Businesses should periodically audit their software license compliance, to be sure they have valid software licenses for all software programs used by the business. Failure to properly license computer software can result in costly copyright violations. The Business Software Alliance, a consortium including, among others, Microsoft Corp., Apple Computer, Inc. and Adobe Systems Incorporated, attempts to enforce the legal obligations of companies to license its members’ software programs, and, upon discovering violations (often by anonymous complaints), has the ability to seek significant fines under United States copyright laws. This firm has experience negotiating favorable resolutions of software audits requested by the Business Software Alliance. However, it is a far better practice for a business organization to self-police its software usage, and periodically ensure, through its in-house information technology department, or its outsourced information technology consultants, that all of the software being used by the organization has been appropriately and lawfully licensed. –Stephen E. Story
Archive for February, 2011
The Central America-Dominican Republic-United States Free Trade Agreement (CAFTA) provides new market access for many products due to considerable tariff cuts. For example, with the implementation of CAFTA, 92% of U.S. capital goods exports, 100% of U.S. agricultural equipment, and 95% of U.S. construction equipment automatically become duty-free. There are also significant tariff cuts for consumer goods, chemicals, environmental goods, electronic goods, footwear, paper, and transportation equipment.
This agreement is of particular benefit to small and medium sized businesses. Such businesses may have the opportunity to enter the global market for the first time due to the tariff cuts required under the CAFTA-DR. Also, for businesses that have limited resources available to navigate customs and regulatory red tape, the transparency provisions should eliminate varying interpretations of product classifications and minimize delays at ports of entry. Furthermore, CAFTA-DR governments are required to publish all of their customs laws, making it considerably easier for businesses to be informed of and comply with such laws. All the CAFTA-DR customs-related obligations will phase in over three years. The text of CAFTA can be located at: http://tcc.export.gov/Trade_Agreements/All_Trade_Agreements/CentralAmericanFreeTA.asp.
–R. Ellen Coley
As mentioned in the previous post, this overview of Accountable Care Organizations (“ACOs”) is intended to lay the foundation for a more comprehensive discussion in future posts over the next several weeks. The previous post set forth the organizations that may become an ACO and the types of requirements an ACO must meet. This post will address how an ACO will qualify for shared savings and discuss the standards for quality performance.
How does an ACO qualify for shared savings?
Participating ACOs that meet specified quality performance standards for each 12-month period will be eligible to receive a share/percentage (to be determined by the Secretary of Health & Human Services (HHS)) of any savings if the actual per capita expenditures of their assigned Medicare beneficiaries are a sufficient percentage below their specified benchmark amount.
The benchmark for each ACO will be based on the most recent available three (3) years of per-beneficiary expenditures for Parts A and B services for Medicare “fee-for-service” beneficiaries assigned to the ACO (for a discussion of “assigned,” see previous post). This benchmark will be adjusted for beneficiary characteristics and other factors deemed appropriate by the Secretary of HHS, and updated by the projected absolute amount of growth in national per capita expenditures for Part A and B.
What are the standards for quality performance?
The specifics for the standards of quality performance will be determined by the Secretary of HHS and, thus, have yet to be issued. However, the standards will include measures in categories such as clinical processes and outcomes of care, patient experience, and utilization of services. We will provide the specifics upon their issuance by the Secretary of the HHS.
In sum, ACOs will be instrumental to the reform of the health care delivery system under the PPACA and deserve a more comprehensive discussion of the structure and processes. Our future posts will provide a full discussion of ACOs and keep you abreast of the final rules once issued by the Secretary of the HHS. –Christopher L. McLean
As we wrote about late last year, the National Labor Relations Board (NLRB) filed an unfair labor practice claim against a Connecticut ambulance company that fired an employee after she posted comments critical of her boss on Facebook. The parties have avoided a hearing on that claim by entering into a global settlement.
Under the terms of the settlement with the NLRB, the company agreed to change its blogging and internet policy that prohibited employees from disparaging the company or its supervisors. The company also agreed to revise another policy that prohibited employees from depicting the company in any way on the internet. The NLRB’s position was that these policies interfered with National Labor Relations Act (NLRA) protections that allow employees to discuss wages, hours, and working conditions with co-workers.
The company also entered into a private settlement with the terminated employee. While the terms were not disclosed, the NLRB explained that the parties reached a financial settlement that did not include reinstatement of the terminated employee.
This result may serve to reinforce the NLRB’s position, and it bears watching whether the NLRB files more claims like this against employers in the future. If so, don’t be caught unprepared: review your policies and tailor them as appropriate. –David J. Sullivan
The new 2011 Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys (the “2011 Standards”), which have been approved by the National Society of Professional Surveyors, the American Land Title Association (ALTA) and the American Congress on Surveying and Mapping (ACSM), will take effect February 23, 2011. The new 2011 Standards replace the currently effective 2005 standards. As of February 23, 2011, all previous versions of the Standard Detail Requirements for ALTA/ACSM Land Title Surveys are superseded by the 2011 Standards. Click here to view a complete copy of the revised 2011 Standards available free of charge on-line on the ACSM website.
Additionally, two other documents, which are also available free of charge at the ACSM website, are excellent resources and quick references to facilitate a review of operative changes in the 2011 Standards. The first is the: “Summary of Significant Changes from the 2005 Standards to the 2011 Standards.” This document lists a detailed summary of specific revisions, inclusive of changes to standard Table A.
The second is an incredibly useful tool in the form of a redlined mark-up of the 2011 Standards. “New Standards with red highlights showing which clauses within those Standards are substantially new or are otherwise significantly modified from the 2005 version” reflects detailed redline addition of revised terms, inclusive of changes to standard Table A.
The new emphasis placed upon minimum fieldwork requirements for compliant plats under Section 5, and the requirements for preparation of a plat or map to specifically reflect the results of fieldwork data and its relationship to Record Documents per Section 6, are particularly noteworthy. Presumably, the results of the newer and more stringent precision in field data, the stated bias against creation of new legal descriptions, and the express reference to the “prudent surveyor” standard of care will all combine to produce more uniform, accurate and detailed surveys.
Heightened requirements on empirical data and related surveyor certifications should produce new processes and protocols in the title insurance industry. Removal of a standard “survey exception” will presumably require a review of surveys, plats and maps satisfying the minimum requirements of the 2011 Standards. In the context of title insurance coverages, Covered Risk 2(c) in the 2006 ALTA Policy forms would presumably require a “survey reading” of a 2011 Standards compliant plat by the underwriter in order to obtain a deletion of the otherwise applicable standard survey exception. Moreover, endorsement coverages for the ALTA 9 series, ALTA 17-06, ALTA 17.1-06, ALTA 19-06 and ALTA 19.1-06, among other special endorsements, would all also presumably require additional new underwriting of a 2011 Standards compliant survey. The standard policy terms and conditions do not expressly adopt the ALTA/ACSM standards; however, they have been the practical benchmark for underwriting purposes for decades.
As the new 2011 Standards are implemented, the ripple effect will additionally beget a broad range of timely practical issues worthy of consideration:
(i) With regards to loan defaults, asset recovery, and related matters in the current economic environment, new survey standards must be considered. In the context of foreclosures and deed-in-lieu transactions, lenders/loan servicers/trustees, etc. will need to consider how the newer standards may impact a prospective disposition of distressed property. Updated survey data would presumably require compliance with the new standards; and, existing mortgagee coverage with exceptions under the older standards may not be adequate for survey related matters;
(ii) In the commercial real estate transaction context, it remains to be seen how the new procedures and commensurate expense of satisfying underwriting conditions will affect the timing and costs of CRE transactions. Presumably commercial lenders, mortgage bankers, conduit lenders, etc. will adopt objective underwriting criteria that mirror the new minimum standards and detail in the 2011 Standards; and,
(iii) It remains to be seen how the new minimum standards and detail will affect local planning, zoning, subdivision and related requirements and procedures. An argument can be made that the 2011 Standards mandate a level of detail and certification that is harmonious with many current local ordinance requirements for planning, subdivision, rezoning, Plan or Development and/or Site Plan review, etc.
Under Section 7 of the 2011 Standards, the new requirements provide significant limitations upon a surveyor’s ability to deviate from the mandatory form certification, confirming compliance with the 2011 Standards. A deviation is permitted only if required under applicable federal, state and/or local laws, rules, regulations, etc. Pursuant to Section 3(B), the surveyor must complete the survey in compliance with the requirements of the 2011 Standards, and the applicable requirements of federal, state and local statutes, administrative rules, regulations and/or ordinances that set out standards regulating the practice of surveying within a subject jurisdiction. In Virginia, reference should also be made to the provisions of Va. Code §54.1-400, et seq.; 18VAC10-20; and, 18VAC10-20-370, et seq., as well as the locality’s planning, zoning, and subdivision ordinances for minimum plat requirements and detail.
The new 2011 Standards hold great promise for better, more complete, more precise, and more accurate surveys. It is essential that lenders, title insurers, attorneys and others, who order, use and rely upon surveys become familiar with the new 2011 Standards.
–E. Duffy Myrtetus
 Multiple electronic versions are available in a .PDF format. Note that the website includes a “Statement of Copyright” as to the new 2011 Standards.
Accountable Care Organizations (“ACOs”) will play an instrumental role in reforming the health care delivery system under The Patient Protection and Affordable Care Act (the “PPACA”). ACOs are designed to facilitate coordination and cooperation among healthcare providers to improve quality of care for Medicare beneficiaries and reduce unnecessary costs. Although the Centers for Medicare & Medicaid Services (“CMS”) is expected to issue the final rules on ACOs in the near future, this post and the next several will help lay the foundation for a more in-depth discussion upon issuance of the final rules.
What is an ACO?
An ACO is an organization of healthcare providers that agrees to be accountable for the quality, cost, and care of Medicare beneficiaries enrolled in the customary “fee-for-service” program assigned to it. In this regard, “assigned” means beneficiaries for whom professionals in the ACO provide the bulk of primary care services.
Who may become an ACO?
The final rules are still to be issued; however, the PPACA itself specifies that the following may become an ACO:
- Physicians and professionals in group practices;
- Physicians and professionals in networks of practices;
- Partnerships or joint venture arrangements between hospitals and physician/professionals;
- Hospitals employing physicians/professionals; and
- Any other entities that the Secretary of Health and Human Services (“HHS”) may deem appropriate.
What types of requirements will an ACO have to meet?
Under the PPACA, there are a number of requirements an organization will have to meet in order to participate as an ACO. Even though the final rules may augment these requirements, the PPACA delineates that the organization must:
- Have a formal legal structure to receive and distribute shared savings;
- Have a sufficient number of primary care professionals for the number of assigned beneficiaries (5,000 beneficiaries at a minimum);
- Agree to participate in the program for a minimum period of three (3) years;
- Have sufficient information regarding participating ACO healthcare professionals as the Secretary of HHS determines necessary to support beneficiary assignment and determination of payments for shared savings;
- Have a leadership and management structure that includes clinical and administrative systems;
- Have defined processes to promote evidenced-based medicine, report the necessary data to evaluate quality and cost measures, and coordinate care; and
- Demonstrate it meets patient-centeredness criteria, to be determined by the Secretary of HHS.
The recent revisions to Form I-129, used to apply for H-1B visas for skilled technical workers, now require companies to certify that they are compliant with “deemed export” regulations. Human resource managers are typically responsible for filling out these forms, which means that they will have to make expert license determinations in order to certify that their company is informed of and compliant with the rules relevant to “deemed exports.” For instance, U.S. entities must apply for an export license under the “deemed export” rule if they intend to transfer controlled technologies to foreign nationals within the United States and transfer of the same technology to the foreign national’s home country would require an export license.
In addition, proposed revisions will require employers to obtain a “deemed export” license from the Bureau of Industry and Security (BIS) before applying for the H-1B visa itself. If a “deemed export” license is required, “the petitioner must submit evidence that a review of the deemed export license requirements has been completed, as set forth by Title 15, Code of Federal Regulations (CFR), Export Administration Regulations (EAR) Part 734.2 the Deemed Export Rule as regulated by the U.S. Department of Commerce.” The Department of Homeland Security is accepting comments to this proposed change until April 9, 2010.
–R. Ellen Coley
On February 28, 2011, the U.S. Supreme Court will hear argument in a dispute between Stanford University and the pharmaceutical giant Roche about the effects of an inadvertently-granted patent assignment. It is only the latest of several recent cases involving the validity, scope and effect of patent assignments. A common thread among them is that all arose from the inartful drafting and/or inattention to the details of assignment documents. In other words, they involve disputes that might have been avoided if those involved sweated the details. Here are three very current examples:
1. The legal question now before the U.S. Supreme Court in Bd. of Trustees of the Leland Stanford Junior Univ. v. Roche Molecular Systems, Inc., is whether an apparently inadvertent assignment by a Stanford researcher to a predecessor of Roche of his future inventions trumped both Stanford’s rights, under a prior agreement where the inventor agreed to assign his inventions to the university, and the federal government’s claims to those inventions under the Bayh-Dole Act. That 1980 statute allocates rights between the government and certain private entities in inventions created in federally-funded research.
In the Stanford dispute, the inventor, a Dr. Holodniy, signed a standard agreement with Stanford in which he “agreed to assign” inventions created under federal contracts. Yet, when he visited a company that had done prior work in the field (Cetus, later acquired by Roche), he signed a standard “Visitors Confidentiality Agreement” that, among confidentiality and other provisions, stated that he “hereby assign[ed] to Cetus any right” in inventions conceived “as a consequence of [his] access to Cetus’s facilities or information.” Roche invoked the Visitors Confidentiality Agreement when Stanford sued Roche for infringing inventions Holodniy later created at Stanford.
The Federal Circuit held that the Visitors Agreement was a binding present assignment of after-developed inventions, while Stanford’s agreement was a contract to execute assignments in the future. As a result, Stanford lacked standing to sue Roche for infringement of a patent that Roche in fact owned.
Stanford is now contending that the Federal Circuit’s holding undermines its and the federal government’s rights in inventions, under the Bayh-Dole Act, in the inventions which were discovered in federally-funded research. That statute gives certain private entities conducting government-sponsored research the option of owning inventions they create, and assures the government of at least licensed rights. However the Supreme Court decides that question, however, it is clear that the dispute never would have arisen if either: (1) Stanford’s standard employee agreement contained a present assignment of present and future inventions (that is, “hereby assigns” language), or (2) Holodniy had read, appreciated and objected to the broad language of the Cetus form.
2. In Abraxis Bioscience, Inc. v. Navinta, LLC, 96 USPQ2d 1977 (Fed. Cir. 2010), the Federal Circuit held that Abraxis lacked standing to sue Navinta for infringement of a patent Abraxis acquired (or thought it acquired) in a purchase of an affiliate of Astra-Zeneca. The asset purchase agreement provided that the seller “shall or shall cause one or more of its Affiliates to, Transfer . . . all of the right, title and interest” in the patents of the company being acquired. Because Astra-Zeneca needed to resolve a defect in the chain of title for the patents among its affiliates, however, the patents were not in fact assigned to Abraxis until after it brought suit against Naventa. The Federal Circuit held that: (1) the asset purchase agreement contained only an agreement to assign, not a present assignment, and; (2) the nunc pro tunc assignment to Abraxis after the suit commenced was not effective because, to have standing, a plaintiff must actually own the patents sued upon when it commences litigation.
The dissent in Abraxis noted that Navinta did not seek interlocutory review of the district court’s earlier ruling that Abraxis did own the patents-in-suit, and stressed the inequity of the appellate court’s reversal on this issue after a full infringement trial and three years of litigation. He reasoned the district court properly applied New York contract law, as opposed to the appellate court’s application of federal law.
Whatever the “correct” result might be, Abraxis might have avoided considerable expense and disappointment had it: (1) insisted that chain-of-title problems be resolved before executing the asset purchase agreement; (2) required present assignment language in the purchase agreement, and also included language vesting in it the right to sue on the patents involved; (3) not treated the assignments as unimportant post-closing details, and/or; (4) ensured that it had unassailable title to the patents before commencing litigation.
3. In SIRF Technology, Inc. v. Int’l Trade Comm., 94 USPQ 2d 1607 (Fed. Cir. 2010), SIRF argued that Global Technology lacked standing to challenge SIRF’s importation of allegedly infringing products because, even though the inventor had assigned the patent-in-suit to Global Technology, he had previously granted to his former employer an automatic assignment of present and future inventions “which are related to or useful in the business of [the former employer] . . . and which were . . . conceived during the period of the [employee’s] employment . . . .” It was agreed that the inventor conceived the invention while working for the former employer. Because the invention was also related to the former employer’s business, SIRF alleged, the invention was vested in the former employer, not Global Technology, even though it was reduced to practice and patented while the inventor was at Global Technology.
The Federal Circuit affirmed the ITC’s ruling that the invention was not “related to or useful in” the business of the former employer, and, as a result, Global Technology owned the patent-in-suit and had standing. To do so, it had to look to extrinsic evidence to divine the meaning of the parties, in light of the broad and ambiguous wording of the assignment agreement. It was able to do so because the record of prior, unrelated litigation between the former employer and Global Technology showed that the former employer became aware of Global Technology’s claim to the technology, yet raised no objection and entered into a settlement agreement not addressing the technology.
Global Technology was lucky to have such good evidence of another company’s intent. The decision is a reminder to employers and employees alike that it is in everyone’s interest to define as precisely as possible the scope of assignments (and licenses, non-compete agreements, nonsolicitation agreements, etc.). Where the scope of future business is uncertain, it should nonetheless be possible to define criteria for determining objective boundaries in the future (e.g., products actually sold; budgeted research and development projects). And employers should be reminded to determine the existence and specifics of any prior agreements to which a new hire may be bound.
Assignments often are viewed as standard forms and details to be addressed after the closing of a transaction. Not so. The decisions summarized above, and others, should remind attorneys and business people alike that there is no standard form; that agreements contain language that has implications, sometimes not readily-apparent; that one should not casually sign a document without appreciating its full meaning, and; that untended loose ends can be dangerous. –Christopher J. Mugel
When structuring a historic tax credit transaction, tax practitioners regularly compile and apply IRS rules, regulations and court decisions. Practitioners and other members of the tax credit community are keenly interested in the outcome of two recent key cases.
In Historic Boardwalk Hall LLC vs. Commissioner, the Tax Court squarely addressed the tax consequences of the structure commonly used in tax credit transactions, ruling that a partnership formed to invest in the rehabilitation of the East Hall of the Atlantic City, New Jersey convention center was not a sham lacking economic substance. The decision is the first indication that the Tax Court will not disturb federal tax credit transactions that involve government and tax-exempt entities. While the tax credit community breathed a sigh of relief with the Tax Court’s decision, practitioners are cautiously optimistic given that (a) the IRS could distinguish future cases from the Historic Boardwalk decision since the decision was not based on new rules imposing a statutory test for economic substance not taking tax benefits into account and (b) it is not clear that the IRS raised an issue regarding the tax exempt use of the property, therefore the IRS may still challenge government/non-profit participation in federal historic tax credit transactions. Moreover, the IRS is likely to appeal the Tax Court’s decision.
On a related note, in January 2011, the Fourth Circuit Court of Appeals heard oral arguments in the IRS’s appeal of the Tax Court’s December 2009 ruling in Virginia Tax Credit Fund 2001 vs. Commissioner in which the Tax Court appeared to bless the structure of Virginia’s allocated state historic tax credit, regardless of the size of the investor’s ownership interest or the length of time the investor remains in the tax credit partnership. A decision in favor of the IRS would be a blow to Virginia’s historic tax credit program as well as other state historic tax programs in which the credits can be allocated disproportionately to the tax credit investor regardless of the size of the investor’s ownership interest in the tax credit partnership. The Commonwealth of Virginia filed an amicus brief in support of the taxpayer.
In a prior post I included a link to a recent U.S. Supreme Court decision confirming the patentability of certain business methods and processes. The ruling in that case actually affirmed the lower court holding that the subject business method was not, in fact, patentable. The Court held the business method in question – a process by which buyers and sellers of commodities in the energy market could protect, or hedge, against the risk of price changes – was merely an abstract idea that was not subject to patent protection. While stating clearly that other business methods and processes could be patentable, the Supreme Court left open the question of the exact standard for determining their patentability.
So, an abstract idea is not patentable. But when does such an idea reach the point where it crosses the line from mere abstraction to something that can be patented? The first requirement is that the idea be susceptible of development into one of the defined categories of things that can be patented — what is referred to as “patentable subject matter.” These are statutorily defined in the U.S. as “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement” of any of these. Clarification of exactly what fits within each of these categories of patentable subject matter is available from many sources including, for example, the recent Supreme Court decision already noted as the most important recent guidance on the “process” category. But it suffices to say here that most products of the human intellect would likely have some chance of fitting into one of these categories. If it can also pass the test of being new and useful (which is not as easy as it might sound), an idea could develop into a patentable invention.
If all of these hurdles are overcome, the final determinant of whether an idea has matured to the point of being patent-protectable is the statutory requirement that a valid patent application must contain three things: (1) a full, clear and concise description of the invention; (2) a full, clear and concise description of the manner and process of making and using the invention, which is exact enough in its terms to enable a person skilled in the art to which the invention pertains to make and use the invention; and (3) the best mode contemplated by the inventor of carrying out the invention. If an idea for a new and useful process, machine, article of manufacture or new substance resulting from a combination of two or more different ingredients (i.e., a new composition of matter) has reached the point where it can be described in this level of detail, it is at the point where a valid U.S. patent application can be filed on it. –Robert E. Smartschan