• Christian Louboutin SAS again has brought suit to protect its signature red-sole shoe design.  This time the French shoe designer initiated suit against shoe manufacturer Charles Jourdan Fashion Footwear LLC, alleging trademark infringement.  Specifically, Louboutin, who brought suit both individually and through his company, alleged that Charles Jourdan willfully sold counterfeit products bearing the distinctive red sole, in violation of Louboutin’s trademark rights, to stores such as the discount shoe retailer Designer Shoe Warehouse, better know as DSW.  The Second Circuit Court of Appeals issued a ruling last fall recognizing Louboutin’s right to trademark protection for red soled women’s shoes where the remainder of the shoe is of a different color.  That decision was rendered in a suit by Louboutin against rival luxury goods maker, Yves Saint Laurent America, Inc.  Louboutin is seeking $2 million in damages for each mark that is infringed.
• The European Union voted to strengthen the rights of intellectual property owners.  Following a vote taken this week, customs officers no longer need a court order to seize and destroy counterfeit or pirated goods that enter the EU’s borders.  In addition, the authority of customs to seize such infringing goods is extended to cover small shipments, an issue that has gained prominence following increased sales of goods via the Internet.  The sale and importation of counterfeit goods is estimated to cost the EU business community over €250 billion a year.  EU Commissioner responsible for customs matters, Algirdas Šemeta welcomed the vote and indicated that the passage of the resolution would serve to make EU businesses more competitive.
• Generic drug makers Teva Pharmaceuticals Industries Ltd. and Sun Pharmaceutical Industries Ltd. agreed to pay Pfizer Inc. and Takeda Pharmaceutical Co. $2.15 billion in patent infringement damages.  The payment was to settle a suit brought by Pfizer and Takeda against Teva and Sun for their sale of generic versions of the heartburn reliever drug Protonix before the drug’s patent had expired.  Under the terms of the settlement, Teva would pay $1.6 billion and Sun would pay $550 million; Pfizer would receive approximately 64% of the settlement payments while Sun would receive the remaining 36%.  The settlement is believed to be the highest for damages from a so-called “at-risk” launch of a generic drug.  An “at-risk launch” refers to when a generic drug maker begins selling the generic product before patent litigation against it has been resolved.
• The U.S. Patent Trial and Appeal Board issued its first decision under the guidelines of the covered business method post-grant reviewing proceedings of the America Invents Act.  The dispute originated in 2007 when Versata, Inc. brought suit against SAP America Inc., claiming that SAP was infringing its ‘350 patent, which covered dynamic pricing technology.  Versata was awarded $345 million in damages by a district court which was affirmed by the U.S. Federal Circuit.  SAP initiated a parallel proceedings before the PTAB, challenging the validity of Versata’s patent.  In its decision the PTAB determined that the technology covered by the patent was too abstract and too general to be patentable, finding the patent invalid.  While SAP has claimed victory in the dispute, the question remains whether the PTAB’s decision will help SAP successfully appeal the damages verdict.

For the full article, click here.

Stephan focuses his practice on corporate, mergers and acquisitions, intellectual property and tax. Inquiries regarding this paper may be directed to slg@vocats.com.

• Apple v. Samsung – The Smartphone Patent Wars Continue: The U.S. International Trade Commission ruled in favor of Samsung and against Apple in a patent case involving the iPhone 4 and iPad 2 3G.  This case could lead to a prohibition on the import of some of these older models into the U.S.  This ruling was merely the latest skirmish in an escalating patent battle between the two smartphone giants.  Experts suggest that this clash will drive the two parties farther apart, making a global settlement on these issues less likely.
• Google Bid to Settle EU Anti-Trust Probe Falls Short:  The EU Competition Commission is demanding an improved proposal from Google to resolve a pending antitrust probe pertaining to the way Google’s search engine operates.  To end the three year probe, Google offered to show in its search result links to three rival search engines.  Google has another month to try again.  For its part, the U.S. Federal Trade Commission concluded in January that Google’s search engine activities do not amount to an antitrust violation.
• Nintendo Lands Blow Against “Patent Trolls”:  Nintendo, the worlds largest video game maker, prevailed in a patent infringement case involving its Wii gaming console in the U.S. last month.  Experts point to this victory as the latest in a trend of manufacturers fighting “patent trolls” (firms that allegedly buy up patents for the express purpose of suing potential infringers) and winning.  The hope is that several successive high profile losses will serve to disincentivize patent trolls from engaging in costly and protracted litigation.

• Private equity firm Apax Partners is set to acquire Rue21 for approximately $1.1 Billion. The target company sells low cost clothing for the adolescent market, and the deal reflects the continued interest between private equity and apparel businesses. Interestingly, the parties released some of the more granular terms of the transaction:
  

  As part of the deal, a special committee of Rue21’s board will seek potential rival bidders during a 40-day “go shop” period. If it chooses to accept a higher bid, the company will pay a breakup fee of about $10 million to Apax.  Rue21’s management team, including the chief executive Robert N. Fisch, have agreed to work with any serious bidder that arises.

  The markets have responded favorably to the news of the purchase with the company experiencing an uptick during Thursday trading.

• Global probing of Google continues relative to concerns about the company’s activities and how they affect market competition. The U.S. Federal Trade Commission completed an inquiry 4 months ago, but now new allegations are being raised about how the company handles ad sales.
  

  The new line of inquiry focuses on tools acquired when Google bought display ad company Doubleclick in 2007; other firms which specialize in helping web publishers sell ads to put on their websites are complaining to the FTC, the source said.

  While no formal complaint was issued by the FTC, overseas regulators are continuing to try to work toward a settlement of an action that alleges that Google was involved with scraping (taking another website’s content without permission) and that also questions the way that Google showed (or in some instances did not show) search results of its competitors. The EU process permits competitors to opine and accept the proposed settlement agreement, which calls for Google:

  • “for the next five years … to clearly label promoted links to its own specialized search services so that users can distinguish them from natural Web search results, and display links to three rival services,”
  • “offer all websites the option to opt-out from the use of their content in Google search”, and
  • “no longer include any obligation for customers to source online search advertisements exclusively from Google” in its contracts with companies that advertise on Google.

These concessions offered by Google have been met with mixed reviews by competitors and other market participants, and even if they are ultimately accepted so as to close the EU investigation, they will have no bearing on the outcome of the most recent allegations here in the U.S.

• Commodity trading firm Prime International Trading, Ltd., is suing BP Plc, Royal Dutch Shell Plc, and Statoil. The class-action lawsuit alleges price fixing by the three companies through misreporting trades in the main oil benchmark North Sea Brent.  The suit is related to an investigation by the European Commission into false price reporting to Platts, which is a price setting agency, and comes just one week after authorities “raided Platts and the offices of the three oil majors named in the lawsuit.”  Because of the claimed price fixing, Prime “traded hundreds of thousands of futures contracts at ‘artificial prices’ because of manipulation,” Prime’s complaint alleges.  The case is Prime International Trading Ltd. v. BP Plc, et al., 7:13-cv-03473-KMK, U.S. District Court, Southern District of New York (White Plains).

Unless you’ve been hunting in the Outback for the last few years, you should be deeply aware of government’s concern regarding the employment of undocumented workers. In fact, the Department of Homeland Security Immigration and Customs Enforcement (ICE) has dramatically stepped up its audit and enforcement activity, otherwise known as I-9 audits.  The number of I-9 audits multiplied over the past decade, rising from three audits in 2004 to 3,004 in 2012. I-9 audits used to be random, but now they are more often the result of disgruntled former employees complaining to ICE.

For the full article, click here.

• Sony Corp. may feel pressure to break-up parts of the company.  Hedge-fund manager Daniel S. Loeb, whose hedge fund recently acquired approximately 6.5 percent of Sony’ shares, wants the Japanese company to consider splitting up its profitable entertainment unit from its struggling consumer electronics division.  Sony shareholders are estimated to have lost over $100 billion in market value since 2000 and a split of the two divisions is estimated to raise the market value of the company’s shares by nearly 30 percent.  A spin-off of the entertainment division, which represents artists, such as Bruce Springsteen and Carrier Underwood; and produces movies, such as “Skyfall” and “Superman,” would allow the entertainment division’s value to be better recognized while also resulting in a cash infusion that could be directed towards improving the electronics division.  Still, given that Japanese corporations are historically averse to shareholder activism and corporate shake-ups, it is unknown whether Loeb’s proposals will be considered.
• The European Commission has indicated its interest in conducting an investigation into possible unfair trade practices, including unfair subsidies, for Chinese network-equipment makers, such as Huawei Technologies Co. and ZTE Corp., and determine whether these practices have unfairly harmed European manufacturers.  The possibility of an investigation seems unorthodox to many, as typically such investigations are triggered by complaints from affected companies.  Here, however, European companies such as Ericsson and Nokia Siemens have actually urged the EC to reconsider its stance.  Many of these companies see China as a major, and lucrative, market and do not want to risk being locked out of the market by the Chinese government in retaliation.  For its part, Huawei has denied engaging in an unfair trade practices and asserts it has complied with international laws and practices.
• J.P. Morgan Chase & Co. became the first company to take formal action in asking Bloomberg LP to provide logs of all of Bloomberg’s employees that accessed J.P. Morgan’s data terminals to monitor the activities of J.P. Morgan employees.  In the week since it was discovered that Bloomberg reporters were able to access certain activity data of terminal users, several financial services companies have had conversations with Bloomberg officials regarding the monitoring of sensitive information; J.P. Morgan was the first to make its request formally.  Bloomberg terminals provide traders with financial data and research, and are considered a vital part of financial services providers day-to-day jobs.  Each terminal costs approximately $20,000 and makes up the core earnings of Bloomberg LP.  Bloomberg reporters’ access to this data was flagged by Goldman Sachs Inc., raising concerns that Bloomberg reporters may have been able to access to sensitive market intelligence.  Bloomberg has since appointed a compliance chief to remedy these problems.

• SEC Rules on Interest Rate Swaps and Other Derivatives Cross Borders.  Last week, with a unanimous commission vote, the Securities and Exchange Commission issued its cross-border security-based swaps rule promulgated under Dodd-Frank.  While Dodd-Frank prohibits the SEC from applying its rules to security-based swaps businesses conducted “without the jurisdiction of the United States,” excepting only cases where international boundaries are used to circumvent otherwise applicable SEC rules, these new rules arguably exceed the statute’s territorial limitations.  Specifically, the new proposed rules adopt a rather opaque standard that considers the extent to which a particular swap will be “conduits of risk into the U.S. financial system.”  If the answer is yes, the new rules would extend SEC jurisdiction to transactions outside the U.S.  Questions remain as to whether this more expansive approach fits within the confines of Dodd-Frank and is otherwise enforceable under international law.
• China’s Industrial Policy Under Increasing Scrutiny.  China currently has approximately 170 domestic automobile, truck, and bus manufacturers.  As the auto industry was designated a “pillar industry” in China’s most recent 5-year plan, these companies enjoy significant government subsidies.  Also, the Chinese government currently provides Chinese consumers subsidies in the thousands of yuan when they purchase from a local manufacturer. Local governments in China often take subsidies one step further by offering a variety of subsidies, ranging from free land to low cost loans to local automotive manufacturers.  Many economists and industry insiders suggest this policy is ineffective and ultimately detrimental to the Chinese economy.  In reaction to these subsidies, the U.S. government brought a complaint last year before the World Trade Organization.
• Trade War Brewing Between U.S. and India re: Solar Panels.  The fledgling alternative energy field has been a minefield of generous but uncertain government subsidies and trade disputes the world over.  Recently, the U.S. government brought a complaint before the World Trade Organization alleging that India’s National Solar Mission impermissibly favors domestically-produced solar power products by requiring that all governmental solar projects include Indian-made solar components. Now, India has hit back, filing a request for information about how the U.S. promotes renewable energy in Michigan, California, and Texas.

The GAO report on the 2009 OVDP is helpful for taxpayers and practitioner’s as they consider entry into the current IRS 2012 Offshore Voluntary Disclosure Program.  This program has no set closing date and is available to taxpayers wishing to come forward and amend their U.S. income tax returns to include unreported income, as well as file informational returns that they have not filed, such as the FBAR.

Of course, if you are considering entry into the IRS program, you should consult your tax advisor.

• Rift in German/French Relationship Threatens Foundation of the Eurozone – Politics does indeed make strange bedfellows. Despite centuries of armed conflict between the two nations, France and Germany have enjoyed a period of relative friendship from the mid-1950’s to present. However, the election of President François Hollande precipitated a noticeable chilling of the Franco-German relationship. This week’s Economist discusses the deleterious effect the increasing disagreement between the two nations is having on the Eurozone. The article postulates that despite their recent disagreements, both countries have few options, but to continue to cooperate. In the words of the Economist, “France may be frustrated by German austerity, and Germany by French aversion to reform; but the two are nevertheless condemned to work together.”
• President Obama to Visit Mexico, Costa Rica – President Obama embarked on a trip south on Thursday, stopping first in Mexico. The visit is the fourth of Obama’s presidency and comes at time when his attempt at immigration reform has stalled in Congress. According to a report by ABC News, economic issues will be the centerpiece of Obama’s visit, but concerns about the ongoing drug violence spilling into the United States will also be at the forefront of his mind. Following his visit to Mexico, the president will stop briefly in Costa Rica, the first time he has done so during his presidency. He will meet with Costa Rican President Laura Chinchilla and other regional heads of state.
• New Zealand Updates Controversial Baby Name Registry – If you were hoping to name your child “Duke”, “Princess,” or “Mafia,” New Zealand is not the place for you. The island nation has updated its list of banned child names. Under New Zealand law, all names must be approved by the government’s Internal Affairs Division and while this controversial practice often makes international news, New Zealand is far from the only country to implement this type of restriction. According to a CNN report, Sweden and the Dominican Republic also prohibit certain names, with the former recently rejecting a set of parents’ choice of “Brfxxccxxmnpcccclllmmnprxvclmnckssqlbb11116.” Try spelling that on the first day of Kindergarten. The good news? Apparently, the agency did approve “Number 16 Bus Shelter.” if that tops your list, New Zealand remains a viable option for raising your family.

Bonus depreciation, which allows purchasers of capital equipment to depreciate an additional 50% off the initial depreciable basis of that equipment in the first year (rather than over a five-year MACRS schedule), was originally set to expire December 31, 2012. With ATRA, purchasers of capital may now take advantage of bonus depreciation for capital equipment placed in service before January 1, 2014. Note that unlike the Section 179 deduction, the property owner need not have current net income to utilize bonus depreciation. However, only new property qualifies for bonus depreciation unlike Section 179 where both new and used property qualifies. The text of the Act can be found here.