In House - The FindLaw Corporate Counsel Blog

June 2014 Archives

Back in February, we wrote about Kind Snacks suing Clif for trademark infringement, à la trade dress violation, related to the new, very similar packaging of Clif's Mojo nutrition bars. Earlier this month, a federal judge denied Kind's motion for preliminary injunction.

But the biggest takeaway has to do more with social media, than trademark infringement. Read on to see why.

While we normally don't cover state court cases, when the state is Delaware, we listen. Because of the sheer number of companies incorporated in Delaware, state court decisions can have a national impact.

A recent Supreme Court of Delaware case involved the board of directors, and what is necessary to effectuate a valid resignation.

Nelson-Smith Wins In-House Lawyer of the Year, Makes Us Hungry

How do you define the role of the modern in-house lawyer? It's probably some amalgamation of legal counsel, reputation manager, data security watchdog, and consigliore to the board. This person should also, of course, be good at watching the bottom line and reigning in outside counsel costs.

At this year's "The Lawyer" Awards (sponsored by Thomson Reuters, our parent company), the UK publication sought to recognize someone who excelled at the jack-of-all-trades role. Who did they pick for In-House Attorney of the Year? Sarah Nelson-Smith of Yum! Restaurants, the parent company of Kentucky Fried Chicken, Taco Bell, and Pizza Hut.

No Clear Winner in Today's Employee Stock Plan SCOTUS Decision

Employee Stock Ownership Plans (ESOP) operate in a weird plane between retirement funds that are meant to benefit employees and a means for employee "buy in" that should benefit the company. The administrator of a plan is supposed to further the latter aim, while maintaining a fiduciary duty to employees.

Smells like conflict of interest, right? That's exactly what happened with Fifth Third Bancorp, which used employee funds to purchase more company stock, even while the bank was engaged in the risky subprime mortgage market. (Spoiler alert: the bubble burst, and the stock price collapsed.)

On Monday, President Obama and First Lady Michelle Obama hosted the White House Summit on Working Families, to engage the country in a "conversation on working families for a 21st Century workplace." In his remarks leading up to the event, and at the summit, the President outlined four issues that are a priority for working families: workplace flexibility, access to affordable child care, minimum and equal wages, and paid maternity leave.

To that end, the President is issuing a Presidential Memorandum directing the Department of Labor to begin expanding flexible workplace policies for federal employees, supporting the Pregnant Workers Fairness Act, changing the definition of spouse in the Family and Medical Leave Act to accommodate same sex married couples, as well as increasing access to affordable child care. Though starting with federal employees is a great way to start, there's nothing to stop your company from leading by example. As lawyers in the legal department, you're in a unique position to help steer the company to help make the workplace more efficient, as well as a happier place for your company's employees.

Here are some ways how your company can help #FamiliesSucceed.

EPA Can Add Greenhouse Gas Limits to Already Regulated Businesses

For those hoping for a stunning reversal of pro-Environmental Protection Agency rulings from the Supreme Court, well, it hasn't happened yet, and doesn't seem like it will any time soon.

Yesterday, the nation's High Court mostly reaffirmed prior holdings that upheld the EPA's ability to regulate greenhouse gasses, but narrowed that power just a bit, by striking down the agency's "tailoring rule," as an agency's overstep into rewriting its enabling statute, the Clean Air Act.

What companies are left with is this: if your emissions are already regulated, the EPA is well within its rights to limit the amount of greenhouse gases that you produce -- which is pretty much exactly what the EPA was aiming for.

Details Leak on Dov Charney Firing; Litigation Looming

Last week, American Apparel axed its founder, CEO, and 27 percent shareholder, Dov Charney, after an "investigation into alleged misconduct." We couldn't help but wonder: with all of his public idiocy (sexual harassment, labor law violations, slurs, and most damning of all: unprofitability), what caused the company to finally pull the trigger, five years too late?

From the reports? Not a whole lot more than we already knew about, including sexual misconduct, as well as a few allegations of personal use of company resources. The real surprise was the way the termination played out: a ten-hour meeting with Charney and an ultimatum: resign or be fired for cause.

Say what you want about Sheryl Sandberg's admonition to lean in, but whether you agree with her theory or not, she has added fuel to the long-stagnant discourse on the professional advancement of women. And it seems like companies are taking note -- and taking responsibility.

Now that the issue of women's professional advancement is definitively on the map, we can all start doing something about getting there.

On Monday, June 16th, 2014, Judge Oing of the New York State Supreme Court, ruled in favor of Macy's in its legal dispute with JC Penney, over a licensing deal with Martha Stewart.

The problems started in 2011, when JC Penney, under the short-lived and ill-fated tutelage of former CEO Ron Johnson, announced a deal with Martha Stewart outlining plans to create in-store Martha Stewart shops. The problem? Martha Stewart already had an exclusive deal with Macy's to manufacture and sell her line of home goods, reports Bloomberg.

American Apparel Fires Founder Dov Charney ... 5 Years Too Late

American Apparel tossed its founder and CEO Dov Charney to the curb this morning, blaming the move on "an ongoing investigation into alleged misconduct."

The move, which reeks of desperation, could mark rock bottom in a comeback. Or, more likely, it could be a precursor to the end: the press release notes that the change in management could trigger an event of default under its credit agreements. Add in five straight years in the red, and this could be the epitome of too little, too late.

6 Takeaways From the Washington Redskins Trademark Opinion

It's the topic of the day: the United States Patent and Trademark Office has invalidated the Pro-Football, Inc.'s trademarked variations on the Washington Redskins name, calling the term "redskin" derogatory. The ruling, if it stands, invalidates the team's ability to protect its intellectual property and brand and effectively forces a change that many in Congress and elsewhere have been requesting for years.

What does the opinion mean for the team, and more importantly, for your company's ability to protect its IP? Let's do a little Monday Morning Quarterbacking of the opinion and the football team's strategy:

Tesla's Patent Sharing Plan: Brilliant, Desperate, or Both?

Last week, Tesla made a big, bold move: It opened its patent portfolio to everyone.

In a post titled, "All Our Patent Are Belong To You," a reference to a poor video game translation turned Internet meme, the company's CEO Elon Musk announced the move and explained why the company would only use the patents for defensive purposes. In short: acceleration of innovation.

A cynic might amend that a bit: acceleration of adoption of Tesla's proprietary and patented standards, ensuring that the company doesn't develop the Betamax of electric vehicles. But nonetheless, this was a huge move. But was it a good move?

A new study of corporate general counsel reveals that in-house counsel are lacking the resources they need to tackle compliance issues, according to Grant Thornton. One Grant Thornton professional noted that, "Corporate counsel are facing a variety of new regulatory risks every day," including fraud, data security, and ethics. He noted that, "perhaps because of these new risks -- corporate counsel do not feel they have the resources to keep up, perhaps creating a vicious circle of regulatory and litigation risk."

So, instead of running around like a hamster on a wheel, what can you do to better grasp compliance issues at your company? Here are four ways you company can get a better handle on compliance.

A pair of jeans, Mickey Mouse and Karl Lagerfeld walk into a bar. Sounds like the makings of a bad joke, but they all are making their way to a bar -- just not the kind that provides booze. The Gap, Disney and Karl Lagerfeld are all getting sued.

Read on to see why they are getting sued, and take note -- your company could be next.

Yesterday, the Supreme Court decided a case that dealt with the intersection of the Food, Drug and Cosmetic Act ("FDCA") and the Lanham Act. At issue was whether a company can sue a competitor for violating the Lanham Act for unfair competition arising from false and misleading labels, where the labels are found to comply with the FDCA.

The Court's unanimous decision may have wide reaching effects -- read on to see if your company will be affected.

5th Cir: In House Lawyers Are Lawyers, Privilege Applies

The smoking gun memo. The "hey, this is really bad for us, and we're totally nuking the neighbors, but my legal opinion is don't tell anyone" memo. That's what Exxon Mobil had: a memo from their in-house attorney, Rosemary Stein, to an employee.

The memo was privileged legal advice, but a doc reviewer let it slip through the cracks. Louisiana has a claw-back provision, but before opposing counsel returned the Stein Memo, he forwarded it to basically the entire state bar. Exxon wanted it suppressed, but the district court declined, holding that it was more business correspondence than legal advice, and therefore not privileged.

NLRB Nixes Policy Prohibiting Off-Duty Access to Facility

Many employers don't allow employees to troll around the facility after or before working hours. Why? The reasons vary: security, a distraction-free workplace, keeping people from working off the clock, etc.

But now, if your company has such a blanket policy, it may have to have an exception: the Section 7 exception. That's right, the NLRB's favorite tool for blocking social media and workplace conduct policies is now making an appearance in off-duty facility access policies.

While you can limit access, you'll want to create an exception for the union and labor activities protected by Section 7.

$4.7 Million Workplace Bullying Case; Do You Have a Policy?

James Robinson might be the most expensive security guard in the world. The former employee of Pretty Girl clothing in Brooklyn, who previously pled guilty to assaulting his coworker, just cost his employer $4.7 million.

Why? Not only did Robinson punch his Yemeni-born coworker, Osama Saleh, in the face, fracturing his cheekbone, but he repeatedly verbally harassed Saleh before escalating to physical violence. Robinson allegedly repeatedly called him "bin Laden" and ranted about hating "dirty" Arabs. Supervisors, meanwhile, did nothing, despite Saleh's pleas, dismissing the conduct as banter, reports the New York Daily News.

Sony's Female Former GC Becomes Entertainment President

She started as General Counsel for Sony in 2001. Now, Sony's Nicole Seligman will hold three titles: President of Sony Corporation of America (the umbrella company for all U.S.-based business), President of Sony Entertainment (includes the company's music, movie, and publishing operations) and senior legal counsel (an advisory role) -- a considerable list of responsibilities that will be eased a bit by ceding GC duties to someone else. She'll also remain on the company's executive committee, reports Deadline.

If all of those titles seem a bit confusing, well, welcome to corporate America. But in simpler terms, she's gone from GC to the boardroom, lawyer to executive -- exactly what we were discussing last week.

The New York Stock Exchanges Governance Services publication, Corporate Board Member, and executive recruitment agency BarkerGilmore, conducted a study to examine the role of general counsel in the boardroom. The study, entitled "GCs in the Boardroom and Beyond," (free download with registration) surveyed 275 directors and CEOs from Corporate Board Member's database.

The results? They are in line with the overall trend of the evolving role of general counsel, and there is recognition that general counsel have more to contribute than just being the fearless leader of the law department.

Don't Get Stung: 3 Corporate Lessons from Burt's Bees Co-Founder

The hirsute co-founder and face of Burt's Bees, Burt Shavitz, has a few lessons to teach corporate counsel about avoiding stings.

Whether that's the sting of regret or the pain felt when a sexual harassment complaint slides across your desk, not even Burt's Bees makes a balm to soothe it. The best way to avoid this hurt is to be prepared.

Check out these three lessons from this ousted co-founder for avoiding a legal sting and the accompanying bad buzz:

We recently read an article about the "7 Secrets to Becoming General Counsel" and were inspired to distill the article for the busy in-house attorneys among you. The seven secrets were gleaned for us, by Corporate Counsel, by interviewing existing general counsel on how they got to their positions.

While we whittled down the message, we also consolidated the seven secrets to three tips. Even a busy in-house lawyer like you will have time to read and follow these tips. The next time you ask yourself if you are "GC material," the answer will be "yes."

Fee Shifting Has Arrived, Thanks to The Supreme Court

On April 29, 2014, the Supreme Court fixed fee shifting in patent cases. The Court lowered the bar for awarding fees and tweaked the appeals court's review standard to force them to respect the trial court's discretion.

Discretion which must, in the first instance, actually be used. You see, back when the standards were impossibly high and non-deferential (April 28 or so), there was no fee-shifting -- only 20 out of 3,000 cases filed in 2011 led to an award of fees.

Like we said in April: the Court's given trial judges the power. Now they have to use it.

Corporate Responsibility: Human Trafficking, Forced Labor Policies

Back in January, we answered the question: how can lawyers help combat human trafficking? The answer was awareness: learning about the problem itself, discussing it with business clients (especially those who have supply chains), ensuring that their legal services aren't used to further trafficking activities, and if necessary, dropping clients who refuse to conduct business legally and ethically.

Meanwhile, industry-wide, organizations like the American Bar Association were pushing for more stringent laws and increased awareness.