One consequence of the United Kingdom’s vote to exit the European Union is the questions it raises regarding European trademark protection.   The UK’s “Brexit” potentially will disrupt both the trademark registration process in the EU and registrants’ trademark rights in the UK.

For the immediate future, there is no change.  EU trademark registrations are protected in the UK by statute as if they were UK registrations.  As a result, owners of EU trademark registrations will continue to enjoy protection in the UK, either by a statutory order, or potentially by way of division from the EU trademark registrations, which might or might not require some action by the trademark owners.  If anything, EU trademark owners may need to file in the UK and claim seniority from the corresponding EU registrations, although this would be sometime in the future.

It is unclear at this stage whether EU applications filed after June 23, 2016 and before the “Brexit” is complete, or pending as of that date, will extend any protections to the UK.  However, going forward, trademark owners with (or planning to have) operations in the UK would be well advised to file separate UK and EU applications to register new marks.

For further information and assistance, contact Karen Frank at kfrank@coblentzlaw.com or Thomas Harvey at tharvey@coblentzlaw.com.

Last week the Department of Labor published a Final Rule updating the federal overtime regulations.  Most significantly, the new rule increases the minimum salary required to qualify for the Executive, Administrative, and Professional exemptions to $913 per week (or about $47,476 annually).  The new rule also creates a mechanism for automatically updating the minimum salary requirement every three years starting January 1, 2020.  These changes become effective on December 1, 2016.

This new rule revises federal requirements concerning these exemptions.  However, states may impose different and additional wage and hour requirements.  Thus, employers must be mindful of and compliant with both state and federal requirements.

California Employers

California has already increased its minimum salary requirement for the Executive, Administrative, and Professional exemptions to $41,600 per year, effective January 1, 2016.  Because the new federal standard is higher, employers who have current salaried exempt California employees whose salaries exceed the California standard ($41,600) but are less than the new federal standard ($47,476) will need to evaluate their options and make appropriate changes to comply with the new federal rule.  For example, employers could raise employee salaries to meet the new salary requirement and try to maintain their exempt status.  Alternatively, employers could reclassify those employees as non-exempt.

Employers should understand that any option could have significant implications for the business and their employees.  An individualized audit of the employer’s current policies and practices will help ensure that employees are properly classified and that any changes are consistent with California and federal law.

We are happy to advise California employers through these changes. To further discuss how these new regulations may affect your business, contact Stephen Lanctot at slanctot@coblentzlaw.com, Susan Jamison at sjamison@coblentzlaw.com, Charmaine Yu at cyu@coblentzlaw.com or Clifford Yin at cyin@coblentzlaw.com.

On May 16, 2016, the United States Supreme Court issued its decision in Spokeo v. Robins, likely making it more difficult for plaintiffs to bring individual or class action lawsuits based on the bare violation of a statutory right.  However, because the Supreme Court merely clarified the standing requirement, and “took no position as to whether . . . Robins adequately alleged an injury in fact,”ⁱ the implications of the Court’s decision remains to be seen.

At first blush, this appears to be a victory for Spokeo, who had argued that Robins only had standing if he suffered an actual, real-world, “palpable” injury.  The Court explained that a plaintiff does not “automatically satisf[y] the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right.”ⁱⁱ However, the Court specified that a “concrete” injury, “is not necessarily synonymous with ‘tangible.'”ⁱⁱⁱ An injury can be “concrete” even if intangible and “difficult to prove or measure.”^iv

As a result, what will constitute concrete injury will be highly dependent on the statutory right allegedly violated.  Where a plaintiff seeks to vindicate a “private,” personal, or individual right, the threshold will likely remain low.^v In contrast, where a plaintiff seeks to enforce a “public” right, the standard may become higher, with a plaintiff having standing only if he can “allege that he has suffered a ‘concrete’ injury particular to himself.”^vi The new battleground will be whether the alleged violation involves a “public” or private” right.

Under the guidance articulated by the Supreme Court, the Ninth Circuit will likely find that Robins’ allegation that Spokeo provided false information about him involves a “private” right, and that his alleged injuries are sufficiently concrete to confer standing.^vii However, Robins’ other FCRA allegations appear to involve “public” rights, and it is unlikely the Ninth Circuit will find that Robins has alleged “concrete” injuries arising from these violations.

For more information, contact Richard Patch at rpatch@coblentzlaw.com or Skye Langs at slangs@coblentzlaw.com.

i.  Spokeo v. Robins, No. 13-1339, slip op. at 11 (2016).
ii.  Id. at 9-10.
iii.  Id. at 8-9.
iv.  Id. at 10.
v.  Id. at 2, 5 (Thomas, J., concurring).
vi.  Id. at 4, 6 (Thomas, J., concurring).
vii.  Id. at 7 (Thomas, J., concurring).

On May 11, 2016, President Barack Obama signed into law the Defend Trade Secrets Act, a culmination of a lengthy bipartisan effort to provide full federal protection to trade secrets.

The new federal law is an effort to harmonize the current patchwork of state laws protecting trade secrets and create a single nationwide framework for litigating trade secrets disputes. Legal commentators consider the DTSA to be the most significant expansion of federal intellectual property rights since the 1946 passage of the Lanham Act, which provides federal protection to trademarks.

Under the new law, companies for the first time have the right to file a federal cause of action for trade secret misappropriation. Prior to its passage, civil protection of trade secrets was a creature of state law only. Currently, federal statutes already provide for civil protection of other forms of intellectual property, including copyrights, trademarks, and patents. While most states have adopted some trade secret statute based upon the model trade secrets law, the Uniform Trade Secrets Act, not all have done so, and the statutory provisions they enacted have varied.

Proponents of the new statute hope that it will allow for the development of more predictable case law, and shift more litigation to federal courts that they believe are better equipped to handle interstate and international trade secrets disputes. Notably, however, the DTSA does not preempt state laws already addressing trade secrets. Rather, it will coexist with state laws and not modify or influence them.

What does the passage of the statute mean for companies?  First and most importantly, it provides for broader access to the federal court system. Federal courts now have subject matter jurisdiction over trade secret disputes, enabling companies to pursue misappropriation claims there. The law also provides for new and potentially valuable remedies to trade secret owners. For example, its most controversial remedy provides for ex parte seizures of misappropriated trade secrets in extraordinary circumstances, such as if the trade secret owner believes the defendant is about to take the trade secrets out of the country. A plaintiff satisfying its stringent requirements may use law enforcement to seize stolen information without providing advance notice to the defendant. There is no comparable provision in the Uniform Trade Secrets Act or any state law.

Finally, an aspect of the DTSA that is immediately relevant to companies is its whistleblower provision. The DTSA creates civil and criminal immunity for whistleblowers that disclose trade secrets under certain circumstances. Companies must provide notice of this immunity to employees and contractors in their confidentiality agreements. Those that fail to do so will not be able to utilize all remedies that the DTSA provides, including its provisions for attorneys’ fees and exemplary damages. Companies hoping to benefit fully from the DTSA’s remedies need to amend their confidentiality agreements to comply with this provision.

For more information, contact Thomas Harvey at tharvey@coblentzlaw.com or Karen Frank at kfrank@coblentzlaw.com.

Authored by Scott Hall; originally published in the Daily Journal, April 22, 2016

The Age of Drones is here, but the legal and regulatory framework necessary to fully realize the anticipated benefits of drones continues to lag behind advances in technology. The potential applications for drones, including aerial photography, precision agriculture, emergency response and package delivery – to name just a few – are well known. Less clear are the laws governing drone use, as well as the basic question of who possesses, or should possess, the authority to make laws aimed at drones. While the majority of states have passed or are considering drone-related laws, currently proposed federal legislation, such as the FAA Reauthorization Bill (S.2658), passed by the Senate on April 19, would prohibit states and local governments from enacting or enforcing any law or regulation “relating to the  design, manufacture, testing, licensing, registration, certification, operation, or maintenance” of drones.

The presumption of all drone-focused legislation, if passed, would significantly restrict the ability of states and local governments to deal with problems in their localities arising from the increasingly popular and widespread use of drones. Those in favor of broad federal preemption argue that strict uniformity is necessary so that drone manufacturers and operators are not confronted with a patchwork of differing state and local laws. But while uniformity is important, the sluggishness with which federal laws and regulations have been, and continue to be, developed may be hindering the advancement of the fledgling drone industry at a critical time for its growth.

. . .

To continue reading the article, click here.

Authored by Skye Langs and Richard Patch. Originally published in Law360, November 2, 2015.

“On Monday, the U.S. Supreme Court heard arguments in Spokeo Inc. v. Robins, a case that has the potential to fundamentally alter the landscape of class actions based on violations of statutory rights. At issue in Spokeo is whether a plaintiff has Article III standing to sue for a violation of his or her statutory rights, absent proof of any “concrete harm” resulting from the violation. If the petitioner is victorious, plaintiffs will no longer be able to sue for bare violations of a statute unless they can demonstrate that they suffered some real-world harm.

. . .

Ultimately, the Supreme Court’s decision in Spokeo could make it much more difficult for plaintiffs to bring large-scale class actions based on bare violations of the FCRA as well as other similar privacy statutes, such as the Telephone Consumer Protection Act, the Electronic Fund Transfer Act and the Video Privacy Protection Act. Under the status quo, class certification for claims based on statutory violations is a relatively low hurdle because no individualized proof of harm is required. Once a class is certified, defendants are under tremendous pressure to settle in the face of potential exposure in the billions of dollars. A ruling in favor of Spokeo would equalize this imbalance, raise the bar for class certification by requiring common proof of actual, real-world harm, and reduce the risk of large-scale liability to corporate defendants.”

Full article can be found at Law360 (subscription required).

Authored by Scott Hall; originally published in the Daily Journal, October 15, 2015

Last week, Gov. Jerry Brown signed into law Assembly Bill 856, which amends Civil Code Section 1708.8 to define a “physical invasion of privacy” as including knowingly entering “into the airspace above the land” of another person without permission in order to capture images, sounds, or other physical impressions of private activity. The law targets the increasingly aggressive efforts of paparazzi and other “peeping toms” in using drones to capture images of private conduct.

AB 856 passed unanimously and has been widely applauded, not only by celebrities, but by many others who value privacy and harbor reservations about the rapidly expanding uses of drones.  The new law, however, was only one of five drone-specific bills to reach the governor’s desk in recent weeks. The four other bills were vetoed by Brown, despite strong bipartisan support.

Less than a week earlier, the governor considered Senate Bills 168, 170 and 271. All three, like AB 856, passed with unanimous votes in the Legislature, but unlike AB 856, were met with a veto. According to Brown, he vetoed those bills because they sought to create “new crimes” that added complexity to California’s voluminous criminal code “without commensurate benefit,” given that much of the activity sought to be prohibited was already covered by other criminal provisions. His rejection of the bills comes as a disappointment to those who hoped the governor would embrace the opportunity to address some of the new and unique legal issues presented by the growing ranks of drones in California’s skies.

. . .

To continue reading the article, click here.

Authored by Timothy Crudo, Rees Morgan and David Anderson; originally published in the Daily Journal, July 15, 2015

White collar pundits have been atwitter since the 2nd U.S. Circuit Court of Appeals’ insider trading decision last December in U.S. v. Newman, 733 F.3d 438 (2d Cir. 2014). There the 2nd Circuit held that, to convict a tippee who traded on inside information, the government must prove that he knew that the insider disclosed the information “in exchange for a personal benefit.”

While that holding was no surprise, the court seemed to drop a bomb with its explanation of what constitutes a personal benefit. For decades, “personal benefit” had been understood to include a gratuitous gift of a tip from one friend to another. Now under Newman, that benefit must be “objective, consequential, and represent[] at least a potential gain of a pecuniary or similarly valuable nature.” In other words, the tipper must receive (or expect to receive) “something more than the ephemeral benefit of the [tippee’s] friendship.” The good vibe of gifting a buddy may no longer be enough.

The 9th U.S. Circuit Court of Appeals’ decision last week in U.S. v. Salman, 2015 DJDAR 7811 (July 6, 2015), is the ninth reported opinion, and first by an appellate court, to analyze Newman. A remarkable one-third of those – including Salman – were written by U.S. District Judge Jed Rakoff of the Southern District of New York. Tracing the evolution of Judge Rakoff’s view of Newman sheds light on both Newman and Salman and whether there is a split between the two.

It’s fair to say that Judge Rakoff is no fan of Newman’s suggestion that the tipper’s personal benefit must be a pecuniary quid pro quo. In April, he seemed to concede that Newman had so narrowed the definition of “personal benefit,” although he questioned whether that holding could be squared with Dirks v. SEC, 463 U.S. 646 (1983), where the Supreme Court, in “arguably unclear” language, suggested that an insider’s “gift of confidential information,” without any quid pro quo, could suffice. SEC v. Payton, 14-4644 (S.D.N.Y. April 6, 205).  Begrudgingly applying Newman’s “more onerous standard,” he concluded that the parties “history of personal favors,” including sharing expenses and help the tippee gave the tipper with a prior legal problem, was sufficient to find a pecuniary benefit to the tipper.

To continue reading the article, click here.

Are you ready? California’s mandated sick leave for all employees pursuant to the Healthy Workplaces, Healthy Families Act takes effect July 1, 2015.

An employer without a paid sick leave or PTO policy must adopt a sick leave policy immediately to ensure full compliance. Employers with paid sick leave policies and/or PTO policies must carefully review them to ensure full compliance with the requirements of the new statute.

Requirements:

• Full-time, part-time, temporary and seasonal employees who work in California for thirty or more days in a year are eligible.
• Accrued sick leave is available after 90 days of employment upon the employee’s oral or written request.
• Sick leave will accrue at the rate of 1 hour of benefit for each 30 hours worked up to a maximum accrual of 48 hours or block vesting of at least 24 hours each year.
• All relevant records must be maintained for a period of three years and be available for review by the Labor Commissioner and your employees.
• Display mandated poster and ensure that employees receive notice of the amount of available paid leave benefit each payday.
• Your wage theft prevention act notification must include information regarding the availability of paid sick leave.
• The definition of family is very broad.
• A separating employee’s unused accrued sick leave need not be cashed out. It must, however, be restored to that employee if he/she returns to the employer within one year of separation.

For more information, contact Stephen Lanctot at slanctot@coblentzlaw.com, Susan Jamison at sjamison@coblentzlaw.com or Charmaine Yu at cyu@coblentzlaw.com.

Yes, it is possible to save hundreds of thousands of dollars per year on your commercial real estate property taxes!  All it takes is a little planning and prompt, timely action for property owners to significantly reduce their property tax burden.  In the following discussion, we will address the importance of planning and filing your appeals early, planning business transactions, such as changes of ownership, to minimize your tax consequences and other important tips that every commercial and residential real estate owner should know.

PLAN TO FILE YOUR VALUATION APPEALS IN A TIMELY MANNER

The most valuable advice that we can give our clients is to FILE VALUATION APPEALS IN A TIMELY MANNER.  The deadline for filing appeals is sometimes extraordinarily brief.  For example, if you wait to receive your tax bill, the time for appealing the valuation has oftentimes already expired.  Therefore, it is important to plan in advance, especially since rules and forms vary between counties.  Here are some important considerations when appealing:

• File Prop 8 Appeals by September 15th (or November 30 depending on the County) of Each Year. If you fail to file a so called Prop 8 Appeal contesting the valuation for a particular tax year on time (between July 2 and September 15 or November 30 for some counties), you cannot obtain a tax refund for that year even though your property has declined in value.  The reduction in value only applies to that particular year.  Some counties (e.g., San Francisco) send out a statement in July showing the assessed value for the fiscal year beginning July 1, but many counties do not.  It is very important to plan in advance for filing your appeal, especially if you anticipate that your property has significantly declined in value, as discussed below.
• File Supplemental and Escape Appeals Within 60 Days of Notice. In many situations, the clock starts ticking from the date that the Assessor or Tax Collector issues its notice, even if not mailed on that date.  These notices are typically issued when property has been sold, a “change of ownership” (as discussed below) has occurred, new construction is completed, or when the Assessor realizes that something was missed or an erroneous exemption occurs.  Since these notices can show up at any time, you should prioritize your response and act swiftly in filing your Appeal.
• File an Appeal to Seek Correction of Base Year Value Promptly. A property’s base year value can be reassessed upon a “change of ownership” or after new construction.  While you technically have four years to file an Appeal, you are not entitled to a tax refund for any tax year in which you failed to file a timely Appeal, even if you are ultimately successful as to the base year value.  Therefore, for the Appeal to retain its maximum value to you, it is important to act quickly when you receive the supplemental or base year notice.

Overall, the Assessment Appeals process includes a hearing before an administrative tribunal (akin to a mini-trial), and it is a good idea to have competent legal representation (and a competent appraiser).  Your attorney should be involved as early as possible to assist you in planning for and filing your Appeals, gathering evidence, conducting negotiations for a Stipulated Assessment, and/or for litigating your Appeal.  Although exchanges of information with the Assessor are provided for, there are otherwise no discovery proceedings such as depositions or interrogatories.  Oftentimes, the benefits of a successful Appeal and the resulting valuation may carry over for several years.

IDENTIFY A REDUCTION IN YOUR PROPERTY VALUE

Every owner of commercial and residential real estate should know how their property is valued, and when it changes in value.  It is a worthwhile investment to consult with a professional appraiser so that you can understand the method of valuation of your property and can compare it with its assessed value.  If the value of the property has declined below the assessed value, then you should be sure to file your Prop 8 Appeal in a timely fashion (between July 2 and September 15 or November 30 for some counties). Here are some common situations that may signal a potential decrease in property value:

• Loss of a major tenant, especially an anchor tenant in a shopping mall
• Prolonged vacancy of space
• Decline in revenue
• Decline in rents for new leases
• Decline in sales prices of comparable properties
• Decline in economic market conditions, such as a rise in interest rates or change in capitalization rates

BE ALERT FOR A “CHANGE OF OWNERSHIP”

A “change of ownership” is a technical, legal term that triggers a reassessment and is a potential trap for the unwary.  Many property owners do not realize that a “change of ownership” can occur in circumstances where there is no apparent purchase or sale of property, such as a transfer of ownership within an entity or a lease of 35 or more years, including options.  Also, a lease for any term of or an exclusive right to use property owned by a government entity creates a possessory interest which interest is subject to property taxes.

Generally, a “change of ownership” occurs with a transfer of a controlling interest in an entity (e.g., more than a 50 percent interest) to one person or entity resulting in a change in control of the entity.  However, there are some transfers in title that will not involve any tax consequences, such as original co-owners transferring title from one form to an entity in the same proportion or certain trusts (although subsequent transactions may trigger a “change of ownership” even if no owner obtains more than 50 percent of the ownership interests, such as when the original co-owners cumulatively over time transfer more than 50 percent ownership interest in the new entity), or transfers between affiliates.

While there is no need for property owners to know all of the various rules and exceptions relating to a “change in ownership,” it is important to know enough in order to be alert for situations that may give rise to this occurrence.  Savvy property owners will involve their attorneys early, because careful planning in the structuring of transactions can void triggering events that will result in a reassessment.

Additionally, remember that the time for filing an Appeal triggered by a “change of ownership” is very brief, as discussed previously.  So, if you receive a notice and have any doubt as to whether a “change of ownership” in fact occurred, consult an attorney to file your Appeal properly filled out and quickly to preserve your rights.  (An Appeal can always be dismissed at a later date, but the consequences of a missed filing usually cannot be reversed.)

AVOID OR MINIMIZE DOCUMENTARY TRANSFER TAXES

Generally, when a transfer of real property occurs, such as with a change of ownership or change in title, a county and sometimes a city documentary transfer tax is assessed based on the property’s value.  Several counties have either enacted legislation (San Francisco) or take the position that a change in ownership of an entity triggers transfer taxes.  These transfer taxes have increased substantially (e.g., San Francisco in recent years).  However, there is a broad range of interpretation among the various cities and counties in California.

One exception is that a mere change in the form of ownership from or to an entity is excluded from county and local transfer taxes as long as the change in form is proportional to the initial investment.  There are also several court decisions and many exceptions to the rules that may apply to situations that would otherwise appear to warrant a transfer tax.  A City’s transfer taxes (e.g., Oakland) can often be greater than the county tax, depend on the local jurisdiction’s ordinances and interpretations.

In the event that you question the appropriateness of a transfer tax payment, there typically is a one-year statute of limitations to file for a refund.  Once again, you should carefully plan to avoid or minimize the applicability of these taxes before you effect the transfer.

ADDITIONAL MONEY SAVING TIPS

A very important method of saving your tax dollars is by avoiding penalties.  This requires that you either familiarize yourself with all applicable rules or have competent counsel to assist you in ensuring that all appropriate documentation is filed on time.

There are many rules that fall outside the purview of routine, day-to-day concerns, which may escape your attention.  For example, a change of ownership statement must be filed with the State Board of Equalization within 90 days of any transaction involving the acquisition of real estate in California, when it is acquired indirectly through acquisition of control of a legal entity.  A penalty of 10% of the tax applies for the failure to file timely.  The filing of the preliminary change of ownership statement will also start the running of the four-year statute of limitations on supplemental assessments.  A Form 571L Business Property Statement must be timely filed by the last Friday in May by anyone doing business in California when their business personal property, such as office furniture, equipment and art objects, exceeds the sum of $100,000.  Also, watch for duplicate assessments, where the tenant is being assessed separately on its tenant improvements and the lessor’s property value is being determined by the income method assuming that the property is fully improved.

If you are involved in any renovation projects, you should know that there are certain types of improvement costs that can be excluded from your additional assessment.  These exclusions include costs incurred for seismic or earthquake retrofitting, fire suppression or improvements in accessibility pursuant to the Americans with Disabilities Act (ADA).  However, you must act quickly in applying for these exclusions as soon as they are identified, usually at the beginning of the project.  If you have not filed within 30 days of project completion, you lose the opportunity to save these taxes.

Additionally, if you are involved in new construction, be sure to segregate costs that do not add value to the project, such as demolition, excessive ground preparation and change orders.  Also be sure that your tenants are aware of these provisions and avoid any duplication in reporting the same costs.  New construction will increase the property’s assessed value.

There are also some situations that can be negotiated on your behalf for payment of your tax bill, such as an escape assessment, allowing for payment over five annual installments without accruing interest.  There are other situations that allow for a cancellation of penalties, interest and/or redemption fees on delinquent taxes.  Competent legal counsel can assist you in determining when these situations apply.

In summary, commercial and residential real estate property owners should not be afraid to challenge the property values that an Assessor assigns to the property.  With attention to detail and careful planning, real estate taxpayers can significantly reduce their annual property tax obligation.

For more information, contact Jeffry Bernstein at jbernstein@coblentzlaw.com or 415.772.5716.

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