Should Chippendales be granted a trademark in their “trademark” “Cuffs and Collar” outfit?  The United States Court of Appeals for the Federal Circuit recently addressed the issue in In re Chippendales, USA, Inc. No. 2009-1370, 2010 US App. LEXIS 20421 (Fed. Cir. October 1, 2010).

Trademark protection may be secured for “trade dress.” “Trade dress” encompasses the design and appearance of the product and its packaging, and the Supreme Court has held that trade dress can be inherently distinctive (see Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 775 (1992)) or proven distinctive through pervasive use. Here, the “Cuffs and Collar” worn by Chippendales dancers constitute “trade dress” because they are part of the “packaging” of the product, which is “[a]dult entertainment services, namely exotic dancing for women.”  At issue was whether the Cuffs and Collar were inherently distinctive—and thus, entitled to a federal trademark.  The Federal Circuit Court of Appeals affirmed the Trademark Office in determining that such “packaging” is not inherently distinctive:

In determining inherent distinctiveness (as opposed to acquired distinctiveness), the Court applied the following four-part test:

[1] whether it was a “common” basic shape or design, [2] whether it was [not] unique or unusual in the particular field, [3] whether it was a mere refinement of a commonly-adopted and well-known form of ornamentation for a particular class of goods viewed by the public as a dress or ornamentation for the goods, or [4] whether it was capable of creating a commercial impression distinct from the accompanying words.

Seabrook Foods, Inc. v. Bar-Well Foods, Ltd., 568 F.2d 1342, 1344  (C.C.P.A. 1977).  If a mark satisfies any of the first three tests, it is not inherently distinctive. See id.; 1 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 8:13 (4th ed. 2008) (The fourth factor, whether the trade dress was capable of creating a commercial impression distinct from the accompanying words, was not applicable).

As the Federal Circuit counseled in Tone Brothers, Inc. v. Sysco Corp., 28 F.3d 1192 (Fed. Cir. 1994), ultimately “the focus of the [inherent distinctiveness] inquiry is whether or not the trade dress is of such a design that a buyer will immediately rely on it to differentiate the product from those of competing manufacturers; if so, it is inherently distinctive.” Id. at 1206 (citing Paddington Corp. v. Attiki Imps. & Distribs., Inc., 996 F.2d 577, 582–84 (2d Cir. 1993)). Thus, if the mark is inherently distinctive, it is presumed that consumers will view it as a source identifier. If the mark is not inherently distinctive, it is unfair to others in the industry to allow what is in essence in the public domain to be registered and appropriated, absent a showing of secondary meaning. The policy is basically the same as the prohibition against registering generic word marks, or descriptive marks that have not acquired secondary meaning.

Deciding that the proper time for measuring inherent distinctiveness is at the time of registration, the Court ultimately found that the third Seabrook question (whether the Cuffs and Collar mark constitutes “a mere refinement of a commonly-adopted and well-known form of ornamentation for a particular class of goods.”) was satisfied as the Cuffs and Collars were a mere variant or refinement of the pervasive Playboy mark, which includes the cuffs and collar together with bunny ears.  As such, the Cuffs and Collar were not inherently distinctive and could not be trademarked on that basis (could only be trademarked on the basis that the symbols had acquired distinctiveness through pervasive use), proving the adage that in the world of trademarks, “less is not always more.”

Stephen E. Noona is the head of Kaufman & Canoles’ Trial Section and Co-chair of its Intellectual Property Law and Franchising Practice Group.  In his 24 years of practice, he has been counsel in hundreds of intellectual property cases in federal courts across the nation, including over sixty (60) patent cases in the Eastern District and is Fellow in the American College of Trial Lawyers. He regularly appears before the judges in all four Divisions of the Eastern District on intellectual property matters.  –Stephen E. Noona

The Equal Employment Opportunity Commission (EEOC) has consistently taken the position that relying on an applicant’s credit history in making hiring decisions can have a disparate impact on women and racial minorities.  As the sluggish economy continues into 2011, the EEOC has indicated a new focus on this issue.  In October of last year, the EEOC held a public meeting and considered testimony from a panel of experts about the effect of relying on credit reports in making employment decisions.  Shortly thereafter, on December 21, 2010, the EEOC filed a lawsuit against Kaplan Higher Education Corporation, in which the EEOC challenged Kaplan’s practice of denying employment based on credit history.  According to the EEOC’s lawsuit, this practice has a disparate impact on racial minorities and is not justified by business necessity.

Commenting on the lawsuit against Kaplan, EEOC Regional Attorney Debra Lawrence stated that “Title VII of the Civil Rights Act of 1964 was intended to eliminate practices that serve as arbitrary barriers to employment because of a job applicant’s race.”  In light of this, “employers need to be mindful that any hiring practice be job-related and not screen out groups of people, even if it does so unintentionally.”

This case is a good reminder to employers who use credit checks when making employment decisions.  Such employers should review their use of credit checks to ensure that the information being used is job-related and justified by business necessity.  This type of review must consider the nature of the employer’s business and the nature of the duties performed by the particular employee. –David J. Sullivan

On December 22, 2010, Congress passed the James Zadroga 9/11 Health and Compensation Act of 2010 (the “Zadroga Act”).  Most people recognize the Zadroga Act as being the act that provides financial and medical relief to our beloved first responders from 9/11 whose health was negatively impacted.  In order to offset the cost of this act, Congress imposed a new excise tax on certain foreign persons that provide goods and services to the federal government.   The tax is equal to 2 percent of the amount of the federal procurement payment which is any payment made pursuant to a contract with the government of the United States for either 1) the provision of goods that are manufactured or produced in a country that is not a party to an international procurement agreement with the United States; or 2) the provision of services that are provided in a country that is not a party to an international procurement agreement with the United States.  The amount is collected as an additional amount to be deducted or withheld as part of the withholding of tax on foreign persons.    An annual compliance review will be conducted by the Administrator for Federal Procurement Policy. –Elaina L. Blanks

What will the cost be to the taxpayer?  According to a Congressional Budget Office Cost Estimate of November 9, 2010, the direct government spending may be relatively small in comparison to the expansion of the housing program, with the anticipated direct spending of $5,000,000 and discretionary costs of $4,000,000 over the 2011-2015 period and $9,000,000 over the 2011-2020 period. These projections are, of course, made with assumptions that may or may not come to be over time.  The report also notes that there will be additional costs to owners of properties or projects that receive funding from the additional reporting requirements imposed by the Act.  –Paul W. Gerhardt

According to a recent report from the Equal Employment Opportunity Commission (EEOC), Charges of Discrimination rose to record levels during the EEOC’s most recently completed fiscal year (period ending September 30, 2010).  Total charges soared to 99,922 during that period, an increase of 7.2% over the previous fiscal year and the highest level of new charges ever recorded by the EEOC.

The largest increase was seen among charges filed for disability discrimination.  Recent changes to ADA regulations, making it easier for individuals to satisfy the definition of disability, likely contributed to this increase.  Retaliation charges continue to outpace all other types of charges, making up just over 36% of total charges filed with the EEOC.

With the sluggish economy and high unemployment rates continuing into 2011, employers should expect these trends to continue.  Avoid being part of the next year’s numbers by reviewing your discipline and discharge procedures, particularly your documentation processes.  Consistent application of legitimate policies and thorough documentation greatly decrease your potential for liability. –David J. Sullivan

On December 17, 2010, President Obama signed into law the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the “Middle Class Tax Act of 2010″).  Most people are familiar with the Middle Class Tax Act of 2010 as being the act that extends 1) the Bush Tax Acts of 2001 and 2003, 2) unemployment benefits and 3) some of the stimulus measures.  An additional extension that received less attention is the extension of the controlled foreign corporation (“CFC”) look-through rule (the “Look-Through Rule”).  This temporary rule (which began in 2006) expired after December 31, 2009 for calendar year taxpayers. Thanks to the Middle Class Tax Act of 2010, the Look-Through rule is now retroactively reinstated for 2010 and through 2011.  The Look-Through Rule is found in I.R.C. 954(c)(6) and generally provides that, a CFC that receives or accrues dividends, interest, rents, and/or royalties from a related CFC is not required to report the income as a foreign personal holding company income provided that the income is properly allocable or attributable to income of the payer that is not subpart F income and not treated as effectively connected with the conduct of a trade or business in the United States.  In 2007 (after the original enactment of the rule), the IRS provided guidance on the application of the Look-Through Rule in Notice 2007-9.  Click here for the Notice.  –Elaina L. Blanks

Recent media reporting on a new patent issued to Amazon for a “System and Method for Converting Gifts” has focused on changing attitudes towards gift giving and acceptance inherent in the subject matter of this patent.  That is, instead of thanking Aunt Mildred for her latest gift and bringing it out of storage whenever she visits, the new Amazon system will – if she purchased the gift online – let you have the online retailer send Aunt Mildred a thank you note for the gift she gave you and at the same time let you convert the gift to something you really want.  Leaving aside how Miss Manners and the Emily Post Institute may feel about the process patented by Amazon, the issuance of their patent underscores the continuing quest for business advantage through patenting of business methods and processes, and the continuing willingness of the U.S. Patent and Trademark Office to issue business method patents. 

In its decision in Bilski v Kappos in mid-2010, the U.S. Supreme Court declined to rule that business methods are not patentable subject matter and, in fact, loosened the standard for them previously articulated by the U.S. Court of Appeals for the Federal Circuit.  That standard will continue to evolve through future court decisions, but for the moment patenting of novel and non-obvious business methods remains a viable pathway to competitive advantage for companies that can afford it.  This is especially so when the claim of legal rights in the business method in question can be interwoven with claims to a computer-based or other technological means of facilitation, as in the Amazon patent, which characterizes the subject matter of the patent as “a computer-implemented data processing system comprising a user interface and gift conversion logic.”
–Robert E. Smartschan

A recent case highlights the difficulty employers may face when trying to identify employees who are covered by the Uniformed Services Employment and Reemployment Rights Act (“USERRA”).

USERRA is intended to encourage noncareer military service, minimize the disruption caused by noncareer service, and prevent discrimination against service members.  If your company employs individuals serving as reservists, when do these employees trigger protections under the Act?  For example, what about reservists on inactive status, are they afforded any rights? 

By its terms, USERRA provides that: “A person who is a member of, applies to be a member of, performs, has performed, applies to perform, or has an obligation to perform service in a uniformed service shall not be denied initial employment, reemployment, retention in employment, promotion, or any benefit of employment by an employer on the basis of that membership, application for membership, performance of service, application for service, or obligation.”  38 U.S.C. Section 4311(a). 

Recently, a federal court of appeals explained that USERRA’s protections applied to a member of the U.S. Army Reserves who was on inactive status (did not require leave for military training), but who had indicated to his supervisors that he intended to return to active duty in the near future.  The court held that this notification satisfied the “applies to perform” requirement described above, recognizing that it was not “strictly speaking an application for service.”  Vega-Colon v. Wyeth Pharmaceuticals (1st Cir. 2010).

This case is a strong reminder that human resource professionals and supervisors must be extremely carefully when handling issues related to employees requiring military leave.
–David J. Sullivan

IRS Commissioner Don Shulman announced on November 16, 2010 that the IRS has now withdrawn its “John Doe” summons against UBS AG Bank thanks to the IRS’s success and cooperation in discovering undisclosed offshore accounts.  In August 2009, UBS, the Swiss government and the United States entered into an agreement whereby account holder information on US taxpayers was disclosed to the IRS.   As a result of the agreement, the IRS provided a voluntary disclosure program last year and announced that approximately 15,000 voluntary disclosures were made and an additional 3,000 voluntary disclosures have been made subsequent to the close of the voluntary disclosure program.  So far, the IRS is asserting that the closed cases have averaged more than $200,000 in tax collections (tax, penalties and interest) per case.  Shulman’s announcement echoes his continued priority and focus on combating international tax evasion.  Thanks to this success, Shulman anticipates developing new leads with numerous banks, advisors and promoters from around the world.  Shulman also touted the benefit of having these taxpayers being brought back into the US tax system and noted that this success is one of many efforts that the IRS is engaged in to increase international tax compliance.  Other efforts include the recent reorganization of the Large Business and International Division, a focus of which is to further emphasize and specialize the international and offshore banking effort and continued work with other governments through the Organization for Economic Co-operation and Development.  A copy of Shulman’s complete announcement is posted here. 
–Elaina L. Blanks

What does affordable housing for seniors have to do with health care? Plenty.  Since 1977, the Senate Special Committee on Aging has been a permanent forum for study, evaluation and consideration of issues affecting our nation’s elderly.  A quick review of the Committee’s website at http://aging.senate.gov tells you that they have been a key participant in annually reviewing Medicare performance and providing oversight of the administration of laws important to the well-being of the elderly, among other activities.  The Committee references the findings of the Commission on Affordable Housing and Health Facility Needs for Seniors in the 21^st Century when noting that there will be an estimated 730,000 more senior housing units needed by 2020.  This is where healthcare meets housing. 

With considerable amounts of Medicare and Medicaid funds being expended in the U.S. for nursing home care, why not continue to encourage development of additional senior housing that could facilitate a longer period of independence for an aging senior in need of an affordable housing option, where they can take advantage of community interaction and community-based services?  A part of the Housing Act of 1959, the Section 202 Housing for the Elderly Program was put in place to facilitate affordable housing for the elderly using tools like capital grants and rental assistance to non-profits developing housing for low income elderly.  With momentum from the Special Committee on Aging and backing from a wide variety of non-profit organizations and support from both the Republican and Democrat sides of the Senate, in December, 2010, Section 202 Supportive Housing for the Elderly Act of 2010 was passed to expand these initiatives.  This Amendment to the Housing Act of 1959 was signed into law by the President on January 4, 2011.  In updating the Section 202 program, the Supportive Housing for the Elderly Act of 2010 does a number of things in an effort to expand the use of the program including: encouraging the development of new units and preservation and enhancement of existing units and expanding access to assisted living facilities and programs that might be associated with those aided by assisted living.  And importantly, it provides for the Secretary of Housing and Urban Development’s maintenance of an information clearing house of affordable housing projects for seniors and a wide variety of government programs, including Section 202.  Some of the other changes, for example: make mandatory the authority of the HUD (Housing and Urban Development)Secretary to adjust the annual amount of a contract for project rental assistance to provide for reasonable project costs; potentially expand the use of national expertise and backing in projects by allowing a national private nonprofit organization that owns multiple housing projects to use a local advisory board to satisfy the local governing board requirement;  expand the definition of “private nonprofit organization” to include limited partnerships and other investor-type entities with a non-profit principal; and expand the definition of assisted living facility for grants for conversion of elderly housing to assisted living.   If this peaks your interest, come back for my next post which will discuss the cost to the taxpayer.
–Paul W. Gerhardt