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Rocky LandscapeTrademark registration allows businesses to protect some very valuable assets—the names, logos, and related designs that clearly identify them to the public. The U.S. Patent and Trademark Office (USPTO) oversees trademark registration in accordance with the federal Lanham Act, which prohibits the registration of marks under certain circumstances. Section 2(a) of the Lanham Act, known as the Disparagement Clause, bars the USPTO from registering any mark that “may disparage…persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt, or disrepute.” 15 U.S.C. § 1052(a). The statute does not define “disparage,” and this vagueness is part of what led the U.S. Supreme Court to strike down the Disparagement Clause as a violation of the First Amendment right to free speech. Matal v. Tam, 582 US ___ (2017).

Both the USPTO and the Trademark Trial and Appeal Board (TTAB) acknowledge that “disparagement” is a highly subjective concept that must be evaluated on a case-by-case basis. The TTAB has identified two factors that can help identify material that might be barred by the Disparagement Clause. First, would a reasonable person, considering the context of the mark, interpret it as “refer[ring] to an identifiable” person or group of people? Second, would a “substantial composite” of that group of people view the mark as disparaging? See Harjo v. Pro-Football, Inc., 50 U.S.P.Q.2d 1705 (TTAB 1999); see also 284 F.Supp.2d 96 (D.D.C. 2003), 415 F.3d 44 (D.C. Cir. 2005).

The Harjo case referenced above involved a professional football team with a name believed by many to be disparaging to Native Americans. The proposed trademark at issue in Matal is generally known as a disparaging term for people of Asian descent. The plaintiff in that case is a member of a band who uses the word as its name and who sought to register it as a trademark. The band members, all of whom are of Asian descent, stated that they wanted to “drain [the word’s] denigrating force as a derogatory term for Asian persons.” The USPTO rejected the application under § 2(a). The plaintiff appealed, claiming in part that the Disparagement Clause is an unconstitutional content- or viewpoint-based restriction on speech.

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text balloonsBusinesses must always be aware of how their actions and communications could affect their legal rights. The media rather frequently report on internal company documents that become public, through the discovery process in litigation or by other means, which at best cause embarrassment for a company. A recent decision from the California Supreme Court, while not directly related to business litigation, offers a useful reminder of the importance of communicating with government officials and employees through “official channels.” The decision, City of San Jose v. Superior Court of Santa Clara Cty., 2 Cal.5th 608 (2017), addresses access to government communications under state law. The court held that official communications by government officials are still public record, even when the official uses a personal email account or mobile device. In other words, anything sent by or to a public official, for official reasons, could become public.

California’s Public Records Act (PRA), Cal. Gov’t Code § 6250 et seq., states that “every person has a right to inspect any public record” upon request, with some exceptions. Id. at § 6253(a). The statute defines a “public record” to include “any writing containing information relating to the conduct of the public’s business” that was “prepared, owned, used, or retained” by any government agency. Id. at § 6252(e). This includes communications written and sent by government employees, as well as those written by private parties and sent to government employees, provided that the subject matter relates to official business.

The San Jose case began in 2009 when an individual made a public records request to the city for “32 categories of public records.” San Jose, 2 Cal.5th at 614. The request was directed to the city itself, its redevelopment agency, the agency’s executive director, and various other officials and employees. The records that were responsive to the request included communications sent and received by city officials and employees. The city produced records of “communications made using City telephone numbers and e-mail accounts,” but not those made with personal phones or email accounts. Id. at 615. The individual who made the request filed suit against the city for declaratory relief.

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carSelf-driving cars have been a subject of great interest in Silicon Valley recently. The technology that would make autonomous vehicles viable on a wide scale is not here yet, but numerous companies are working to make it a reality. As with any new technology, competition can easily lead to conflict. In this case, a company affiliated with the tech company Google has filed suit against the ridesharing company Uber and others, alleging infringement of trade secrets and patent rights, as well as unfair business practices. Waymo LLC v. Uber Technologies, Inc. et al., No. 3:17-cv-00939, am. complaint (N.D. Cal., Mar. 10, 2017).

Unlike other forms of intellectual property, the value of a company’s trade secrets depends on their confidentiality. State and federal trade secret laws therefore focus on preventing or dissuading the misappropriation of trade secrets. A business must show that information meets several criteria in order to invoke trade secret protection. The information must have economic value based on the fact that it is not known to others and not easily discoverable by others who are in a position to benefit from it, and the business must have made reasonable efforts to safeguard the information’s secrecy. 18 U.S.C. § 1839(3), Cal. Civ. Code § 3426.1(d).

California law allows the owner of trade secrets to obtain injunctive relief preventing “actual or threatened misappropriation.” Cal. Civ. Code § 3426.2. If a court finds that an injunction would be “unreasonable,” it can order a person to pay “a reasonable royalty” for use of the information. Id. A court can award damages for “actual loss” or “unjust enrichment caused by misappropriation,” along with punitive damages in an amount up to twice the total amount of damages in cases of “willful and malicious misappropriation.” Id. at § 3426.3. Federal law contains similar provisions for damages and specifically allows courts to order “seizure of property necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action.” 18 U.S.C. § 1836(b)(2).

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planetsMinority shareholders, meaning those whose shares in a corporation make up only a small percentage of the total outstanding shares, are at a disadvantage if one or more majority shareholders take actions that harm their interests. State business and corporate laws offer protection against certain potentially harmful actions by the majority. In the event of a merger, for example, minority shareholders can challenge the valuation of the corporation and the resulting price per share that they would receive. The Delaware Court of Chancery recently considered a shareholder’s claim that he did not receive sufficient information to evaluate and object to a planned merger. In Re United Capital Corp., Stockholders Litigation, No. C.A. No. 11619-VCMR, mem. op. (Del. Ch., Jan. 4, 2017).

A “merger,” generally speaking, involves two companies combining to form a single company. Delaware allows a procedure known as a “short-form merger,” which typically involves a parent company merging with a subsidiary. Since the parent company, by definition, owns a majority of the subsidiary’s stock, the merger only requires buying the shares of the minority shareholders. A short-form merger can also occur when one shareholder owns an overwhelming percentage of outstanding shares and wants to buy out the minority shareholders. Shareholder approval is not required for this type of merger. See 8 Del. Code § 253. This was the type of merger that led to the dispute in United Capital.

Minority shareholders who believe their shares have been undervalued in a short-form merger have little legal recourse. The Delaware Supreme Court has held that “absent fraud or illegality, the only recourse for a minority stockholder who is dissatisfied with the merger consideration is appraisal.” Glassman v. Unocal Expl. Corp., 777 A.2d 242, 243 (Del. 2001). This involves “an appraisal by the Court of Chancery of the fair value of the stockholder’s shares of stock” under the circumstances of a merger. 8 Del. Code § 262.

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Via Rodeo DriveCalifornia imposes numerous responsibilities on businesses, particularly in their capacity as employers. These include requirements regarding the payment of wages and the maintenance of employment records. Employers are also prohibited from various types of discrimination under state and federal laws, including discrimination on the basis of race. A putative class action pending in a California federal court alleges race discrimination and various wage and hour violations against a designer clothing retailer. Sampino v. Versace USA, Inc., No. 3:16-cv-07198, am. complaint (N.D. Cal., Apr. 19, 2017).

In addition to general requirements that employers pay their workers for the full amount of compensation that they have earned, California sets numerous additional standards. For example, employers must maintain records of their employees, including payroll records showing the number of hours worked and the wages paid. Cal. Lab. Code § 1174. They must also provide itemized statements to their employees with each paycheck. Id. at § 226. A failure to meet these requirements may result in civil fines and liability to aggrieved employees.

California law prohibits employers from discriminating against employees and job applicants on the basis of race and multiple other factors. Cal. Gov’t Code § 12940(a). It further prohibits an employer, or anyone acting on an employer’s behalf, from “aid[ing], abet[ting], incit[ing], compel[ling], or coerc[ing]” any unlawful acts of discrimination. Id. at § 12940(i). Retaliating against an employee for complaining about prohibited conduct, either internally or to state regulators, also violates state law. Id. at § 12940(h).

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Copyright OfficeOperating an online business requires careful attention to numerous potential liabilities, including copyright infringement. Any online service that allows users to post or share information needs to be aware of the federal laws and regulations dealing with potential copyright infringement. The Digital Millennium Copyright Act (DMCA) is a far-reaching law dealing with copyright on the internet and other digital systems, first enacted by Congress in 1998. Title II of the DMCA, also known as the Online Copyright Infringement Liability Limitation Act (OCILLA), creates a “safe harbor” for certain internet service providers (ISPs). The U.S. Copyright Office recently issued new rules regarding safe harbor protection, which took effect toward the end of 2016.

The DMCA covers a wide range of copyright issues, including a prohibition on attempts to circumvent copy-prevention systems in digital media devices. The statute also allows technicians to make temporary copies of software for the limited purpose of computer repair, reversing a court ruling that this constituted copyright infringement. See MAI Systems Corp. v. Peak Computer, Inc., 991 F.2d 511 (9th Cir. 1993). As the internet has gained prominence, and websites that allow users to upload and share content have become features of daily life for millions of people, the “safe harbor” provisions have perhaps become the most important provisions of the DMCA.

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Silicon ValleyThe U.S. financial system depends on competition in order to maintain efficiency and fairness. Federal and state antitrust laws prohibit a wide range of anti-competitive activities in order to protect the public against monopolistic behaviors. This applies not only to commercial activities like buying and selling goods and services but also features of employment like hiring and salary decisions. When a group of employers makes anticompetitive agreements that harm workers, those workers may have recourse in court. A putative class action in California alleges that two companies entered into an unlawful “anti-poaching” agreement, by which each company agreed not to hire employees of the other company. Frost et al. v. LG Corporation et al., No. 5:16-cv-05206, consol. class action complaint (N.D. Cal., Nov. 8, 2016).

The main federal antitrust law in the U.S. is the Sherman Act of 1890, 15 U.S.C. § 1 et seq. It prohibits various anticompetitive activities, and it empowers the federal government to investigate businesses that have amassed significant market power, sometimes known as “trusts.” California’s Cartwright Act, Cal. Bus. & Prof. Code § 16720 et seq., contains similar provisions. A business does not violate antitrust law solely by attaining a monopoly in a particular market. A company that attains a monopoly by suppressing competition from others does violate antitrust law, however, as does a company that legitimately attains a monopoly and then suppresses competition in order to keep it.

Examples of anticompetitive activities prohibited by the Sherman and Cartwright Acts include price-fixing or boycott agreements between businesses that are otherwise competitors, as well as contractual terms that require customers or vendors to do business exclusively with a particular company. In the context of employment, employers may violate antitrust laws by making agreements to keep wages below a certain level for their employees, as well as anti-poaching agreements that keep employees from changing jobs within their field.

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runners-silhouettes-athletes-635906Patent protection can be the key to many business’ success, giving them the exclusive right to use a particular invention or process, or to license its use to others. The federal government has exclusive jurisdiction over patent law in the U.S. In the event of a patent dispute that crosses international borders, a patent owner in the U.S. has several options, including objecting to the importation of allegedly infringing products. The U.S. International Trade Commission (ITC) is authorized to investigate alleged intellectual property infringement under § 337 of the Tariff Act of 1930, 19 U.S.C. § 1337. A recently-closed matter involving rival wearable technology manufacturers demonstrates this process. In re Certain Activity Tracking Devices, Systems, and Components Thereof, Inv. No. 337-TA-963, notice (ITC, Oct. 20, 2016); see also 81 Fed. Reg. 74479 (Oct. 26, 2016).

Congress created the ITC in 1930, giving it responsibility to report on issues involving customs laws to both the White House and Congress. See 19 U.S.C. § 1332. The ITC’s investigative jurisdiction includes alleged import injuries and intellectual property disputes involving imports. This latter category includes patent, trademark, and copyright infringement.

Section 337 prohibits the importation of items that infringe a patent or copyright issued under U.S. law, as well as the sale of such items after importation. The ITC may initiate an investigation of alleged infringement on its own, or in response to a complaint. If it concludes that infringement has occurred, or is occurring, it can order the exclusion of the articles at issue from importation. This typically only applies to individuals or businesses found to have violated the law, but it can also be a general exclusion.
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DefaultBankruptcy offers a way to obtain relief when one’s available income is not sufficient to cover one’s required debt payments. Federal bankruptcy law offers several options for businesses, including a restructuring of debts through Chapter 11 of the Bankruptcy Code. The goal of a Chapter 11 bankruptcy is to create a plan that pays down much of a business’ debt, discharges some remaining debts, and allows continued business operations once the bankruptcy case closes. Creating a Chapter 11 reorganization plan can be a complex task, depending on the size of the business and the extent of its debts. The Ninth Circuit recently considered a question about whether a default interest rate should still apply after a Chapter 11 debtor cures the default. The court reversed its own precedent, ruling that curing the default does not wipe out the default interest rate. In re New Investments, Inc., No. 13-36194, slip op. (9th Cir., Nov. 4, 2016).

Many secured loan or credit agreements require a debtor to pay a higher interest rate after a default. Almost 30 years ago, the Ninth Circuit held that a debtor who cures the default could eliminate their obligation to pay the default interest in a Chapter 11 bankruptcy. In re Entz-White Lumber & Supply, Inc., 850 F.2d 1338 (9th Cir. 1988). The court based its decision in part on language in the Bankruptcy Code stating that a Chapter 11 bankruptcy plan “shall…provide adequate means for the plan’s implementation, such as…curing or waiving of any default.” 11 U.S.C. § 1123(a)(5)(G).

The Bankruptcy Code does not define “cure,” so the court applied the common meaning of “taking care of the triggering event and returning to pre-default conditions.” Entz-White, 850 F.2d at 1340 (internal quotations omitted). It held that the interest owed by the debtor should be “at the market rate or at the pre-default rate provided for in the contract,” rather than the higher default interest rate. Id. at 1343.

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Banana RepublicThree plaintiffs filed a putative class action against a retail clothing company, alleging that it induced them to enter store locations with misleading advertisements of a storewide sale. The defendant sought summary judgment, partly on the ground that the plaintiffs lacked standing to sue because they had not established actionable economic injuries. The trial court ruled in the defendant’s favor. The appellate court reversed this ruling, finding that the plaintiffs had demonstrated a triable issue of fact as to whether they suffered injuries-in-fact. SV v. Banana Republic, LLC, No. B270796, slip op. (Cal. App. 2nd, Dec. 15, 2016).

The lawsuit asserts causes of action under three California statutes. The Unfair Competition Law (UCL) prohibits “unfair, deceptive, untrue or misleading advertising.” Cal. Bus. & Prof. Code § 17200. The False Advertising Law (FAL) broadly prohibits the advertising of goods or services using “any statement…which is untrue or misleading, and which is known, or which…should be known, to be untrue or misleading.” Cal. Bus. & Prof. Code § 17500. The Consumers Legal Remedies Act (CLRA) prohibits “unfair or deceptive acts or practices” connected with the sale of goods or services. Cal. Civ. Code § 1770(a). The plaintiffs in SV alleged three CLRA violations involving false advertising of goods, false or misleading statements regarding “price reductions,” and misrepresenting the nature of a transaction. Id. at §§ 1770(a)(9), (13), (14).

In order to establish standing under any of these statutes, a plaintiff must demonstrate that they have “suffered injury in fact and…lost money or property” because of the defendant’s unlawful act. SV, slip op. at 10, quoting Kwikset Corp. v. Superior Court, 51 Cal.4th 310, 321 (2011), Cal. Bus. & Prof. Code § 17204. With regard to the amount of damages a plaintiff must show, the court notes that an “injury in fact is not a substantial or insurmountable hurdle.” SV at 10, Kwikset at 324. All three statutes allow restitution and injunctive relief. The UCL and the FAL limit any other kind of damages, but the CLRA expressly includes compensatory and punitive damages as available remedies.

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