ACC Focus on the San Diego Chapter - 02/07/2011 (Plain Text Version)
Featured Article - "Outside The Box : Current Issues to Discuss With Outside Legal Counsel"
As part of the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act, US public companies are now required to provide their shareholders specific voting rights with respect to named executive officer compensation. Any public company annual shareholders meetings held after January 21, 2011 must hold an advisory vote on named executive officer compensation (“Say on Pay”) and a vote with respect to the frequency of future Say on Pay votes. Over 100 proxy statements have already been filed under these new rules and in-house counsel should be talking with the outside attorneys who have been monitoring these filings and the trends and developments that are already shaping up. For example, it is worth noting that while both Institutional Shareholder Services (ISS) and Fidelity Investments recommend in their shareholder guidelines an annual vote, approximately 55% of the reporting companies filing through mid-January have recommended a triennial vote.
One of the latest trends affecting numerous corporate defendants are cases filed by plaintiffs’ law firms involve “false marking.” These usually involve situations where patented goods are marked with either the wrong patent number, an expired patent number or a patent number which may not apply to the goods marked. In 2010 over 750 false marking cases were filed in the US. These cases are considered qui tam actions where the government and the plaintiffs’ attorneys split any recoveries. Since the government is a necessary party to these actions the details of the early settlements of these matters are already publicly available. Published settlements during the second half of 2010 have ranged from $2,500 to $350,000. In-house counsel should be especially vigilant and taking proactive steps with regard to any of their goods marked with patent numbers to make sure that all patent numbers are accurate, unexpired and cover the goods marked. Oftentimes a patent will expire and the goods will continue to be marked because it may be considered time-consuming or expensive to change the packaging or manufacturing dies. Plaintiffs counsel are actively monitoring expiring patents looking for these opportunities. If you get hit with a false marking case you should refer these immediately to outside counsel to mitigate damages and lower defense and settlement costs arising from these claims.
Business Opportunities Regarding China
As a result of the greatly increased activity of Chinese businesses and capital within the US, virtually every company in the US appears to be examining the various opportunities and challenges which this presents for American businesses. Large Chinese companies and funding sources are actively looking to place capital within the US through direct investment, strategic partnering arrangements and merger and acquisition activity. US businesses are looking to lower costs through manufacturing and supply or other outsourcing arrangements in China. US businesses are also seeking ways to market their products and services directly or indirectly to the large and rapidly growing number of Chinese consumers. The Chinese government is offering various incentives to encourage overseas trade and business development within certain Special Economic Zones. In-house counsel should be discussing with senior management any pending or contemplated China initiatives or opportunities and discussing these issues with experienced outside international counsel with offices in China to fully understand the potential benefits and challenges that these activities may present.