March 2010 Client Alerts

April 1, 2010

Authored by: Jeannie Osborne

Third Circuit Rules Secured Lender Not Entitled to Credit Bid at Sale of Collateral Under a Cramdown Plan

On March 22, 2010, the Third Circuit in a split decision joined the Fifth Circuit in holding that a debtor may sell its assets under a plan of reorganization without permitting a secured lender to credit bid by offsetting its secured claim against the purchase price.  This decision may have major implications for secured lenders and may lead to more contested confirmation hearings and litigation over valuation.  For more information, please read the Client Alert published by the Bankruptcy, Restructuring and Creditors’ Rights Client Service Group on March 30, 2010.

Summary of the Federal Reserve Board’s Final Gift Card Rules

On March 23, 2010, the Federal Reserve Board issued its final rule, a summary and analysis of the final rule, and the official staff interpretation of the final rule in connection with Title IV of the CARD Act.  The Final Rules are comparable to the proposed rules that were issued in November, and follow the gift card related provisions set forth in the CARD Act.  For a brief summary of key provisions of the Rules, please read the Client Alert published by the Financial Institutions Client Service Group on March 29, 2010.

Proposed Amendments to the Federal Sentencing Guidelines Emphasize the Importance of Having an Effective and Compliant Records Management Program – What Every Business Needs to Know

In January, the United States Sentencing Commission published proposed changes to the Federal Sentencing Guidelines.  Public hearings on the proposed amendments were held in March.  The Commissioners are to take final action on the proposals in April.  The amendments will be effective in November, unless Congress intervenes.  A major focus of the proposed amendments is on the document retention component of records management.  For a discussion of the proposed changes, please read the Client Alert published by the Records Management Team on March 24, 2010.

“HIRE Act” Offers Tax Incentives to Hire and Retain Unemployed Workers

The “Hiring Incentives to Restore Employment Act of 2010” (the “HIRE Act”), signed into law by the President on March 18, 2010, provides several tax incentives to businesses to hire and retain unemployed workers.  For more information, please read the Client Alert published by the Tax Advice & Controversy Client Service Group on March 25, 2010.

New Law Expands US Tax Reporting and Anti-Abuse Provisions Designed to Discourage U.S. Persons from Hiding Income and Assets in Foreign Countries

On March 18, 2010, President Obama signed into law the Hiring Incentive To Restore Employment Act (the “Hire Act”).  The Hire Act contains provisions which impose a withholding tax on payments to “non-compliant foreign financial institutions” and additional reporting requirements for U. S. Taxpayers and Foreign Financial Institutions.  For more information, please read the Client Alert published by the Tax Advice & Controversy Client Service Group on March 23, 2010.

RiskMetrics Introduces Governance Risk Indicators (“GRId”), a New Tool to Measure Corporate Governance

On March 10, 2010, RiskMetrics Group, formerly known as Institutional Shareholder Services or ISS, published its new scoring system to measure corporate governance practices, which it has named “Governance Risk Inducators,” or GRId.  In the 188-page publication, RiskMetrics sets forth the questions, scoring and weighting methodology for GRId, including breakdowns by market.  For more information  on the new tool, please read the Client Bulletin published by the Corporate Finance and Securities Client Service Group on March 12, 2010.

COBRA Subsidy Extended and Expanded

On March 2, 2010, President Obama signed the “Temporary Extension Act of 2010,” extending the eligibility period for the COBRA premium subsidy for another month and expanding the group of individuals who may be eligible for the subsidy, among other changes.  For more information on the new law, please read the Client Bulletin published by the Employee Benefits & Executive Compensation Client Service Group on March 4, 2010.

U.S. Authorizes Internet-Related Exports to Iran, Sudan and Cuba

The U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) has issued new regulations authorizing the export to Iran, Sudan and Cuba of services “incident to the exchange of personal communications over the Internet, such as instant messaging, chat and e-mail, social networking, sharing of photos and movies, web browsing and blogging” so long as such services are “publicly available at no cost to the user.”  For more information, please read the International Regulatory Bulletin published by the International Trade Client Service Group on March 9, 2010.

The Federal Circuit confirms that 35 USC Section 112, Par. 1 Includes Separate Written Description & Enablement Requirements

In an en banc decision, the Federal Circuit confirmed that 35 U.S.C. Section 112, Par. 1 includes a “written description” requirement that is separate and apart from the “enablement” requirement.  In Ariad Pharmaceuticals, Inc., et al. v. Eli Lilly & Co., the Federal Circuit further held there is no exception for original claims.  For more information regarding this decision, please read the Client Bulletin published by the Intellectual Property Client Service Group on March 24, 2010.

Richardson v. Stanley Works, Inc. – The Federal Circuit concludes that, where a patent design includes both functional and ornamental elements, the claim scope is limited to the ornamental aspects.

In Richardson v. Stanley Works, Inc., Richardson sued tool and hardware maker Stanley, claiming that Stanley’s multi-functional utility bar, know as the “FuBar,” infringed Richardson’s design patent covering his multi-functional tool, the “Stepclaw.”  As part of claim construction, the District Court distinguished the ornamental aspects from the purely functional aspects of Richardson’s design, and held that the ordinary observer, after discounting the functional elements, would not be deceived into thinking that the FuBar tool was the same as the Stepclaw.   For more information regarding the decision, please read the Client Bulletin published by the Intellectual Property Client Service Group on March 15, 2010.

District Court Finds Isolated DNA To Be Unpatentable Subject Matter

In Association for Molecular Pathology, et al. v. United States Patent and Trademark Office, the United States District Court for the Southern District of New York issued an opinion, on partial summary judgment, which invalidated, as non-statutory subject matter, 15 claims covering isolated DNA and diagnostic and screening methods underlying a test used for detecting breast cancer.  The decision, if upheld, could disturb over 30 years of jurisprudence and cast doubt upon the validity of many so-called “gene patents.”  For more information on this opinion, please read the Client Bulletin published by the Intellectual Property Client Service Group on March 30, 2010.

Chamber of Commerce Urges EPA to Reconsider Endangerment Finding

The U.S. Chamber of Commerce is petitioning the EPA to reconsider its finding that greenhouses gases “endanger” public health and welfare.  The determination enables the EPA to move forward with climate change regulations.  “The Chamber believes that the right way to reduce greenhouse gas emissions . . is through bipartisan legislation and comprehensive international agreements,” reads a statement released by the nation’s largest business lobby.  For more information on this and other issues, please read the Bryan Cave Energy Update Issue 31 published March 19, 2010.

House Passes ‘Black Liquor’ Provision,  Prohibits ‘Tall Crude Oil’ Credit

The House voted to prevent paper companies from claiming a biofuel tax credit for two byproducts of the paper production process.  In the first vote, paper companies will not be able to claim the credit for “black liquor,” which the companies burn as fuel to produce paper mills.  As part of the jobs package, the House also voted to exclude “tall crude oil,” which is produced by skimming the top layer off black liquor and treating it with acid.  The byproduct is sold for us in paint and print ink manufacturing.  For more information on this and other issues, please read the Bryan Cave Energy Update Issue 32 published March 26, 2010.

EU Climate Chief Doubts Possibility of Treaty

EU commissioner for climate change, Connie Hedegaard,the Danish minister who spearheaded the recent UN climate change summit in Copenhagen, recently said that negotiations were not progressing quickly enough for a treaty to be signed soon.  While it was hoped that a treaty would be signed at a global conference this December in Mexico, Hedegaard said a treaty was more likely to be finished next year during a meeting in South Africa. To read more about this and other issues, please read the Bryan Cave Energy Update Issue 30 published March 12, 2010.

Basic Foods Denies it Continued to Ship Product after Company knew of Salmonella Contamination

As recalls of products containing salmonella-contaminated hydrolyzed vegetable protein (HVP, a common food additive) continued, reports indicated that FDA believed HVP manufacturer Basic Food Flavors continued shipping its product for a month after it knew the product was contaminated.  For more information about this and other news, please read the Regulatory and Policy Bulletin published by the Food and Drug Administration practice on March 17, 2010.

Number of HVP-Related Recalls Continued to Grow

In the weeks after the FDA confirmed the presence of salmonella in a batch of hydrolyzed vegetable protein (HVP) produced by Basic Food Flavors in Nevada, many food manufacturers recalled products that contain the ingredient, a common food additive.  The recalls also expanded to Canada.  For more information on this and other news, please read the Regulatory and Policy Bulletin published by the Food and Drug Administration practice on March 12, 2010.

FDA Calls on Food Industry to Correct Labeling Violations; Issues Warning Letters to 17 Companies

On March 3, 2010, FDA Commissioner Margaret Hamburg issued an open letter to industry to serve as a reminder of the standards required for making claims on food labels.  In conjunction with the 17 warning letters that were posted to the FDA’s web site on the same day, Dr. Hamburg hoped to provide further clarification to food manufacturers about what is expected of them as they review current labeling.  For more information on the labeling issues highlighted and other news, please read the Regulatory and Policy Bulletin published by the Food and Drug Administration practice on March 8, 2010.

Congress Hold Hearings on Reversing Child Obesity Epidemic and Child Nutrition; MOFS Holds Action Day

Senate Health, Education, Labor and Pensions Committee held a full committee hearing on Childhood Obesity:  Beginning the Dialogue on Reversing the Epidemic on March 4, 2010.  On the same day the Make Our Food Safe Coalition held a Food Safety Action Day, bringing victims of foodborne illness to the Capitol to encourage lawmakers to act on the FDA Food Safety Modernization Act.  For more information on the hearings and other issues, please read the Regulatory and Policy Bulletin published by the Food and Drug Administration practice on March 2, 2010.

House Panel Prioritizes Bill for More FDA Oversight of Imports

Lawmakers from the House Energy and Commerce health subcommittee have stated that they hope to move forward this year on the Globalization Act, legislation that would increase foreign facility inspections for FDA-regulated products and add new user fees in an effort to ensure the safety of medical goods entering the country.  For more information on on the Act and other news, please read the Drugs & Devices Regulatory & Policy Bulletin published by the Food and Drug Administration practice on March 16, 2010.

FDA Seeks Comments on How to Improve Transparency

Under increasing criticism for its lack of transparency, FDA formed the Transparency Task Force as part of President Obama’s campaign to “achieve an unprecedented level of openness in government.”  FDA is soliciting comments from interested persons on ways in which the FDIC can increase transparency between the FDA and regulated industry.  For more information on the Task Force and other news, please read the Regulatory and Policy Bulletin published by the Food and Drug Administration practice on March 19, 2010.

Industry Submits Comments on 510(k) Review, Use of DeNovo Process

Reports are predicting that, as the FDA considers changes to its 510(k) review process, it will face difficulties in expanding or creating a vehicle for the review of novel medical devices without requiring those technologies to go through the more cumbersome premarket approval process.  For more information, please read the Drugs & Devices Regulatory & Policy Bulletin published by the Food and Drug Administration practice on March 30, 2010.

FDA 510(k) Workgroup Identifies Areas for Change

Members of the FDA’s internal workgroup charged with reviewing the 510(k) clearance process have identified ten areas that could require administrative, regulatory or legislative changes, including the De Novo process, incorporation of new technology, postmarket data collection, third-party review, indication definitions, evidence, standards, product bundling, device modifications and the use of predicates.  For more information on the identified standards and other news, please read the Drugs & Devices Regulatory & Policy Bulletin published by the Food and Drug Administration practice on March 12, 2010.

FDA May Ask for Rescission Authority for 510(k) Clearances

CDRH Director Jeffrey Shuren has stated that, as the agency considers proposed changes to the 510(k) process, it may request additional authority from lawmakers, including 510(k) rescission authority.  The agency has said that it is challenged by a lack of robust ability to rescind device clearances.  For more information on this and other news, please read the Drugs & Devices Regulatory & Policy Bulletin published by the Food and Drug Administration practice on March 3, 2010.

Health Care Reform Update:  What Employers Need to Know Now

The Patient Protection and Affordable Care Act (“PPACA”) was signed into law on March 23, 2010.  Accompanying PPACA was the Health Care & Education Affordability Reconciliation Act of 2010, which contains a number of amendments to PPACA and was passed by the Senate and House of Representatives on March 26, 2010.  For more information on the impact the law will have on employers, please read the Employee Benefits & Executive Compensation Client Service Group Bulletin published March 30, 2010.

President Signs Major Health Care Reform Bill Into Law

On March 23, 2010, President Obama signed the Patient Protection and Affordable Care Act into law.  Although it may prove to be one of the most significant pieces of social legislation in history, there are relatively few provisions that conern food, dietary supplements or cosmetics.  However, many believe the Senate will turn their attention to the food safety bill once they have completed the health care overhaul legislation.  For more information, please read the Food Regulatory & Policy Bulletin published by the Food and Drug Administration practice on March 30, 2010.

House Passes Health Reform Bill

The House passed the health reform bill which was then signed into law by President Obama.  However, the House had to vote on changes to the landmark overhaul of the country’s health system after the Senate’s parliamentarian rejected two provisions in the measure.  For more information, please read the Drugs & Devices Regulatory &  Policy Bulletin published by the Food and Drug Administration practice on March 26, 2010.

Health Care Reform Alert:  Matters Important to Providers and Suppliers

Late March 21, the House took its final step toward comprehensive health care reform by passing the Senate health bill and an accompanying reconcilation bill.  On March 23, President Obama signed the Senate health bill, making it law.  For information on the new law’s impact on coverage, insurers and employers, please read the Client Alert published by the Life Sciences and Health Care Client Service group published March 24, 2010.

House Expands Device Tax in Health Reform Bill

The House unveiled its 153-page reconcilationn package estimated to reduce the deficit by $138 billion in the first decade and $1.2 trillion in the second, according to CBO’s score of the package.  For more information, please read the Drugs & Devices Regulatory & Policy Bulletin published by the Food and Drug Administration practice on March 19, 2010.

President Calls for Action on Healthcare

In a speech on Wednesday night, President Obama reiterated to Democrats and Republicans the necessity of passing healthcare reform this year, calling for a yes or no vote within weeks on the proposal.  The President also outlined several Republican proposals he was willing to add to his health reform proposal, including efforts to combat waste and fraud and Medicaid.  For more information, please read the Drugs & Devices Regulatory & Policy Bulletin published by the Food and Drug Administration practice on March 8, 2010.

Update on Trade Agreements

Thailand Implements ASEAN-Australia-New Zealand FTA; Offers Preferential Tariffs Starting March 13, 2010; Singapore Concludes FTA Negotiations with Costa Rica.  For more information and updates on other trade agreements, please read the February – March 2010 Asia Trade Update published by the International Trade group.