Nonprofit Wednesdays: Keeping Your Family Foundation in Compliance

by Elizabeth Minnigh

The 2016 election cycle made front page news of certain failures in compliance by both the Bill, Hillary & Chelsea Clinton Foundation and The Donald J. Trump Foundation. Every new year brings new goals and, for every family with a family foundation, one goal for 2017 should be ensuring that your foundation is in full compliance with applicable state and federal rules. Many family foundations operate without the benefit of professional staff, and try to minimize administrative expenses by limiting use of outside professionals such as accountants and attorneys. Without professional oversight, however, it is not uncommon for a foundation to fall out of strict compliance with one or more rules over time. Below is a summary of the common steps needed to keep your foundation in compliance.
1. Give Contemporaneous, Written Acknowledgements to All Donors, Including Yourself.
As odd as it may seem, even a charitable contribution of $250 to an individual’s own family foundation must be substantiated by a contemporaneous, written acknowledgment that contains the following information:
  • Name of the organization; 
  • Amount of cash contribution; 
  • Description (but not value) of non-cash contribution; 
  • Statement that no goods or services were provided by the organization, if that is the case; 
  • Description and good faith estimate of the value of goods or services, if any, that the organization provided in return for the contribution; and 
  • Statement that goods or services, if any, that the organization provided in return for the contribution consisted entirely of intangible benefits, if that was the case.
In order to be considered contemporaneous for 2016 contributions, a written acknowledgment should be prepared and delivered no later than April 15, 2017. In future years, the foundation should set up procedures, such as calendar alerts, to ensure these acknowledgements are provided annually. Most public charities make it a practice to send their written acknowledgements by January 31st of each year. The donor should retain the contemporaneous, written acknowledgment in his or her files until the statute of limitations has run on the return claiming the contribution (generally, three years from date of filing but may be six years in certain circumstances).
2. Review Your Recordkeeping.
Family foundations should consider whether to adopt a document retention policy so that the foundation has consistent record keeping practices. Smaller foundations that elect not to adopt a formal document retention policy should take an inventory of their records and ensure they have the following documents at a minimum:
  • A copy of its Form 1023, Application for Recognition of Exemption Under §501(c)(3) of the Internal Revenue Code, including all attachments thereto; 
  • A copy of the foundation’s IRS determination letter; 
  • Copies of Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation, as filed; and 
  • Such permanent books of account or records as are sufficient to establish its items of gross income, receipts and disbursements, and to substantiate the information required for its annual Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation, for any years where the statute of limitations has not yet run (generally, three years from date of filing but may be six years in certain circumstances).
3. Maintain List of Foundation Managers and Disqualified Persons.
Section 4941 of the Internal Revenue Code imposes a series of taxes on disqualified persons and foundation managers who engage in certain types of prohibited “self-dealing” transactions with a private foundation. The term “self-dealing” includes:
  • Direct or indirect sale, exchange or leasing of property between the private foundation and disqualified persons; 
  • Lending of money or other extension of credit between a private foundation and a disqualified person; 
  • Furnishing of goods, services or facilities between a private foundation and a disqualified person; 
  • Payment of compensation by a private foundation to a disqualified person, unless such compensation is compensation for personal services and is reasonable and not excessive; 
  • Transfer to, or use by or for the benefit of, a disqualified person of the income or assets of a private foundation; and 
  • An agreement by a private foundation to make any payment of money or other property to a government official during the period of his or her government service.
To ensure that the family foundation is able to identify potential self-dealing issues before they happen, the foundation should maintain a list of foundation managers and disqualified persons and review that list annually, making any updates as necessary.
  • “Foundation managers” include any officer, director or trustee of a private foundation (or any individual having powers or responsibilities similar to those of officers, directors or trustees).
  • “Disqualified persons” includes substantial contributors to the foundation and foundation managers, as well as members of the family of disqualified persons and entities in which disqualified person or family members hold a sufficient interest (20% or 35%, depending on the type of entity).
    • A substantial contributor includes any person who contributed or bequeathed a total amount of more than $5,000 to the private foundation if the amount is more than 2% of the total contributions and bequests received by the foundation from its creation up through the close of the tax year of the foundation in which the contribution or bequest is received from that person. For a private foundation formed as a trust, a substantial contributor includes the creator of the trust regardless of the amount he or she contributed. As a general rule, once a person is a substantial contributor to a private foundation that person remains a substantial contributor. 
    • Members of the family are confined to spouses, ancestors, children, grandchildren and great-grandchildren, as well as the spouses of children, grandchildren and great-grandchildren.
For more click here or below.


Business Legal Advice Monday: Tax basis: The key to reducing gain on sale or deducting asset purchases

by Steve Gorin

This article discusses key ideas used in reducing or eliminating gain subject to tax when you sell an interest in your business or when your business sells part or all its assets. These ideas can also possibly help those who buy or inherit a business obtain better tax write-offs.
Suppose you buy stock for $10 and sell it for $50. The sale generates a $40 gain, the excess of the $50 sale price over your $10 purchase price. Your $10 purchase price is referred to as your tax “basis.” However, if you die holding this stock, its basis will increase to the $50 date-of-death value. This increase and other basis increases are referred to as “basis step-up.”
Suppose you pay $25,000 for a piece of equipment. You might be able to write off part to all of the purchase price in the first year. The equipment’s tax basis starts at $25,000, but then is zero when it’s fully written off. Whatever you write off reduces the equipment’s basis, eventually to zero. The reduced basis is referred to as “adjusted basis,” as contrasted with the purchase price, which is the property’s “original basis.” Generally, I will be referring to adjusted basis when I refer to basis.
Suppose you form a corporation. You invest $100,000 in equipment, which is then written off, so that the equipment’s basis is now zero. Your basis in your stock in the corporation is referred to as your “outside basis,” and the corporation’s basis in its equipment is referred to as its “inside basis.” When you sell the stock for $150,000, the buyer’s stock will have a $150,000 basis, but the equipment’s basis will remain zero. Thus, outside basis will be $150,000, and inside basis will be zero.
The buyer would prefer to have a higher basis as the result of the purchase, so that the buyer can write off the equipment. In other words, the buyer wants an inside basis step-up. For this reason and for nontax reasons, a buyer may prefer to buy assets instead of stock. However, a special election may be available to treat the stock sale as an asset sale, followed by the shareholders disposing of the stock in a liquidation. This treatment is available only if at least 80% of the stock is sold.
For the rest of the article click here or below the break.


Entertainment Friday: Football Stories

In anticipation for Super Bowl Sunday, today's theme covers football related legal news.

Why Roger Goodell Might Be Glad The Super Bowl Is Not Competing With An eSports Event … Yet by Kevin Braig

In a recent column, Sports Business Journal media reporter John Ourand predicted the Super Bowl 51 audience will decline 5 percent from the 111.9 million people who watched Denver upset Carolina in Super Bowl 50.  If his prediction is accurate, it will be consistent with the trends that NFL broadcaster endured during the regular season and playoffs.  NFL ratings tumbled about 14 percent during the first half of the 2016 NFL regular season and reportedly finished down 8 percent from 2015.  In addition, seven of the 10 playoff games played to date have drawn fewer viewers than they did in 2015.
On the other hand, more and more viewers have been tuning in to watch eSports competitors battle for prize money in games like League of Legends and Counter-Strike: Global Offensive.  In late January, more than 1 million viewers tuned in on Twitch to watch the CS:GO ELEAGUE major grand finals in which Astralis defeated Virtus Pro.  According to Twitch, the audience broke the Twitch’s previous record of concurrent live viewers on a single channel.  In addition, the grand finals were contested in front of a packed house at Atlanta’s Fox Theatre.
With ratings for eSports programming growing, the ESL Gaming Network announced on February 1, 2017 that it had hired television executive and innovator David Hill to launch a premium eSports production service that will be called Esports by Hill.  Hill is best known for spearheading the launch of FOX Sports.  Hill’s noteworthy digital achievements include developing the game scores and time remaining box (Fox Box), the NFL first down graphic line, and the NHL’s glowing hockey puck.
There may be some connection between the growing audience for eSports programming and the declining NFL audience.  On October 16, 2016, Fox Business reported that a survey conducted by market research company Newzoo found that 76% of eSports enthusiasts claim their interest in professional gaming interferes with the time they would have spent watching sports on television.
Houston is a “No Drone Zone” for Super Bowl LI by J.G. Harrington, Anne Swanson

As has been the case the last several years, the FAA has announced that flights by drones will again be prohibited in a wide area around NRG Stadium in Houston, the site of Super Bowl LI on February 5.  The “no drone zone” extends for 34.5 miles around the stadium.  The “no drone zone” goes live at 4:00 pm and ends at 11:59 pm CT.  The FAA also has produced a YouTube video on the restrictions.

NLRB General Counsel Concludes Division I Scholarship Football Players are Employees under Labor Law by Michael Bertoncini, Howard Bloom, Gregg Clifton, Patrick Egan, Paul Kelly, Monica Khetarpal, Robert Morsilli, Philip Rosen, Jonathan Spitz

Scholarship football players in Division I FBS private sector colleges and universities are employees under the National Labor Relations Act, National Labor Relations Board General Counsel Richard F. Griffin has concluded. Accordingly, he explained, the players have all of the rights and protections available to employees under the Act.

The determination is contained in “General Counsel’s Report on the Statutory Rights of University Faculty and Students in the Unfair Labor Practice Context,” Memorandum GC 17-01, to NLRB Regional Directors and others describing the office’s “prosecutorial position” when unfair labor practice charges are filed by or on behalf of certain college and university students, including the scholarship football players.

...Section 7 of the NLRA protects the rights of employees:
  • “to form, join or assist labor organizations,”
  • “to bargain collectively through representatives of their own choosing,” and
  • “to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”
The first two rights generally are familiar to managers, but the third right is not commonly known, although can be and, in recent years, has been broadly interpreted by the NLRB. It is a violation of the Act for an employer to take adverse action against an employee for engaging in Section 7 activity.
Protected concerted activity usually involves two or more employees banding together to improve their working conditions, or one employee acting as the spokesperson for other employees while seeking a common workplace improvement, or even one employee acting alone to achieve a change that would benefit other employees. For example, a player advocating for more water breaks for the team during a hot August practice can constitute protected concerted activity. It might be unlawful retaliation, in violation of the NLRA, for a coach to direct the player to run laps in response to the player’s request.
The General Counsel Memorandum casts a wide net, discussing more than student- athletes. According to the Memorandum, “students performing non-academic work who meet the common law test of performing services for and under the control of universities, in exchange for compensation, fall within the broad ambit of [NLRA’s definition of employee under] Section 2(3).” Thus, any student who receives compensation from the institution and performs services under the direction of an agent of the institution likely will find a receptive ear in this General Counsel when alleging that he or she engaged in protected concerted activity and was treated adversely as a consequence.
Universities and colleges should be mindful that any student performing service for the institution potentially may file an unfair labor practice charge over perceived retaliation for engaging in protected concerted activity. Training coaching staffs and managers in all departments about the scope of student rights under the NLRA, as well as reviewing student-athlete handbooks and employee handbooks for NLRA compliance, could help reduce an institution’s exposure in an unfair labor practice proceeding.
Jiminian Law PLLC is devoted to helping clients in all areas of business, copyrights, trademark, sports and entertainment law.  Providing knowledgeable and effective representation are the keys to my success.  I am available for a free consultation if you call me at 917.388.3574 or 929.322.3546 or email me at danny@djimlaw.com.


Trademark Thursday: THE PROCESS of Joel Embiid's Trademarks

by Mari-Elise Paul and originally published in Mondaq 1.31.17

It seems my step-twins and Joel Embiid have something in common: they all love Shirley Temples. Embiid prefers his made with ginger ale and grenadine and allegedly drank as much as a pitcher a day while recovering from an injury.

Embiid's love of Shirley Temples is so strong that he decided to build a brand around it. Following the lead of Steph Curry and Jeremy Lin, last October Joel Embiid filed two trademark applications for his nickname THE PROCESS:
The applications were all filed on an intent to use basis for a variety of goods including apparel, cell phone cases, rubber bracelets, children's books, and pre-bottled Shirley Temples. I have no doubt that pre-bottled Shirley Temples will be a hit with kids.

A party with a bona fide intent to use a mark in commerce in connection with specific goods or services may file an application on the basis of intent to use. However, before the mark can be registered, the applicant must actually use the mark in commerce in connection with all the goods and services listed in the application. A declaration attesting to this use must be filed, as well as specimens showing use of the mark in connection with each class of goods and services. Any good or service not actually used by the applicant must be deleted from the application before the application proceeds to registration.

For the rest of the article, click here.

Jiminian Law PLLC is devoted to helping clients manage, protect, register, license, sell, grant and use their trademark(s) or defend it or themselves in matters of trademark infringement.  Regarding trademark management, it is always best to be pre-emptive with your business and implement a trademark strategy.  That is where I can come in. Providing knowledgeable and effective representation are the keys to my success.  I am available for a free consultation if you call me at 917.388.3574 or 929.322.3546 or email me at danny@djimlaw.com.


Copyright Tuesday: How to Deal with Copyright Infringement on YouTube

Did someone post a video on YouTube infringing on your copyright? In other words, did someone use a song, a photograph or a video clip that you have a copyright to, without your permission, and posted it on YouTube? If you believe so, then you can do something about it.

Here are the steps to resolve that problem:

  1. Consider whether the infringing video meets a fair use criteria. You may need to consult an attorney for advice.
  2. Next consider whether the person who made or uploaded the video has some form of permission or authorization from you. If so, was it a verbal or written agreement and what are the terms to that agreement?
  3. If the uploaded video is still infringing on your copyright then your next step is to "Submit a copyright takedown notice" on YouTube. Click here to go that page. Note that these requests should only be submitted by the copyright owner or an agent authorized to act on the owner’s behalf. Furthermore, this request is the first step in a legal process that can result in a lawsuit.
  4. The form will ask a series of questions which you must fill in such as what is the issue, who is the copyright owner, what are the name(s) and URL(s) of the video(s) to be removed, what work of yours is being infringed, information about the copyright owner and your contact information.
  5. Most importantly, you must swear under penalty of perjury that your statements are accurate. If you materially misrepresent any claims, you may be liable for damages and attorney's fees.
  6. Finally you will submit the complaint and wait to hear back from YouTube.
  7. YouTube usually removes the video soon after unless the person who posted the infringing video disputes the notice. When that happens, YouTube will reinstate the video unless you take further action.
  8. In that event, you will decide to either move on or actually file a copyright infringement lawsuit.
These steps are similar to what you would have to do with other content providers except that they may not have a fillable form you can click on. Instead you will have to draft a letter with the appropriate information and send to the content providers legal office. Finally, addressing trademark infringement and trade secret disclosures require similar steps.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Jiminian Law PLLC is devoted to helping clients manage, protect, register, license, sell, grant and use their copyright(s) or defend it or themselves in matters of copyright infringement.  Regarding copyright management, it is always best to be pre-emptive with your business and implement a copyright strategy.  That is where I can come in.  Providing knowledgeable and effective representation are the keys to my success.  I am available for a free consultation if you call me at 917.388.3574 or 929.322.3546 or email me at danny@djimlaw.com.


Trademark Thursday: Trademark Infringers Can Limit The Damages They Must Pay If The Trademark Owner Fails To Prove That The Parties' Marketing Areas Overlap

by Hunter Freeman | McNair Law Firm, P.A. and originally published at JD Supra on 1.25.17
It has long since been the rule that an infringing trademark use may only be prevented in the geographic areas where use of the infringing mark and owner's trademark overlap.In the recent case of Variety Stores, Inc. v. Wal-Mart Stores, Inc.,iithe Eastern District of North Carolina stressed the importance that geographical overlap plays in recovering damages from such infringement. In fact, proof of geographic overlap can be more important than evidence of lost sales resulting from the infringement. While the District Court awarded Variety Stores damages for Wal-Mart's infringement, it limited the award to the profits Wal-Mart made under the infringing mark solely in the states where both parties actually used their competing marks. And it did so despite Variety Stores' failure to present evidence that the infringement actually caused it to lose any sales.
For the rest of the article click here or at the break below.

Trademark Thursday: Does Louis Vuitton Lack A Sense Of Humor? The Parody Defense Is No Laughing Matter For Brand Owners

1/18/2017 by Charlene Azema, Jonathan Hyman for JD Supra

On December 22, 2016, the Second Circuit gave tote bag manufacturer My Other Bag an early Christmas present by tossing out luxury giant Louis Vuitton’s claims of trademark infringement, copyright infringement, and trademark dilution and agreeing with the District Court’s finding that My Other Bag was shielded from liability by the parody defense.
My Other Bag – No Ordinary Bag
Defendant, My Other Bag, sells canvas tote bags for use as a grocery or all-purpose bag with the phrase “My Other Bag…” on one side and look-alike drawings of luxury purses (including Louis Vuitton purses) on the other side, such as the bag shown below:
For the full article click here or continue reading after the break.


Copyright Tuesday: A Tale of Two Cakes: Can Copyright Law Protect this Cake Design?

by Cynthia Blake Sanders of Baker Donelson, originally published on 1/23/2017 by JDSupra
Duff Goldman of Charm City Cakes, one of our hometown heroes in Baltimore, a.k.a. the Ace of Cakes, created a striking cake for President Obama’s 2012 inauguration. The cake design caught the eye of the incoming presidential administration that ordered a different pastry chef, Buttercream Bake Shop, to create a replica of the Ace’s creation.
Can the pastry chef that produced the replica cake be held liable for stealing the Ace’s cake design?
To find out click here for the article or read more below.


Entertainment Law News: NY Gov. Cuomo’s Budget Extend State’s Film Incentives Program

originally published on Deadline on January 17, 2017

New York Gov. Andrew Cuomo tonight unveiled a state budget that includes a three-year extension of the state’s film production tax credit. Launched in 2004 and extended by Cuomo in 2013, the $420 million-a-year program isn’t set to expire until 2019 but was expected to run out of money later this year without the additional funding provided for in the new state budget.

An economic impact report conducted for Empire State Development, the state’s economic development arm, found that in one two-year period – 2013 and 2014 – the program had created more than $5 billion in spending in the state, generated nearly $10 billion in total spending throughout the state’s economy, created more than 60,000 jobs and $3.3 billion in earnings.
Many in the state’s booming film and TV community had urged the governor to extend the program, including the New York Production Alliance and the DGA.
“The Directors Guild of America applauds Governor Cuomo for his continued leadership, and thanks him for including a three-year extension of the Empire State Film Production Tax Credit in his budget,” the guild said in a statement. “The positive impact of the incentive on the economy, jobs and local business is enormous. Between 2005 and 2015, as production increased by more than 300%, the earnings of our members who live and work in New York’s communities grew 350%. This simply would not have happened without the incentive.”
The program’s extension  also will be good for businesses like Kaufman Astoria Studios, which boasts the only studio backlot in New York City. “The governor’s support of the tax credit is a great economic policy,” said Hal G. Rosenbluth, the studio’s president and CEO. “The tax credit, combined with New York’s great talent, drives the $9 billion production industry in New York. The industry creates in excess of 100,000 high-paying jobs and spends millions of dollars in the local community for goods and services. Having the tax credit in place encourages Kaufman Astoria Studios and its counterparts to invest in building new infrastructure to service and grow the industry. With this extension of the tax credit the governor has established a win-win for the economy.”
SAG-AFTRA said that it too is pleased with the extension and the jobs for performers it will bring to the state. “SAG-AFTRA is grateful to Governor Cuomo for his leadership in recognizing the substantial economic benefits this tax incentive program brings to New Yorkers,” said Mike Hodge, president of the union’s New York local. “Film, television and other productions now create over 140,000 SAG-AFTRA-covered entertainment jobs every year in New York. The proposed extension of the tax incentive program, combined with the extraordinary talent of our local members, will ensure that producers continue to invest and thrive here.”

Jiminian Law PLLC is devoted to helping clients in all areas of business, copyrights, trademark, sports and entertainment law.  Providing knowledgeable and effective representation are the keys to my success.  I am available for a free consultation if you call me at 917.388.3574 or 929.322.3546 or email me at danny@djimlaw.com.

Business Law Monday: Protecting Trade Secrets and Non-Competes with Low Level Employees

Today's business tips are (1) don't be too quick to kick out an employee who has quit your company for a competitor and (2) be wary of forcing low-level employees to sign non-competes. To find out, why read the excerpts below:

(1) from When Employees Leave With Your Secrets
When you first learn of a departure, you are engaged in triage with two parallel priorities: find out what’s going on, and lock down the evidence.  In most circumstances that may give you time for an initial meeting to get some details and perhaps try to turn the situation around.  But you also have to be ready immediately to take actions that guarantee you get control over your data.
The initial investigation is low key, brief and uses internal resources.  Talk to the supervisor, find out what the departing employee knows and the apparent level of risk presented by the departure.  Identify relevant contracts, especially noncompete, nonsolicitation and invention assignments.  Get a quick read on any unusual recent behavior, including attempts to access information outside normal areas of responsibility, emailing documents to a personal website or uploading to a cloud storage site.
At this point you may be ready for an initial meeting to confront the employee with any disturbing facts or inferences and make a further assessment of the risk.  Where are they planning to go and what will be their responsibilities?  How long have they been looking at this?  What are the attractions of this new opportunity, and what are the negatives with their current position?  If you don’t want to lose them, ask about their willingness to change their mind and stay.  If not, make sure that no one else is involved in the move, and assess whether there is any project that would be seriously hurt if they left immediately.  (If so, then you might want to arrange a carefully controlled and swift transition process.)
Now you need to find out where all of your data are located.  Where are the company laptop and other mobile devices, including USB drives and security keys?  Is anything on a home computer system, in personal email accounts or stored in a cloud account such as Dropbox?  All of these assets, as well as physical files, need to be located and secure in company premises.  Be sure to emphasize clearly – and confirm this in writing – that nothing is to be deleted, even personal files, until the exit interview that will be scheduled to debrief and to separate personal from company data.
If the employee has given notice of willingness to stay on for a period of time, you can take them up on that without necessarily having them be present in the facilities.  Beyond tasking them with gathering and producing all company devices and data, and remaining available to answer questions, you may want to just send them home.  Preserve evidence by duplicating (preferably through a forensic service) all of the drives and accounts to which the employee had access.  And avoid any new damage by terminating the employee’s access to electronic systems.
The initial phase is often completed in the same day that notice is received, and in the process you will have made a basic assessment of the significance of the departure and the level of risk it poses.  If that assessment is moderate to serious, then the next step will often involve bringing in outside counsel to perform a deeper investigation.  This carries several advantages.  First, the entire process will be protected against disclosure by attorney communication and work product privileges.  Second, you will have the benefit of specialists who know what questions to ask and how far they can properly and usefully dig for the story.  Third, you will get sober, independent advice that is not affected by the emotional reaction of some managers when troublesome departures happen on their watch.
Outside counsel can assist with tying down the forensic record and reviewing it for evidence of improper behavior.  They will help you prepare for the exit interview, and in some circumstances they may participate in that process.  More typically you will conduct the exit interview internally, with two primary goals: first, learn as much as you can about where the person is going and what they are going to do; and second, deliver a clear and firm message about the importance of respecting their legal obligations, and the consequences if they don’t.
Here is a common exit interview checklist:
  • Confirm that all company property and information has been returned.
  • Ask about why they are leaving and how it might have been prevented.  This might provide information about others who are at risk.
  • Identify who they have talked to about their leaving; if the person is a manger, remind them of their duties relating to solicitation.
  • Find out about how they got the new job and precisely what they will be doing.
  • Ask them how they intend to ensure that they can perform their new functions while scrupulously protecting your confidential information.
  • Provide copies of their relevant agreements and point out their continuing restrictions and responsibilities; ask if they have questions, and emphasize that these promises are extremely important and serious and that the company will enforce them if it believes there is a breach.
  • Ask them to sign a “termination statement,” for example:
I certify that I do not have in my possession, nor have I failed to return, any files, data, notebooks, drawings, notes, reports, proposals, or other documents or materials (or copies or extracts thereof) or devices, equipment, or other property belonging to XYZ Corporation.
I also certify that I have complied with and will continue to comply with all of the provisions of the Proprietary Information and Employee Inventions Agreement which I have previously signed, including my obligation to preserve as confidential all secret technical and business information pertaining to XYZ Corporation.
Following the exit interview, review the results with counsel and formulate a strategy.  In most cases, the only followup will be a “warning letter” addressed either to the employee alone or also to the new employer, noting the company’s concerns, citing any relevant restrictive agreements, and offering the assumption that everyone will comply with their obligations.  A variation on this approach might include a request for a meeting to discuss assurances required to provide comfort that the employee will not be placed in a position that will imperil the integrity of your data.  (Click here for sample warning letters, and a note on new risks in sending them.)
Of course if you believe that there’s evidence not just of risk but of actual misappropriation of your trade secrets, you need to take prompt action.  You should have outside counsel involved immediately, to help you balance the need for a basic understanding of the facts with the imperative of prompt legal action.  But where you can afford the time to prepare before you act, your decisions will be better informed and less likely to cause collateral damage.  (Click here for my white paper “So You Want To Sue For Trade Secret Theft?”)
(2) from Requiring Non-Competes for Low Level Employees Raises Increasing Risks for Employers

A client recently asked us to draft a non-competition agreement that would prevent entry level machinists from working for a competitor for one year following their departure from employment. When we asked the client about the reasons for requiring the non-competes, he responded that he was sick and tired of training employees and losing them to a competitor that promised marginally higher wages. We responded that use of non-competes in these situations could result in legal claims against the employer for restraint of trade.

...For lower level employees, often a confidential information agreement is sufficient to cover the employer’s true protectable interests. In the above scenario, we recommended that the client use a combination of a confidential information protection agreement along with structured retention bonuses to deter employees from moving to a competitor for small differences in hourly compensation. This alternative has the dual benefits of having a considerably better chance of being enforced, as well as avoiding possible legal claims over restraint of trade or unfair trade practices.

Jiminian Law PLLC is devoted to helping clients in all areas of business, copyrights, trademark, sports and entertainment law.  Providing knowledgeable and effective representation are the keys to my success. Contact me for matters pertaining to the formation and maintenance of your business as well as corporate compliance matters, contracts, trade secrets, employment and more.  I am available for a free consultation if you call me at 917.388.3574 or 929.322.3546 or email me at danny(at)djimlaw(dot)com.

Corporate News: IRS on Tax Inversions and FCC on Cybersecurity

An excerpt from GC Cheat Sheet: The Hottest Corporate News Of The Week

IRS Issues Final Rules to Discourage Tax Inversions

The Internal Revenue Service has issued its final rules aimed at making it harder for U.S. businesses to reap the tax benefits of inversions, transactions that see businesses merging with foreign companies and moving corporate assets overseas. Additionally, it adopted temporary regulations that tweak the de minimis exception to the rule, which disregards foreign company stock resulting from prior inversions or acquisitions of U.S. companies from the calculation that determines the company's ownership percentage and thus whether the IRS treats the transaction as an inversion.

The rule is aimed at companies that engage in several inversions or acquisitions in order to manipulate their sizes to avoid the inversion threshold. Under the most recent version of the regulations, when the de minimis exception applies, the disqualified stock rule does not apply. The IRS is seeking comments on the temporary regulations.

The U.S. Department of the Treasury and the IRS will also now consider only the ownership of former domestic entity shareholders or partners individually rather than collectively, in an effort to stroke "the appropriate balance between preventing the de minimis exceptions from applying in inappropriate circumstances and addressing the practical difficulties" that commenters raised.

FCC Says It Has a Key Role in Cybersecurity Policy
In a white paper published Wednesday, the Federal Communications Commission's Public Safety and Homeland Security Bureau said cybersecurity was one of the commission's top priorities and that it is "uniquely situated" to address the issue. The FCC said shifting oversight of cyber risk to a nonregulatory body would "not be good policy" and it recommended initiatives for collaboration and greater cooperation with internet stakeholder groups and government agencies. It noted that internet service providers "naturally" consider risk to the firm when deciding to invest in cyberprotections.

"Unfortunately," the FCC said, "relying on market forces alone fails to adequately weigh the risks imposed on third parties who rely on the networks and services they provision. A cybersecurity gap confronts the public."

Going forward, the FCC will focus on issues including the internet of things, risks for small and medium carriers, 5G security, the next-generation broadcast standard ATSC 3.0, and the emergency alert system, according to the paper.

For more corporate news visit Law 360.

Jiminian Law PLLC is devoted to helping clients in all areas of business, copyrights, trademark, sports and entertainment law.  Providing knowledgeable and effective representation are the keys to my success. Contact me for matters pertaining to the formation and maintenance of your business as well as corporate compliance matters, contracts, trade secrets, employment and more.  I am available for a free consultation if you call me at 917.388.3574 or 929.322.3546 or email me at danny@djimlaw.com


Entertainment Case: California Defends IMDb's Challenge to Actor Age Censorship Law

originally published on 1.20.17 by Eriq Gardner for THR

California has filed its opposition to IMDb's attempt to stop a controversial new law over the display of an actor's age. The state tells a California federal judge that the statute is more about contracts than speech.
California Gov. Jerry Brown signed the law in September after Hollywood's biggest actors' guild lobbied for the change. SAG-AFTRA aimed to combat age discrimination by forcing certain websites to remove age information upon request.
In November, IMDb filed suit and demanded an injunction on enforcement. The Amazon.com subsidiary argues the law is "unconstitutionally over-inclusive because it requires IMDb to censor the factual age-related information of producers, directors, casting agents, and myriad other entertainment professionals, many of whom face no realistic risk of age discrimination from the publication of their ages on IMDb."
IMDb has drawn support from the EFF, the First Amendment Coalition, the Wikimedia Foundation and The Center for Democracy & Technology. Meanwhile, SAG-AFTRA is looking to intervene in the case by being named as a defendant.
In a brief filed on Thursday, California's deputy attorney general Anthony Hakl draws attention to exactly how the law functions. Most have assumed that any actor can request age removal, but the law specifically reserves removal requests to a "subscriber" of services that enters into a "contractual agreement to provide employment services to an individual."
In other words, what IMDb Pro does when it allows actors to build profiles, showcase their talents, access contact information for agents and publicists, and so forth. A fee is charged, and what California is saying is that any of these customers have the right to tell the service to not post their ages on the IMDb platform as a whole, including the portion that the wider public can access without registration.
For the full article, click here.
Jiminian Law PLLC is devoted to helping clients in all areas of business, copyrights, trademark, sports and entertainment law.  Providing knowledgeable and effective representation are the keys to my success.  I am available for a free consultation if you call me at 917.388.3574 or 929.322.3546 or email me at danny@djimlaw.com.

Entertainment Case: New York Court of Appeals Says No Common Law Public Performance Right For Pre-1972 Sound Recordings

originally published on 1/4/2017 by Chidera Anyanwu, Edwin Komen on JD Supra

On December 20, 2016, the New York Court of Appeals, the highest court in the state, held that no common law public performance right exists for pre-1972 sound recordings. The issue of whether a common law public performance right exists for pre-1972 sound recordings in New York was an issue of first impression. Although this holding is only binding on New York state courts and federal cases decided under New York law, it is anticipated that, coming from a premier IP jurisdiction, it will also be highly influential for courts throughout the nation that are adjudicating or may adjudicate similar cases.
In 2013, members of the band, The Turtles, initiated a lawsuit against SiriusXM, the nation’s largest satellite digital radio service, claiming rights to royalties for SiriusXM’s broadcasts of their pre-1972 recordings. The radio service broadcasts pre-1972 sound recordings, including those recorded by The Turtles, but does not pay the group or other artists for broadcasting the recordings.
The court was tasked with determining whether the band members had a right to control public performances of works that were produced prior to 1972. In coming to the conclusion that the members had no such right, the court initially recognized that Congress did not provide a public performance right for pre-1972 sound recordings. Congress first provided copyright protection to sound recordings in 1971, effective February 15, 1972, but limited the protection to recordings produced after such effective date. Further, it did not initially grant owners of post-1972 copyrights in sound recordings a public performance right. Even the Digital Performance Right in Sound Recordings Act of 1995 (“DPRA”), effective February 1996, only provided a limited and highly regulated digital performance right that did not extend to nonsubscription broadcast transmissions, namely performances transmitted through AM/FM radio stations. Therefore, the court found significant that Congress has never recognized a general public performance right for post-1972 sound recordings nor provided generally for federal protection of pre-1972 sound recordings. It emphasized, however, that Congress expressly did not pre-empt any existing state laws concerning pre-1972 sound recordings, and such rights under state statute or common law may be asserted until February 15, 2067.
The court then analyzed its case law to determine whether New York courts have recognized a public performance right for pre-1972 sound recordings. It highlighted cases that discussed distribution and reproduction rights for owners of copyrighted works – these rights being necessary to prevent piracy of the works – but determined that the question of whether a public performance right in pre-1972 sound recordings existed in common law was an issue of first impression.
Finding no cases that addressed the issue, the New York Court of Appeals answered the question in the negative. 
Why did the court answer in the negative?
It explained that the failure of artists to assert the right in court supports the contention that no such right existed. In fact, the court expressed its belief that artists failed to assert the right because they derived benefits from radio stations playing their music. For example, artists and record companies experienced an increase in album sales as a result of radio play.
The court also expressed concern about courts establishing a public performance right where none existed before. It explained that courts do not have the resources to balance the various interests that may be affected if such a right were to exist. It further encouraged artists to, instead, ask Congress to pass legislation on the issue. Congress, it explained, has the proper tools to establish the right and the scope of its protection.
What is one take-away moving forward?

In regard to the resolution of similar cases, this holding represents an understanding that state courts should adjudicate this issue under state law. As the court discussed, federal copyright law does not provide an answer to the dilemma presented by the facts of this case. Therefore, federal courts should realize that resolution of this issue should be handled by the states or, at the very least, state courts should provide guidance regarding the existence of the right under state law.

The importance of the concurrence

The Court of Appeals decision is also notable for a well-reasoned concurrence and dissent that each provide insight on how similar cases might be viewed by other courts.  In particular, the concurrence includes a detailed discussion on the kinds of uses of sound recordings that fall on a continuum running from those that are clearly performances to those that are clearly reproductions and distributions, with some uses that don’t comfortably fall within either category.
To sum up

Ultimately, state courts will have to decide whether a public performance right in pre-1972 sound recordings exists in their state. This will present a hurdle to enforcing any such performance right on a uniform nationwide basis. Consequently, copyright owners in pre-1972 sound recordings should consult their attorneys regarding any interest they may have in public performances of their pre-1972 sound recordings, and, if the state has or appears to have granted the right, how best to enforce it.

For the full article and analysis, click here.
For a copy of the decision, click here.

Jiminian Law PLLC is devoted to helping clients in all areas of business, copyrights, trademark, sports and entertainment law.  Providing knowledgeable and effective representation are the keys to my success.  I am available for a free consultation if you call me at 917.388.3574 or 929.322.3546 or email me at danny@djimlaw.com.


Trademark Alert: Changes in Requirements for Affidavits or Declarations of Use, Continued Use, or Excusable Nonuse in Trademark Cases

To assess and promote the accuracy and integrity of the trademark register, the USPTO is changing its rules regarding the examination of affidavits or declarations of continued use or excusable nonuse of trademarks filed under Section 8 of the Trademark Act, and on affidavits or declarations of use in commerce or excusable nonuse under Section 71 of the Act, effective February 17, 2017
The new rules will allow the USPTO to require additional proof of use to verify that a trademark is in use in commerce in connection with particular goods/services identified in the registration, unless excusable nonuse is claimed in whole or in part. 
The USPTO issued a notice of final rulemaking entitled “Changes in Requirements for Affidavits or Declarations of Use, Continued Use, or Excusable Nonuse in Trademark Cases" in the Federal Register, 82 Fed. Reg. 6259, on January 19, 2017.  

Offensive TMs At High Court: Everything You Need To Know

by Bill Donohue

The highest-profile trademark case in years will be argued before the U.S. Supreme Court on Wednesday, pitting a rock band and a billion-dollar football team against the federal government — and the First Amendment against laws limiting offensive speech. To get you up to speed, here's everything you need to know.

What's at issue here?

The justices are weighing the Lanham Act's Section 2a, which bars the U.S. Patent and Trademark Office from registering any trademark that "may disparage" people — namely, whether the provision violates the First Amendment rights of those who want to register such offensive words as trademarks.

Though the Washington Redskins aren't directly involved in the case, Section 2a is the same provision cited in the high-profile 2014 ruling that revoked the football team's trademark registrations on the grounds that the name is offensive to Native Americans. The court's decision, coming in a separate case involving an Oregon rock band called The Slants, will likely make or break the team's case, too.

Section 2a has been on the books since 1946, a testament to the fact that few questioned its legality until recently. For years, courts ruled that it didn't violate the First Amendment because it doesn't actually bar real-life use of the offending mark or prevent the owner from enforcing common law trademark rights.

How did we get here?

Simon Tam, the lead singer of The Slants, applied in 2010 to register his band's name as a federal trademark. He and his band mates are of Asian descent, and they say they chose the name to "reappropriate" and disarm an anti-Asian slur.

But an examiner at the trademark office didn't see it that way, ruling that the name would violate Section 2a's ban on "disparaging" marks and rejecting the application. Tam appealed to the Trademark Trial and Appeal Board, but that body upheld the examiner's decision in 2013.

Tam then appealed to the Federal Circuit, which initially affirmed the ruling but then issued an unusual after-the-fact order withdrawing the earlier decision and setting the stage for the en banc court to weigh in on whether Section 2a violated the First Amendment rights of applicants like Tam.

In December 2015, the full court sided with Tam, expressly overturning decades-old Federal Circuit precedent that Section 2a was constitutional. Though such marks often "convey hurtful speech that harms members of oft-stigmatized communities," the appeals court said that "the First Amendment protects even hurtful speech."

"The government cannot refuse to register disparaging marks because it disapproves of the expressive messages conveyed by the marks," the court wrote.

The USPTO filed a petition for a writ of certiorari in April, and the high court granted cert in September.

What's the government's position?

That there is a big difference between discriminating against speech and simply declining to use public funds to actively support something — in this case, racial slurs — that the government deems is against the public interest.

"Nothing in the First Amendment requires Congress to encourage the use of racial slurs in interstate commerce," the USPTO wrote in its brief to the high court.

The agency makes that central argument in different ways, but one to keep an eye on during Wednesday's arguments is the so-called government speech doctrine: the idea that expression by the government is exempt from First Amendment protections.

The doctrine got a big thumbs-up from the high court in June 2015, when the justices ruled that license plates were government speech, meaning Texas wasn't violating the First Amendment by refusing requests to adorn them with the Confederate flag.

That ruling was already applied in the Redskins' parallel case, where a district judge upheld Section 2a as constitutional by finding that trademark registrations were analogous to those Texas license plates. Unsurprisingly, the USPTO is asking the justices to do the same in The Slants' case.

"Just as any motorist who wished to display a Confederate battle flag on his vehicle could do so on a bumper sticker without the state's assistance, respondent can use the term 'slants' in any way he wants even if his trademark cannot be registered," the agency wrote. "Just as the state of Texas could permissibly disassociate itself from a symbol it viewed as offensive to the public, the federal government can permissibly disassociate itself from disparaging trademarks."

For outside observers, that line of argument gives the court a chance to offer needed clarification on the extent of "government speech."

"I'll be very curious to see if the justices press them on the boundaries of government speech doctrine," said Megan L. Brown, a partner with Wiley Rein LLP. "Its application in the license plate case was already arguably aggressive, and this would be an even bigger leap."

What's Tam's position?

That withholding the benefits of a registration is a serious burden that the First Amendment requires the government to justify — and that "shielding people from being offended" simply isn't good enough.

"The First Amendment does not allow the government to impose burdens on speech for the purpose of protecting listeners against offense," the band's brief to the high court read. "Disparaging trademarks understandably arouse disgust, but disgust is not a valid basis for restricting expression."

Given the high court's previous treatment of free speech cases, court watchers say they wouldn't be shocked if the justices are receptive to the argument that the USPTO has failed to offer up a sufficient reason for its restriction on speech.

"If you go back and look, there is usually a very serious harm that's being prevented with a restriction of speech," Mintz Levin's Weller said. "A real danger of physical injury or child pornography or libel. You don't really have that same kind of harm here."

Tam also weighed in on the government speech doctrine during briefing, saying a registration was decidedly different than a license plate.

"Unlike license plates, trademarks are not a form of government ID the public thinks of as government speech," Tam wrote. "Unlike license plates, the government does not control the design or the content of trademarks."

The case is Lee v. Tam, case number 15-1293, in the Supreme Court of the United States.

--Editing by Christine Chun and Catherine Sum.

For more, click here.

Jiminian Law PLLC is devoted to helping clients manage, protect, register, license, sell, grant and use their trademark(s) or defend it or themselves in matters of trademark infringement.  Regarding trademark management, it is always best to be pre-emptive with your business and implement a trademark strategy.  That is where I can come in. Providing knowledgeable and effective representation are the keys to my success.  I am available for a free consultation if you call me at 917.388.3574 or 929.322.3546 or email me at danny@djimlaw.com.


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