A post on the Morgan Lewis Tech & Sourcing blog reviews issues related to the defense and indemnification aspects inn contracts impacting intellectual property ownership.

Authors Peter M. Watt-Morse and Michael R. Pfeuffer write that “an IP indemnity clause typically includes the obligation to defend against third party IP claims. However, the potential costs and risks associated with this obligation can be impacted by the language of the provision.”

“Like any indemnitee, the user will want indemnification for IP infringement to be as broad as possible, including any losses, costs, damages or expenses whatsoever sustained by virtue of the third-party claim,” the explain.

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A post on the Faegre Baker Daniels website asks the question: What does a contractor do when the owner stops making progress payments?

The contractor has two options: it can either continue to perform the work or cease the work, neither of which is a perfect solution.

“The owner’s failure to pay progress payments that are ‘clearly due and owing’ generally entitles the contractor to stop work until the progress payment is made. While this rule seems clear, it is not that simple,” according to the post.

The contractor should look to its contract with the owner to find answers to two questions: Does the contract require the contractor to take a certain action? And, is payment”clearly due and owning?”

Read the article.

A recent California case may force companies doing business with foreign entities to reconsider—and maybe rewrite—their contracts, points out Sheppard, Mullin, Richter & Hampton in its Corporate & Securities Law Blog.

In Rockefeller Tech. Invs. (Asia) VII v. Changzhou Sinotype Tech. Co., No. B272170, the California Court of Appeal held that parties may not contract around the formal service requirements of the Convention on the Service Abroad of Judicial and Extrajudicial Documents, commonly referred to as the Hague Service Convention.

Authors Hwan Kim and Neil Popovic write that the decision could have profound implications for international business.

“The Rockefeller decision arguably makes it impossible to require foreign companies from some of the largest economies including China, Japan, Germany, U.K., India, Korea, Russia and Mexico, to show up in a California court based on notice provided by mail, courier (FedEx), or email even if the parties agreed to such forms of notice in their contract,” the authors warn. “This will have profound consequences for companies with global supply chains such as Apple and GM, for investment funds with foreign investors, for engineering and construction companies that procure materials and handle projects around the world, such as AECOM, and potentially for any company that imports or exports goods to or from the United States.”

Read the article.

A recent decision from the Connecticut Superior Court illustrates the limits to enforcing non-compete agreements, writes Michael LaVelle for Pullman & Comley’s Working Together blog.

LaVelle explains the case’s background: “Typical of non-compete enforcement situations, the plaintiff company learned that an executive employee who had just resigned had been hired by a key competitor. The former employee had signed a ‘Confidential Information, Non-Compete and Inventions Assignment and Assumption Agreement’ at the start of her employment. The company sought to enforce the agreement by obtaining an injunction to prevent the former employee from working for the competitor.”

The court found that by preventing the individual from performing any work or services, whether as an employee, consultant or independent contractor, for any competitor, the agreement went beyond the limits of reasonableness.

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Few concepts are as confusing as the “gross up” of operating expenses to those who do not regularly deal with office leases, writes William Hof in a white paper for Husch Blackwell.

“Most tenants understand that in addition to base rent, tenants often directly reimburse their landlords for a portion of the building’s operating expenses (e.g., real estate taxes, casualty insurance, maintenance, utilities, etc.),” explains Hof.

In the paper, he defines “gross up” and explains how it works, and he discusses variable vs. constant expenses and tenant protection.

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Arbitration is a creature of contract, and an arbitrator’s powers are in effect defined by the parties’ arbitration agreement, points out a post on the Mintz, Levin, Cohn, Ferris, Glovsky and Popeo blog ADR: Advice From the Trenches.

“Paradoxically, although an arbitration agreement can be written (double-spaced) on one side of a cocktail napkin, in some cases it may grant greater authority to an arbitrator than a judge has,” writes Narges Kakalia.

In the post, she discusses Timegate Studios, Inc. v. Southpeak Interactive, LLC, in which the Fifth Circuit confirmed an arbitration award in which the arbitrator substantially reformed the parties’ commercial agreement by, among other things, awarding one a broad perpetual license to certain of the other’s intellectual property, despite the fact that the original agreement had granted only a more narrowly drawn ten-year license.

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The number of cases involving consumer data breaches is rapidly growing, points out Ehren M. Fournier in a post on the website of Schoenberg Finkel Newman & Rosenberg LLC. Data breaches inflict additional costs on financial institutions, leading those institutions to turn to litigation to recoup their losses from merchants.

Fournier discusses a recent case in which the United States Court of Appeals for the Seventh Circuit Court dealt a significant blow to attempts by financial institutions to bring negligence claims against merchants for failing to adequately safeguard their customers’ data:

In 2012, hackers infiltrated Schnuck Markets, a large Midwestern grocery chain, and stole the data of about 2.4 million credit and debit cards. Financial losses from the unauthorized purchases and cash withdrawals made with the stolen data reached into the millions. Because federal law requires the consumers’ banks to indemnify the consumers for losses incurred as a result of fraudulent activity, four banks brought a class action lawsuit against Schnucks to recover their losses. The plaintiff banks had no direct contract with Schnucks, and instead resorted to common-law negligence/tort claims, common-law contractual claims, and several claims under Illinois statutes. The Seventh Circuit affirmed the lower court’s decision to dismiss all claims, and its decision on the economic loss doctrine bears some discussion. The federal appellate court anticipated that the high courts of both Illinois and Missouri would reject imposing tort liability under these circumstances.

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Winston Maxwell and Gauthier Vannieuwenhuyse of Hogan Lovells point out that we are living in the era of constant technological progress, and then ask the question: As smart contracts emerge, why not think about totally automated arbitration?

“Big data and e-discovery can assist counsel in document management and reduce the risk of human error during discovery,” they write for an article for Bloomberg Law.

They discuss machine learning, predictive justice, and sophisticated programs that can even analyze the behavior of specific judges and arbitrators to predict their propensity to grant or deny certain motions and claims.

“This may open arbitration to new markets, such as low value disputes, whose players were traditionally reluctant to resort to this type of resolution,” they write.

“While it is possible to envision completely robotized arbitration taking place in a not-so-distant future, that sort of arbitration would not be recognized by state institutions. If the arbitration occurs in a self-contained, self-executing framework, then its nonrecognition by state institutions may not be a major obstacle,” the authors conclude.

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Morgan, Lewis & Bockius lawyers, writing in the firm’s Tech & Sourcing blog, discuss the typical ways that parties can use contracts to determine intellectual property ownership.

“In the context of negotiating an agreement where intellectual property rights are addressed, most parties will readily agree that those intellectual property rights owned by a party before the effective date of the agreement or developed outside of the agreement (commonly referred to as background rights) should be owned by that party,” write Vito Petretti and Cindy L. Dole.

Their article discusses the common allocations of foreground IP rights.

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Drew York, writing in Gray Reed & McGraw’s Tilting the Scales blog, offers some advice on how to “failsafe” electronic agreements with employees.

He describes a scenario in which a company requires its employees to electronically acknowledge receiving, reviewing and agreeing to abide by the company’s employee handbook. One of the workers later is injured on the job, and the company wants to invoke the handbook ‘s arbitration agreement.

“In several recent cases, employees have disputed that they electronically acknowledged an agreement with their employer,” writes York. “This raises an intriguing question: how do employers prove that an employee ‘signed’ an agreement when there is no written signature?”

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A divided panel of the Texas Court of Appeals in Houston has held that the 2014-2015 drop in oil prices is not a force majeure for purposes of general force majeure contractual protection, reports Liskow & Lewis in its Energy Law Blog.

Jackie E. Hickman explains that the court addressed a dispute between ConocoPhillips Company and TEC Olmos over a farmout agreement that required Olmos to commence drilling by a specified date.

“During the interval between execution of the agreement and commencement of drilling, however, changes in the global supply and demand of oil caused the price of oil to drop significantly. As a result, Olmos was unable to secure financing for drilling and informed ConocoPhillips that it would be unable to meet its drilling obligations. ConocoPhillips filed suit against Olmos and the guarantor of the contract, Terrace Energy Company, for breach of the farmout agreement. The lawsuit sought $500,000 in liquidated damages,” Hickman writes.

Olmos invoked the force majeure clause of the farmout agreement to excuse its inability to perform, but the court agreed with ConocoPhillips.

Read the article.

Compliance Week will present a webcast titled “Compliance and Contract Management –The Right People, Process & Technology” to highlight effective strategies and considerations to maintain compliance with contractual agreements in the U.S. and abroad.

The event will be Wednesday, June 27, at 2 p.m. EDT.

“While relying on both outside counsel and third-party legal services providers to meet standards and governing party obligations, competitive organizations enlist effective digital strategies where appropriate and seek to automate as many tasks as possible,” Compliance Week says on its website. “As we explore the people, processes and technology that aid compliance and contract management, we’ll discuss e-Communications monitoring, digital learning services, open source software and trending technology such as block chain contracts, and other tools.”

Register for the webcast.

Bloomberg is reporting that Walmart Inc. sued its former chief tax officer for violating her employment agreement by defecting to online rival Amazon Inc., the latest broadside in the slugfest between the two retail giants.

Walmart, citing contractual terms, is trying to block Lisa Wadlin, Walmart’s senior vice president and top tax executive, from taking the Amazon position until May 2020 and bar her from handing over “sensitive business information obtained at Walmart.”

Reporters Jef Feeley and Matthew Boyle write that Walmart’s suit claims that Wadlin “wrongfully left the Bentonville, Arkansas-based chain last month to move to Amazon’s headquarters in Seattle, Walmart officials said Wednesday in a lawsuit.”

Read the Bloomberg article.

Corporate counsel often hire external technology lawyers to review, draft, or negotiate technology contracts such as software licensing agreements because of their ability to identify software licensing issues, resolve complex licensing models, and compare the subject deal to the many other unique technology contract structures to solve problems, according to a blog post by Kirkpatrick Law.

There are a few technology contract types that should signal a need for a technology attorney to review, so the article lists some software examples to narrow the focus, but these could be true for other technology types.

The article covers one-sided enterprise agreements, the short and simple agreement, and the standard agreement.

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A decision by the Federal District Court for the Northern District of Illinois in Medix Staffing Solutions, Inc. v. Dumrauf serves as a reminder to employers why restrictive covenants should be limited in scope and duration to what is necessary to protect the employer’s business, writes David J. Hochman in an alert for Roetzel & Andress.

“The District Court, applying Illinois law, granted the defendant’s motion to dismiss Medix’ suit with prejudice and without providing the plaintiff an opportunity to present evidence or to pursue discovery,” he explains. “The Court held that the covenant was overbroad on its face and, therefore, unenforceable because it prohibited the defendant from taking any position with another company engaged in the same business as Medix— without regard to whether his new position was similar to his position with Medix or whether his new employer competed with Medix.”

Hochman writes that the opinion demonstrates why it is so important to limit the activities prohibited by a restrictive covenant, as well as the geographic scope and duration, to what is reasonably needed to protect the employer.

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Although a signed non-disclosure agreement will certainly make someone think twice before disclosing private information, the limitations of the NDA have become far too apparent to be ignored, warns Marwa Elzankaly in a blog post for McManis Faulkner.

“[T]he NDA does not keep someone from disclosing private information. It simply creates consequences if a person does,” she explains. “Once confidential information is disclosed, it is hard to undo the damage that has been done. Oftentimes, no amount of monetary recovery can really compensate for having had private information spread to the public.”

In the article, she discusses some other methods of protecting one’s business or personal information.

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The Fifth Circuit has affirmed an order compelling arbitration, despite the fact that the parties seeking to compel arbitration were not signatories to the relevant arbitration agreement, according to a post on Carlton Fields’ Reinsurance Post.

Jason Brost explained that the case involved a real estate sale contract that contained an arbitration agreement under which the parties agreed to arbitrate any disputes “in accordance with the Comprehensive Arbitration Rules and Procedures administered by J●A●M●S/Endispute.”

The plaintiff claimed that the defendants in the case induced the buyer to enter into the 1998 agreement based on the false premise that he would get a properly constructed home. The defendants, who were non-signatories to the agreement, moved that the arbitration clause be enforced.

The appellate court found for the defendants.

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Nearly $4 million in fees are at stake in a California Supreme Court fight between a big law firm and a big client over broad advance conflict waivers the firm used in its client engagement letters, according to Bloomberg Law.

Reporter Joyce Cutler explains that Sheppard Mullin Richter & Hampton LLP was “disqualified from representing J-M Manufacturing Co. Inc. in a $1 billion qui tam action because the firm concurrently represented one of the hundreds of defendants in an unrelated matter. The state appeals court held the advance conflict waiver J-M gave Sheppard Mullin didn’t absolve the firm of its duty to tell J-M about the specific conflict once it came to light.”

The question for this case of first impression is whether a law firm needs to tell a sophisticated client about a specific conflict when it arises, or whether the firm can instead rely a boilerplate advance conflict waiver in the client’s engagement agreement.

Read the Bloomberg article.

Morgan Lewis authors, writing in the firm’s Tech & Sourcing blog, discuss how patent, copyright, and trade secret ownership works in the United States if there is no agreement in place to allocate these rights.

Striking an interest provision from a draft subcontract wasn’t enough to keep a party to the agreement from being required to pay interest, according to a review of a Missouri case by Jane Fox Lehman in Pepper Hamilton’s Constructlaw blog.

When the general contractor later failed to pay the subcontractor, the sub sued and won a verdict that included prejudgment interest at the rate of 9 percent pursuant to Missouri law. The general contractor appealed.

Lehman explains the outcome: “The court held that it could not consider the stricken interest provision because it was extrinsic evidence. ‘The rationale,’ it explained, ‘is that the writing excised from the agreement, whether by way of striking, erasing, or simply transferring the agreement to a new piece of paper without the stricken language, is not part of the agreement between the parties.’”

Because the parties had failed to reach an express agreement on an interest rate, the trial court’s ruling was upheld.

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