In a blog post, DLA Piper partner Jeff Lehrer discusses some common commercial contract issues to watch out for as your company begins contracting with third parties and looks forward to the next venture round or potential acquisition.

He points out that it is important to address the critical intellectual property rights issues that will allow the protection of an idea in the commercial market.

Among the points he discusses: consider the impact that the agreement may have on the company’s ability to pursue subsequent contracting opportunities; commercial agreements must clearly allocate ownership of IP; ensure compliance with open source licenses; and avoid being on the hook for uncapped liability.

Read the article.

The first batch of employers are getting estimates from the IRS of penalties they owe for not providing health coverage to employees in 2015. Some of the estimates are in the millions, reports Bloomberg.

Kristen Ricaurte Knebel writes that the IRS won’t say how many “226-J” letters have gone out or who’s getting them.

“But some practitioners expect Industries like trucking, restaurant, and staffing to see a high proportion of them,” she explains. “That’s because there is a high turnover rate inherent in those industries, which makes it challenging to keep track of workers, Alden J. Bianchi, a member at Mintz, Levin, Cohn, Ferris, Glovsky & Popeo PC in Boston, told Bloomberg Law.”

The Affordable Care Act in 2015 required employers with 100 or more full-time employees to offer minimum essential coverage to at least 70 percent of full-time workers. Failure to do so could result in a penalty of $2,080 for every full-time employee, with penalties sometimes reaching $10 million.

Read the Bloomberg article.

The Antitrust Update of Patterson Belknap Webb & Tyler discusses a Federal Trade Commission case in which it appears an amicus brief may have been dispositive to the outcome of an appeal.

In Federal Trade Commission v. Penn State Hershey Medical Center, a group of 36 economists affiliated with top universities across the country filed an amicus brief explaining that the lower court used a faulty economic theory when it ruled against the FTC. The appellate court cited the brief when it reversed the district court.

Authors Jake Walter-Warner and Jonathan H. Hatch examine the brief’s influence on the appellate court and show how the court laid out the issues with the district court’s analysis just as the amicus brief did.

Read the article.

The Association of Corporate Counsel has set the agenda for the 2018 ACC Mid-Year Meeting, which will be in Denver April 22-24.

The ACC is promoting two special sessions: “Advanced Ethical Issues in Negotiating and Drafting Contracts” with Clara Ohr, general counsel for East Coast Power & Gas, LLC, and a presentation by Gary Kennedy, former CLO of American Airlines and author of “Twelve Years of Turbulence: The Inside Story of American Airlines’ Battle for Survival.”

Three major components of the meeting will focus on:

• Contracts: Learn advanced drafting and negotiation techniques and tools that drive contract performance, mitigate risk, and meet rapidly changing needs of your organization.
• Mergers and acquisitions: Knowing business—and your company’s business, specifically—will make you an immensely more valuable business partner as your company navigates complex corporate transactions.
• Business training: Business management is the #1 non-legal skill desired by CLOs for their lawyers. Boost your business acumen through academic-taught live and on-demand sessions on key finance, accounting, and emotional intelligence concepts.

Get more information.

As more and more “smart” products incorporate computer and software elements, manufacturers must evaluate whether they have the appropriate supply chain practices and procedures in place to handle the addition of these elements, advises Nicholas J. Ellis of Foley & Lardner in the firm’s Manufacturing Industry Advisor blog.

This could involve revising contracting practices and documents, he writes.

“Many of the contract forms used to source raw materials or physical components may not be appropriate to use when sourcing software. The terms of any contract must be dictated by the specific circumstances,” Ellis explains.

He discusses some examples that highlight some of the potential issues that may arise when trying to use traditional supply form documents to purchase software or other computer components to be included in a product.

Read the article.

Earlier this month, tax attorneys Steven Toscher and Michel R. Stein, principals at Hochman Salkin Rettig Toscher & Perez P.C., delivered a presentation titled “New IRS Scrutiny on Cryptocurrency Reporting: Filing Requirements and Exchange Treatment.”

Toscher and Stein’s presentation explains, “Cryptocurrency is drawing increased attention from government regulators.” They note that in November 2017, Coinbase was ordered to release information on approximately 14,000 customers.

They also discuss the means of obtaining virtual currency, problems posed by “fair market value,” and issues that are unresolved.

Read the article.

The Associated Press is reporting that Japanese air bag maker Takata Corp. has reached a $650 million deal to settle consumer protection claims from 44 states and Washington, D.C., but only a fraction of the money will be paid due to Takata’s financial problems and bankruptcy.

Plaintiff states agreed not collect the settlement so that victims of Takata’s faulty air bag inflators can get a bigger piece of the company’s remaining money. But South Carolina, which led the states, will get more than $139,000 to cover costs of the investigation.

Reporter Tom Krisher explains that Takata air bag inflators can explode with too much force and spew shrapnel into drivers and passengers. At least 22 people have died worldwide and more than 180 have been hurt.

Read the AP article.

A recent unpublished Michigan Court of Appeals opinion provides some guidance with respect to the architect’s and engineer’s common law duty when processing pay applications, according to a post on the website of Clark Hill.

Jeffrey M. Gallant and Scott D. Garbo explain that the court held that the owner of a construction project could not maintain a professional negligence claim against the architect for failing to adequately review payment applications.

“While you may only have a contract with one of many project participants, Michigan courts continue to elaborate on the potential obligations owed to all other participants, including architects, engineers, contractors, subcontractors, owners, and lenders,” they write.

Read the article.

Glenn West, writing in Weil, Gotshal & Manges LLP’s Global Private Equity Watch, writes about a case in which a cut-and-pasted forum selection clause from an unrelated contract made its way into the wrong document.

The cut-and-pasted text declared that “any action pertaining to this agreement shall be the State of Illinois.” When the plaintiff sued the defendant in Florida, where the defendant’s headquarters were located, the defendant moved to dismiss on the basis that the contract required choice of Illinois as the forum.

The Florida appellate court said that mandatory forum selection clauses mean what they say, even when what they say was the result of a supposed cut and paste error. Accordingly, the case was dismissed for being filed in an improper forum.

West sees the ruling as good news for the careful transactional lawyer and bad news for those who fail to draft a bespoke clause.

Read the article.

FTI Consulting, Inc. announced findings from its Technology segment’s 12th Advice from Counsel study of e-discovery, information governance (IG), privacy and security trends. The study explores how issues of data security and privacy impact in-house legal teams at Fortune 1000 corporations and reveals the top concerns and emerging best practices across three key and intersecting topics: the General Data Protection Regulation (GDPR), IG and data security and remediation.

“A clear and recurring theme is that in-house legal teams are under greater pressure to meet ever-changing and increasing data-related challenges,” said Chris Zohlen, a managing director in the Technology segment at FTI Consulting and co-author of the study. “This year’s Advice from Counsel study shares their practical advice on a range of topics, from securing executive buy-in to benchmarking against peers or auditing the security practices of service providers.”

Data privacy, security challenges and threats were top priorities for virtually every large organization around the globe. Respondents had dozens of suggestions for proactive ways to address IG and data protection, including addressing the human element and creating a culture of awareness in achieving strong security. While billions of dollars have been spent on technology to strengthen security, several participants said that they do not believe their organizations are safer than they were five years ago, because the human element has not been adequately addressed. Other organizations reported working with outside experts to focus equally on implementing technology solutions and creating a culture of awareness to address continually evolving data privacy and security challenges.

Additional key findings and takeaways in the study include:

• The investment required to ensure GDPR compliance was a top concern among the 80 percent of organizations that confirmed they will be impacted by the regulation. However, they were divided on whether they should wait to see how the regulation will be enforced before acting, vs. working to get ahead of penalties proactively.
• For those evaluating an IG strategy to better protect data, respondents agreed on the importance of seeking outside experts. They repeatedly made clear that data security is an area that is evolving quickly and teams need to work with technical experts to stay apace and handle it effectively.
• The growth of cloud storage and machine learning is making it easier for organizations to identify trends and realize monetary benefits from enterprise data. Finding the right balance between Big Data and over-preserving is a common challenge. Organizations know they are creating and saving too much data, and more than half of respondents reported successfully conducting data remediation projects. Others were hampered by limited resources, lack of engagement from cross-department teams or failure to obtain C-level buy-in to move projects forward.

“In today’s business climate, all organizations are challenged to better protect enterprise data, which is a complicated effort that requires dedicated resources across multiple departments,” said Jake Frazier, Head of the Information Governance, Privacy & Security practice and a senior managing director in the Technology segment at FTI Consulting. “Overcoming the initial barriers of securing buy-in and approval from top company leadership can be overwhelming but will make all the difference in setting projects up for success from the outset. Our clients and the respondents in the Advice from Counsel study have found that working with internal and external partners to conduct data protection assessments, identify priorities and execute a plan custom-built for the company’s risk profile are the most effective steps to address budget issues and the broader landscape of challenges.”

About the study
For the past nine years, FTI Technology has partnered with Ari Kaplan Advisors to publish the annual Advice from Counsel study, a quantitative and qualitative view into e-discovery best practices for corporate counsel. The study was conducted through phone interviews with 30 in-house lawyers at Fortune 1000 corporations with responsibilities that included some aspects of e-discovery and information governance. Of this year’s participants, 79 percent develop and implement e-discovery processes while 89 percent develop and implement information governance processes. Eighty percent of participating organizations had total annual revenues greater than $5 billion and 67 percent had over 10,000 employees. In terms of litigation events over the past 12 months, 33 percent reported managing 100 to 500 litigation events, and 33 percent reported managing more than 500 litigation events.

A recent written decision of the Patent Trial and Appeals Board sheds light on how the PTAB may treat common sense as used in obviousness arguments, reports Jones Day in its PTAB Litigation Blog.

Albert Liou discusses the recent case of Kranos Corporation v. Riddell, Inc., which involves the claimed invention of a sports helmet with a quick release connector for the faceguard. An important claim element was the “releasable coupler mechanism.”

“The Kranos decision teaches Petitioners to avoid relying only upon ‘common sense’ as a reason for combining references.” Liou writes. “Rather, an effective Petition should lead the PTAB to conclude that ‘common sense’ supports obviousness, after presenting the PTAB with a persuasive showing of why the elements or structure of one reference should be combined with those of another.”

Read the article.

Gibson, Dunn & Crutcher has posted an on-demand webcast that discusses what the firm has been seeing and expects to see in the future in regard to mergers and acquisitions in the oil and gas industry.

Members of Gibson Dunn’s Mergers and Acquisitions and Oil and Gas Practice Groups produced the 60-minute presentation to (1) discuss the current state of mergers and acquisitions at the corporate level (“M&A”) and acquisitions and divestitures at the asset level (“A&D”) in those segments of the energy sector comprised of upstream oil and gas, midstream oil and gas, and oilfield services; (2) identify trends in M&A and A&D in those segments; and (3) use their crystal balls to attempt to foresee what the future holds for M&A and A&D in those sectors.

Panelists are partners Michael P. Darden, Tull Florey and Justin T. Stolte. The moderator is Jeffrey A. Chapman.

Watch the on-demand webcast.

U.S. Bank, the fifth-largest commercial bank by assets in the United States, was charged by the the Justice Department on Thursday with failing to guard against illegal activity and, in at least one instance, even abetting it, reports The New York Times.

The bank is charged with severely neglecting anti-money laundering rules, helping a payday lender operate an illegal business and lying to a regulator about its plans for tracking potential criminal activity by bank customers, writes reporter Emily Flitter.

The bank settled the Justice Department charges and cases brought by other regulators by agreeing to pay various fines and penalties totaling $613 million.

Read the NY Times article.

CNBC is reporting that an expected bankruptcy filing by Remington could jeopardize a landmark class action settlement involving the company’s iconic Model 700 bolt-action rifle, according to an attorney involved in the case.

The article quotes Mark Lanier, a lead attorney for plaintiffs: “If they file for bankruptcy, it will stay all proceedings.”

Plaintiffs claim that Remington covered up a deadly design defect that allows the rifle — and a dozen similar models — to fire without the trigger being pulled. Remington denies those accusations.

“In 2014, while still maintaining the guns are safe, Remington agreed to replace the trigger mechanisms, free of charge, on millions of guns in order to settle the case. But two Model 700 owners, Richard Denney of Oklahoma and Lewis Frost of Louisiana, appealed the settlement. They argue the agreement deliberately downplays the risks from the guns, and does not do enough to notify the public,” reports Scott Cohn.

Read the CNBC article.

A recent ruling  is a powerful reminder that the broad freedom of contract that Delaware law accords entities such as LLCs offers both the promise of great latitude to contracting parties and the threat of serious pitfalls for parties that fail to carefully protect their interests in the agreement, according to a post on the website of Cadwalader, Wickersham & Taft.

The decision also underscores the limits on an implied covenant breach claim under Delaware law.

The authors offer some takeaways from the ruling, discussing in detail:

• The implied covenant of good faith and fair dealing as applied in Delaware does not operate to rewrite contract simply because regretful plaintiffs wished they had negotiated a better or different deal
• The negotiated, mutual waiver of fiduciary duties narrows the already slim chance a Delaware court will apply the implied covenant of good faith and fair dealing
• Waiver of fiduciary duties, conditioned on a sale to an unaffiliated third party, granted the board unfettered discretion to determine the marketing and structure of the company’s sale
• Plaintiffs offered no reason to believe defendants’ conduct frustrated their reasonable expectations
• The court highlighted certain conduct that may be sufficiently egregious to implicate the implied covenant in similar situations

Read the article.

An agreement between two parties involved in an international contract may involve a mechanism, known as the “home country” provision, that provides that the party initiating arbitration must sue the other party in its home country.

A post of the website of Skadden, Arps, Slate, Meagher & Flom explains that “proponents of such clauses say they provide a disincentive to elevate disputes because a party will be reluctant to go to the other side’s home country. Though they are not widely used in large transactions (and are not recommended in arbitral literature or by arbitral institutions), they are occasionally present.”

The authors discuss two cases that illustrate that “home country” arbitration clauses may prove cumbersome to administer in practice and may result in unintended consequences for the parties.

Read the article.

Image by Ra Boe / Wikipedia

Los Angeles Times columnist Michael Hiltzik sees warning signs for Amazon, Google and Facebook.

“Competitive advantage is not a permanent gift,” he writes. “Indeed, the more successful a company is, the more unassailable its competitive position appears, the greater the forces that gather to knock it off its perch.”

He continues: “It’s always tempting to think of the future as the same as today, only more so. That’s why we imagine a future in which Amazon is the only name in retail and Google and Facebook control everything we read, hear and feel. Things have never worked out that way no matter how majestic are the kings of commerce at any given moment. ”

Read the LA Times article.

Amending agreements is a common practice with managed service providers (MSPs) and companies involved with software licensing and companies that provide professional services, according to a blog post on the website of Kirkpatrick Law.

Even the best agreements can require amendments based on changes in law, technology, and the products or services provided.

The post discusses some examples of ways to amend contracts, including delete and replace, from and to, and a revised agreement.

Read the article.

Zapproved and General Counsel News have posted an on-demand webinar that can help executives and lawyers learn about the impact and strategies associated with the European Union’s General Data Protection Regulation set to take effect in May. (See the video below.)

While the GDPR standardizes data protection law across the EU, it doesn’t spell out how U.S. companies can update data preservation processes to be compliant. This on-demand webinar offers key steps on ensuring a company’s approach to processing personal data of EU citizens meets these new cross-border data privacy guidelines.

The webinar covers such topics as:

• Prepare for Article 30’s demand for detailed record keeping
• Article 30 of the GDPR broadly requires that data controllers and data processors maintain a detailed record of their processing activities.
• Understand the U.S and EU perspectives on privacy rights
• Consider gaining ISO2l701 certification
• Gaining ISO2l701 certification, an International standard of security that European regulators cite, demonstrates that you’re thinking like an international citizen with a cross-border responsibility.

When the Federal Reserve announced its punishment of Wells Fargo in the company’s sales scandal, the agency also announced that the company would replace four members of its 16-person board.

In a commentary for The Washington Post, former treasury secretary Lawrence Summers discussed the question: Why aren’t the directors who are leaving being named and asked to resign effective immediately with an element of humiliation?

“There are compelling reasons for due process before anyone goes to jail, even if it undermines deterrence,” Summers writes. “There is no similar justification for due process before being fired, publicly, for being a failed fiduciary. The Fed and other regulatory agencies should change their procedures.”

Read the Post article.