Scandalous Trademarks: What You Need to Know.

The Lanham Act, which governs trademarks that are registered through the United States Patent and Trademark Office (“USPTO”), expressly prohibits the registration of marks that are deemed scandalous, immoral, or deceptive. This prohibition has historically prevented brands from using marks that could fall into this category, even if the mark is appropriate for the situation. However, in 2019, this prohibition was expressly overridden and these types of marks are now eligible for registration and protection under the Lanham Act.

During the summer of 2019, the United States Supreme Court determined that the prohibition against scandalous marks contained in the Lanham Act is an unconstitutional prohibition on protected speech. See Iancu v. Brunetti, 488 U.S. ___ (2019). Essentially, the Court decided that this amounted to viewpoint discrimination, in violation of the First Amendment. As a result, the USPTO is required to accept and consider scandalous trademark registration applications.

For businesses, artists, and musicians that utilize what was deemed scandalous marks by the USPTO as part of their operations, now is the time to act to protect the intellectual property. Although the USPTO hasn’t reported a rush applications that fit this category, now that these previously un-protected marks are protectable, it is expected that the volume of applications will increase.

VW Contributor: Alex Rainville
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Supreme Court to Determine Whether Fossil Must Turn Over Profits for Trademark Infringement

Fossil, Inc., the luxury goods retailer, could owe a manufacturer, Romag Fasteners, Inc., its profits for infringing on Romag’s trademark. The issue of whether Fossil owes Romag approximately $6.7 million dollars in profits gained by using the infringing trademark depends on whether the remedy of disgorgement of profits by a party infringing on a trademark requires willfulness by the infringing party.

The issue arises from Fossil using a magnetic snap fastener on some of its bags, purchasing some of the fasteners directly from Romag. However, Fossil also purchased some fasteners that looked nearly identical to those of Romag from another source, likely knowing that the fasteners were counterfeit and infringed on the trademark of Romag. Despite this knowledge, Fossil proceeded to use them anyways in “callous disregard” to the rights of Romag. In a moment of luck for Romag, an employee discovered the counterfeit products when visiting a Macy’s, finding the Fossil bags with the counterfeit fastener. Romag successfully argued that Fossil infringed on their trademark rights, but an open question regarding the remedy remains. The United States Supreme Court will determine whether the remedy includes the profits of Fossil, and such decision will be based on whether Fossil must willfully infringe on Romag’s trademark rights or if “callous disregard” is sufficient to entitle Romag to the profits of Fossil.

This case highlights the broader importance of protecting the brand and intellectual property of a company. Traditionally, this means taking active steps to ensure that the trademarks, copyrights, trade secrets, and patents are protected under applicable law, but it should also mean proactively verifying that the initiatives of the company don’t infringe on the rights of another. Failure to take consider trademark rights, as Fossil is learning the hard way, could result in disgorgement of profits.

VW Contributor: Alex Rainville
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Circuit Courts Continue to Rule in Agreement that Future Potential Disabilities are not a “Disability” under the ADA

The Seventh and Eleventh Circuit Courts of Appeal recently joined the Eighth, Ninth, and Tenth Circuits, in holding that individuals with no current disability cannot be regarded as disabled under the Americans with Disabilities Act (ADA).  The mere possibility or even likelihood the individual will develop an impairment or disability in the future is not sufficient to sustain a cause of action under the ADA.  In Shell v. Burlington Northern Santa Fe Railway Co., 941 F.3d 331 (7th Cir. 2019) and EEOC v. STME, LLC, 938 F.3d 1305 (11th Cir. 2019) the Seventh and Eleventh Circuits respectively, refused to extend protections under the ADA to employees with a “perceived risk” of potential impairment.

In Shell, a transportation company refused to hire a job applicant with a body mass index (BMI) over 40, which is classified as Class III Obesity or “extreme” or “severe” obesity.  The Defendant had a policy that prohibited individuals with a BMI over 40 from being employed in “safety-sensitive” positions, due to individuals with Class III Obesity being at an increased risk for sleep apnea, diabetes, or heart disease, conditions that could lead to dangerous consequences while on the job.  The Seventh Circuit first noted that obesity in and of itself does not qualify as a disability under the ADA, unless it is caused by an underlying physiological disorder or condition.  Likewise, obesity alone does not qualify as a disability even if the individual’s obesity may increase the likelihood that he or she will develop a future qualifying ADA disabling impairment.  The condition of being “regarded as” having an impairment applies when an individual has been subjected to an impairment, in a past or present sense, not a perceived future impairment that has not yet occurred.  Thus, the Seventh Circuit held that since Defendant only declined to hire the Plaintiff based on a perceived future impairment and not a current ADA disability, the ADA did not afford protection to the Plaintiff.

The employer in STME fired an employee who had traveled to Ghana during an Ebola outbreak in countries neighboring Ghana, even after the employer raised concerns about the Plaintiff making such a trip.  The employer’s decision was based on a potential future impairment, which is not protected by the ADA under the “regarded as” theory of recovery, which requires a current impairment.  The potential physical or perceived impairment of Ebola was not enough to get ADA protection; the Eleventh Circuit found there was no violation of the ADA in the firing of the Plaintiff.

Both cases demonstrate a continued trend at the appellate level of federal courts that future or potential impairments are not protected under the ADA.  This should be good news to employers who have concerns about potential impairments with employees and whether they feel such concerns could impact the ability for that employee to perform their job functions.

VW Contributor: Ryan J. Coufal
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New York enacts “Women on Corporate Boards Study” law

On the heels of California requiring all corporations headquartered in the state to have at least one woman on its board of directors, with increasing diversity requirements in future years, New York has decided to study the issue. At the end of 2019, New York passed a law that requires all corporations that do business in New York to report the gender composition of its board.

The New York “Women on Corporate Boards Study” law is broader than the law enacted by California in that it pertains to any corporation doing business in New York, as opposed to headquartered in its state. As a result, this law will likely lead to a large volume of data to study the issue, with reporting required for both public and private corporations. The reporting requirement starts on June 27, 2020, and New York will compile year over year trends before publishing the first report no later than February 1, 2022.

Currently, California, New York, Colorado, Massachusetts, Michigan, New Jersey, Ohio, Pennsylvania, Washington, Maryland, and Illinois have introduced or passed a law pertaining to gender diversity on the board of directors. For corporations, these initiatives will increase board compliance obligations, but may also have an impact on the makeup of the board itself. At least, that is what the state of New York is hoping to accomplish.

VW Contributor: Alex B. Rainville
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Fortnite Under Siege

Fornite, the video game by Epic Games that has taken the world by storm, has been subject to a number of copyright infringement claims for dances performed by characters in the game. The dances causing problems include those that are well known and new viral sensations such as the “Carlton,” “Backpack Kid” flossing, “Milly Rock” dance, and Halloween “Pump It Up.” While most are relatively standard copyright infringement claims, alleging the characters doing the dances in the game infringe on the copyright, one claim, for infringement of the “Running Man” dance, has an interesting twist.

A recent decision by the United States Supreme Court mandated that a copyright owner must register the work with the Copyright Office prior to filing a claim for copyright infringement. As a result, many claims, including those against Epic Games, were withdrawn until the work could be registered. However, the owners of the “Running Man” dance elected to amend their claim, from a copyright infringement claim to trademark infringement claim. As a defense to trademark infringement, Epic Games is asserting that the claims are preempted by the Copyright Act. Although no one disputes that the name of a dance can be protected under trademark law, it is unclear whether a court will decide if the dance itself is protected; typically a dance is protected by copyright, as choreography.

This could open the door for more claims against Epic Games for dances used in Fortnite, but the more impactful consequence is the potential to further define the scope of what constitutes a trademark. If it is ultimately determined that a dance can be a protectable trademark, that would add to the list of protectable marks, which already includes color, scent, sound, designs, layouts, and words.

VW Contributor: Alex Rainville
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Sixth Circuit Holds Employers cannot shorten time frame to file Title VII Discrimination Claims

Date: December 31, 2019

The federal Sixth Circuit Court of Appeals recently held that employers cannot reduce the time employees have to file a charge alleging Title VII employment discrimination under the Civil Rights Act of 1964.  The court found that contractual provisions and clauses that shorten Tile VII’s statute of limitations 300-day filing time frame are unenforceable.

Title VII prohibits discrimination by an employer on the basis of race, color, religion, sex, and national origin, and requires employees to first file a discrimination complaint with the Equal Employment Opportunity Commission (EEOC).  The statutory deadline requires charges to be filed within 300 days of the alleged unlawful employment action, and cannot be changed by contract.  After a charge is filed, the EEOC can investigate the allegations, or take administrative remedial measures to resolve the issue (such as mediation).  Alternatively, the EEOC can grant the employee a right-to-sue letter, giving the employee a chance to sue the employer outright in court on their own.  If an employee receives this letter, they have ninety (90) days to file a lawsuit in federal court against their employer.

In the Sixth Circuit case, the Plaintiff’s employment contract contained a provision waiving her right to sue if she waited longer than six (6) months following a discrimination event to file a claim.  The lower federal district court initially adopted the employer’s deadline-shortening clause, but the Sixth Circuit reversed the decision on a case of first impression, stating “[W]here statutes that create rights and remedies contain their own limitation periods, the limitation period should be treated a substantive right . . . [a]nd this type of substantive right generally is not waivable in advance by employees.”  The court distinguished Title VII’s statute of limitations from those under the Employee Retirement Income Security Act of 1974 (ERISA) or Section 1981 claims in that those statutes rely on general limitation periods created by other statutes.  Title VII’s statute of limitations to bring a discrimination claim is found within its own text.  The court also held that Title VII created a “uniform, nationwide system using ‘an integrated, multistep enforcement procedure.’”  The court rejected the employer’s policy of imposing contractual limitations on Title VII’s statutory remedies because it would disrupt Title VII’s uniform national procedures.

The Sixth Circuit oversees federal district courts in Kentucky, Michigan, Ohio, and Tennessee.  Nevertheless, this case provides context to federal questions and interpretations of federal authority, and provides a framework of considerations should you have a business practice that is any state.

VW Contributor: Ryan Coufal
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2nd Circuit Ruling that Dodd-Frank Whistleblower Retaliation Claims are Arbitrable under Employment Agreements filed for US Supreme Court Review

Date: December 31, 2019

On December 16, 2019 Petitioner Erin Daly filed a petition for writ of certiorari to have the United States Supreme Court review the 2nd Circuit ruling of Daly v. Citigroup Inc., 939 F.3d 415 (2nd Cir. 2019), which held that arbitration clauses were valid for whistleblower retaliation complaints under the Dodd-Frank Act.

The facts of the case pertain to the Plaintiff working in the Private Bank Division of Citigroup.  The Plaintiff allegedly complained to internal bank attorneys and human resources employees that her supervisor repeatedly demanded of her to disclose material non-public information to the supervisor’s favored clients, and was subsequently fired when she reported her complaint.  The Plaintiff then filed a complaint in the Southern District of New York alleging several claims under the whistleblower retaliation clauses of the Dodd-Frank and Sarbanes-Oxley Acts.  Citigroup responded by filing a motion to dismiss the Plaintiff’s Sarbane-Oxley Act claims and compel arbitration for the Dodd-Frank Act claims.  Citigroup argued the Plaintiff’s signed employment agreement contained an arbitration clause, and all of the claims, except the claims under the Sarbanes-Oxley Act were subject to mandatory arbitration.  In regard to the Sarbanes-Oxley Act claim, Citigroup argued for dismissal based on the fact the Plaintiff had not exhausted all of her administrative remedies.  The district court granted both of Citigroup’s motions.

On September 19, 2019, the 2nd Circuit affirmed the district court’s ruling and joined the 3rd Circuit in holding that Dodd-Frank whistleblower retaliation complaints are arbitrable (See Khazin v. TD Ameritrade Holding Corp., 773 F.3d 488 (3d Cir. 2014)).  The 2nd Circuit justified its decision in noting that unlike the Sarbanes-Oxley Act, which explicitly contains an anti-arbitration provision, the Dodd-Frank Act contains no language, signaling Congress’s intent to not preclude whistleblower retaliation complaints under the Dodd-Frank Act from being precluded.  Thus, the Plaintiff, in signing the employment agreement with the arbitration provision, was bound to arbitration for her Dodd-Frank Act whistleblower retaliation claims.

While there is no guarantee that the Supreme Court will grant certiorari and review the case, this is an important case to follow as the 2nd Circuit is now the second federal appellate court decision to conclude that mandatory arbitration clauses in employment agreements are enforceable with respect to whistleblower retaliation claims under the Dodd-Frank Act.

VW Contributor: Ryan Coufal
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SEC Proposes To Expand the Definition of an Accredited Investor

In an era where, according to the Wall Street Journal, an estimated $3.4 trillion dollars is sitting on the “sidelines”, the Securities and Exchange Commission (“SEC”) is proposing to expand the number of individuals that can invest in non-public securities and other restricted investment vehicles. To do this, the SEC has proposed to expand the definition of an “accredited investor,” opening the door for more money to funnel into these restricted offerings by expanding the number of individuals qualified to make such an investment.

Generally, the limits were implemented to protect those individuals not knowledgeable enough to invest in securities that are not subject to the disclosure rules of a public security. However, the definition of an accredited investor qualified to make such an investment hasn’t been updated in a number of years, leaving it outdated. The proposed expansion of the definition will incorporate new categories of “natural persons” and “entities,” as well as other investment related organizations. New categories of natural persons include professionals with certain designations, such as those licensed with their Series 7, 65, or 82. Similarly, those knowledgeable employees of private funds would qualify as an accredited investor. Other proposed new categories include certain limited liability companies, investment advisers, investment companies, and family offices.

The SEC proposed expanding of the definition of an accredited investor on December 18, 2019, and the proposal will be open for a 60 day comment period. The SEC is actively soliciting comments regarding every aspect of this rule change, including its overall economic impact. For many, this is a long awaited and desired change to the definition of accredited investor that could result in more capital moving off the “sidelines.”

VW Contributor: Alex Rainville
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Holding the EEOC Accountable: 8th Circuit affirms EEOC must pay attorney fees incurred by employer on frivolous claims

On December 10, 2019 the 8th Circuit affirmed a federal district court’s order requiring the Equal Employment Opportunity Commission (EEOC) to pay $3.3 million in attorneys’ fees to CRST Van Expedited, Inc. (CRST) for pursuing claims that the commission knew or should have known were frivolous and failing to satisfy presuit obligations under Title VII.

The EEOC originally filed suit against CRST in 2007, after a female driver alleged that two male trainers sexually harassed her during a training trip.  The litigation was filed on behalf of over 250 female employees, and claimed that CRST was responsible for severe and pervasive sexual harassment and that it subjected its female employees to a hostile work environment. The district court found the EEOC had not established a pattern or practice of CRST tolerating sexual harassment, and dismissed the suit. Finding CRST as the prevailing party and that the EEOC had failed to satisfy Title VII’s presuit obligations, the district court entered an attorneys’ fee sanction of nearly $4.7 million against the EEOC.

This award of attorneys’ fees has been hotly contested, and has made its way through the 8th Circuit and back on remand, and up to the United States Supreme Court, which held that a favorable judgment on the merits is not a requirement to be a “prevailing party” when awarding attorneys’ fees.

The case was sent back to the district court, which engaged in extensive individualized inquiries, and found that most of the EEOC’s claims on behalf of 78 claimants for sexual harassment that were dismissed on summary judgment were frivolous, groundless, and/or unreasonable. The district court further found that the dismissal of the 67 other claims as a result of the EEOC’s failure to satisfy the presuit obligations constituted a sufficient alteration of the parties’ legal relationship to award fees.   The district court ultimately issued a fee award of $3,317,289.17, and the EEOC again appealed to the 8th Circuit.

In the recent decision, the 8th Circuit affirmed the district court’s $3.3 million fee award, holding that the district court did not abuse its discretion in holding individualized inquiries, and determining that 71 of the claims it dismissed on summary judgment were frivolous.  The 8th Circuit also upheld the district court’s method of fee calculation and stated the reasoning was sound “in light of the realities of the case, how it was litigated and the [lower] court’s unique understanding of these proceedings.”

The 8th Circuit rejected the EEOC’s arguments that its claims were not frivolous as it conjectured that the EEOC could not hold a reasonable belief that it satisfied its presuit obligations when it actually “wholly failed to satisfy them [under Title VII].”

This ruling should provide employers with assurance of the 8th Circuit holding the EEOC accountable for bringing frivolous claims, and failing to meet its mandatory presuit duties.

VW Contributor:  Ryan Coufal
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Will New York be Next to Enact a Robust Privacy Law?

Technology has driven disruption in virtually every industry and created an opportunity for businesses to compete in manners previously thought impossible but, with such opportunities, new regulations have emerged at both the state and federal level. Specifically, most businesses have elected to implement new policies, procedures, and safeguards to ensure compliance with the California Consumer Privacy Act (“CCPA”) and the European Union General Data Protection Regulation (“GDPR”). However, one more law that might be added to the list is the New York Privacy Act, currently under consideration by the New York State Legislature.

 

The New York State Senate, not to be left behind California and the EU, has been actively discussing the New York Privacy Act, which proposes to be the most robust consumer privacy and data protection regulation passed in the United States. The proposed law will regulate any use, storage, or disclosure of personal data of a consumer, and will apply to anyone that does business in New York. These principals are similar to those included in the GDPR and CCPA, however, New York intends to bolster these rules by adding a fiduciary duty, further transparency, and additional notice obligations.

 

The latest hearing by the New York State Senate in November of 2019 suggested the legislature would be reluctant to pass the legislation if the United States Congress ultimately passes federal legislation, but noted that failure to move at a federal level will result in state legislation. For businesses, this would mean further adjustments to privacy, data security, and technology policies and procedures. Given the myriad of regulations and their evolving nature, each business will need to evaluate how they intend to comply with the regulations and monitor new obligations. As always, the attorneys at Vandenack Weaver are available to provide assistance with these matters.

VW Contributor: Alex B. Rainville
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