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.

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.

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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 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.

Copyright © 2015 Coblentz Patch Duffy & Bass LLP, All Rights Reserved.

With the opening of doors to business in Cuba, U.S. brand owners should take steps to make sure their trademarks are protected.

Unlike in the U.S. (and many other jurisdictions), where trademark rights are based on use,  trademark rights in Cuba accrue to the first party to file to register a trademark. Any party can file for trademark registration, even if that party has never used, or does not even intend to use, the mark.  Due to the risk of third parties beating a U.S. trademark owner to the Cuban register, and the potential of the party then holding the U.S. trademark owner hostage over its marks, U.S. trademark owners that anticipate doing business in Cuba should take steps now to register their marks.

Trademarks can be registered in Cuba by filing with the Oficina Cubana de la Propiedad, through local trademark agents.  An IP exception to the current embargo against Cuba allows US businesses to pay filing fees and retain local agents in Cuba in order to protect their intellectual property rights.

A forthcoming explosion in potential domain names could have dramatic effects on trademark owners. Trademark and brand owners should take steps promptly to protect their marks.

Until recently, so-called “top level domains,” that part of a domain name address to the right of the dot, were limited to just 23, including the familiar .com, .biz and .net, among others.  However, since 2013, in an widening of the domain name system, over 580 new generic top level domains (“gTLDs”) have become available, and at least 800 more are in process.  Many of the new gTLDs are potentially useful generic terms such as .boutique, .restaurant, .menu and .design.  However, others of the new or proposed gTLDs are potentially disparaging terms that could have a negative impact on a company’s brand.   Among these are .sucks (already available), and .porn, .sex, .adult among others, that are slated to become available in the near future.

There are two primary steps that the owner of a registered trademark can take to protect its marks from being registered in connection with a disparaging term.

First, as noted in our Alert dated March 2013, owners of registered trademarks can register their marks with an entity called  the Trademark Clearinghouse (“TMCH”).  If a mark is registered with the TMCH, the owner will have the opportunity during a “sunrise” period that lasts at least 30 days from the date that a new gTLD is available to  register a domain name using its mark and the new gTLD before the new gTLD is available to the general public.  For example, Coblentz Patch Duffy & Bass would have the exclusive opportunity to register the domain name CPDB.law during the sunrise period following the availability of the .law gTLD.

Second, even if a trademark owner does not register a domain name during the sunrise period, the trademark owner may have the opportunity to object to another party’s registration of a domain name using its registered mark.  The TMCH’s trademark claims service notifies an applicant for a domain name if the requested domain name is using a trademark that previously was registered with the TMCH.  If the applicant proceeds to register the domain name using a registered trademark, the TMCH will notify the trademark owner, who may then take action against the new registrant if it believes trademark infringement or a likelihood of confusion will result.

Since new gTLDs will become available over time, there are a few steps that trademark owners should take to try to cut off disparaging or confusing uses of their marks by third parties:

1. Register important trademarks with the U.S. Trademark Office (or another official international registry) in order to take advantage of the TMCH benefits.
2. Register registered trademarks with the TMCH.  A trademark can be registered with TMCH for approximately $150 for 1 year, $435 for 3 years and $725 for 5 years.  Bulk pricing is available for owners of multiple trademarks. Registration is generally handled through a registration service.
3. Identify the gTLDs that are most important for protecting the trademark/brand.
4. Monitor the sunrise periods for such gTLDs.
5. Complete sunrise registrations for the newly available gTLDs.

Important forthcoming dates regarding certain gTLDs include:

• .sucks – Sunrise period for trademark owners previously registered with the TMCH: March 30, 2015 to May 29, 2015
• .porn, .adult and .sex:  Open registration available for any party without eligibility requirements (i.e. no trademark registration or TMCH registration required): Opens June 4, 2015

It’s important to note that registration of a trademark with the TMCH for notice purposes is different from registering a particular domain name for use.   Registering a domain name with a new gTLD will be through an accredited domain name registrar.  Each registrar sets the price for registering a domain name using a specific gTLD.

For example, the cost to register a .sucks domain name during the sunrise period costs $2,499 for a single year.  This option is available only for trademarks that have already been registered with the TMCH.  Following the expiration of the sunrise period, .sucks domains may be purchased by the general public for $249 per domain per year and domain names can be blocked from registration for $199 per domain per year.

A list of all the new gTLDs current available can be seen at http://newgtlds.icann.org/en/program-status/delegated-strings

 

Co-Authored by Tim Crudo, originally published in Litigation, Spring 2015

“‘How long could I go to prison?’ is a delicate question coming from any client. Estimate a sentence too high and your client could be inclined to plead guilty in a case he or she otherwise would want to fight. Too low, and you risk one day having a very surprised (and angry) client. The U.S. Sentencing Guidelines offer different factors to count in calculating a sentence, but they help only to a point. The factors are many, the guidelines are nonbinding, and judges have considerable discretion in formulating a sentence.

When it comes to sentencing white-collar defendants in particular, what factors matter? Each case is different, of course, but the defendants caught up in the Galleon Group insider trading scheme provide an interesting laboratory to study this question. The cross section of different strategies employed by the two dozen or so criminal defendants in these highly publicized cases presents an opportunity to examine the impact of a number of sentencing factors. Looking back from the vantage of the defendants’ sentences, was it better to go to trial or take a plea? Is loss, which seems to play a huge role in calculating guideline ranges, all it’s cracked up to be? How beneficial was cooperation? Of the sentencing factors to count, what really counts?”

Continue reading here.