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Obviously, when I think of space hacking, I think like a full on James Bond villain. I imagine an evil genius circumventing all Earthly firewalls to manipulate global currencies. I imagine a megalomaniac reprogramming the world’s nuclear arsenal to give themselves full control from their space lair on the dark side of the Moon.
I do not imagine a spurned lover checking in on her spouse’s bank accounts during a bitter divorce. But, of course, our weak and petty species would use the God-like power of space habitation to check in on whether their ex bought a new car. That’s humanity: a species not ready to join the intergalactic community (if there is one) because we are still easily consumed by our own materialistic problems.
Summer Worden, a former Air Force intelligence officer living in Kansas, has been in the midst of a bitter separation and parenting dispute for much of the past year. So she was surprised when she noticed that her estranged spouse still seemed to know things about her spending. Had she bought a car? How could she afford that?
Ms. Worden put her intelligence background to work, asking her bank about the locations of computers that had recently accessed her bank account using her login credentials. The bank got back to her with an answer: One was a computer network registered to the National Aeronautics and Space Administration.
Ms. Worden’s spouse, Anne McClain, was a decorated NASA astronaut on a six-month mission aboard the International Space Station. She was about to be part of NASA’s first all-female spacewalk. But the couple’s domestic troubles on Earth, it seemed, had extended into outer space.
Ms. McClain acknowledged that she had accessed the bank account from space, insisting through a lawyer that she was merely shepherding the couple’s still-intertwined finances. Ms. Worden felt differently. She filed a complaint with the Federal Trade Commission and her family lodged one with NASA’s Office of Inspector General, accusing Ms. McClain of identity theft and improper access to Ms. Worden’s private financial records.
Goddamnit. It’s not even an interesting jurisdictional issue. If McClain had hijacked a Star Destroyer and laid waste to Worden’s new Camry from space, like that would at least be a thing. Does GEICO cover that or do death beams from low Earth orbit constitute an act of God? This is just boring-ass alleged invasion of privacy. It doesn’t matter that McClain is accused of doing it from space, you could get busted for invasion of privacy is you do it from Phuket, once you are back in U.S. jurisdiction.
The Times does raise a potential issue with discovery, because it’s likely that NASA’s email protocols on the International Space Station are subject to highly classified security that far surpass the kinds of protections your bank offers you for online banking. But even there, I mean this case is not what a kid has in mind when she dreams of “space discovery.”
We’ll get there. More people are going into space, and that means more stupid things will happen in space, and eventually something will happen that will be both interesting and totally illegal, but for the fact that it happen in space.
NASA Astronaut Anne McClain Accused by Spouse of Crime in Space [New York Times]
Elie Mystal is the Executive Editor of Above the Law and a contributor at The Nation. He can be reached @ElieNYC on Twitter, or at elie@abovethelaw.com. He will resist.
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Pardon the delay, but we have to talk about this tweet from last Friday:
Oh, David.
We get that this Tesla short position has been your white whale, but even Captain Ahab didn’t demand that Moby Dick just quit. There are rules to a crusade, homeboy.
You can’t short a religion and then win by making its founder abdicate. That’s neither cool nor fun. Even the Medicis killed a pope or two. Bill Ackman didn’t get free of his Herbalife itch by getting everyone to stop selling bullshit shakes. He quit. And he’s never been happier.
Plus, do you really want Elon to hand you the W at this point? Is that really how you want this to end? Come on, David, roll up your sleeves and end this thing.
And then go take care of the one unfixable mess that is your true destiny: Buy The Mets.
Bryan Schmitt, associate corporate counsel and director of contracts for Manhattan Associates, says “he saw a man on the side of the road next to a trash can making “a throwing motion with his arm” before he ‘saw a white object’ strike his car.” At that point, Schmitt told investigators that he confronted the guy who threw a trash can and in the process of swerving to avoid that, the guy was struck — receiving injuries that led to his death.
Prosecutors charged Schmitt with murder, felony murder and aggravated assault because the rest of the evidence suggests to law enforcement that Schmitt was much more direct in using his car as a weapon:
However, surveillance footage and witness statements contradicted Schmitt’s account, the criminal complaint states. One neighbor, a nurse, allegedly witnessed Schmitt attempting to pull Jahangard’s body from underneath his car and told him to stop and wait for paramedics to arrive, stating that Schmitt “ran him over” rather than knocked him down, according to WSB-TV.
In either case, it’s a reminder that a car is a deadly weapon even if law professors get to joke about vehicular homicide.
Atlanta lawyer killed victim with Mercedes after car was struck with golf ball, prosecutors say [ABC News]
Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.
Anyone who has spent any time in Biglaw is familiar with the concept of firm-wide events. There’s the requisite bonding/networking/making a good impression on newbies and you’re supposed to leave the event feeling some degree of warm fuzzies for the place where you spend the overwhelming majority of your waking hours. What you aren’t supposed to feel is that you’ve been hoodwinked into forking over a chunk of your valuable vacation time.
Unfortunately for the associates at Quinn Emanuel, the warm fuzzies were hard to come by this year.
Above the Law has been tipped off by firm insiders about a massive snafu following the firm’s annual hike. According to our tipsters, in previous years the firm has allowed associates that attend the event to bill the time to a non-billable client number. When associates attempted to repeat the practice this year however, they were told that time should, instead, be charged to their vacation time. Yup, that’s right, after the fact they were told attending a firm event was really their vacation because attendance wasn’t mandatory.
Associates at Quinn were just as shocked as you are. And, to be clear, vacation time at Quinn is not unlimited, so this is a far cry from a “no harm, no foul” situation.
This policy, in a word, stinks. We know, as a profession, that the legal world has issues with mental health and wellness. The right response for a firm to the stresses of Biglaw life is not to take away the limited time attorneys have to unwind and (hopefully) unplug.
We reached out to the firm and they defended the policy since it subsidizes the travel costs associated with the trip:
The firm sponsors an annual hike. It’s always voluntary, but always very popular. In recent years, the hike has been in Switzerland, Japan, Iceland and Italy. Many associates and partners sign up. The firm heavily subsidizes the cost for associates. This year the hike took place in Interlaken, Switzerland. We hiked the “Faulhornweg” trail through some of the most spectacular scenery in the world. The final night of the trip, there was a celebratory group dinner held at the Victoria Jungfrau Les Colonnades & Atrium. Over 250 attorneys attended the hike, which is the biggest turnout the firm has seen. It’s an opportunity to travel, see some of the most beautiful settings in the world, and enjoy time outside the office with one’s colleagues. It is properly treated as vacation time though some associates have recorded it as recruiting time because some summer associates also attend.
While international travel might be a nice perk for associates, it isn’t the same as an actual vacation. However nice the firm trip may be, it is still part of the job. Sharing a drink with your boss does not have the same relaxing properties as not responding to your boss’ emails because you’re lying on a beach somewhere. And changing the policy about how the time gets billed after the associates get home? Well, that just really stinks.
Kathryn Rubino is a Senior Editor at Above the Law, and host of The Jabot podcast. AtL tipsters are the best, so please connect with her. Feel free to email her with any tips, questions, or comments and follow her on Twitter (@Kathryn1).
When meeting our law firm clients, or prospective clients, I’m often asked which team or practice group would benefit most from HighQ. My answer is always the same — all of them! HighQ is an intelligent collaboration and client engagement platform, with the relevant word here being platform.
Although lawyers might not want to admit it (they’re a fiercely competitive bunch), the fundamental anatomy of most legal matters looks the same — even though the precise process, type of law, and even the jurisdiction may differ.
The HighQ platform delivers core features and solutions that are applicable across all teams and practice groups, so no matter the type of legal work, HighQ has the essential tools needed to optimize the management, collaboration and delivery for that matter.
Law is a team sport. Yes, there are some big personalities, but all legal matters involve a team of people with differing roles and responsibilities working towards a common goal.
Team collaboration is both internal (between paralegals, legal project managers, lawyers, support staff and so on) and external (with other key project stakeholders such as clients, banks, accountants, surveyors, foreign counsel, expert witnesses and so on). All of these project participants will benefit from effective communication and collaboration tools, enabling them to break down silos and improve transparency and knowledge sharing.
Thankfully for our clients, HighQ is the engine room of collaboration; it allows matter teams to share files, work together on documents, send private messages, post updates in a blog, manage team tasks, share project calendars, and connect using social collaboration tools. Unfortunately, legal project teams still rely on email for matter collaboration, which is often a problem as information needs to be consolidated in one place to make it accessible by the entire project team. HighQ solves this issue by providing a central workspace for distributed teams to work.
Efficient collaboration also requires teams to connect regardless of their location and time zone. All you need is a web browser to access the HighQ platform, and it’s also accessible on mobile devices, so team members can access files, information and collaborate on the go from anywhere in the world. Easy!
There’s no escaping that all legal matters involve documents and files of some kind — engagement letters, KYC documents, contracts, advice notes, exhibits, pleadings, witness statements, reports…the list goes on. As do the document management use cases — data rooms, M&A documents lists, conditions precedent trackers, e-bundles and more. However, how often is there a central online workspace where the whole project team can access and manage key documents, as well as collaborate on those documents? Not very often.
Unfortunately, document management, sharing and collaboration across project teams is still done via email in conjunction with Microsoft Word or Excel indexes. Finding the latest version of a document involves searching through an email chain. Yes, some team members will save them to a document management system, but where is the “project DMS” for all team members to use?
This is where HighQ comes into its own. Our platform allows teams to not only centrally store and securely manage matter documents with indexing, version control, custom file metadata and DMS integrations, but also collaborate around those documents with annotations, comments and tasks. Creating and editing documents in either Microsoft Office or Office Online and saving them to HighQ is also easy — there’s even simultaneous editing for collaborative document drafting.
Document access and permissions can be set right down to the file level, and the HighQ platform has full digital rights management and activity reporting so you can control and monitor who does what in the platform. If that wasn’t enough, HighQ integrates with DocuSign and Adobe Sign for electronic document execution, as well as comparison tools for document redlines.
HighQ also has an Outlook integration and a dedicated HighQ Drive desktop and mobile app, which let you work with documents online or offline without having to directly access the HighQ platform. So, whatever you might want to do with a document during a legal matter, HighQ has it covered.
Law can be immensely complex, and a lawyer’s job is to help their client navigate this complexity in order to obtain the best possible outcome. The most successful law firms are therefore those with the best map and guidebook, in the shape of legal experience and know-how.
However, law firms aren’t always good at capturing know-how, so they tend to have a shifting body of knowledge that depends on the makeup of their lawyers at any point in time. The challenge for law firms is to capture and centralize their collective intelligence so that the quality of their know-how develops and improves over time. A firm that masters this process, and makes quality knowledge available to all its lawyers at the point they need it, will enable better decision-making and improved outcomes for its clients.
HighQ provides several ways for firms to unlock and capture legal knowledge and share it with other lawyers who need it. This might involve storing and managing precedent documents through the Files module, collaborating with colleagues on know-how topics within the Wiki, or sharing current awareness through the Blog.
The social collaboration tools within the HighQ platform also mean that it can be used to share knowledge and opinions in real time, as well as crowdsource knowledge and guidance. For example, just post a question to your colleagues to tap into their knowledge and collaboratively identify the best course of action. HighQ can become the hive mind of your law firm!
All legal matters, except for perhaps the most unique and exceptional, have a standard process and workflow. Whether it’s a contract negotiation, litigation, stock market listing, competition clearance or property financing, they all involve a series of standard steps and actions. Sure, each process will have its own intricacies and complexities, but the foundational process of a specific matter type will be consistent.
Establishing and following a standard process is essential for law firms—it ensures quality and consistency of delivery and helps to mitigate the risk of error (something firms are keen to avoid at all costs).
However, an automated approach to legal process carries even more benefit — it helps reduce manual intervention in the process, frees up lawyer time to focus on higher value tasks, enables downstream allocation of work, and speeds cycle times. It also produces data and metrics that allow law firms to identify opportunities for process reengineering and improvement.
The HighQ platform contains tools that enable standard legal processes to be systematized. With the iSheets module, you can create process checklists to help walk project teams through a project framework. These checklists can be made “smart” through the use of conditional logic. Notifications can be built into the checklists so that team members are regularly notified about process status and risk.
However, workflow is more than tracking progress through checklists, which is why we are working hard on process automation capabilities. Our workflow engine will enable users to create a fully automated legal process by identifying a series of triggers and actions — if this, then that. For example, if a user uploads a file to Folder X, then the system creates a new task in List Y and adds an event to category Z. This functionality means that process automation can be “baked” into a HighQ site, enabling the automation itself to be seamless and discreet. This is going to be a game changer for efficient legal process delivery!
Legal project management (LPM) is not a new discipline, but it remains a fairly nebulous concept for many lawyers. Several law firms now have LPM functions or methodologies. However, despite clients crying out for greater efficiency, consistency and transparency in legal projects, many firms haven’t found a way to institutionalize a best practice approach to the management and delivery of legal matters.
Whenever I talk to our law firm and corporate clients about LPM, one thing is clear — they all believe technology has a big role to play in helping to drive adoption of project management techniques in legal. When I was a lawyer, I was involved in a project to create a LPM methodology for transactional work. What was interesting was that when we distilled it down, LPM was actually quite straightforward.
It’s about efficient engagement, planning, delivery and closure of projects. The tools involved are also fairly simple — project plans, timelines, workstream and milestone trackers, task lists, status updates, integration checklists and so on. It’s all about establishing a plan, and then delivering against that plan whilst at the same time providing full transparency for the client.
LPM is a core focus for HighQ. Our platform is built for agile project management so that legal matters can delivered on time and on budget. A core element of LPM is transparency, and HighQ provides the online workspace to consolidate project content in one place and make it accessible to everyone (lawyers, clients and other advisers).
Our Tasks module helps keep team activity organized and aligned. You can assign tasks and track due dates and statuses so that everyone has a clear overview of project progress. The new timeline view of tasks allows you to view activity across days, weeks and months, giving project teams a view of the complete project schedule. Our Events module can also be used to track key milestones and meetings, as well as manage team availability.
The iSheets module is perfect for systematizing traditional Microsoft Excel project trackers, including budget, WIP and billing information, project portfolios, key issues lists and workstream reports, as well as project-specific trackers such as due diligence issues for M&A, negotiation points for commercial contracting and witness evidence for litigation. Another key component of LPM is simple transparent reporting, and this can be achieved by using our dashboard builder. Take data from both the iSheets and Tasks modules and visualize it in graphs and charts in the Home module.
With all of this awesome functionality, there’s no doubt that HighQ enables a smarter way to manage matters, and is the go-to platform for efficient legal project management.
Lawyers help their clients mitigate and manage risk as well as achieve value, and they do this in many different ways, for example, negotiating and drafting contracts and agreements, documenting arguments and defenses, providing advocacy, performing due diligence, sharing legal know-how and current awareness, reviewing information and advising on the best course of action, and so on.
The HighQ platform supports and optimizes the delivery of legal services in several different ways. Taking a literal approach, the HighQ platform enables secure file sharing for the delivery of legal documents to clients, with tools to enable online collaboration around, and execution of, that document.
However, HighQ offers further scope for transformation. Our document automation functionality in iSheets can help lawyers easily generate agreements and reports. But it’s not limited to lawyers; more forward-thinking law firms are opening up the platform and document automation directly to their clients—creating legal self-service portals for document generation as well as advice and access to legal playbooks.
These portals can be developed into full client relationship portals that contain client engagement documents, matter management reporting, financial information, know-how and e-learning, event diaries, regulatory and compliance trackers, lawyer directories and help-desks.
Last but not least, our new AI Hub allows lawyers to leverage AI tools, including our new HighQ AI service, directly in the platform. This helps lawyers with the heavy lifting of contract categorization, review and analysis. It also cuts down the chargeable hours, delivering work to clients more efficiently and cost-effectively.
When you sift through the mystique of law, you quickly realize that there is a clear and consistent framework for legal service delivery across all legal matters. With clients expecting more efficiency, transparency and value from their lawyers, it’s time for law firms to reengineer their legal service delivery into a real competitive advantage. The starting point is to health check the anatomy of your legal matters, diagnose the source of the pain and discomfort, and then seek treatment.
In any event, the prescription is clear — one dose of the HighQ platform to transform and optimize your legal service delivery. Your firm will be fighting fit in no time!
Rob is an experienced legal technology and innovation leader specialising in the design and creation of digital solutions to empower corporate legal teams and transform the delivery of legal services. As a former M&A and private equity lawyer for some of the UK’s leading law firms, Rob is passionate about the use of technology to create smarter legal service delivery methods as well as innovative new legal products.
Rob leads the corporate legal solutions team at HighQ. Before joining HighQ in 2017 he was group innovation manager for Pinsent Masons as part of their award-winning SmartDelivery team. Rob is an active member of the LegalTech community, regularly contributing for organisations and publications such as ACC, CLOC, The Lawyer, Bloomberg, Corporate Counsel and Law360.
In the future, when the computerized philosopher-king Ray Dalio has imposed order and principles on the universe, backed by his invincible force of RayBots, people from the world over will come to the Cave of Contemplation, deep in the Enchanted Forest of Westport, Conn., to ask themselves if they’ve earned the right to an opinion whilst gazing upon statues of the great paramount exemplars of humanity: Dalio himself, of course. The disappointed but now-venerated Paul Volcker. Oh, and the Fab Four.
Dalio was in his early twenties when he was inspired by the famous foursome to take up a new skill: Meditation.
Today, half a century on, it remains a constant of his daily routine, and one to which he attributes his greatest career wins.
“It was life changing,” Dalio, now 70, told CNBC’s Christine Tan in a recent episode of “Managing Asia….”
“It’s like if you take a hot shower and the ideas come to you,” he said. “That ability to reflect well and to be above those things that you’re operating so you can navigate them well is a real great thing to have.”
It appears that Donald Trump really wants a centrally planned economy, where the government directs companies what to buy, what to sell, and what to build. Like the one China has. Sure, that’s, you know, “socialism,” but Republicans are craven hypocrites who support Trump for his bigoted ideology and deep misogyny. Economic theories were always just a mask for these guys, and Trump’s continued Republican support despite his unhinged economic ravings proves the point.
But can Trump have a centrally planned economy? Last week, Trump tweeted: “Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.” that drew predictable derision from literate non-Republicans. Later in the week, Trump tweeted something about the International Emergency Economic Powers Act, which sent lawyers (including me) scrambling to figure out how he derived authoritarian central economic planning from a provision of American Law.
It’s always a risk to apply normal standards of judicial interpretation to the Republican Supreme Court, but let’s try to break this down.
The International Emergency Economic Powers Act (IEEPA) is a 1977 law designed to give the President broad powers to direct economic levers against our foreign enemies in times of crisis. It’s important to understand that the IEEPA was written to constrain the President’s use of these powers to “emergencies.” Previously, the President’s powers to control the private economy were regulated by the Trading With The Enemies Act of 1917 (TWEA). That thing gave the President broad powers in times of war, but had been interpreted to be applicable in peace time, as well. The “Cuban Embargo” is enforced mainly through the Trading with the Enemy Act, for instance.
Obviously, we’re not at “war” with Cuba, we just don’t like them. By the late 70’s it became clear that the TWEA was being used by Presidents because they didn’t like this or that regime, as opposed to only during the case of open, violent hostilities. The IEEPA was meant to constrain that use of economic authoritarianism to “emergencies” instead of mere disagreement, while still giving the President leverage to punish enemies who we were nonetheless “at peace” with.
If an emergency exists, the IEEPA gives the President extraordinary economic powers.
(1) At the times and to the extent specified in section 1701 of this title, the President may, under such regulations as he may prescribe, by means of instructions, licenses, or otherwise—
(A) investigate, regulate, or prohibit—
(i) any transactions in foreign exchange,
(ii) transfers of credit or payments between, by, through, or to any banking institution, to the extent that such transfers or payments involve any interest of any foreign country or a national thereof,
(iii) the importing or exporting of currency or securities,
by any person, or with respect to any property, subject to the jurisdiction of the United States;
(B) investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest by any person, or with respect to any property, subject to the jurisdiction of the United States;
In one of his most famous opinions, Dames & Moore v. Regan, former Chief Justice William Rehnquist upheld this incredible grant of power. The IEEPA is expansive and it allows the President nearly limitless control over the economy, should an emergency be declared.
The question is not whether the President can “hereby order” private American companies to stop doing business in China. He almost certainly can. The issue is whether the President can will an international economic emergency into existence based only on his say so.
We’ve asked that question before. Trump’s purported “use” of the National Emergencies Act to build his Wall presents the same problem. No emergency exists, but if Trump says one does, is that enough? Here, the IEEPA specifies:
The authorities granted to the President by section 1702 of this title may only be exercised to deal with an unusual and extraordinary threat with respect to which a national emergency has been declared for purposes of this chapter and may not be exercised for any other purpose.
Again, the IEEPA was written to STOP Presidents from using draconian economic powers to punish enemies by Presidential whim. China existing is not “unusual” or “extraordinary.” Trump picking a fight with China is unusually and extraordinarily stupid, but that’s not what this law means when it contemplates an international emergency. The Rehnquist opinion authorizing such use of economic powers was written in the context of the Iran hostage crisis. The IEEPA is used, frequently, to ban companies and non-profits from doing business with suspected state-sponsors of terrorism. Trump trying to get China to do what Trump wants is not an “emergency” by any reasonable reading of this statute.
Will it matter to Roberts? This is a guy who allowed Trump’s Muslim ban. This is a Court which might in fact allow Trump to steal money not authorized by Congress to build his bigoted metaphor across the Southern Border, under the guise of a “national emergency.” If you trust this Supreme Court to have more fealty to the law than to Trump, you simply haven’t been paying attention.
I don’t want to sound like George Will, but this is all Congress’s fault. Congress has, for decades and decades, been ceding its power to the executive branch, because it does not want to make difficult, politically charged decisions about international hot spots. You see it here, you see it with the National Emergencies Act, you see it with the Patriot Act. Congress, at an institutional level, would rather let the President do what he wants, then bitch and moan about it later when it’s politically convenient, instead of using its Article I powers to STOP the President during a politically charged moment.
Congress should not give these “emergency” powers to the President, without clearly defining “emergency,” without automatic sunset provisions, and without the escape hatch of a legislative veto via simple majority. To that last point, we should also amend the Constitution to overrule the Supreme Court’s disastrous decision in INS v. Chadha, so that the legislative veto is once again a thing.
If we learn one thing from the Trump Era… well, that one thing should be “electing a racist con-man because he promises to be racist has consequences.” And then we should learn that Republicans can never be trusted because their entire political philosophy is a mere dog-whistle for the racism of their base. But if we learn THREE things from the Trump Era, let the third thing be to stop writing laws that require “good faith” on the part of the President of the United States. We are a weak and stupid people. Now that Trump has opened the Pandora’s Box on these powers, he will not be the last to use them.
Elie Mystal is the Executive Editor of Above the Law and a contributor at The Nation. He can be reached @ElieNYC on Twitter, or at elie@abovethelaw.com. He will resist.
They say that the third time is the charm — I don’t know how applicable that phrase may be in most circumstances, but in this case, it may be right on point. I previously wrote on the Supreme Court of the United States (SCOTUS) opinion in Mission Products Holdings v. Tempnology here and here. I recently had the great pleasure of being invited to participate on a panel at the American College of Bankruptcy 10th Circuit Educational Program in Santa Fe, NM to give my intellectual property perspectives on the Mission Products Holdings ruling. Specifically, I spoke along with Bob Keach, outside counsel for Mission Products Holdings (as well as a Fellow of the American College of Bankruptcy and Past-President of the American Bankruptcy Institute) and the Hon. Robert H. Jacobvitz, Chief Judge of the US Bankruptcy Court for the District of New Mexico, all moderated by Paul Fish (also a Fellow of the American College of Bankruptcy). Needless to say, this was an exceptional group of bankruptcy lawyers and I am honored to have been a part of this panel to speak “IP” on this topic. More importantly, I left with some final takeaways from the Mission Products Holdings case that are worth some additional thought.
My previous writings go through the background of Mission Products Holdings, so I won’t rehash them here. That said, a quick summary won’t hurt: As a direct result of the 4th Circuit’s ruling in Lubrizol Enterprises, Inc. v. Richmond Metal Finishers, Inc. (4th Cir. 1985), Congress enacted Section 365(n) of the Bankruptcy Code to clarify that, “the rights of an intellectual property licensee to use the licensed property cannot be unilaterally cut off as a result of the rejection of the license pursuant to section 365 in the event of the licensor’s bankruptcy.” This has the effect of permitting a licensee to elect to retain the rights under the license agreement as existed prior to the initiation of bankruptcy proceedings for the remainder of the license term after a rejection of the license agreement by the trustee/debtor-in-possession. See 11. U.S.C. Section 365(n)(1)(B). The problem: Trademarks are not listed as “intellectual property” under the Bankruptcy Code, due to the unique issues presented by the nature of trademarks themselves, such as the requirement of the trademark owner to maintain quality control over goods/services under the trademark provided by a licensee. Failure to maintain such quality control can result in a “naked license” because the product or service would no longer represent the level of quality expected of such product or service under such trademark(s). The effect: invalidation of the license and, in the worst cases, loss of trademark rights (and any attendant trademark registrations). Therefore, permitting a licensee to continue use post-rejection would foreseeably require the licensor to continue its quality control obligations on a license it rejected.
Thankfully, this issue was granted certiorari and clarified by SCOTUS. Addressing a plain reading of Section 365(g), a SCOTUS majority led by Justice Kagan held that “a debtor’s rejection of an executory contract in bankruptcy has the same effect as a breach outside bankruptcy…[and] cannot rescind rights that the contract previously granted.” As a result, the SCOTUS majority held “that construction of Section 365 means that the debtor-licensor’s rejection cannot revoke the trademark license.” By all accounts, this plain meaning approach to Section 365 (along with an excellent analysis) confirmed that Section 365(n) supplements (rather than supplants) Section 365(g). As a result, trademark licensees have some clarity where the licensor enters bankruptcy and the debtor-in-possession or trustee chooses to reject the license. As a panel, we all agreed that such a direct approach to statutory construction was refreshing and that SCOTUS got this one right. That said, open issues (beyond those I previously addressed) definitely remain that should be considered carefully by counsel. Here are a few of the most prominent ones we discussed with respect to trademarks:
These are just some of the issues discussed, and I am sure that some (or all) of them will eventually be addressed through the courts. In the meantime, trademark holders and licensees will approach negotiations with a keener eye towards quality control and termination provisions. Further, purchasers (such as, for example, brand aggregators) would be wise to perform extra due diligence when reviewing company portfolios to ensure that any trademark licenses will not create impediments to value and intended monetization. Without question, the Mission Products Holdings case has left an indelible mark upon the law involving trademark licenses post-rejection — just make sure it doesn’t leave a big mark on the trademark assets of your company (or client) as well.
Tom Kulik is an Intellectual Property & Information Technology Partner at the Dallas-based law firm of Scheef & Stone, LLP. In private practice for over 20 years, Tom is a sought-after technology lawyer who uses his industry experience as a former computer systems engineer to creatively counsel and help his clients navigate the complexities of law and technology in their business. News outlets reach out to Tom for his insight, and he has been quoted by national media organizations. Get in touch with Tom on Twitter (@LegalIntangibls) or Facebook (www.facebook.com/technologylawyer), or contact him directly at tom.kulik@solidcounsel.com.