Indemnification Clauses Critical to Fighting Patent Trolls

Much has been written about the rise of lawsuits, and threatened lawsuits by so-called patent trolls, also known as “patent assertion entities” or “PAEs.” If your business has not yet been the target of a patent troll, you can count yourself among the fortunate few. The proliferation of these types of claims is so widespread that the Federal Trade Commission has actually instituted an investigation into the business practices of patent assertion entities. According to a White House Report issued on June 4, 2013, PAE lawsuits have jumped 250% since 2011, now accounting for 62% of all infringement cases. As many as 100,000 companies have been threatened by patent trolls just in the last 12 months. Often these cases are based on highly questionable interpretations of highly questionable patents, applying them to technology not imagined at the time that the patent was granted. Rather than bear the cost and risk associated with litigation, businesses faced with these claims often agree to pay license fees to the PAE, further feeding the cycle.

As with many threats to business, the most effective technique for dealing with these claims is to anticipate them during your procurement process. In many instances, a well-negotiated agreement with a vendor can provide you with protection against patent trolls in the form of an indemnification clause requiring the supplier of the product or service that gives rise to the patent claim to defend you. A well-drafted indemnification provision properly allocates risk to the party in the best position to understand and assess the risk of a claim. In addition, the supplier of the product or technology actually has an economic incentive to do battle with a patent troll that its individual customer may lack. Intellectual property indemnification provisions accordingly are a critical component of any agreement.

In our commercial transactional practice, we have long been routinely advising clients on this issue and, by and large, vendors understand the need to stand behind the technology or product that they sell. In the last several months, however, a new development has arisen. A recent agreement reviewed for a client contained a carve-out from the indemnification provision in instances “where Client authorized the implementation of generally applicable and non-site specific technology, know-how, materials or information representing functionality already readily available on the internet to the public or used throughout the industry without a license.” This carve out seems to target the non-practicing entity issue and shift risk associated with patent troll claims back to the client. To the extent that this becomes a trend, you and your advisors will need to continue to be vigilant and to insist on adequate IP indemnifications in your commercial agreements.

Washington Court Rules On Statutory Exclusion For Internet Service, Awards Refund To Online Services Provider

On June 4, 2013, the Washington Superior Court issued a decision that AOL, Inc. is entitled to a multi–million dollar refund of sales tax paid on services that AOL purchased for use in providing Internet access and online services to its members during the period 2002-2006. In response to an appeal by the Washington Department of Revenue from a decision of the Washington Board of Tax Appeal rendered in AOL’s favor, the Superior Court agreed with the arguments made by AOL. The company asserted the services at issue were “internet services” under RCW 82.04.297(3), and thus excluded from the statutory definition of taxable “network telephone service” under RCW 82.04.065(2) in effect during the time period in question. The Washington Department of Revenue had argued that the services AOL purchased were nothing more than transmission services, subject to Washington sales tax. The Court rejected the Department’s arguments, finding that AOL met each and every independent subpart of the exclusion for internet services. Consequently, the Court held that the services were not subject to taxation under the applicable state statute. As a result, the Court concluded that the Board properly awarded AOL a full refund of all amounts paid to the Department.

AOL was represented in the case by Martin Eisenstein and Matt Schaefer of Brann & Isaacson.

RAPID REALTY LEADING "BUSINESS VILLAGE" INITIATIVE

Rapid Realty Townsville invites our business connections, customers and public to the Townsville Trade Show being held at the Heatley Primary School on Fulham Road this Saturday 20th June 2013 at 2pm.

The Townsville Trade Show (TTS) is a compilation of business professionals displaying their services and solutions to clients, customers and acquaintances in a "traditional village" setting. This business village is open to all members of the public.

The TTS is sponsored by Business Network International (BNI) members bringing together essential business services and professionals in real estate, financial planning, loans, accounting, law, construction, insurance, painters, carpenters, electricians, etc. in this relaxing and intimate village environment.

 

With the support of local Members of Parliment, business leaders, existing clients and customers, Rapid Realty is expecting a great launch to this new and innovative way of connecting with the community.

 

"The explosion of social media and mobile technology in a modern community fearful of personal contact on the phone or the traditional door knocking that real estate professionals are used to makes this event unique and non-threatening." Rapid Realty Managing Director said.

 
Rapid Realty Townsville looks forward to seeing our friends on the day. Please register your interest in attending by contacting us via www.rapidrealty.com.au.

Smoking, Bad for You, Bad for Resale Values.

Trade publication REM Online (I read 'em so you don't have to) reports that 87 per cent of Ontario agents and brokers surveyed said that smoking in a house has a negative effect on resale value. Eighty-nine per cent of those surveyed said that houses where people smoke are harder to sell.

The surveyed professionals said smoking could hurt the resale price anywhere from 20 to more than 30 per cent.

It's true. Lingering cigarette smoke is one of the big turn offs when people visit a property, along with cat box smells, stale cooking odors and a lingering smell of dampness.

People notice weird smells first and those smells tend to linger in memory, often unconsciously. 

You can read the REM Online story here.

The Summer of Privacy: With the Government Under Fire, Retailers May Overlook New Rules and Risks

This may one day be known as the Summer of Privacy. From claims that the NSA surreptitiously obtains cellphone (and GPS) information from at least 100,000,000 Americans to the Supreme Court blessing routine collection of DNA evidence from arrestees, it is impossible to avoid almost daily stories on governmental privacy issues. But, don't be fooled by the focus on governmental activity. From advances on the "do not track" front to a vastly expanded federal children's privacy rule going into effect on July 1, 2013, the privacy temperature is rising not just for the government, but for online and multichannel retailers as well.

For someone who has worked in the field of privacy for many years, this summer has involved a much welcome return of focus to the substantial harm that can result from a governmental violations of privacy rights, as opposed to the alleged harms caused by retailers. Unlike the recent privacy case against Michaels Stores in Massachusetts, where the alleged “harm” was the mere receipt of unwanted catalogs, government collection and misuse of private information can lead to dire consequences, ranging from Internal Revenue Service audits to profiling and criminal charges.  Moreover, the privacy issue as it relates to the government is one of constitutional dimensions.  As Justice Brandeis famously (and presciently) said in his dissenting opinion in Olmstead v. U.S., 277 U.S. 438, 478 (1928), the very first wiretapping case heard by the Court, each citizen has “the right to be let alone — the most comprehensive of rights and the right most valued by civilized men. To protect that right, every unjustifiable intrusion by the government upon the privacy of the individual, whatever the means employed, must be deemed a violation of the Fourth Amendment.” Olmstead was ultimately overturned, and Justice Brandeis' famous standard adopted, in Katz v. U.S., 389 U.S. 347 (1967), where the Court found a constitutional “right to be let alone” where a "reasonable expectation of privacy" existed.

Don't Be Fooled.  Even though the media is dominated by stories involving governmental intrusions into our private lives, the government itself remains fixated on pushing “do not track” requirements, with even a Republican FTC Commissioner giving industry what may amount to one last chance to come up with meaningful self-regulation rather than face the “static legislative solution” championed by Democratic FTC Chairwoman Edith Ramirez.  Ramirez recently vowed "to more aggressively regulate Internet companies like Facebook and Google and has called on Congress to pass privacy legislation.” Ironically, the most publicized "do not track" bills of the last few years impacted mostly on smaller online companies, and included gaping loopholes for the likes of Google, Facebook, and Apple.  As a result, every online seller needs to look closely at proposed "do not track" schemes — whether legislative or under voluntary industry standards — and decide whether proactive measures are appropriate, including involvement in industry groups and lobbying.  In all of their various iterations, "do no track" rules could have a considerable negative impact on online and multichannel retailers.

New Children's Privacy Rules.  There are also the new children’s privacy rules that go into effect on July 1, 2013, and which are creating significant compliance issues for many companies. Among other things, the new rule expands the definition of “personal information” to include “persistent identifiers” which can include online user names, cookies, and IP addresses, and the number of web sites that could fall under its requirements may be far larger than under prior law.

Privacy Litigation In Full Bloom.  Finally, litigation over privacy issues continues apace, not only including the now infamous zip code collection class actions, but also actions brought by privacy rights groups against companies like Snapchat.  Snapchat is accused of misleading users by claiming that its messages self-destruct after a fixed period of time.  However, according the Electronic Privacy Information Center, they do not.  This kind of litigation underscores the risks that can result if a company does not accurately describe its privacy-related practices, and reinforces the need to keep a close watch on your business activities to make sure that your privacy policy and other statements to consumers remain accurate.

We will continue to follow developments in privacy as it relates to both merchants and consumers and continue to update our readers in this space.

UPDATE:  The National Journal published a thoughtful and detailed article on June 13, 2013 about what Americans think about privacy, and which institutions they trust most. As the author, Ronald Brownstein explains: "Asked what would do the most to protect people’s personal information on the Internet, just 8 percent picked more government oversight. The biggest group (48 percent) said the key was 'more commitment by companies to not share users’ information with other businesses or government.'"

Affiliate Nexus Law Update: Minnesota and Maine Approve New Statutes, Missouri Governor Vetoes Bill

While the Marketplace Fairness Act sits in committee in Congress awaiting hearings, two more states have enacted affiliate nexus statutes imposing tax on remote sellers. The governor of another state, however, declined to add his state to the list of jurisdictions enacting counterproductive, and arguably unconstitutional, “click through” nexus laws. Below is a quick round up of recent news in Minnesota, Maine, and Missouri:

Last week, Minnesota Governor Mark Dayton signed into law a click-through nexus bill which creates a rebuttable presumption for out-of-state retailers with in-state affiliates and which goes into effect for sales made after June 30, 2013. The new law states that an out-of-state seller is presumed to be soliciting sales in the state if it enters into an agreement with a resident for a commission or other similar consideration for referrals of potential customers, whether by a link of a website or otherwise. The presumption only applies if the seller has at least $10,000 of gross receipts in the 12 month period preceding the calendar quarter in which the sale is made. Sellers can rebut this presumption with proof that the resident did not engage in any solicitation on behalf of the seller that would satisfy the nexus requirement under the Constitution. The same bill also imposes tax on certain specified digital products which previously were exempt from sales tax.

Meanwhile, on June 5, Maine Governor Paul LePage signed into law a bill that creates a rebuttable presumption for out-of-state sellers with affiliates in Maine. Under Maine’s new law, sellers are required to register if they have an affiliate with a substantial physical presence in the state (other than a common carrier) if the affiliate sells similar products under a similar name, maintains a facility to help deliver property or services sold by the seller, shares trademarks with the seller, or provides various services to the seller’s customers. Out-of-state sellers can rebut this presumption by demonstrating that the affiliate’s activities do not help establish or maintain a market in Maine.

Maine’s new law also establishes click-through nexus for out-of-state sellers, similar to the Minnesota bill. As in Minnesota, the seller’s gross receipts must be in excess of $10,000 for the law to apply. Additionally, sellers can rebut the presumption by showing that the seller’s in-state referrer did not engage in any activity “significantly associated with the seller’s ability to establish or maintain the seller’s market” in the preceding 12 months. Proof can include signed, written statements obtained in good faith from referrers that they did not engage in solicitation on behalf of the seller. The Maine law is scheduled to go into effect on September 17, 2013.

Finally, also on June 5, Missouri Governor Jay Nixon vetoed a bill that would have added affiliate nexus and click through nexus provisions to Missouri’s tax code and would have required the Missouri DOR to enter into the Streamlined Sales and Use Tax Agreement. Legislators will have a chance to overturn the veto in September.

As Prices Rise - Buyers Must Be More Wise

Ventura County’s Home Market For June

 

Just as we predicted in January, home prices are rising quickly. We have been hoping for a larger inventory of homes in order to help our buyers, but this is just not happening in much of Ventura County.  Across the USA, home prices are still an average 25 percent lower than at the height of the market in 2007/2008.  This means there are still a large number of people who are upside down on their home values and cannot afford to put their homes on the market quite yet. As a result we simply do not have enough homes to show our prospective home buyers.  

Low inventory and strong demand are fueling double digit price increases. In various California markets we have seen greater than 20 percent price increases over the previous 12 months. According to MLS Listings Incorporated, home prices rose 47 percent in Oakland and 45 percent in Santa Barbara from April’12 to April’13. The Santa Clara County – better known as Silicon Valley -  has seen the median single family home price rise to $795,000. This is near the all time peak of $850,000 set just before the crash.  

Ventura County, especially East Ventura County has experienced very strong growth with a bit more inventory coming to market than earlier this year.  Once a home gets to market, our buyers have to compete with multiple offers from other buyers and investors. Typically we have a 2 or 3 day response time to find a new home, view it, and write an offer before an offer is picked and accepted by the Sellers. Our Current market resembles the 2006 market where people were writing offers on the hood of their car after viewing a home.  

Interest rates have now begun to trend upwards and rose  for the third week in a row. Three weeks ago, they rose from 3.42 to 3.51 for a 30 year fixed. Then the rate went to 3.59 for the week ending May 23rd. We don’t see any near term trend changes here. Home prices are going up and that is inflationary by itself, but our national economy is also improving. A few more jobs and an improving stock market are also contributing to housing demand.  

Just as an aside, your family credit history has a huge impact on your ability to get a home loan. Most people don’t spend enough time reviewing their records for mistakes or for possible identity theft issues. Credit accuracy is a huge concern, and while better than a few years ago, Buyers often find discrepancies on their reports which need to be corrected before the loan process begins. You won’t have time to do this once an offer is on the table competing for the Sellers approval.

The only Federally Sanctioned free credit reporting website is www.AnnualCreditReport.com .  Here you can get a free copy of your report from each of the three major credit reporting agencies each year. According to FindLaw  A Thomson Reuters Business www.FindLaw.com -

22 percent of Americans have never even seen their credit report!  23 percent of 1,000 Americans surveyed said they have had a problem with their credit report – Including incorrect or outdated credit history or incorrect personal information. There were also problems reported with identity theft, and information mixed up with another consumers file! 

Do not overreach yourself to purchase your home. If you are pre-approved for $400,000, don’t just look at $400,000 homes!  If you are competing for a home, you must expect the winning offer will often be at or above the asking price. Your lender will not loan for more than the appraised value of a home. If you are tapped out at $400,000 and the appraised value came in at $390,000 for the home in our example above, you must make up the $10,000 difference between the appraised value and your winning offer with cash.  

Many times in our market the winning offer is above list price and made by an individual who is paying cash anyway.Yes, you can negotiate the difference with the Seller, but the Seller usually just accepts the next best offer. My point is, don’t put yourself in a position where you cannot afford to be the winning offer. Find a home for less. 

Find a home for less. Lower your immediate expectations and consider a less expensive home. Find a home priced low enough that your cash reserves cover the downpayment/good faith deposit, closing costs, home inspection anda little more for you to beat the competition. If you can do all that and be happy with your home of choice, you greatly increase your chances of successfully competing in this Seller’s market. Whatever home you find in Ventura County today will probably be selling for 10 to 20 percent more in within the next six months to a year.  

So what does all this mean if you want to buy a home in Ventura County? Buyers must do more preparation when they are ready to go shopping. Check your credit history, get pre-approved with your lender for an amount that will allow you to subsist, should you be successful with your offer.  Prepare yourself emotionally and financially. Don’t be greedy – be smart.

 

You can win.

Mark Thorngren

 

Like me on facebook at: www.facebook.com/markthorngrenrealtor and check out the latest videos on our national markets and newest mortgage trends. Updated weekly. 

DRE Lic. #01413932

The Marketplace Fairness Act: Are Online Retailers Now Required to Collect and Remit Every States’ Sales Tax Even Though They Do Not Have A Physical Presence?

On May 6, 2013, the U.S. Senate passed the Marketplace Fairness Act (S.743). If enacted into law, the Act would require Internet sellers (as well as catalogers and other direct marketers) to collect and remit the sales and use tax of each state (and any local jurisdictions that assess sales taxes) on all of their remote sales to the state, even if the retailer does not have a physical presence in the state. If adopted, the bill would do away with the nexus/physical presence requirement for mandatory sales tax collection described in Quill v. North Dakota.

Much of the media coverage of the Marketplace Fairness Act gives the impression that the requirement of sales and use tax collection without a physical presence will be effective immediately, now that the Senate has passed the bill. That, of course, is not the case. In order for states to have the power to require sales tax collection by companies without a physical presence, the U.S. House must pass the bill in the same form as did the Senate, and then President Obama must approve the jointly passed legislation.

While President Obama has indicated his support for the Marketplace Fairness Act, there are a number of members of the House who are opposed to the bill. Moreover, unlike the Senate which did not hold any committee hearings prior to voting, the House will hold hearings on the legislation, through the House Judiciary Committee. Importantly, House Judiciary Committee Chairman Bob Goodlatte, a Republican from Virginia, has noted his concern regarding the failure of the Marketplace Fairness Act to address many of the concerns of remote sellers. Speaker Boehner has voiced similar concerns. Thus, it is likely that even if legislation abrogating Quill is adopted by the House ― a possibility given existing bipartisan support ― such a bill will probably not be in the same form as passed the Senate. Moreover, given the significant role played by Rep. Goodlatte, Speaker Boehner, and other members of the House, chances are there will be a substantial delay before adoption of any legislation. Indeed, the House Judiciary Committee has yet to schedule hearings on the bill, and it has been reported that the Committee is drafting its own legislation. The message for any remote seller should be wait and see, at a minimum, before embarking on costly measures to implement sales tax collection in the more than 9000 jurisdictions that impose sales taxes.

It is also important to note that the Marketplace Fairness Act, as passed by the Senate, gives a remote seller some time to implement new tax collection systems. For any state which is a member of the Streamlined Sales and Use Tax Agreement (“SSTA”), the state may only impose tax on remote sellers if it first publishes notice that it intends to exercise its authority under the Act. Once the state publishes notice, the state may not impose the tax until the first day of the calendar quarter that is at least 180 days (or 6 months) after publication. At this writing, there are 22 states that are members of the SSTA. For any state which is not a member of the SSTA, the state may not impose tax on remote sellers unless it adopts legislation enacting the alternative “minimum simplification requirements” spelled out by the Act. Remote sellers will have at least six months from the date of non-SSTA states’ enactment of alternative simplification to beginning collecting tax on their remote sales.

In short, there is a real possibility that the Marketplace Fairness Act will be defeated or modified prior to enactment. Moreover, remote sellers still have time to obtain and develop appropriate collection systems.  Indeed, it may well be premature at this time to begin implementing such systems, particularly since the shape of the legislation may change.

What Were They Thinking?

"If you buy this property, you can put carpets here and here. Also, you can make random heaps of stuff like this and maybe line up a few chairs and a sofa."