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>Gibson Brings Another Defendant On-stage

>Gibson has filed suit against another defendant alleging infringement of its concert simulation patent. This time, it involves Seven45 Studios’ new video game Power Gig: Rise of the SixString. Gibson lost its first suit involving the same patent against Activision in 2009. In June of 2010, Gibson settled with Harmonix, Viacom, and EA in a similar suit.

Second District Court Holds Health Care Reform Unconstitutional

A federal district court in Florida has held that the individual insurance coverage mandate under the federal health care reform law is unconstitutional. Further, the court concluded that the insurance mandate could not be severed from the broader health reform law and that it therefore rendered the entire law unconstitutional. Texas was among 26 states that brought the action challenging the constitutionality of the individual coverage mandate, which is not scheduled to take effect until 2014. This is the second district court to hold the individual coverage mandate unconstitutional, while two other district courts held it constitutional. Florida vs. U.S. Dept. of Health and Human Services, Case No.: 3:10-cv-91-RV/EMT (N.D. Fla. January 31, 2011).

SEC Adopts Final Rule on Say-on-Pay and Golden Parachute Compensation

On January 25, 2011, the Securities and Exchange Commission (SEC) adopted final rules implementing the approval of executive compensation (and frequency of approval of executive compensation) and golden parachute compensation as required under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Under the final rules, public companies subject to the federal proxy rules are required to: (1) provide their shareholders with an advisory vote on executive compensation at least once every three calendar years (“say-on-pay”), (2) provide their shareholders with an advisory vote on the desired frequency of these votes at least once every six calendar years (say-on-frequency); (3) provide shareholders with an advisory vote on golden parachute arrangements and understandings in connection with merger and other corporate transactions (say-on-golden-parachute compensation); and (4) provide additional disclosure of golden parachute arrangements in merger proxy statements. The say-on-pay and say-on-frequency votes are required at least once every three years and every… Continue Reading

Sixth Circuit Limits Reach of Yard-Man Inference on Vesting of Welfare Benefits

The U.S. Court of Appeals for the Sixth Circuit recently addressed the enforceability of a plan amendment limiting to a period of two years the duration of collectively-bargained occupational disability benefits under a pension plan. The opinion is notable because it distinguishes existing case law on the vesting of welfare benefits cited by both the participant and the plan. The plaintiff, a participant who was already receiving the disability benefits at issue, argued that the amendment violated ERISA because his benefits were vested as a matter of law. The district court agreed, relying on Int’l Union, United Auto., Aerospace, & Agric. Implement Workers of Am. v. Yard-Man, Inc., 716 F.2d 1476, 1482 (6th Cir. 1983), under which an inference in favor of vesting is used to determine whether a right to retiree health benefits continues beyond the expiration of a collective bargaining agreement. The Sixth Circuit vacated the district court… Continue Reading

Forfeiture of Unvested Benefits in Mandatory Plans is Not A Refusal to Pay Wages Under CA Law, Court Says

Plaintiffs alleged that they were required to accept part of their wages in the form of awards under the Company’s bonus programs and  “top hat”  plan.  When Plaintiffs terminated employment, they forfeited their unvested benefits in these plans.  Under California labor law, an employer must pay any wages earned and unpaid at the time of termination of employment.  In order to be “wages” under California law, all the conditions agreed to in advance for earning those wages have to be satisfied.  The court found that the unvested benefits were not “wages” because the specific terms of the bonus programs and the top hat plan controlled whether the Plaintiffs were entitled to such wages and the bonus programs and top hat plan provided that such benefits were forfeited.  Callan v. Merrill Lynch & Co., No. 09 CV 0566 BEN, 50 EBC 1449 (S.D. Cal. Aug. 30, 2010).

IRS Deadline for Reporting ISO Exercises and ESPP Stock Transfers for 2010 is Approaching

Section 6039 of the Internal Revenue Code requires companies to furnish a written statement to any employee or former employee who either (i) exercised an incentive stock option (ISO) during 2010 or (ii)  acquired shares under an employee stock purchase plan (ESPP) during 2010.  The company must furnish these statements  to employees on IRS Forms 3921 (for ISO exercises) and Form 3922 (for ESPP transfers) or an acceptable substitute, no later than January 31, 2011.  In addition, beginning for ISO exercises and ESPP transfers occurring in 2010, companies must file returns with the Internal Revenue Service on IRS Forms 3921 and 3922 no later than February 28, 2011, for paper filings, or March 31, 2011, for electronic filings.  Failure to file proper reports with the IRS or to provide information statements may result in penalties under the Internal Revenue Code.  A copy of the Form 3921 and 3922 are available… Continue Reading

IRS Updates Guidance on Determination Letters

The IRS issued Revenue Procedure 2011-6 this week, updating the process of requesting employee plans determination letters from the agency on the qualified status of pension, profit-sharing, stock bonus, annuity and employee stock ownership plans. In addition, the IRS published Revenue Procedure 2011-8, increasing user fees effective February 1, 2011. This guidance is available here.

Federal District Court Permits Employer’s “Mistake of Fact” Rescission Based on Employer Presumption

The United States District Court for the Eastern District of California reviewed a 401(k) plan administrator’s decision allowing the employer to rescind its employer contributions on behalf of an employee under the “mistake of fact ” doctrine. The “mistake of fact ” was that the employee committed misconduct on the job which would have resulted in termination (and no contribution) had the employer known about the misconduct sooner. The federal district court allowed the plan administrator’s decision to stand because its interpretation was not unreasonable, and therefore not an abuse of discretion. Anderson v. Strauss Neibauer & Anderson APC Profit Sharing 401(k) Plan, No. 1:09-cv-01446 OWW JLT, Slip op. (E.D. Cal. Dec. 6, 2010).

>MDY v. Blizzard – The Court of Appeals Weighs-in

>As you may recall (and as we’ve been covering), last January, an Arizona District Court found that using MDY’s Glider bot program in conjunction with Blizzard’s World of Warcraft game software fell outside the scope of the game’s End User License Agreement (EULA). The District Court then held that MDY is responsible for players running Glider outside the scope of the EULA, and awarded Blizzard a $6.5 million judgment against MDY for copyright infringement. MDY appealed the case to the Ninth Circuit Court of Appeals, which recently issued its own decision. The Ninth Circuit overturned the District Court’s finding of copyright infringement, but nevertheless held MDY liable for breach of the EULA on a different ground – violation of the Digital Millennium Copyright Act (DMCA).The Ninth Circuit held that using Glider while playing World of Warcraft in violation of the EULA did not amount to copyright infringement. The Ninth Circuit… Continue Reading

>Tip: IP Indemnification

>As patent and other intellectual property lawsuits continue to litter the video game landscape, it makes a mind wander to one of everyone’s favorite clauses in developer and publisher agreements: indemnification (which we have discussed before). This is one of those clauses that gets buried at the end of the agreement, often on the hope that it never gets discussed. And, certainly neither party ever hopes to have to invoke the indemnity clause. The problem arises that, while the clause generally does not see the light of day, should the clause ever become necessary — the dollars and stakes are bigger than ever anticipated.A publisher will generally try to seek a broad indemnity from a developer, so that, if a patent owner sues the publisher alleging that the developer’s game infringes the patent (or other intellectual property), the publisher will be protected. The indemnity clause will be used to shield… Continue Reading

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