Business Without Borders – An International Business Blog

• In what could be troubling news just days ahead of Facebook’s IPO, General Motors announced its plans to stop advertising on the social media website.  General Motors said its decision came after the company conducted a review of its marketing budget allocation.  Executives felt that the paid advertisements had little impact on consumers despite spending approximately $10 million annually on Facebook since 2008.  The company will still maintain a presence on the site, as it will continue to create content and promote its products there. Notwithstanding the untimely news, GM’s advertising expenditures represent only a small percentage of Facebook’s $3.7 billion in revenue for 2011.  And in contrast to GM’s decision, other car manufacturers, including Kia and Honda, have indicated they will increase advertising on Facebook.
• Shares of Taiwanese smartphone maker, HTC, fell to a five-month low after an announcement by the company that shipments to the U.S. of two HTC phones, the One X and the EVO 4G LTE, have been delayed.  The delay is a result of an exclusion order issued by the U.S. International Trade Commission in relation to a patent infringement suit brought by Apple against HTC.  In December, the ITC found that certain HTC phones infringed on Apple patents concerning the formatting of data in unstructured documents.  HTC indicates that new versions of the phones do not include the infringing technology, but the shipments are still under review by the U.S. customs authority.  It is unclear how long the review may take.  As a result, the exclusion order has also impacted U.S. wireless carriers, such as Sprint Nextel Corp. and AT&T Inc. which carry the phones but currently have none in stock.
• Following the news that two companies will begin mining in Haiti’s northeastern mountains, the Haitian government has begun drafting new legislation to regulate the mining industry.  The companies believe there may be as much as $20 billion in precious metals in that region, including gold, copper, and silver.  Prime Minister Laurent Lamothe stated that the country intends to draft legislation that would both protect Haiti while keeping the country attractive to investors.  The revised legislation will apportion royalties between mining companies and the government, and settle protections for the people and environment that could be affected by mining activities.
• The familiar melted red wax seal on Maker’s Mark bourbon whiskey has been given some legal fortitude after a court has determined it to be protected trade dress.  In 2003, Maker’s Mark Distillery Inc. brought suit against Casa Cuervo, S.A. de C.V. and Jose Cuervo International Inc., following Cuervo’s decision to use a dripping red wax seal on bottles of their “Reserva de la Familia,” a premium tequila.  Despite Cuervo’s arguments against the strength of the mark, Judge Martin of the U.S. Sixth Circuit Court of Appeals determined the iconic bottle’s seal was indeed distinctive and due protection.
• The global telecom company Bharti Airtel is being investigated by the Indian Enforcement Directorate, as well as the government’s Central Bureau of Investigation.  Indian government authorities allege the company has engaged in money laundering and breaking foreign exchange usage rules.  Specifically, authorities are investigating whether Bharti was hoarding excess spectrum, as well as whether additional airwaves spectrum was allotted to the company, in violation of the subscriber-linked criteria in effect from 2001 to 2008.  The investigation stems from an audit of the award of mobile licenses that has resulted in the cancellation of licenses and affected several global telecom companies, including Norwegian Telenor and Russian Sistema.
• Foreign Direct Investment in China fell for the sixth consecutive month.  A combination of the still sluggish global economy and signs of a slowing Chinese economy may have contributed to the decline.  Analysts cautioned investors that reports of below expectation trade figures may indicate lower growth potential for the country.  Chinese officials have taken steps to give the country’s economy a boost.  Earlier this week, the government reduced the bank reserve requirement in an effort to improve lending.

Tune in to Queens Public Television where Norris McLaughlin & Marcus Tax Member Melinda Fellner Bramwit discusses offshore tax issues in a live exclusive interview.  Bramwit will cover the IRS Offshore Voluntary Disclosure Program, Form 8938 reporting issues, and international tax planning concerns. The live show airs on Tuesday, May 22, at 8:00 p.m.

Queens Public Television is available on Time Warner cable channel 34, RCN channel 82, and Verizon FiOS channel 34.

The Internet Crime Complaint Center (IC3) issued a notice on May 8^th that revealed a recent claim by the FBI and other agencies that cyber criminals are targeting travelers abroad through pop-up windows while they attempt to connect to the Internet in their hotel rooms. 

Specifically, as travelers attempt to setup a hotel room Internet connection through their laptop, they are presented with a pop-up window that asks to update a widely-used software product. If the user clicks “accept and install,” malicious software downloads on the travelers’ laptops. The pop-up window appears to offer a routine update to a legitimate software product for which updates are frequently available.

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• India has had much economic progress, but recently such economic growth has slowed. Unfortunately, the decline in India’s economic growth is distributed unevenly, with India’s poor feeling the brunt of this burden.  If this decline continues, millions of Indians will fail to rise above the extreme poverty level.  There are many factors which have attributed to this slow down.  One factor that contributed to the slow down is India’s less than positive attitude towards foreign businesses and investments.  For example, the government is considering enacting a retroactive tax on foreign businesses for previously earned income.  Further, India’s service based industry (i.e., call centers) may have reached its peak.  Additionally, the legal system in India has proven to be complex and difficult to reform.  India is not the only country experiencing an economic slowdown as the economies of Brazil, Russia and China have also slowed.
• The Hong Kong Stock Exchange has a giant IPO market, accounting for 60% of investment banking revenue in Asia.  However, new strict securities rules could impact this market.  The new securities regulator Ashley Alder recently proposed new securities rules that would impose criminal liability on banks and underwriters that sponsor companies which make false misleading statements to investors. The newly proposed rules are the result of investigations by the Hong Kong Securities and Futures Commission, which found that the due diligence conducted by underwriters in connection with IPOs has been substandard, resulting in untrue statements in company prospectuses.
• The Federal Reserve Bank has approved of the expansion of three banks owned by the Chinese government into the United States.  This is a huge milestone as Chinese banks for years have sought access to the U.S. banking system as a means of financing Chinese companies, but such expansion in the U.S. had been impeded.  The Federal Reserve was reluctant to give their approval of such expansion as it had concerns about the adequacy of Chinese bank supervision.  Now, by allowing such expansion, the Federal Reserve has essentially given its nod of approval of China’s banking system.  Allowing Chinese banks into the U.S. banking industry enables the Chinese to further engage in business in U.S. and European markets.
• In an effort to restore confidence in its banks, European governments may need to give the European Union more power.  The current banking system in Europe relies on the coordination among national supervisors; however, this approach has not been successful.  An alternative to consider is an integrated approach to overseeing Europe’s banking system.  The reassessment of Europe’s banking system comes in the wake of Spain taking a controlling share in its third largest bank and the country’s largest real estate lender, Bankia.  In order for the banking crisis in Europe to be resolved, it may require the governments of Europe to relinquish part of their national sovereignty and integrate their banking systems.
• Although Germany has the largest European economy and the fourth largest market worldwide, it may not be able to escape the recession that has spread across Europe. Unlike Spain and Greece, Germany has a relatively healthy economy and has not needed to subject its economy to austerity measures. However, the austerity measures taken by other European countries have lead to a general economic downturn across Europe. Such a downturn has taken a toll on German’s export driven economy and it is unlikely that domestic consumption would offset such decline in exports. Nonetheless, because Germany’s economy is competitive; any potential recession in Germany would likely be short lived.
• In an ongoing effort to bring business, particularly international business, to New Jersey, the New Jersey Economic Development Authority (“EDA”) has approved of an incentive package to lure Peapod, the online grocery seller, to New Jersey. The EDA approved of a $34.6 million incentive which would allow Ahold Ecommerce Sales Co., the parent company of Peapod and a subsidiary of a Dutch retail giant, to lease part of a distribution center located in Jersey City.

To paraphrase Ronald Regan “there they go again”.  The June Visa Bulletin was just released bringing even more bad news for EB2 hopefuls from China and India.  The numbers for China and India have been regressing over the past months but now; the EB2 is completely unavailable regardless of one’s priority date for the remainder of this fiscal year.  New numbers should be available for fiscal 2013, which starts October 1, 2012. Not only is that bad news for the people affected but it also adversely affects the ability of the USA to attract and retain highly educated and experienced workers.  More bad news in the bulletin for prospective immigrants is the prospect that the availability of employment based visas in all categories may either retrograde or become unavailable for some countries as well in the upcoming months.

The arbitrary quota system was set up by Congress to “protect” the American work force is counterproductive.  Unless there is a dramatic cultural shift causing a material increase in the number of USA citizens graduating with advanced degrees in the sciences and technologies, who will step up to design the products, technology, factories, etc. that will employ our people.  Under the current visa availability program, a potential Albert Einstein could spend years in limbo waiting and waiting for a green card that may never materialize.  Right now, families never know whether they’ll be able to remain in the USA or if they’ll have to suddenly leave – not a very attractive recruiting position for USA companies.

Those foreign companies conducting business in the United States and having facilities and operations in Ohio should be aware of the new tax amnesty program launched by Ohio.  Ohio’s Tax Amnesty Program specifically provides amnesty for corporate taxpayers with respect to underreported taxes prior to May 1, 2011.  The program provides for the forgiveness of penalties and a 50% reduction in applicable interest owed for qualifying taxes; however, amnesty is not available to taxpayers who have already received a notice of tax delinquency or who are currently under audit.  The program runs for 45 days, commencing on May 1, 2012 and ending on June 15, 2012. Delinquent taxpayers who participate in the amnesty program can avoid criminal prosecution with respect to any delinquent taxes.  Applications and instructions regarding the program can be found at www.ohiotaxamnesty.gov.

A United States District Court Judge for the Judicial District of New Jersey has sentenced a former employee of Sanofi-Aventis (“Sanofi”) to 18 months in prison for attempting to sell Sanofi’s trade secrets for her own gain.  In announcing the sentencing, the United States Attorney explained that the defendant, a foreign national working in the U.S., had been a research chemist at Sanofi for five years, assisting in the development of several compounds that Sanofi considered its trade secrets.  The defendant accessed internal, confidential databases and copied 144,000 chemical compounds to her personal computer.  She then offered to sell the compounds over a website owned by a company in which she was a fifty percent owner.  The criminal complaint filed by the government detailed the extensive protections Sanofi employed to protect the theft of its trade secrets.  This is the second criminal case this year brought by the U.S. Department of Justice against a foreign national working in the U.S., concerning the theft of trade secrets from a pharmaceutical company in New Jersey.

Norris McLaughlin & Marcus attorneys Robert Gabrielski and Oren Chaplin recently participated in a luncheon discussion with The Honorable Elizabeth Littlefield, President and Chief Executive Officer of the Overseas Private Investment Corporation (“OPIC”).  The lunch discussion was presented by the Business Council for International Understanding (“BCIU”) and with the goal of providing a forum where participants could learn more about OPIC’s operations and objectives.

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Guest Blogger: Andrew Nicoll, Martelli McKegg

The New Zealand Personal Property Securities Act 1999 determines priority between security interests over, or retention of title to, goods sold on credit.  This law effects not only transactions in New Zealand, but also international transactions where the goods sold are intended to be exported to New Zealand.  Once any goods have been moved to New Zealand, then New Zealand law will take precedence.

While retention of title (or Romalpa) clauses remain a valid form of security in New Zealand for goods sold on credit, the effectiveness of retention of title clauses relies on the vendor/creditor registering notice of its interest on a central statutory (electronic) register.  By registering notice of this interest under the Personal Property Securities Act within strict time limits a vendor/creditor will ensure that its security has “super” priority over all other competing claims for the goods or their proceeds (whether such claims were created before or after this particular interest).

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• South Korea has approved a carbon emission trading plan that is intended to reduce greenhouse gas emissions. Under the plan, companies would have a cap on carbon emissions, but may trade emissions permits or purchase carbon offsets.  According to the International Energy Agency, South Korea was the eighth largest carbon emitter in 2009. While the approval is considered to be positive from an environmental standpoint, many, including the Korean Chamber of Commerce and Industry, expressed concerns that the carbon trading platform would increase costs and cause Korean businesses to have a competitive disadvantage against other countries that do not impose charges on emissions.
• Nokia has sued HTC, Research In Motion, and ViewSonic in Germany claiming patent infringement. These actions reportedly are part of Nokia’s strategy to capitalize on its patent portfolio, and those court filings are in addition to suits filed by the company in Delaware and a complaint filed with the U.S. International Trade Commission (ITC). The ITC complaint alleges infringement by HTC of Nokia patents for “technology like synchronizing information, including calendars, between the smartphone and mainframe computers, extending battery life and allowing mobile phones to be compatible with different signal systems.”
• Novartis AG recently announced its plans to acquire Fougera Pharmaceuticals Inc. for a purchase price of $1.5 billion. The acquisition “makes Sandoz, Novartis’s generic pharmaceuticals division, the world’s largest maker of generic dermatological drugs.” The transaction, which requires regulatory approval, would result in a combined generic drug force which is estimated to generate $620 million in annual sales.
• We had previously reported on accounts from various countries of their efforts to curtail foreign investment. That trend continues in Mongolia, where the Mongolian parliament is debating a law that would require “majority Mongolian ownership in businesses worth more than 100bn tugriks ($76m) and in ‘strategic’ sectors including natural resources, transport, food, real estate, communications and agriculture.” If passed, the law could curtail foreign investment in the nation, possibly making Mongolian companies less attractive as a part of an investment portfolio.