar circumstances, but the specific facts of each case are determinative. Indeed, not all objectionable posts by employees will support disciplinary action and not all employees posting objectionable material will have leverage to counteract legitimate employer discipline.

It is important that employers consider the potential value of regulating and monitoring the use of social media by employees and applicants. In fact, such policies are necessary in the event employers are aware of or even sponsor social media activity among employees. Of course, employers should also be mindful of the risks associated with these practices. To avoid or minimize these risks, employers adopting such policies should make sure that their social media policies are carefully drafted and consistently enforced. –David J. Sullivan

The interim final rules published by the HHS, DOL and the IRS provided details regarding the external review requirements under the Patient Protection Affordable Care Act (“PPACA”). Group health plans and insurers must comply with the external review processes under the regulations. A group health plan not subject to state external review processes is required under the PPACA to comply with the federal external review process. The regulations that are currently available do not fully address what it means to have a compliant federal external review process. The agencies have stated that the standards for the federal external review process will be based on NAIC Uniform Model Act.

Group health plans and insurers subject to these new regulations should carefully review their current internal claims and appeals procedures. If a group health plan or insurer is subject to a state external review process, then the plan or insurer must verify its procedures are compliant. A plan or insurer required to comply with the new federal external review process will have to wait for those federal requirements to be issued. In the meantime, the DOL and IRS issued Technical Release 2010-01 that provides an interim safe harbor for all plans subject to the federal review process.

What we do know is that like much, if not all, of the PPACA, these new internal claims and appeals and external review requirements will continue to add to the already existing administrative burdens placed on plan sponsors. The Kaufman & Canoles’ Health Care Practice Group will continue to monitor these regulations as further guidance is issued on the federal external review process. –Katie G. Davenport

Picture an exclusive event where everyone is trying to get in the door.  The line is around the building and you have been standing in line for hours and yet you keep seeing some people go straight up to the front of the line, flash their C-TPAT membership card and immediately get in the door.  This is happening everyday in the international trade world, and if you want your company to have a fast pass to the front of the line, your company is going to need a C-TPAT membership card. 

C-TPAT is short for Customs-Trade Partnership Against Terrorism and is a program promoted by U.S. Customs and Border Protection to enroll cooperative low-risk companies who are responsible for importing, transporting, and coordinating commercial import cargo.  C-TPAT is a voluntary program and your company may be approved for membership only if it meets certain security criteria.  Also, once a member, a company’s membership can be suspended or removed if it does not remain in compliance with C-TPAT standards.  However, as a C-TPAT member, your business will be rewarded with numerous benefits, including front of the line processing for inspections before any non-C-TPAT shipments, regardless of how long they have been waiting, and fewer inspections overall.  Click here to access the C-TPAT online electronic application.  –R. Ellen Coley

Internet domain name registrations give certain opportunists openings to try to generate revenues through unsolicited offers to “help” domain name owners protect and expand their rights.  As with similar offers relating to trademark registrations, ones relating to domain name services are often designed to make the recipient think action is urgently needed and that a response to the mailing or email containing the unsolicited offer is required.

Some of these solicitations, under titles like “Urgent Notice of Domain Extension,” “Domain Name Expiration Notice,” and “Domain Listing Service,” may offer renewal services for domain names you have already obtained, help in registering related domain names, or other services.  Others take the form of emails from parties claiming to be registrars of domain names outside the U.S., advising the owner of a .com, .net or .org Top Level Domain (TLD) name that someone else has applied to register the same name with a lower level suffix at its end – for example .asia, .hk, .cn, .kr, etc.  The purpose of these emails is to get the recipient to respond, at which point an effort to sell additional domain names begins.  Click here for an example of what these emails look like. 

Recipients of these kinds of domain name-related communications should understand that they are, by and large, attempts to market and sell unnecessary services.  For most companies, securing their chosen domain names with the .com, .net and .org TLD suffixes will give them a sufficient Internet presence and adequate assurance against “cyberpiracy” resulting from someone else using a domain name that is the same as theirs, but for its TLD suffix.  Because .com, .net and .org are the TLDs that are most known and used, there is little or no reason to also obtain (and pay for) reservations of the same domain names with .biz, .us and other similar suffixes, let alone ones like .asia, .cn and .hk that are specifically applicable to faraway regions and countries.  Solicitations for sales of these other domain names are a byproduct of the open availability of information with regard to domain name ownership, and can be safely ignored.  –Robert E. Smartschan

When faced with a lawsuit from an employee alleging discriminatory termination, an employer needs to show that there was a legitimate, non-discriminatory explanation for its actions.  The employee then has to prove that these legitimate reasons are nothing more than a pretext for discrimination.  To many human resource personnel fluent in employment law, this is not a surprise.   The natural inclination then, when firing an employee who falls within a protected class, is to document all the non-discriminatory reasons for the termination.  While such documentation is critical, HR personnel and in-house decision makers need to be aware of the importance of (i) identifying the actual legitimate reasons early, and (ii) being consistent when presenting these reasons in any future litigation. 

A recent decision from the Sixth Circuit ruled that inconsistent justifications for firing a manager implied that those non-discriminatory reasons for the termination were actually a pretext for discrimination.  In Eades v. Brookdale Senior Living, Inc., 2010 U.S. App. LEXIS 19755, the plaintiff was a forty-two year old manager who claimed he was unlawfully terminated in retaliation for filing complaints about his supervisor with human resources.  The employer, Brookdale Senior Living, won a motion for summary judgment after the district court found that the plaintiff provided no evidence of a “pretext.”  The Sixth Circuit, however, reversed this ruling, finding that the employer changed its story over the course of the EEOC investigation and litigation.  On separate occasions, the employer said Eades was fired for performance reasons and then explicitly denied that Eades’ performance was an issue.  In fact, the court identified five separate versions of the justification for termination.  While each of these reasons was legitimate and non-discriminatory, the employer’s flip-flopping raised a question of fact regarding the existence of a pretext sufficient to overcome a motion for summary judgment and allowed the plaintiff to go forward with the case. 

Employers and HR managers need to make sure that they not only document the non-discriminatory justification for disciplinary actions or terminations, but must also make sure they are consistent in all representations to the employee, the EEOC, and the courts if they want a chance of defeating any potential litigation at the summary judgment stage. 
–Michael B. Steele

As we continue to unpack the various provisions of the Patient Protection Affordable Care Act (“PPACA”), this particular post will focus on the new regulations regarding the processes for internal claims and appeals, as well as external review processes, for group health plans and group health insurance insurers.  The Internal Revenue Service (“IRS”), Department of Labor (“DOL”) and the Department of Health and Human Services (“HHS”) published the interim final regulations implementing new Sec. 2719 of the Public Health Service Act (“PHS Act”), as added by Sec. 1001 of the PPACA regarding internal claim and appeal processes and external review processes on July 23, 2010.  These regulations became effective on September 21, 2010 and apply to the group health plans for plan years beginning on or after September 23, 2010.  The regulations do not apply to grandfathered health plans.

Under these new regulations, a group health plan sponsor is required to implement an effective internal claim and appeal process for beneficiaries to challenge “adverse benefit decisions,” a “denial, reduction, or termination of, or a failure to provide or make a payment (in whole or in part) for a benefit.”  In addition to incorporating the internal claims and appeals procedures set forth in 29 CFR 2560.503-1, a group health plan must comply with the following six new standards:                                                           

1. A rescission of coverage is now treated as an adverse benefit determination for purposes of applying to the internal appeals requirements.
2. A plan or issuer must now notify a claimant of a benefit determination (whether adverse or not) with respect to a claim involving urgent care as soon as possible, taking into account medical exigencies, but not later than 24 hours after the receipt of the claim. 
3. Additional criteria are required to ensure that claimant receives full and fair review.  Plans or insurers must provide, free of charge, any new or additional evidence considered, relied upon or generated by the plan or insurer in connection with the claim. In addition, the plan or insurer must make the claimant aware of any new or additional rationale before the rationale can be used to issue a final internal adverse benefit determination so as to allow the claimant notice of the new rationale and a reasonable opportunity to respond to the new evidence or reasoning.
4. Plans and insurers must take steps to avoid conflicts of interest in the appeals process and ensure independence and impartiality of the individuals making claims decisions. For example, decisions involving hiring, compensation and other similar matters must be made without regard to the likelihood that an individual would support benefit denials.
5. Notice to claimants must be provided in a culturally and linguistically appropriate manner and the notice must sufficiently identify the claim involved.
6. If a plan or insurer fails to strictly adhere to all the regulatory requirements applicable to a claim, a claimant will be deemed to have exhausted the internal claims and appeals process. If that occurs, a claimant may initiate an external review and pursue any available remedies under applicable law, such as judicial review.

In addition to these six new requirements, a plan or issuer must provide continued coverage pending the outcome of an internal appeal.

 Stay tuned for our next post which will discuss the external review process. 
–Katie G. Davenport

For those of you doing business in notoriously corrupt countries, I hope you saw the front page story in the October 8, 2010 edition of The Wall Street Journal detailing the Justice Department’s current FCPA investigation of Schlumberger Ltd. related to its dealings in Yemen.  Schlumberger’s legal woes result from its alleged acquiescence in urgings from Yemen’s Petroleum Exploration and Production Authority to hire a local Yemeni intermediary, Zonic Invest Ltd., an entity owned by the nephew of Yemen’s president.  (According to The Wall Street Journal story, Schlumberger allegedly paid Zonic a total of $1.38 million, including a $500,000 signing bonus and payments for “services” of dubious authenticity.)  Schlumberger would be well advised to take the Justice Department’s investigation seriously, especially in light of a number of recent settlements and fines paid by companies accused of violating the anti-bribery provisions of the FCPA, e.g.,

             Company                                             Penalties and Fines

            Halliburton Co./KBR                          $579 million

            Baker Hughes                                   $44 million

            Siemens AG                                     $100 million

            Novo Nordisk A/S                             $9 million

            UT Starcom Inc.                               $3 million

            ITT Corporation                               $1.6 million

The above fines and penalties underscore both the significant liability attaching to FCPA  violations as well as the greatly enhanced enforcement activity currently being pursued by the U.S. Department of Justice and various international law enforcement entities.
–Charles V. McPhillips

In a previous post, I discussed the Federal Circuit’s recent Princo decision, which limited the affirmative defense of patent misuse.  The effect of the decision is to give licensors more room to use certain restrictive license terms.  Princo is a good occasion to take stock and reconsider what types of practices may constitute patent misuse.  What follows is not breaking news, but I hope it is a useful refresher.  

Starting with the easy stuff, Congress amended Section 271 of the Patent Act in 1988 to make clear that certain practices are not patent misuse:  (1) enforcing a patent against infringement; (2) refusing to license a patent (to anyone, or to someone in particular); (3) licensing a patent only on condition that the licensee purchase another product or take a license to another patent, unless the licensor has “market power” in the market for the patented product (generally speaking, market power is the power of a company to raise prices or restrict competition in a given product market, usually as a result of considerable market share or other competitive advantages); and (4) using one’s invention or authorizing another to use it in ways that (to simplify a bit) knowingly facilitate infringement of the patent by a third party (“contributory infringement”  — in other words, a defendant cannot avoid liability for infringement by claiming misuse on the grounds that the patent holder knew he might infringe and licensed the patent anyway).  To this list of statutory exceptions, Princo adds practices that do not directly use the patent to gain leverage and, it seems, those that are not anticompetitive.

Many other license restrictions will not constitute misuse because they do not impermissibly enlarge the scope of a patent.  No misuse occurs when a licensor grants less than the full rights in a patent, for example by imposing territorial or field of use limitations, output restrictions or quality requirements.  Many license practices are unlikely to cause misuse when they are warranted by legitimate business concerns and not clearly anticompetitive.  One example would be a “grant-back” clause where a license is granted with a requirement that the licensee grant back to the licensor nonexclusive rights in any improvements (some case law has found misuse in grant backs under some circumstances, such as those involving unrelated subject matter and exclusive grant backs involving competitors).

By contrast, looking to several (mostly decades old, but still good law) Supreme Court decisions and Princo, we can say that some types of practices can constitute misuse, at least in the right circumstances. 

“Tie-in” arrangements constitute the first set of practices.  A “tie in” is an antitrust concept that describes agreements (in the patent setting) where a seller conditions the sale of a patented product (or the license of the invention) on the buyer’s willingness to purchase an unpatented product.  For example, the Supreme Court in Morton Salt (1942) concluded that the holder of a patent in a machine for adding salt to canned foods would sell the machine only if buyers purchased its unpatented (and utterly fungible) salt tablets.  Morton was improperly trying to extend the scope of its patent to unpatented products (where it faced much stiffer competition).  What exception No. 3 above in Patent Act 271(d) clarifies is that a tie in can be patent misuse only if the patentee has market power.  In the past, some lawyers and courts believed that, because patents conferred something like a monopoly, patent holders always had market power.  The prevailing law today (as evidenced by Section 271(d)) is that patents do not necessarily create market power because many patents are not so broad and so successful as to give their owners the power to raise prices.  Just the same, licenses including tie ins of unpatented products are relatively risky if the patentee has a strong market position.

Another category of licensing terms that can be misuse are those that improperly extend the duration of a patentee’s exclusive rights.    For example, in Brulotte v. Thys Co. (1964), the Supreme Court held a license unenforceable because it required the payment of royalties beyond the life of the patent.  A licensor cannot argue that royalties of longer duration are “part of the price” of getting a license.  This rule too depends on circumstances.  For example, a licensor may require royalties before or after a patent issues if the license includes trade secret subject matter.  See Aronson v. Quick Point Pencil (1979).

What is intriguing in the wake of Princo is the question of whether other practices can amount to misuse when they are not necessarily antitrust violations and/or that do not expand the “physical or temporal” reach of the patent, but that undermines the purposes of the Patent Act.  The question has special significance for those doing business in the Fourth Circuit (which includes Virginia), because the Fourth Circuit has twice ruled (once in a patent case, and another in a copyright misuse holding) that licensor-imposed post-license noncompete clauses were unenforceable because they prevented the licensees from inventing their own devices or creating their own copyrighted software.  In both cases (Compton v. Metal Products, Inc (1971), the patent matter, and Lasercomb America, Inc. v. Reynolds (1990), the copyright case), the licenses contained long-term noncompete clauses that prevented the licensees from creating and selling competitive offerings.  The court held the practice undermined the policy inherent in both patent and copyright law of encouraging inventiveness and creativity, respectively. 

The majority opinion in Princo distinguishes and criticizes the Compton decision, and it seems to require anticompetitive effects and, perhaps, an actual violation of antitrust law.  Yet, it does not squarely hold that an IP policy-based misuse theory is invalid.   Overall, Princo is not encouraging for those alleging misuse on the ground that a license subverts the policies in IP law (at least in patent matters, where the Federal Circuit is now the exclusive court of appeals).  It said that misuse is not available “simply because a patentee engages in some kind of wrongful commercial conduct, even conduct that may have anticompetitive effects.”  Princo appears to state that the practice must involve the patent, seek to extend the physical or temporal scope of the patent, and have anticompetitive effects.  If the decision is as sweeping as the language suggests, then licensees facing some highly restrictive license terms that stifle creation but do not constitute antitrust violations (such as the noncompete in Lasercomb that barred the licensee from developing any competing software for the term of the license plus one year – the license had a 99 year term) may have no remedy.   Aggressive licensors will be emboldened.  –Christopher J. Mugel

Each fiscal year the Department of Health and Human Services Office of Inspector General (“OIG”) releases a Work Plan that establishes a list of issues that OIG will focus on as priorities during the coming fiscal year.  All health care entities are well advised to monitor and evaluate the Work Plan each year in order to understand which areas of its practice and which third-party reimbursement priority issues may be relevant to its practice for the coming fiscal year.  OIG issued the 2011 fiscal year Work Plan on October 1, 2010.

Among the issues that appear in the 2011 fiscal year Work Plan as priorities in the Medicare Parts A and B context are:  (i) payments for high cost diagnostic testing, (ii) home health agency profitability trends, (iii) disproportionate share hospital payments, (iv) implementation of the hospital-acquired conditions policy, (v) impact of quality improvement initiatives in poorly performing nursing homes, (vi) the competitive bidding process and resultant pricing determinations for durable medical equipment (“DME”), and (vii) Medicare contractors’ administrative costs, including a review of the first level of the Medicare administrative appeals process and a review of the performance of the Medicare Recovery Audit Contractor (“RAC”) program in detecting and recovering overpayments.

With regard to Medicare Part C, the Work Plan establishes as priorities, among others, the following:  (i) Medicare Advantage (“MA”) plans’ chronic condition enrollment requirements, (ii) duplicate fee-for-service billings, and (iii) the financial impact of Medicare beneficiaries disenrolling from an MA plan on the federal healthcare program.  For Part D, the priorities include, without limitation:  (i) identifying deviations from usual benefit patterns, (ii) costs of high-volume prescription drugs to Part D plans as well as state Medicaid programs, and (iii) the reliability of Part D sponsors’ internal controls to combat fraud, waste and abuse.

A copy of the entire fiscal year 2011 Work Plan can be downloaded at http://oig.hhs.gov/publications/workplan/2011/.  –Aaron J. Ambrose

Along with the advent of the new Large Business & International (“LB&I”) division of the Internal Revenue Service (“IRS”) (see earlier post regarding the new division), comes the joint dispute resolution division known as the LB&I/Appeals Fast Track Settlement program (“FTS”).  The FTS program (which is also available for other divisions) has been touted by the IRS as a method for qualifying taxpayers to have their disputes resolved with an IRS Appeals Officer in 120 days or less – a process that can easily surpass 2 years under normal resolution procedures.  Appeals officers have mediation and delegated settlement authority.  Qualifying for this program requires the completion of a one-page form (Form 14017) and is generally available to taxpayers who are already within the LB&I division and can also be used to resolve certain disputed issues before the tax return is filed. In addition to the reduction in the length of the time for resolution, the FTS program has additional goals of providing independent reviews and ensuring that all parties participate in the mediation and resolution.  Participation is voluntary and the taxpayer may withdraw from the process after it has begun.  On September 23, 2010, the IRS announced that the FTS program has proven to be successful with an 85% resolution rate.  Click here for more information regarding this program and its availability.  –Elaina L. Blanks