FTC Lowers Thresholds for HSR Filings and Interlocking Directorates
On January 19, 2010, the Federal Trade Commission (FTC) announced a three-percent reduction in the jurisdictional thresholds for pre-merger notification filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”) and for interlocking directorate calculations under Section 8 of the Clayton Act. Since 2005, the HSR Act thresholds have been indexed annually by the FTC to reflect changes in U.S. gross national product.
The HSR Act requires companies (or private investors) contemplating mergers or acquisitions of voting securities or assets that meet or exceed certain monetary thresholds to file notification forms with the FTC and DOJ, and to wait a designated period of time before consummating the transaction. For transactions closing on or after February 22, 2010, parties generally will need to comply with the HSR pre-merger notification and waiting period requirements if the following revised thresholds are met and no exemptions apply:
1. The size of the transaction is in excess of $253.7 million;
2. (a) The size of the transaction is in excess of $63.4 million, (b) the total assets or annual net sales of one party to the transaction equal $126.9 million or more, and (c) the total assets or annual net sales of the other party to the transaction equal $12.7 million or more.
New Interlocking Directorates Thresholds
When the FTC revised the HSR thresholds, it also announced the annual adjustment to the test for interlocking directorates under Section 8 of the Clayton Act. Like the HSR thresholds, the interlocking directorates threshold was reduced as a result of the current economic downturn. Section 8 of the Clayton Act prohibits, with certain exceptions, one person from serving as a director or officer of two competing corporations. Under the adjusted thresholds, which were effective January 21, 2010, a person may not serve as a director or officer of two competing corporations if each corporation has capital, surplus and undivided profits aggregating more than $25,841,000, and if one or more of the companies has competitive sales above $2,584,100.
Additional details are provided in the “Mergers & Acquisitions/Antitrust Advisory.”
Patent False Marking Executive Summary
Within the last two months, private plaintiffs have filed more than four dozen complaints in federal courts across the United States that accuse patentees and retailers of violating the false marking statute, 35 U.S.C. Section 292. These complaints allege that the defendants marked their products or advertisements with patents that either did not cover the product or that had expired. They claim that the marking was done with intent to deceive the public, such that a fine of up to $500 per offense should be imposed. These plaintiffs appear to be motivated by the opportunity afforded by Section 292, to retain one-half of any fine that is awarded (the other half going to the federal government).
In late 2009, the Federal Circuit’s opinion in The Forest Group, Inc. v. Bon Tool Co. 1 held that each act of false marking is a separate offense, so that the penalty should be imposed based on the number of mismarked items. Another recent case, Pequignot v. Solo Cup ２, determined that products become “unpatented” when the patent covering them expires. Because a false marking claim against a large number of items bearing an expired or inapplicable patent designation raises the prospect of a large aggregate fine, these cases have the potential to be lucrative to plaintiffs and expensive to defendants.
As noted above, in order to prevail, a plaintiff must show that any false marking was done with intent to deceive the public. It is not yet clear whether any plaintiffs will be able to meet this burden, or even what evidence will be determinative in connection with the intent element.
Additional details are provided in the following IP advisories.
1. Recent Cases Affect Risk of False Patent Marking Liability
2. Update: False Patent Marking Complaints Skyrocketing
For more information:
Michael S. Connor
C. Augustine Rakow
1 No. 2009-1044, 2009 WL 5064353 (Fed. Cir., Dec. 28, 2009).
２ 92 U.S.P.Q.2d 1495 (E.D. Va., Aug. 25, 2009).
U.S. Trade Initiatives 2010
Trade policy initiatives in 2010 will have a direct impact on the U.S.-Japan economic and trade relationship. The Obama administration has signaled a very different posture on trade than the previous Bush Administration. During much of the Bush administration, the United States concentrated its resources to open new markets and to negotiate free trade agreements. It also looked to finish a major multilateral negotiation through the WTO. Although mentioned in this year’s State of the Union address, the free trade agreements negotiated under the Bush administration still languish and movement towards implementation seems far off.
In contrast to the Bush administration, the Obama administration looks to promote trade by enforcing existing trade agreements and commitments by using bilateral and WTO means. Japan must remain vigilant as it may be the target of several enforcement actions by the Obama administration.
In the import and export controls areas, the Obama Administration has continued along the lines of the Bush Administration. On the import side, the United States has kept its focus on security. The borders continue to be moved from U.S. shores to the shores of the exporting country. In January, importers began to be required to make Importer Security Filings (ISF) prior to merchandise being exported to the United States. While the full effects of ISF have yet to be experienced, the U.S. government, in promulgating this regulation, predicted increased costs for importers and exporters. These new requirements have the effect of slowing trade and increasing the cost of trade.
On the export side, enforcement of U.S. export controls remains a high priority of the Bureau of Industry and Security of the U.S. Department of Commerce and the Directorate of Defense Trade Controls at the Department of State. Moreover, the Department of Justice continues to criminally prosecute export controls cases with vigor.
Alston & Bird has created an advisory entitled "Trends in International Trade Legal Issues" on things to expect or not to expect in 2010 from the United States on the international trade front.
Service of Process on a Foreign Corporation - Yamaha v. Superior Court
A recent California appellate decision holds that, in California, service on a domestic subsidiary may affect service on a foreign corporation.
California Code of Civil Procedure § 413.10 provides that service of a summons, outside of the United States, is subject to the provisions of the Hague Service Convention (“Convention”). California Corporations Code § 2110, on the other hand, provides that delivery by hand of a copy of any process to the “general manager in this state” of a foreign corporation “shall constitute valid service on the corporation.” Accordingly, in California, if a domestic subsidiary of a foreign corporation is considered to be its “general manger,” service on the domestic subsidiary is valid and the Convention does not apply. This result is consistent with the holding in Volkswagenwerk v. Schlunk (1988) 486 U.S. 694 where the U.S. Supreme Court held that when state law permits service of process on a foreign company via service on the domestic subsidiary, there is no need to serve papers in accord with the Convention.
In Yamaha v. Superior Court (2009) 174 Cal.App.4th 264, plaintiff was injured while riding a vehicle manufactured by Yamaha Motor Co. Ltd. (“Yamaha-Japan”), a Japanese manufacturer. Plaintiff served Yamaha Motor Corp. USA (“Yamaha-USA”), which was Yamaha-Japan’s subsidiary in the United States, based on a theory that Yamaha-USA was Yamaha-Japan’s “general manager in [California].” Yamaha-Japan moved to quash service, arguing that service needed to be made through the Convention. The trial court denied the motion and Yamaha-Japan moved for a writ of mandate. The Fourth Appellate District of the California Court of Appeal denied the petition, holding that because Yamaha-America was the American face of the Japanese company, and handled the sale, distribution and marketing of Yamaha-Japan’s products in the state, it was the “general manager” of Yamaha-Japan in California. Accordingly, the Yamaha Court held that service on Yamaha-USA was valid and that service under the Convention was unnecessary.
The Yamaha opinion ostensibly makes it easier to get foreign defendants into court by providing plaintiffs with a way to avoid the cost and delay involved in serving defendants under the Convention. However, in dicta, the Yamaha Court cautioned that “easy is not necessarily better” because parties that comply with the Convention ultimately may find it easier to enforce their judgments abroad. As such, the Court noted that, despite its ruling, it anticipates that parties will resort to service under the Convention “voluntarily.”
For more information:
Douglas G. Scribner
Joann M. Wakana
This publication by Alston & Bird LLP provides a summary of significant developments to our clients and friends. It is intended to be informational and does not constitute legal advice regarding any specific situation. This material may also be considered attorney advertising under court rules of certain jurisdictions.