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Northern California businesses rely on intellectual property protection for numerous business assets, particularly software. Copyright often offers the best protection for the various types of code that comprise software. Unauthorized use of copyrighted software may lead to liability for infringement under federal law. In order for unauthorized use of software to be actionable as infringement, however, the Ninth Circuit Court of Appeals has held that it must be “significant.” Newton v. Diamond, 388 F. 3d 1189, 1192-93 (9th Cir. 2004). The “de minimis” exception holds that, if the unauthorized use is not “significant,” there is no liability for infringement. The Newton decision specifically involved a sound recording, so it is worth looking at a more recent decision applying the de minimis exception to software, Design Data Corp. v. Unigate Enterprise, Inc., 63 F.Supp.3d 1062 (N.D. Cal. 2014).

Copyright protection is available under federal law for “original works of authorship fixed in any tangible medium of expression” that can be communicated to others. 17 U.S.C. § 102. The exclusive rights protected by copyright law include reproduction of the copyrighted work. Id. at § 106(1). In the case of software, this can mean making copies for sale to consumers or customers subject to a license agreement. In 1976, Congress revised the copyright law and added provisions specifically relating to software. See id. at § 117.

The de minimis exception takes its name from an old legal maxim, “the law does not concern itself with trifles” or “de minimis non curat lex.” Newton, 388 F.3d at 1193. The Ninth Circuit’s decision in Newton focused on the extent to which “the average audience would not recognize the appropriation.” Id. In that case, the defendant admitted to copying an audio clip that was three notes in length to use in a track by the hip hop group the Beastie Boys. The plaintiff also conceded that the original recording and the Beastie Boys track were “substantially dissimilar in concept and feel.” Id. at 1196. The court ruled that the de minimis exception applied, noting that “an average audience would not discern [the plaintiff’s] hand as a composer.” Id. See also VMG Salsoul, LLC v. Ciccone, 824 F. 3d 871, 874 (9th Cir. 2016) (copying “a 0.23-second segment of horns from an earlier song” was de minimis).
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About twenty thousand employees of the California-based technology company Google walked off the job, from offices in Mountain View, New York City, Dublin, London, Singapore, Tokyo, Zurich, and other cities, on November 1, 2018. The multinational protest arose from a news report on the company’s handling of sexual harassment claims against a former executive. The walkout’s organizers presented a list of demands to the company’s management, including changes to sexual harassment reporting and investigation procedures. About a week later, the company announced that it was granting one of the demands by ending forced arbitration of sexual harassment claims. For employment attorneys in California, this event raises questions on both the employer’s and employees’ sides about the extent of legal protections for workers who walk off the job. While California employment law broadly favors employees, one federal statute provides the bedrock of protection for employees engaged in strikes and walkouts.

Congress enacted the National Labor Relations Act (NLRA) in 1935, in the midst of widespread disputes between employers and unions representing their employees. The statute protects the right of employees to organize for the purpose of collective bargaining, either by joining an existing labor union or forming one of their own. It also states that employees may “engage in other concerted activities” for “mutual aid or protection.” 29 U.S.C. § 157. Employers may not “interfere with, restrain, or coerce employees in the exercise of [these] rights,” but neither may unions “restrain or coerce employees.” Id. at §§ 158(a)(1), (b)(1). For employers, this means that they may not retaliate against an employee—such as through termination or demotion—for engaging in “concerted activities.”

The NLRA does not define the term “concerted activities,” leaving that job to the courts. Early cases before the U.S. Supreme Court resulted in some general exclusions. Actions that involve “force and violence in defiance of the law of the land” are not protected “concerted activities.” NLRB v. Fansteeel Corp., 306 U.S. 240, 258 (1939). Neither are actions that constitute a “repudiation by the employee of his [employment] agreement.” NLRB v. Sands Mfg. Co., 306 US 332, 344 (1939). The U.S. Supreme Court has defined “concerted activity” in a way that “embraces the activities of employees who have joined together in order to achieve common goals,” but which also includes individual action that is “intend[ed] to induce group activity.” NLRB v. City Disposal Systems, Inc., 465 US 822, 830-31 (1984).
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Businesses are subject to a variety of California employment laws affecting the employer/employee relationship. These include laws setting a minimum wage, establishing rules for overtime compensation and standards for workplace safety, and addressing employment discrimination and harassment. A lawsuit recently filed in a Northern California federal court alleges that a company violated state and federal laws that deal with employers’ obligations prior to mass layoffs of employees. Roberts, Jr. v. Telltale Games, Inc., No. 3:18-cv-05850, complaint (N.D. Cal., Sep. 24, 2018). The defendant, a video game developer in the Bay Area, recently announced that it had laid off most of its workforce in anticipation of closing its operations. The plaintiffs allege that the company failed to give advance notice as required by law.

The federal Worker Adjustment and Retraining Notification (WARN) Act of 1988 applies to employers with one hundred or more full-time employees. An employer must give notice in advance of a “plant closing” or a “mass layoff.” A “plant closing” occurs when an employer’s closure of a work site causes at least fifty employees to lose their jobs within a span of thirty days. 29 U.S.C. § 2101(a)(2). The Roberts case cited above involves an alleged “mass layoff.” The WARN Act defines this as a “reduction in force” within a thirty-day period that causes the loss of either (1) five hundred or more jobs, or (2) fifty or more jobs when that number accounts for at least one-third of the company’s total workforce. Id. at § 2101(a)(3).

California law applies more broadly than the federal WARN Act. The state statute applies to any employer with at least seventy-five employees, including part-time workers. Cal. Lab. Code § 1400(a). A “mass layoff” includes any incident that results in the loss of fifty or more jobs in thirty days. Id. at § 1400(d). Under both statutes, employers must give notice to affected employees or their representatives at least sixty days in advance of a mass layoff. 29 U.S.C. § 2102(a), Cal. Lab. Code § 1401.
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State and federal employment statutes prohibit discrimination by California businesses on the basis of multiple factors, including race, sex, religion, and others. The scope of these laws extends beyond overt, deliberate discrimination. An employment practice that adversely impacts one or more protected groups—known as “disparate impact”—may also constitute unlawful discrimination, even if the employer has no discriminatory intent. Questions of this nature should be directed to a dedicated California employment discrimination attorney to ensure you understand all options available to you.

A recent news story offers an example of how a disparate impact claim could have emerged. An internet-based retail company recently abandoned an artificial intelligence (AI) system that it had developed to screen job applicants, after it discovered that the system was apparently favoring male over female applicants in ways that were unrelated to job qualifications. The company has stated that it never used the system for real-world recruiting or hiring decisions.

Title VII of the federal Civil Rights Act of 1964 prohibits employment discrimination on the basis of race, color, religion, national origin, and sex. 42 U.S.C. § 2000e-2. Other federal statutes address discrimination based on age, disability, and genetic information. See 29 U.S.C. § 623(a); 42 U.S.C. § 12112; 29 U.S.C. §§ 1182(a)(1)(F), (b)(3). The California Fair Employment and Housing Act of 1959 also covers these factors, as well as others like sexual orientation and gender identity or gender expression. Cal. Gov. Code § 12940(a). It allows exceptions for “bona fide occupational qualifications.”

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Social media has provided near-countless ways for people to communicate with one another. The “marketplaces of ideas” that social media companies provide, however, require constant moderation in order to enforce rules against inappropriate and illegal content. Facebook, which is based in Northern California, has been the world’s largest social media service for over a decade, and now has more than two billion active monthly users. The company employs content moderators, through a staffing agency, to review posts by Facebook users and remove those that violate the service’s rules. A former content moderator has filed a putative class action alleging that the company has negligently failed to maintain a safe work environment for its content moderators, and that this has caused her to “suffer[] from significant psychological trauma and post-traumatic stress disorder.” Scola v. Facebook, Inc. et al, No. 18CIV05135, complaint at 2 (Cal. Super. Ct., San Mateo Cty., Sep. 21, 2018). The lawsuit also asserts several causes of action under the California Unfair Competition Law (CUCL). If you have a question about an issue you’re experiencing at work, contact a California business lawyer.

The Scola lawsuit is primarily based on the common-law theory of negligence. In order to prevail on a negligence claim in a court of law, a plaintiff must prove four elements by a preponderance of evidence: (1) the defendant owed a duty of care to the plaintiff or the general public; (2) the defendant breached this duty of care; (3) this breach was the proximate cause of the plaintiff’s injuries; and (4) the plaintiff has suffered a measurable loss because of these injuries.

The CUCL defines “unfair competition,” in part, as “any unlawful…business act or practice.” Cal. Bus. & Prof. Code § 17200. The plaintiff in Scola cites various provisions of the California Labor Code, and alleges that violations by the defendants constitute “unfair competition.” State law generally requires employers to “furnish employment and a place of employment that is safe and healthful for the employees therein.” Cal. Lab. Code § 6400(a). Employers must take various affirmative steps to safeguard the workplace and their employees, including the use of “an effective injury prevention program.” Id. at § 6401.7(a).
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Trademark protection, while commonly associated with brand names, slogans, and logos, is available for almost anything visual or tangible that distinctly identifies a product or service. In some situations, this may include the shape of a product. The U.S. Patent and Trademark Office only has authority to register trademarks within the United States, so California businesses that operate abroad or in international commerce may need to seek additional protection. International registration is possible through a treaty framework known as the Madrid Protocol. The European Union (EU) also maintains a system for trademark registration for its member countries. The European Court of Justice (ECJ), the EU’s highest court, recently ruled on a trademark claim by Nestlé regarding the “four-finger” shape of its KitKat chocolate bar in Société des produits Nestlé SA v Mondelez UK Holdings & Services Ltd. A lower court had ruled that Nestlé’s trademark was invalid under EU law. The ECJ dismissed Nestlé’s appeal, affirming the lower court’s finding that the mark—i.e. the shape of the KitKat bar—did not meet the “distinctiveness” requirement. The legal basis for the ruling is similar to what might happen in a U.S. court. If you have questions about this often nuanced and complex area of law, get in touch with a California intellectual property attorney.

In order to obtain trademark protection through the USPTO, an applicant for registration must be able to demonstrate that they are using the mark in commerce, or that they have a “bona fide intention to use [it] in commerce.” 15 U.S.C. § 1127. The mark itself may consist of “any word, name, symbol, or device, or any combination thereof.” Id. Subject to certain restrictions, any mark that “has become distinctive of the applicant’s goods in commerce” may be eligible for registration. Id. at § 1052(f). The EU has similar requirements. The regulation in force at the time of the dispute in the Nestlé case specified that “trade marks which are devoid of any distinctive character” are ineligible for registration, unless a mark has become distinctive because of its use in connection with a particular good or service. European Council Regulation No. 207/2009 Arts. 7(1)(b), (3).

Nestlé first applied to the European Union Intellectual Property Office (EUIPO) to register the KitKat’s shape in March 2002. The EUIPO approved the application in July 2006. The following year, Cadbury, a competing candy bar maker, filed an application seeking to invalidate the trademark. The EUIPO granted the application and invalidated the trademark in 2011. An appellate board later reversed that decision, accepting Nestlé’s argument that the KitKat shape had acquired distinctiveness under Article 7(3) of Regulation 207/2009. Cadbury, through its parent company Mondelez, appealed this ruling to the European General Court (EGC).
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State and federal wage laws require employers to pay a minimum wage and overtime to non-exempt employees. The U.S. Supreme Court has identified an exception when the alleged amount of unpaid wages is particularly small, known as the “de minimis doctrine.” It applies to wage claims under federal law, but not necessarily to state wage claims. The California Supreme Court recently ruled on a certified question from the Ninth Circuit Court of Appeals, asking whether the federal de minimis doctrine applies to California wage laws. The state high court ruled that it does not apply in Troester v. Starbucks Corp., No. S234969, slip op. (Cal., Jul. 26, 2018).

The federal Fair Labor Standards Act (FLSA) currently sets the national minimum wage at $7.25 per hour. 29 U.S.C. § 206(a)(1)(C). It allows states to enact their own statutes with a higher, but not lower, minimum wage. Id. at § 218(a). California law sets a minimum wage of $10.50 per hour for employers with up to twenty-five employees, and $11 per hour for employers with at least twenty-six employees. Cal. Lab. Code §§ 1182.12(b)(1)(B), (2)(A). Both state and federal law establish an overtime wage rate of one-and-a-half times a non-exempt employee’s usual wage for work in excess of forty hours in a week. 29 U.S.C. § 207(a)(1), Cal. Lab. Code § 510.

The FLSA’s de minimis doctrine holds that employers are not liable for wage law violations when the amounts in question are sufficiently small, based on three factors:
1. When the amount of time in question “is so miniscule that it cannot, as an administrative matter, be recorded for payroll purposes”;
2. When “the size of the aggregate claim” is “insubstantial”; and
3. When “the claimants [did not] perform[] the work on a regular basis.”
Lindow v. United States, 738 F. 2d 1057, 1063 (9th Cir. 1984). See also Anderson v. Mt. Clemens Pottery Co., 328 US 680, 692 (1946); 29 C.F.R. § 785.47.
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Without financing, home ownership would likely remain out of reach for most people in this country. Few homebuyers have the means to pay the full purchase price in cash. Mortgages typically include a deed of trust granting the lender the right to foreclose on the property. The foreclosure process allows the lender to recover some or all of their investment if a borrower defaults. Most deeds of trust include a “power of sale” clause, which allows a trustee designated by the lender to sell the property without a court order. This is known as nonjudicial foreclosure. California foreclosure law protects homeowners by requiring trustees and lenders to follow a rigid process before selling a property. Federal law protects consumers from unscrupulous debt collection practices, but courts have reached differing conclusions about whether federal debt collection laws apply to nonjudicial foreclosure. The U.S. Supreme Court recently agreed to hear a case that raises this question, Obduskey v. McCarthy & Holthus LLP.The federal Fair Debt Collection Practices Act (FDCPA) prohibits “abusive, deceptive, and unfair debt collection practices” by debt collectors. 15 U.S.C. § 1692(a). It defines “debt collectors” as anyone who “collects or attempts to collect” debts owed to other people or businesses in interstate commerce, or who engages in such activities as a regular business. Id. at § 1692a(6). In addition to its prohibitions on misleading and abusive practices, the FDCPA also requires debt collectors, after contacting a consumer regarding an alleged debt, to provide them with information validating the debt. Id. at § 1692g.

California’s nonjudicial foreclosure laws also require notice and disclosures to debtors. A mortgage lender or trustee must provide notice to a borrower at least 30 days before filing a notice of default in the public record, and it cannot conduct a sale of the property for several months after that. Cal. Civ. Code §§ 2923.5, 2924. California homeowners’ associations (HOAs) can pursue nonjudicial foreclosure as a remedy for unpaid assessments, but only if the total delinquent amount is at least $1,800, or the delinquency has persisted for over 12 months. Id. at § 5730. In addition to various notice requirements, an HOA’s board must vote on the foreclosure at least 30 days before they may sell the property. Id. at § 5705.

The dispute in Obduskey arose from allegations that, among other violations, the lender failed to follow the procedures for validating the debt under § 1692g of the FDCPA. A Colorado federal court dismissed the lawsuit, finding that the lender was not a “debt collector” within the meaning of the FDCPA because it was responsible for servicing the loan before the plaintiff went into default. Obduskey v. Wells Fargo, 879 F. 3d 1216, 1219-20 (10th Cir. 2018). In other words, its responsibilities went beyond merely collecting unpaid amounts owed by the plaintiff.

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Copyright law allows the owners of copyrighted works to control or prevent the use of those works by others. The Fair Use Doctrine sets limits on copyright owners’ ability to prevent certain unauthorized uses, such as the inclusion of a copyrighted image in a news report or the use of a copyrighted film clip by a film critic. Courts have also recognized an exception to copyright infringement when the unauthorized use of a copyrighted work is deemed “de minimis,” or too minor and trivial to merit court intervention. A recent New York court ruling, Gayle v. Home Box Office, Inc., No. 1:17-cv-05867, mem. op. (S.D.N.Y., May 1, 2018), addressed a de minimis claim in a case alleging copyright infringement. Courts have reached similar rulings in California intellectual property cases involving music, software, and other copyrighted works.Federal law allows copyright protection for “original works of authorship fixed in any tangible medium of expression.” 17 U.S.C. § 102(a). The owner of a copyrighted work has the exclusive right to use the work for a wide range of purposes, including making and distributing copies of the work and creating new derivative works. Id. at § 106. The Fair Use Doctrine allows certain unlicensed or unauthorized uses, however, “for purposes such as criticism, comment, news reporting, teaching…, scholarship, or research.” Id. at § 107. The statute identifies several factors to consider in determining whether Fair Use should apply, including the “substantiality” of the infringing use.

The de minimis exception gets its name from the legal maxim “de minimis non curat lex,” or “the law does not govern trifles.” It is partly derived from the “substantiality” element of Fair Use, but it is not necessarily an example of Fair Use. The Ninth Circuit has held that “a use is de minimis only if the average audience would not recognize the appropriation.” Newton v. Diamond, 388 F.3d 1189, 1193 (9th Cir. 2004). The Second Circuit has held that the de minimis exception involves copyright infringement that is “so trivial that the law will not impose legal consequences.” Ringgold v. Black Entertainment Television, Inc., 126 F.3d 70, 74 (2d Cir. 1997).
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When a company does business across state lines, it may need to consider questions about jurisdiction over various potential disputes. An extensive and complicated body of law addresses when and how courts may exercise personal jurisdiction over defendants. Many contracts include “choice of law” or “forum selection” provisions, which identify a specific state and county as the proper jurisdiction and venue for lawsuits. The Delaware Court of Chancery recently ruled on a dispute over a choice of law provision, in which the defendant argued that the plaintiffs’ consent to jurisdiction in Kentucky required them to bring their lawsuit there. The court disagreed, noting that the contract did not “contain clear language indicating that litigation will proceed exclusively in the designated forum.” In re Bay Hills Emerging Partners I, L.P., et al, C.A. No. 2018-0234-JRS, mem. op. at 13 (Del. Ct. Chanc., Jul. 2, 2018).

Forum selection is an important part of any contract that involves parties in different jurisdictions, especially when relevant laws significantly differ from one another. This includes conflicts between the laws of two or more states, and conflicts between federal and state law. The parties to a contract need to know which laws will apply. Courts have developed rules and procedures for determining which jurisdiction’s laws apply in a particular situation, but that procedure is never simple or easy. Agreeing in advance to jurisdiction and venue can save a great deal of headache in many situations.

The defendant in Bay Hills is the official administrator of the Commonwealth of Kentucky’s retirement system. Through investments, it became the sole limited partner in four Delaware-based limited partnerships (LPs). It executed limited partnership agreements (LPAs) that included provisions allowing it to remove general partners “for cause.” Bay Hills at 4. In May 2017, the defendant exercised this right as to the general partners of all four LPs. It later withdrew its notice of removal, but served a second notice of removal on all four general partners in February 2018.
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