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The Association of the Federal Bar of New Jersey: Has Everything in Federal Criminal Prosecutions Changed or Is it Much Ado About Nothing?

26 Apr 2023 00:00:00 -0800

On April 26, Matthew E. Beck, Chair of the White Collar Defense & Investigations and Litigation Groups, will moderate, "Has Everything in Federal Criminal Prosecutions Changed or Is it Much Ado About Nothing? The Impact of the Garland and Monaco Memos and U.S. v. Banks on Charging, Pleas and Sentencing in Individual and Corporate Cases," presented by the Association of the Federal Bar of New Jersey. Mr. Beck will moderate alongside Linda D. Foster, Assistant Federal Public Defender, Office of the Federal Public Defender, District of New Jersey, and panelists include:

Philip R. Sellinger, United States Attorney, United States Attorney’s Office, District of New Jersey
K. Anthony Thomas, Federal Public Defender, Office of the Federal Public Defender, District of New Jersey
Vikas Khanna, First Assistant United States Attorney, United States Attorney’s Office, District of New Jersey
Jenny Kramer, Alston & Bird

For additional information or to register, click here.

CSG Law Alert: Navigating Risk in Artificial Intelligence: Content Creation and Creative Works

28 Mar 2023 00:00:00 -0800

Artificial Intelligence (“AI”) for business use presents both the opportunity to replace existing, less efficient processes and the potential for new technologies and products. In addition to the integration of AI technology with existing services and products, there is a race amongst technology companies, entrepreneurs, and investors to innovate, create, and profit from the technology and output made possible by AI.

As identified in The Blueprint for an AI Bill of Rights, which was publicly released by the White House Office of Science and Technology Policy,¹ the multitude of AI technology use cases includes content creation generated by AI. Referred to as “generative AI,” this type of AI technology aggregates and analyzes preexisting creative works authored by humans and generates new creative works when prompted by a human. However, the dichotomy between preexisting and new creative works is an area of constant debate.

As a matter of contract law, owner(s) of generative AI technology may expressly retain ownership rights according to the terms of their vendor agreements, terms of use or other documents that govern the use of their generative AI technology. In addition, if an independent contractor creates content for a third party, the independent contractor has ownership rights with respect to such content, unless the parties have an agreement in which the independent contractor agrees that the content is owned by such third party. As a result, a user may not have ownership rights with respect to generative AI materials. This is particularly problematic when a company produces generative AI materials intended to be owned by a customer. In fact, such a company’s potential liability is exacerbated since it cannot grant its customer ownership of the deliverable and may be providing work product that potentially infringes upon a third party's rights, thereby effectively breaching its contractual obligations to the customer.

In addition, ownership rights to content, designs, and other creative works produced by generative AI technology remains unclear. For example, new creative works generated by AI is derived from mass digitization and text and data mining (“TDM”) and expressive (copyrighted) works.² Hypothetically, a company may be held liable if the company disseminates works that is produced by generative AI technology that infringes copyrighted works, even in an instance where the generative AI technology is deemed to have operated autonomously.³ Similarly, the same company can be indirectly liable for infringing a registered mark without the consent of the trademark registrant by way of utilizing the generative AI technology that infringes a registered trademark.⁴

On the other hand, protecting creative works that incorporate generative AI materials is not a clear cut path. The U.S. Copyright Office, which administers copyright registration, has been recently grappling with copyright registration that involves generative AI materials.

On February 14, 2022, the Review Board of the United States Copyright Office affirmed the refusal to register a copyright claim for a two-dimensional artwork entitled A Recent Entrance to Paradise, which was autonomously created by generative AI technology without any creative contribution from a human.⁵ It was determined, among other things, that A Recent Entrance to Paradise lacked the required human authorship necessary to sustain a claim in copyright, whereby there was no evidence establishing sufficient creative input or intervention by a human author. Citing a recent report from the U.S. Patent and Trademark Office (“USPTO”) addressing intellectual property issues raised by AI, the Review Board agreed that “existing law does not permit a non-human to be an author [and] this should remain the law.” The Review Board also rejected arguments involving work made for hire. The Review Board explained that a work made for hire must be prepared by either (A) an employee, or (B) one or more parties who enter into a work-for-hire agreement.⁶ Under existing law, the Review Board emphasized that (1) the generative AI technology cannot be an employee since it is not a human; (2) generative AI technology cannot enter into a work-for-hire agreement since it is not a human; and (3) existing law requires that a work contain human authorship.

On February 21, 2023, the U.S. Copyright Office canceled the previous registration of a creative work (a graphic novel) that incorporated generative AI materials due to a failure to exclude non-human authorship contained in the graphic novel.⁷ The application allegedly did not disclose that generative AI technology was used to create any portion of the graphic novel, nor did the applicant disclaim a portion of the graphic novel that was produced by generative AI technology. The U.S. Copyright Office concluded that although a graphic novel comprised of human-authored text combined with images produced by the generative AI technology constituted a copyrightable work, the individual images in and of themselves could not be protected by copyright. As a result, the new registration must explicitly exclude materials produced by generative AI technology.

On March 16, 2023, the U.S. Copyright Office issued Copyright Registration Guidance: Works Containing Material Generated by Artificial Intelligence to clarify its current approach to the registration of works containing materials produced by generative AI technology:⁸

Copyright can protect only material that is the product of human creativity.
In the case of works containing generative AI materials, the U.S. Copyright Office will consider whether the AI contributions are the result of ‘‘mechanical reproduction’’ or a human author’s ‘‘own original mental conception.”
In the purview of the U.S. Copyright Office, humans do not exercise ultimate creative control over how the generative AI technology interprets prompts and generate material.
If the generative AI technology determines the expressive elements of its output, then the generated material (1) is not the product of human authorship, (2) is not protected by copyright, and (3) must be disclaimed in a registration application.
Applicants have a duty to disclose the inclusion of generative AI materials in a work submitted for registration and to provide a brief explanation of the human author’s contributions to the work.
Individuals who use generative AI technology may claim copyright protection only for their own contributions to that work.
Applicants should not list a generative AI technology or the owner of the generative AI technology as an author or co-author, even if used when producing generative AI materials.
Generative AI materials that are more than de minimis should be explicitly excluded from the application.

In conclusion, while generative AI technology presents opportunities and unlocks potential, companies should be wary of the contractual and intellectual property issues involving AI work product/contributions to [human] work product.

¹ See generally The White House Office of Science and Technology Policy, The Blueprint for an AI Bill of Rights: Making Automated Systems Work for the American People. Last accessed February 26, 2023, https://www.whitehouse.gov/wp-content/uploads/2022/10/Blueprint-for-an-AI-Bill-of-Rights.pdf.

²The United States Patent and Trademark Office, Public Views on Artificial Intelligence and Intellectual Property Policy. Last accessed October 7, 2020, https://www.uspto.gov/sites/default/files/documents/USPTO_AI-Report_2020-10-07.pdf, at iii, 23.

³ Id. at 28.

⁴ Id. at 33.

⁵ U.S. Copyright Office Review Board, Decision Affirming Refusal of Registration of a Recent Entrance to Paradise at 2 (Feb. 14, 2022), https:// www.copyright.gov/rulings-filings/review-board/ docs/a-recent-entrance-to-paradise.pdf.

⁶ 17 U.S.C. § 101 (definition of “work made for hire”).

⁷ See U.S. Copyright Office, Cancellation Decision re: Zarya of the Dawn (VAu001480196) (Feb. 21, 2023), https:// www.copyright.gov/docs/zarya-of-the-dawn.pdf.

⁸ Copyright Registration Guidance: Works Containing Material Generated by Artificial Intelligence, 88 Fed. Reg. 16,190 (Mar. 16, 2023) (to be codified at 37 C.F.R. § 202).

CSG Law Alert: USPTO Transitioning from Paper to Electronic Patent Grants (eGrants)

24 Mar 2023 00:00:00 -0800

The United States Patent and Trademark Office (USPTO) is transitioning from the traditional issuance of paper patents to electronically issued patents with a digital USPTO seal and the digital signature of the USPTO director. The older format was bound with a cover sheet that featured both an embossed seal and the signature of the USPTO director, but the new format incorporates those features into a Portable Document Format (PDF) document.

The new electronic patent grant is the official statutory patent grant and will be available to view and print from the USPTO website immediately upon issue.

During a transition period that begins on April 18, 2023, the USPTO will issue both paper and electronic copies of issued patents. The paper copy will be ceremonial, and the electronic copy will be the official statutory patent grant. Ceremonial paper copies will continue to be available for a fee after the transition period. The USPTO has not yet specified the duration of the transition period.

Under the new electronic issuance, the USPTO will issue the patent shortly after the payment of the issue fee. As a result, applicants will have limited time to file continuing applications, Information Disclosure Statements or petitions to withdraw an application from issue after payment of the issue fee. Therefore, best practice would be for applicants to file these submissions as early as possible. Preferably, continuing applications should be filed before the payment of the issue fee.

Please contact one of the authors if you have any questions regarding eGrants or any other patent related questions.

NJICLE Webcast: Navigate the Evolving and Uncertain World of Identifying, Quantifying and Mitigating Environmental, Social, Governance (ESG) Risks

23 Mar 2023 00:00:00 -0800

On March 23, from 9:00 am - 12:00 pm, Rafael Corbalan, an Associate in the Environmental Group, will speak at NJICLE's Webcast, "Navigate the Evolving and Uncertain World of Identifying, Quantifying and Mitigating Environmental, Social, Governance (ESG) Risks." Mr. Corbalan, among others, will discuss how businesses are facing mounting ESG expectations, as well as increasingly widespread attention to climate change, even for small businesses.

In-House Connect: Employment Law for In-House Counsel - How to Engage in the Interactive Process and Discipline Employees While Complying with the ADA

22 Mar 2023 00:00:00 -0800

On March 22, Lindsay A. Dischley, a Member of the CSG Law Employment Law Group, and Melissa A. Salimbene, Practice Group Leader of the CSG Law Employment Law Group, will speak at In-House Connect's program, "Employment Law for In-House Counsel: How to Engage in the Interactive process and Discipline Employees while Complying with the ADA." Ms. Dischley and Ms. Salimbene will discuss an employer’s obligation to engage in the interactive process and provide reasonable accommodations to current employees and job applicants who may need such an accommodation due to a disability.

For additional information or to register, click here.

CSG Law Attorney Francis J. Giantomasi Featured on Steve Adubato's Lessons in Leadership with Co-Host Mary Gamba on News 12+

20 Mar 2023 00:00:00 -0800

Francis J. Giantomasi of Chiesa Shahinian & Giantomasi PC (“CSG Law”) was featured on Steve Adubato’s Lessons in Leadership with Co-Host Mary Gamba on News 12+ on March 19 where he shared his perspective on the law, family and leadership as well as the firm’s move to its state-of-the-art, 120,000 square foot headquarters at 105 Eisenhower Parkway in Roseland, New Jersey.

“We were committed to (staying in) Essex County, Steve,” Giantomasi said. “We were going to relocate from West Orange, but we would not move to Morris (County) or any other county, so the search was a little difficult.”

The firm put together “a serious package of improvements and renovations” for the former site of Arthur Andersen’s global headquarters, Giantomasi said, with the aim of meeting the needs of an ever-growing employee and client base.

“Everybody loves it,” he said. “You think you’re in a tech headquarters. It’s really, very modern and follows all the new (updates) we read about post-COVID.”

Giantomasi said the firm built the expansive new headquarters when so many are going remote because they believe a physical location “is an integral part of the new normal.”

“We built approximately 45 huddle and conference rooms, all Zoom capable. We don’t have a telephone anywhere in our office. They’re gone. We’re on a complete Zoom platform,” Giantomasi said. “We’re recognizing and respecting what you’re talking about, but we also believe that a business our size – if you don’t get people back, if you don’t create that connective membrane that was there, if (employees are) just tethered together by a paycheck and a virtual existence – you don’t have a business.”

He continued: “And so we bet on, and we bought into, a return to work, but we changed and adapted and morphed it into a new semi-virtual, semi-present return to work.”

And part and parcel of that investment, Giantomasi said, is the firm’s commitment to its entire team – not just the attorneys but the support staff as well.

“I will tell you that we have a motto here at the firm – it’s family first – and that’s for real,” he said. “We don’t just talk it, we walk it. So, we tell people all the time, come forward with your family dynamics, whatever they may be that are challenging you, or that need us to pay some special attention to your moment in time, or if you’re changing your living existence and we’re going to support you.”

He continued: “I learned a long time ago that using the word ‘leader’ means that you have to show the team that you care. And you have to care. If you’re faking that you care, you’re not leading, you’re failing. We do care.”

To view the entire interview, please visit here.

CSG Law Alert: Don't Press Your Luck That Your Severance Agreements are Compliant with Recent Changes in the Law

16 Mar 2023 00:00:00 -0800

On February 21, 2023, the National Labor Relations Board (“NLRB”) issued a decision in McLaren Macomb impacting how private sector employers, including those with unionized as well as non-unionized workforces, must now draft their severance agreements.

Specifically, the NLRB overruled its prior decisions that previously permitted an employer to include very broad non-disparagement and confidentiality provisions in severance agreements. Consequently, a severance agreement may now be deemed unlawful if it contains non-disparagement and confidentiality provisions that are drafted so broadly that they effectively “chill” an employee’s ability to exercise their rights under the National Labor Relations Act (“NLRA”) to collectively band with others in an effort to improve the workplace. Those rights, which are generally known as Section 7 rights, afford protections to employees who engage in communications with each other as well as a wide range of third parties, including, administrative, judicial, legislative and political forums, newspapers, the media, social media, and communications to the public, about the terms and conditions of employment.

The non-disparagement and confidentiality provisions at issue in McLaren were as follows:

6. Confidentiality Agreement. The Employee acknowledges that the terms of this Agreement are confidential and agrees not to disclose them to any third person, other than spouse, or as necessary to professional advisors for the purposes of obtaining legal counsel or tax advice, or unless legally compelled to do so by a court or administrative agency of competent jurisdiction.

7. Non-Disclosure. At all times hereafter, the Employee promises and agrees not to disclose information, knowledge or materials of a confidential, privileged, or proprietary nature of which the Employee has or had knowledge of, or involvement with, by reason of the Employee’s employment. At all times hereafter, the Employee agrees not to make statements to Employer’s employees or to the general public which could disparage or harm the image of Employer, its parent and affiliated entities and their officers, directors, employees, agents and representatives.

8. Injunctive Relief. In the event that Employee violates the provisions of paragraphs 6 or 7, the Employer is hereby authorized and shall have the right to seek and obtain injunctive relief in any court of competent jurisdiction. If Employee individually or by his/her attorneys or representative(s) shall violate the provisions of paragraph 6 or 7, Employee shall pay Employer actual damages, and any costs and attorney fees that are occasioned by the violation of these paragraphs.

The NLRB determined that these provisions were violative of the NLRA because:

They prohibited the employee from making any statements to other employees or the general public, which could disparage or harm the image of the employer, its parents and affiliated entities and their officers, directors, employees, agents, and representatives, which provision is too broad in that it could chill the employee’s Section 7 rights.
They prohibited the employee from disclosing the terms of the agreement “to any third person,” thereby, precluding the employee from even disclosing the existence of any unlawful provisions contained in the agreement.
They lacked a temporal limitation, instead applying “at all times hereafter.”
In the event of a breach, the agreement provided for substantial monetary and injunctive sanctions against the employee.

The NLRB further held that the mere “proffering” of a severance agreement containing such problematic provisions amounted to an unlawful labor practice because the act of conditioning receipt of benefits on the acceptance of unlawful terms effectively waiving the employee’s Section 7 rights is coercive in and of itself.

As a result of this decision, an employer’s mere proffer of a severance agreement may be unlawful if the agreement, on its face, restricts the exercise of Section 7 rights. Notably, the NLRB will consider “whether any relinquishment of Section 7 rights is narrowly tailored,” hinting that a potential solution to ensure compliance is for employers to include disclaimers in severance agreements clearly stating that the provisions included therein do not prohibit the employee from engaging in any activities protected by the NLRA.

This new standard will likely have employers guessing whether the provisions in their standard severance agreements have suddenly become unlawful. Do not press your luck this St. Patrick’s Day – contact your employment counsel at CSG Law to review and modify your severance agreements to reflect the NLRB’s most recent decision.

Four CSG Law Women Leaders Earn Place Among ROI-NJ's 2023 Influencers: Women in Business

10 Mar 2023 00:00:00 -0800

Chiesa Shahinian & Giantomasi PC (“CSG Law”) congratulates four of its women leaders on being named to ROI-NJ’s 2023 Influencers: Women in Business list this week.

Managing Member Patricia K. Costello again ranked 20th in the state, earning the highest placement of any private practice lawyer on the list. She was joined by Rhonda Carniol (Chair of the firm’s Tech, Privacy & Data Innovations Group), Marisa Rauchway (head of the Franchise Team) and Abigail Remore (Practice Group Leader of the Trademarks & Copyrights Group). Pat was also named to ROI-NJ’s Influencers: Women in Business list in 2022.

“We are extremely proud of our team at CSG Law, and especially of the four women who earned a place on this prestigious list for their accomplishments, hard work and leadership,” said Francis J. Giantomasi, Member of the firm’s Executive Committee.

“Pat, Rhonda, Marisa and Abby are inspiring leaders who continually demonstrate their commitment to our clients and our firm in everything they do,” said Jeffrey S. Chiesa, Member of the firm’s Executive Committee.

CSG Law stands out among its peers for retaining, mentoring and advancing women attorneys – in 2022 the firm named its first woman Managing Member, while women comprise more than half of the firm’s practice group leaders and C-suite management team.

Patricia Costello, who serves as the firm’s Managing Member, oversees the operations of the firm which today enjoys more than $100 million in revenues, 190 attorneys and more than 300 employees overall, with offices in two states – New Jersey and New York.

Rhonda Carniol, who counsels entities in all aspects of technology, media, advertising and corporate law, founded CSG Law’s Tech, Privacy & Data Innovations Group earlier this year. Her clients include multinational publicly traded companies, advertising agencies, software companies, data and media providers, start-up ventures, and angel investors.

Marisa Rauchway, a former associate of CSG Law, rejoined the firm in January to head up CSG Law’s new Franchise Team. In this role, she serves as a strategic legal advisor and partner to the local, regional and national franchise community across a wide range of industries.

Abigail Remore handles a wide range of intellectual property matters, including litigation, enforcement, counseling, licensing and prosecution of trademark and copyright applications. Abby recently argued before the U.S. Patent and Trademark Office’s (“USPTO”) Trademark Trial and Appeal Board (“TTAB”) on behalf of singer and rapper, Lizzo, obtaining a precedential decision allowing the singer to trademark the phrase “100% That Bitch.”

Visit csglaw.com/award-methodology for additional details on the selection process for the above-mentioned recognitions.

CSG Law Alert: Senate Committee Advances Law Concerning Guidance for Municipal Approval of Warehouse Development

09 Mar 2023 00:00:00 -0800

On March 2, 2023, the Senate and Urban Affairs Committee advanced a new law, Senate Bill 3468 (“S3468”), requiring that the New Jersey State Planning Commission (the “Commission”) publish regulatory guidance to assist municipal planning boards and other local agencies, when acting pursuant to the Municipal Land Use Law (“MLUL”), on applications for warehouse development. The Commission has three months following the enactment of the law to publish the regulatory guidance. Once completed, the guidance publication will be available to the public on the Commission’s website and will also be incorporated by the Commissioner of Community Affairs into the course offered to local land use officials responsible for enforcing the MLUL.

S3468 is a clear expansion of the Distribution Warehousing and Goods Movement Guidelines adopted by the State Planning Commission in September of 2022 (the “2022 Guidelines”) to assist municipalities with warehouse development. The 2022 Guidelines distinguished between different types of warehouses and included specific attributes for each type of facility to help municipalities determine whether a project was compatible with a site and beneficial to a community. In addition, the 2022 Guidelines addressed municipal zoning and siting considerations, redevelopment and brownfields, overburdened communities, traffic, transportation and road safety, sustainable design, mitigation best practices and examples of best practices for community involvement and engagement.

The 2022 Guidelines, however, did not provide warehouse development applicants or local approving authorities with examples of questions and reports that would typically be asked of or requested from a warehouse development applicant prior to the issuance of development approvals. This legislation goes a step further by directing the Commission to publish regulatory guidance that incorporates model questions and reports to address potential community concerns, such as traffic volume, road safety, and environmental considerations. In addition, S3468 includes a requirement for a module specifically on warehouse development to be included in the training materials for current and prospective members of local planning boards and zoning boards of adjustment in connection with the teaching and enforcement of the MLUL.

A copy of the S3468 can be found here and a copy of the 2022 Guidelines can be found here.

CSG Law Alert: NJ Board of Public Utilities Adjusts Value of Solar Renewable Energy Credits

08 Mar 2023 00:00:00 -0800

On March 6, 2023, the NJ Board of Public Utilities (“BPU”) voted unanimously to adjust the value of the solar renewable energy credit (“SREC-II”) of the Administratively Determined Incentive portion of the Successor Solar Incentive Program.

The adjustments are as follows:

The net metered residential SREC-II was decreased from $90 to $85.
The SREC-II for net metered non-residential rooftop, carport, canopy, and floating solar was increased from $100 to $110 for small projects (under 1MW) and from $90 to $100 for large projects (1 to 5MW). The value for public entity projects was increased from $120 to $130 for small projects and from $110 to $120 for large projects.
The SREC-II for ground-mount net metered non-residential projects increased from $85 to $90 for small projects (under 1MW) and from $80 to $85 for large projects (1 to 5MW). The value for public entity projects was increased from $105 to $110 for small projects and from $100 to $105 for large projects.
Notably, the BPU did not increase the value for the community solar SREC-II or the interim subsection (t) program (projects on landfills and brownfields).

The net metered residential, net metered non-residential and community solar segments each have a capacity limit of 150MW, and the interim subsection (t) segment has a capacity limit of 75MW.

CSG Law Alert: Real Estate Property Tax Law - Commercial Property Tax Appeals in 2023: Inflation and Rising Interest Rates While Transitioning from The Covid-19 Pandemic to Endemic Environment

07 Mar 2023 00:00:00 -0800

The Impact of Rising Interest Rates and Inflation Levels Along with the Residual Effects of the COVID-19 Pandemic

The 2023 Real Estate Property Tax Appeal filing season is suddenly upon us. The lasting impact of the Covid-19 pandemic on real estate valuations remains uncertain but the sharp rise in interest rates, and the significant increase in overall expenses that property owners face due to the current inflationary environment, make it especially appropriate for you to review your 2023 commercial property tax assessments.

What You Need to Know This Tax Appeal Filing Season

On or before February 1, 2023, the tax assessor for each taxing district issues a postcard "Notice of Assessment" which lists, among other information, the property assessment for 2023. It is important to understand that, unless there has been a district-wide revaluation, "assessed" value is not necessarily the "market value" claimed by the municipality through the assessment. Rather, the municipality must defend the "imputed" or "equalized" value of the property, which reflects the assessments in the district are a percentage of true market value as judged by the average of all usable sales in the district. This “equalized” value is often higher than the assessment and is the actual value to be analyzed in determining whether the property is fairly assessed.

An appeal of a 2023 assessment must be filed on or before April 1, 2023. All appeals may be made initially to the County Board of Taxation, but if the assessment (not the equalized value) exceeds $1,000,000, then the appeal must be made directly to the New Jersey Tax Court. Direct appeals to the Tax Court must also be made by April 1, 2023. The only exception to the April deadline is if the municipality has performed a district-wide revaluation or reassessment in which case the deadline is May 1, 2023.

CSG’s Property Tax Group is poised to address each of these issues, and we welcome the opportunity to evaluate properties for appeal potential at no charge. Our Property Tax Group has successfully handled appeals involving regional shopping malls, hotels, casinos, corporate headquarters, office buildings, multi-family apartment buildings and complexes, industrial properties from warehouses to special purpose properties such as chemical plants, power generation plants, oil refineries, breweries, regional reservoirs, and recreational properties such as golf courses and amusement parks. Our Property Tax Group also vigorously defends “reverse tax appeals.” Tax appeals generally are handled by the firm on a contingency fee arrangement, although other fee arrangements, including application of standard hourly rates, can be utilized.

For more information concerning property tax appeals in the current environment, please contact your CSG Law attorney.

CSG Law Alert: The Unitary Patent System to Begin on June 1, 2023 in Europe

07 Mar 2023 00:00:00 -0800

On February 17, 2023, Germany ratified the Agreement on a Unified Patent Court (“UPCA”). This ratification was the final condition that needed to be satisfied in order for the UPCA to enter into force for the participating member states of the European Union. The long-delayed Unitary Patent system will begin on June 1, 2023, establishing the European patent with unitary effect (commonly referred to as the Unitary Patent) and the Unified Patent Court.

Currently, under the European Patent Convention (“EPC”), granted European patents are validated in one or more EPC contracting states on a country-by-country basis, resulting in so-called classical European patents. Classical European patents provide patent protection only in the validated states. In contrast, the new Unitary Patent will provide uniform patent protection in all participating member states¹ of the European Union. To obtain a Unitary Patent, European patent applicants must file a single request for unitary effect with the European Patent Office (“EPO”) no later than one month from grant of the European patent application. Moving forward, the current validation system and the Unitary Patent system will coexist.

The Unified Patent Court will have jurisdiction over all Unitary Patents and, by default, classical European patents. As a consequence, Unitary Patents and classical European patents under the jurisdiction of the Unified Patent Court are enforced or invalidated across all participating member states in a single action. However, during a transitional period of seven years, which may be extended for a further seven years, owners of classical European patents may opt-out of the jurisdiction of the Unified Patent Court as long as no action has been brought before the Unified Patent Court with respect to such classical European patents. By opting-out, classical European patents must be individually enforced or invalidated in the national courts of the validated states. The opt-out can be filed during a Sunrise Period, which began on March 1, 2023.

To facilitate the implementation of the Unitary Patent system, the EPO has introduced two interrelated transitional measures that are currently available to European patent applications in which an intention to grant has been issued. The first transitional measure enables applicants to file an early request for unitary effect prior to the start of the Unitary Patent system. The second transitional measure allows applicants to request a delay in issuing the decision to grant. These two transitional measures allow for an applicant to obtain a Unitary Patent for a European patent application which would otherwise have been granted prior to entry into force of the UPCA.

In view of the entry into force of the UPCA, European patent owners and applicants have a number of upcoming decisions to make, including whether to request unitary effect for granted European patents and whether to opt-out of the jurisdiction of the Unified Patent Court for existing classical European patents and applications. There are many factors that should be considered in making these decisions, such as, for example, costs, likelihood of enforcement, administrative overhead, and uncertainty. If you have any questions about the Unitary Patent system, please contact one of the authors.

¹ As of the date of this publication, the participating member states are Austria, Belgium, Bulgaria, Denmark, Estonia, Finland, France, Germany, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Portugal, Slovenia and Sweden.

Financial Poise Webinar: Defending White Collar Crime 101

07 Mar 2023 00:00:00 -0800

On March 7, at 2:00 pm CST, Matthew E. Beck, Chair of the CSG Law White Collar Defense & Investigations Group, will participate in Financial Poise's, "Defending White Collar Crime 101" webinar. Mr. Beck, among other speakers, will discuss how companies need to avoid unknowingly acting in ways that may be unlawful; how to prevent and detect potential employee misconduct; and how to react if misconduct does occur as governmental enforcement of laws against those accused of white-collar crime increases.

For additional information or to register, click here.

CSG Law Alert: United States Supreme Court Saves Taxpayer Millions in FBAR Penalty Case

06 Mar 2023 00:00:00 -0800

On February 28, 2023, the United States Supreme Court delivered a major victory for taxpayers, limiting the penalty for non-willful failures to meet reporting requirements under the Bank Secrecy Act (“BSA”) to $10,000 on a per-report, rather than per-account, basis. Under the BSA, taxpayers with foreign accounts that hold an aggregate balance of more than $10,000 are required to file an annual Report of Foreign Bank and Financial Accounts, commonly known as an FBAR. The BSA imposes a penalty of $10,000 for non-willful violations but does not explicitly state whether these penalties apply per-report or per-account. Alexandru Bittner, a Romanian-born dual citizen, filed FBARs, but did not initially include over 272 foreign accounts over a five-year period in which he had “signatory authority or in which he had a qualifying interest.” Arguing that the BSA’s $10,000 penalty should be applied per account, the government imposed a staggering $2.72 million penalty. Bittner counter argued for a $50,000 maximum penalty, $10,000 per annual report.

The Court, in a sharply divided 5-4 majority opinion authored by Justice Gorsuch, agreed with Bittner, holding that the $10,000 penalty should apply on a per-report, not per-account, basis. It reached this conclusion by analyzing the BSA’s text, drafting history, and other features of its statutory scheme. Specifically, the Court found that the fact that Congress chose to specify that willful violations can be penalized on a per-account basis but did not so specify for non-willful violations was strong evidence that Congress did not intend for non-willful violations to be penalized on a per-account basis. Responding to the dissent, the majority was also not persuaded that the failure to penalize non-willful violations on a per-account basis would cut against the BSA’s objective to identify criminal and terrorist activity, querying, “Are we to imagine that drug cartels and terrorists often make innocent mistakes when filing their FBARs?”

As further evidence weighing against the government’s argument, the Court identified several examples of government-issued guidance that stated that a failure to file an FBAR came with a maximum penalty of $10,000. Finally, the Court invoked the “rule of lenity,” a principle that requires courts to strictly construe penalty statutes in favor of taxpayers, succinctly concluding that, “In these circumstances, the rule of lenity, not to mention a dose of common sense, favors a strict construction [against the government].”

The Court’s holding in Bittner grants welcome relief to taxpayers subject to FBAR filing requirements. A burdensome reporting scheme, coupled with a notable up-tick in U.S. citizens moving overseas, has created plenty of opportunities for taxpayers to commit non-willful violations. It will be interesting to see if Bittner emboldens future challenges to draconian penalties imposed by government, brought by taxpayers similarly seeking leniency and a dose of common sense.