The SEC's announcement today that it has extended an emergency order designed to limit short-selling in certain situations and for certain firms, continues the already-heated debate over whether the rule is effective or fair. Set to expire July 29, the SEC extended the tightening of its short-selling rule until August 12. The rule, which requires traders to "pre-borrow" stock before initiating a short sale, has raised concerns that it unfairly excludes some firms that need protection from dramatic fluctuations in securities prices. Gary Distell, a partner in the Financial Services Practice at Katten Muchin Rosenman LLP (New York) who was previously a senior managing director at Bear Stearns, says that while this extension was expected, the great unknown is what long-term rules the SEC will propose. "The extension of the emergency short sale order was expected as Chairman Cox had previously telegraphed the Commission's intentions," Mr. Distell says. "What is unknown and more significant is what long term rules the SEC plans to propose. The Chairman has floated a few alternatives already, including the expansion of the order's provisions into a market-wide rule. An expansion of the rule would force firms to spend money to automate their systems and would add costs to both brokers and customers in the form of increased borrowers' fees. In this time of economic uncertainty, that would not be a popular outcome for Wall Street." Mr. Distell is available for interviews on the extension of the rule and its possible impact on the financial markets.

In addition to watching the athletes competing during Beijing's Summer Olympics, many will also be keeping tabs on how China deals with ambush marketers looking to cash in at the expense of legitimate sponsors. Ambush marketing varies in form and can range from what is seen as a traditional infringement of IP rights, such as using logos without permission to imply sponsorship; to more sophisticated campaigns where companies create advertising built around an event that suggests sponsorship but doesn't explicitly say the advertiser is a sponsor. "In this advertising-driven world, it's inevitable that people would seek to benefit from being linked to a major sport or sporting event, whether or not they have actually paid to do so," say David Brooks and Dr. Sibylle Gierschmann, intellectual property lawyers with Taylor Wessing (London and Munich) who counsel clients on dealing with the issue. A number of initiatives have already been launched by both the Beijing Olympics Organizing Committee (BOCOG) and by the national authorities. These include measures such as: suspending and controlling all prominent advertising sites in Beijing or around Olympic venues; suspending all advertisements that feature Olympic athletes; preventing television stations from featuring non-official sponsors in conjunction with Olympic-related programming; monitoring companies for potential infringing advertising practices; monitoring individuals who may be engaged in ambush marketing, for example by wearing logos of non-official sponsors and taking action to make them cover up infringing logos or prevent them from entering official venues. "China will no doubt be keen to demonstrate to the IOC, its official sponsors and to the world more generally that it can take effective measures to recognize and protect intellectual property rights. However, what remains to be seen is whether a legal regime which is relatively undeveloped where intellectual property rights are concerned will be adequate to restrain ambush marketing which, by its very nature, is sophisticated and often involves no traditional infringement of intellectual property rights," say Brooks and Gierschmann. They are available to discuss ambush marketing, the approach taken by other major sports organizations and events organizers, and China's efforts. [07/31/2008]

Though there may be a case for some employers to sign on to the federal government's new electronic I-9 compliance verification system known as E-Verify, the decision should not be made lightly. "The government has offered some incentives for companies to sign on to E-Verify, such as 17-month extensions for foreign national student employees who work in the so-called STEM fields of science, technology, engineering and mathematics. But for most other employers, the problems with E-Verify may outweigh any benefit," say Daniel Maranci and Teresa A. Crowley, immigration counsel and specialist, respectively, with Verrill Dana, LLP (Boston). They say employers using E-Verify to submit I-9 details for foreign nationals are having a particularly difficult time with the system. "Because there's a delay between when a foreign national enters the country, submits their biometric and other information, and when that information is transferred to the E-Verify system, many employers are having non-confirmations returned when they enter details for foreign nationals. The system also only gives them eight federal workdays to resolve the no-match before it the employer must terminate them. So, you have situations where a foreign national is legal to work in the U.S., has gone through all the proper hoops, but may have to be taken off payroll because the data between the government agencies is not exchanged properly." Adding to the problem, say Maranci and Crowley, is that foreign nationals whose employment is terminated may be able to pursue wrongful dismissal claims against employers. Employers may also be signing up for more than they realize with E-Verify. "The memorandum of understanding that employers sign when starting up with E-Verify stipulates that they will give full access to ICE and the Department of Homeland Security to come onto their premises and make checks as to whether employees are being trained to use E-Verify, I-9 compliance, and other issues," say Maranci and Crowley. "It gives them carte blanche access and they don't have to give any notice to an employer. They can just show up." For these reasons, Maranci and Crowley advise employers to weigh the benefits and drawbacks of E-Verify carefully before signing on. They are available for interviews to discuss the issue, and to write on the matter. [07/31/2008]

The UK has introduced a fast-track trademark examination process that has significantly reduced waiting periods for both domestic and foreign applicants. "For U.S. applicants, this means examinations are completed within ten business days and publication occurs much sooner than for standard applications," says Chris Benson, an attorney in the Intellectual Property Practice Group of Taylor Wessing (London) who has facilitated several applications for American clients under the new fast-track system. "The new system provides much more certainty for trademark owners," says Benson. New trademark rules for the UK will also be coming into effect in October 2008. "These will include measures designed to complement fast-track examinations. Of most significance is a reduction of the opposition period to two months," says Benson. He is available to discuss the UK's new fast-track trademark application process, its implications, as well as the new rules coming into effect in October. [07/31/2008]

Though the rules of the game for companies and patent trolls are becoming more clear in the U.S., thanks in large part to the NTP v. RIMM case, Europe is proving to be a brand new playing field for this conflict. "The German case, IP.com v. Nokia, is the first litigation we've seen in Europe involving patent trolls, and the laws are much different here than in the U.S.," says Sabine Rojahn, a partner in the Intellectual Property Practice at Taylor Wessing (Munich, Germany). Rojahn says U.S. companies must pay attention to the developments in the IP.com suit, particularly the fact that the protections that European laws give to patent owners could prove to work in the trolls' favor. "In the EU, patent owners — including patent trolls — filing infringement suits have an automatic right to an injunction and the courts cannot be flexible on that. As well, if a patent troll wins damages, the infringer can be forced to pay back its gross revenues for a product as damages, and not its net profit after production, marketing and other costs. In addition, the courts faced with these cases involving patent trolls will have a hard task balancing the need to protect patent owners with the desire to deal with patent trolls," says Rojahn. She is available to discuss and write about the battle that companies will face against patent trolls in Europe. [07/31/2008]

The Delaware Supreme Court has issued its much anticipated decision in CA, Inc. v. AFSCME Employees Pension Plan. The court ruled in favor of CA, Inc., finding that the American Federation of State, County and Municipal Employees (AFSCME) union's proposed by-law mandating the reimbursement of proxy expenses for short slate winners would violate Delaware law. The court, acting for the first time on a request by the U.S. Securities and Exchange Commission (SEC) for clarification on a Delaware law matter, ruled that the proposed by-law would deprive CA's directors of their full power to exercise their fiduciary duty to decide whether or not reimbursement of proxy expenses would be appropriate in a given circumstance. CA, Inc. had sought SEC approval to omit the AFSCME proposal from proxy papers scheduled to be sent to shareholders next week.

Perspectives:

a. Decision Affirms Authority of Corporate Boards

"Under Delaware law, the decision to spend corporate funds on contested director elections rests within the sound discretion of a company's board," says John F. Grossbauer, a partner with Potter Anderson & Corroon LLP (Wilmington, DE) who practices in the area of corporate law. "This decision affirms the authority of corporate boards in this important fiduciary matter. It also provides some clarity on the scope of by-laws, stating that by-laws cannot limit the board's authority to manage the business and affairs of Delaware corporations." Mr. Grossbauer is available to discuss the ruling and its implications. [07/24/2008]

News Contact: Lisa M. Altman
Email: altmanl@jaffeassociates.com
Phone: 301-943-9948

b. Partial Victory for Both Sides

"The court found that because the proposed bylaw focused more on the process of conducting elections and did not mandate a specific result, it was a proper subject of shareholder action," says Peter Ladig, a corporate litigation attorney and director with Bayard, P.A., a Wilmington, Delaware law firm. "The opinion leaves both the company and the shareholder with some cause to claim victory and will undoubtedly play a major role in shaping the future of Delaware law as institutional investors and other shareholders struggle to co-exist with corporate management," Ladig said. "No doubt the first in a series of cases that will test the boundaries of shareholder autonomy and the limits of directors' exclusive managerial authority. Shareholders, directors and companies should pay careful attention to this decision." Peter Ladig and Stephen Brauerman, an associate with Bayard, are available to write an article on the recent CA/ASCFME decision and its impact on corporate governance issues facing Delaware companies. They are also available for comment on this topic. [07/24/2008]

Non-traditional lenders, including hedge funds and other privately-funded institutions, increasingly made loans to borrowers during the peak of the easy credit market a few years ago. Today, as those loans approach maturity, and with a slow lending environment, the number of foreclosures and Chapter 11 filings is likely to increase. "The benefits of easy credit that a borrower sought from non-traditional lenders are about to expire as these loans reach maturity," says W. Glenn Jensen, a partner in Orlando, Fla. with Roetzel & Andress, who focuses his practice advising institutional clients in litigation, bankruptcy and workout matters. "While refinancing would typically be an option for people at this crossroad, given the downturn in the real estate market and general economy, there are not many outlets to which people can turn. Instead, we are going to see an increase in foreclosures and bankruptcy cases as lenders seek to enforce their defaulted loans." Mr. Jensen is available to discuss issues related to this nationwide trend and other distressed commercial real estate loan matters. [07/24/2008]

The SEC's new emergency order designed to limit short-selling in certain situations and for certain firms is already taking heat from critics. Last week, the SEC announced that it would tighten short-selling rules for 19 financial firms by requiring traders to "pre-borrow" stock before initiating a short sale. While the SEC believes this rule will protect those firms and the overall markets from wild fluctuations in securities prices, those against it claim that it unfairly excludes some firms that need similar protection. However, Gary Distell, a partner in the Financial Services Practice at Katten Muchin Rosenman LLP (New York), who was previously a senior managing director at Bear Stearns, says that the SEC was wise to start out with a relatively small group of securities until they can gauge the rule's effectiveness. "At this early stage, it is unclear what impact the order will have on the trading activity in the included securities," Mr. Distell says. "It may dampen short selling, but may impede overall liquidity which may not be advantageous. Most new rules produce some unintended consequences. Because the SEC only included certain securities within the financial sector, it will be able to gauge the impact of the order by comparing the trading characteristics of like-companies. If the SEC were to make a permanent rule after this order expires, it is likely they would include many or all securities. Mr. Distell is available for interviews on the SEC's new short-selling rule and its possible impact on the financial markets. I am including his bio below for your reference. [07/24/2008]

While it used to be the case that attorneys wanting to forge appellate careers went from clerking at the Supreme Court to other positions in DC, whether with the government or a law firm, more and more they are now choosing to practice far from the Beltway. "This is largely due to the phenomenon of State Attorneys General setting up very high-profile Solicitor General operations," says Kevin C. Newsom, who co-chairs the Appellate Group at Bradley Arant Rose & White LLP (Birmingham, Ala.). "Appellate work, more than any other kind of litigation practice, is also geographically transferable." After clerking for the U.S. Supreme Court, Newsom served as State Solicitor General for Alabama before going into private practice in Birmingham. Working far from DC has not affected the kind of appellate work he's been able to take on. In fact, Newsom and the Bradley Arant Appellate Group won two cases before the Supreme Court during its 2007-2008 term — Allen v. Siebert and Riley v. Kennedy. For Newsom, choosing to work in Alabama was not difficult after he realized he would still secure the same level of work as an appellate attorney working in DC, while remaining close to his roots in Birmingham. "I needed to be able to convince myself that I could have the sort of practice here that I really wanted. If I could have a thriving appellate practice here , there was no real benefit on the personal side to being in DC that outweighed living in my hometown. If you can live where you want to live and have the kind of practice you want to have then there's absolutely no reason not to do it." Newsom is not alone in his career path. Several Solicitors General from other states that knew while he served in Alabama have gone on to join appellate practices outside of DC. Newsom is available to discuss the options for those seeking to work in appellate law but who also want to have choices in where they will build their practice. Contacts with other former Supreme Court clerks and/or State Solicitors General who have followed a similar career path are also available. [07/24/2008]