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August 15, 2019 |
Gibson Dunn Lawyers Recognized in the Best Lawyers in America® 2020

The Best Lawyers in America® 2020 has recognized 158 Gibson Dunn attorneys in 54 practice areas. Additionally, 48 lawyers were recognized in Best Lawyers International in Belgium, Brazil, France, Germany, Singapore, United Arab Emirates and United Kingdom.

June 17, 2019 |
Supreme Court Holds That The First Amendment Does Not Apply To Private Operators Of Public Access Television Channels

Click for PDF Decided June 17, 2019 Manhattan Community Access Corp. v. Halleck, No. 17-1702  Today, the Supreme Court held 5-4 that private operators of public access television channels are not state actors subject to the First Amendment. Background: The First Amendment generally restricts only state action.  Private entities, however, may be treated as state actors in some circumstances, such as where they perform functions traditionally performed by the government alone.  Here, New York City designated Manhattan Neighborhood Network (“MNN”)—a private, independent non-profit corporation—to operate public access television channels in Manhattan.  After Respondents produced a video criticizing MNN, MNN banned the video, and prohibited Respondents from submitting content to MNN.  Respondents sued MNN and others under the First Amendment.  The Second Circuit held that public access channels are public speech forums protected by the First Amendment, and that MNN—as the entity selected by the City to administer those channels—is a state actor, even though it is not controlled or funded by the government. Issue: Does a private entity that operates public access channels qualify as a state actor subject to the First Amendment?  Court’s Holding: No.  Private operators of public access channels are not state actors subject to the First Amendment because the operation of public access channels on a cable system is not a function traditionally reserved exclusively to the government. “[M]erely hosting speech by others is not a traditional, exclusive public function and does not alone transform private entities into state actors subject to First Amendment constraints.” Justice Kavanaugh, writing for the majority What It Means: While the First Amendment constrains state actors when they operate public speech forums, the decision confirms that those constraints do not apply to private entities.  Merely operating a public forum does not make a private entity into a state actor under the traditional test for state action because operating a public speech forum is not a traditional, exclusive public function.  Instead, private entities that operate forums for speech retain their “editorial discretion” over the speech and speakers on those forums. The Court rejected the argument that MNN qualifies as a state actor simply because the City designated it to operate the channels.  Instead, the Court compared the City’s designation to a government license, government contract, or government-granted monopoly, which “d[o] not convert the private entity into a state actor—unless the private entity is performing a traditional, exclusive public function.”  Similarly, the Court explained that a private entity does not become a state actor simply because the government regulates its activities. Justice Sotomayor’s dissent would have held that the City retained a property interest in the channels pursuant to an agreement with the cable system that hosted them.  She would have concluded, therefore, that MNN qualified as a state actor in administering the City’s property interest.  The majority disagreed, holding that the agreement did not give the City a formal property interest.  The majority emphasized that the analysis may have been different if the City administered the channels itself or retained a property interest in them. The opinion is the sixth this Term from Justice Kavanaugh, and offers insight into his approach to First Amendment issues.  The decision expressly applies to private operators of public access cable channels, but has implications for Internet companies and property owners that also provide forums for public speech. As always, Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the Supreme Court.  Please feel free to contact the following practice leaders: Appellate and Constitutional Law Practice Allyson N. Ho +1 214.698.3233 aho@gibsondunn.com Mark A. Perry +1 202.887.3667 mperry@gibsondunn.com Theodore J. Boutrous, Jr. +1 213.229.7804 tboutrous@gibsondunn.com Related Practice: Media, Entertainment and Technology Scott A. Edelman +1 310.557.8061 sedelman@gibsondunn.com Kevin Masuda +1 213.229.7872 kmasuda@gibsondunn.com Orin Snyder +1 212.351.2400 osnyder@gibsondunn.com

June 6, 2019 |
Carrie LeRoy Recognized by LMG Americas Women in Business 2019

Palo Alto partner Carrie LeRoy was recognized as Best in Technology at the eighth annual Euromoney Legal Media Group Women in Business Law Awards. The awards recognize “the individuals, teams and firms setting a new standard in progressive work practices and leading the way in their field.” The awards were held on June 6, 2019. Carrie LeRoy, Co-Chair of the firm’s Technology Transactions Practice Group, advises clients on a wide range of intellectual property, technology and sourcing transactions, including development and license agreements, patent and other technology license agreements, outsourcing, joint ventures and strategic collaborations.  Her extensive work for technology companies, including leading semiconductor, social media and information technology companies, involves advising on the intellectual property aspects of a range of complex transactions, including mergers, acquisitions, asset purchase, joint development and intellectual property divestitures.

June 5, 2019 |
Carrie LeRoy and Kristin Linsley Named Technology Trailblazers

The National Law Journal named Palo Alto partner Carrie LeRoy and San Francisco partner Kristin Linsley to its 2019 Technology Trailblazers list. LeRoy was recognized for leading the firm’s new Artificial Intelligence practice group. Linsley was recognized for defending Facebook and other internet platforms against terrorism claims. Their profiles were published in the June 2019 issue. Carrie LeRoy, Co-Chair of the firm’s Technology Transactions Practice Group, advises clients on a wide range of intellectual property, technology and sourcing transactions, including development and license agreements, patent and other technology license agreements, outsourcing, joint ventures and strategic collaborations.  Her extensive work for technology companies, including leading semiconductor, social media and information technology companies, involves advising on the intellectual property aspects of a range of complex transactions, including mergers, acquisitions, asset purchase, joint development and intellectual property divestitures. Kristin Linsley specializes in complex business and appellate litigation across a spectrum of areas, including water and energy law, cybersecurity and technology law, international and transnational law, data and privacy, and complex financial litigation.  She has earned a national reputation for achieving favorable results for her clients in high-profile complex matters, and is noted for the strength of her legal analysis and the depth and breadth of her multinational litigation experience. Linsley has defended clients in high-stakes litigation involving financial issues arising from the mortgage crisis, commercial/contract disputes between companies, securities fraud and RICO violations, technology, telecommunications, and privacy issues, consumer class actions, intellectual property, and defense and aerospace-related issues.

April 25, 2019 |
Gibson Dunn Earns 79 Top-Tier Rankings in Chambers USA 2019

In its 2019 edition, Chambers USA: America’s Leading Lawyers for Business awarded Gibson Dunn 79 first-tier rankings, of which 27 were firm practice group rankings and 52 were individual lawyer rankings. Overall, the firm earned 276 rankings – 80 firm practice group rankings and 196 individual lawyer rankings. Gibson Dunn earned top-tier rankings in the following practice group categories: National – Antitrust National – Antitrust: Cartel National – Appellate Law National – Corporate Crime & Investigations National – FCPA National – Outsourcing National – Real Estate National – Retail National – Securities: Regulation CA – Antitrust CA – Environment CA – IT & Outsourcing CA – Litigation: Appellate CA – Litigation: General Commercial CA – Litigation: Securities CA – Litigation: White-Collar Crime & Government Investigations CA – Real Estate: Southern California CO – Litigation: White-Collar Crime & Government Investigations CO – Natural Resources & Energy DC – Corporate/M&A & Private Equity DC – Labor & Employment DC – Litigation: General Commercial DC – Litigation: White-Collar Crime & Government Investigations NY – Litigation: General Commercial: The Elite NY – Media & Entertainment: Litigation NY – Technology & Outsourcing TX – Antitrust This year, 155 Gibson Dunn attorneys were identified as leading lawyers in their respective practice areas, with some ranked in more than one category. The following lawyers achieved top-tier rankings:  D. Jarrett Arp, Theodore Boutrous, Jessica Brown, Jeffrey Chapman, Linda Curtis, Michael Darden, William Dawson, Patrick Dennis, Mark Director, Scott Edelman, Miguel Estrada, Stephen Fackler, Sean Feller, Eric Feuerstein, Amy Forbes, Stephen Glover, Richard Grime, Daniel Kolkey, Brian Lane, Jonathan Layne, Karen Manos, Randy Mastro, Cromwell Montgomery, Daniel Mummery, Stephen Nordahl, Theodore Olson, Richard Parker, William Peters, Tomer Pinkusiewicz, Sean Royall, Eugene Scalia, Jesse Sharf, Orin Snyder, George Stamas, Beau Stark, Charles Stevens, Daniel Swanson, Steven Talley, Helgi Walker, Robert Walters, F. Joseph Warin and Debra Wong Yang.

April 23, 2019 |
Webcast: IPOs and Public Company Readiness: Outsourcing Transactions

Whether to reduce costs and improve profitability, or improve performance or scalability of a company’s operations, there are many ways a company can leverage outsourcing to prepare for an IPO. Members of our Capital Markets and Strategic Sourcing and Commercial Transactions Practice Groups discuss the potential benefits of outsourcing and how to avoid the many pitfalls when sourcing and contracting for outsourcing services. View Slides (PDF) PANELISTS:  Stewart L. McDowell is a partner in Gibson Dunn’s San Francisco office, Co-Chair of the Capital Markets Practice Group, and a member of the Corporate Transactions Practice Group and the Steering Committee of the Securities Regulation and Corporate Governance Practice Group. Ms. McDowell’s practice involves the representation of business organizations as to capital markets transactions, mergers and acquisitions, SEC reporting, corporate governance and general corporate matters. She has significant experience representing both underwriters and issuers in a broad range of both debt and equity securities offerings. She also represents both buyers and sellers in connection with U.S. and cross-border mergers, acquisitions and strategic investments. William J. Peters is a partner in Gibson Dunn’s Los Angeles office, Co-Chair of the Strategic Sourcing and Commercial Transactions Practice Group, and a member of the Corporate Transactions Practice Group. He has spent his entire legal career in the information technology and business process outsourcing industries, including serving as corporate counsel to a major ITO service provider and general counsel to a leading HR BPO services provider. Mr. Peters has extensive experience representing and counseling clients on a wide range of legal and business issues relating to complex sourcing and technology transactions. His experience includes structuring, negotiating, and documenting large-scale business process and information technology outsourcing arrangements, ERP implementation agreements, application service provider agreements, software development agreements, and software licenses. Kari Krusmark is a senior associate in Gibson Dunn’s Los Angeles office and a member of the Corporate Transactions, Strategic Sourcing and Commercial Transactions, and Technology Transactions Practice Groups. Ms. Krusmark’s practice focuses on the structuring and negotiation of a wide range of transactions, including agreements for cloud services; information technology outsourcing (ITO) services; business process outsourcing (BPO) services; systems implementation and integration; application development, licensing and maintenance; consulting services; transitional services; strategic alliances; OEM and reseller arrangements; contract manufacturing; the purchase and sale of goods and services; and other technology-related matters. MCLE INFORMATION: This program has been approved for credit in accordance with the requirements of the New York State Continuing Legal Education Board for a maximum of 1.0 credit hour, of which 1.0 credit hour may be applied toward the areas of professional practice requirement. This course is approved for transitional/non-transitional credit. Attorneys seeking New York credit must obtain an Affirmation Form prior to watching the archived version of this webcast. Please contact Jeanine McKeown (National Training Administrator), at 213-229-7140 or jmckeown@gibsondunn.com to request the MCLE form. This program has been approved for credit in accordance with the requirements of the Texas State Bar for a maximum of 1.0 credit hour, of which 1.0 credit hour may be applied toward the area of accredited general requirement. Attorneys seeking Texas credit must obtain an Affirmation Form prior to watching the archived version of this webcast. Please contact Jeanine McKeown (National Training Administrator), at 213-229-7140 or jmckeown@gibsondunn.com to request the MCLE form. Gibson, Dunn & Crutcher LLP certifies that this activity has been approved for MCLE credit by the State Bar of California in the amount of 1.0 hour. California attorneys may claim “self-study” credit for viewing the archived version of this webcast.  No certificate of attendance is required for California “self-study” credit.

April 19, 2019 |
Gibson Dunn Ranked in Legal 500 EMEA 2019

The Legal 500 EMEA 2019 has recommended Gibson Dunn in 14 categories in Belgium, France, Germany and UAE.  The firm was recognized in Competition – EU and Global in Belgium; Administrative and Public Law, Dispute Resolution – Commercial Litigation Industry Focus – IT, Telecoms and the Internet, Insolvency, Insurance, Mergers and Acquisitions, and Tax in France; Antitrust, Compliance, Internal Investigations and Private Equity in Germany; and Corporate and M&A and Investment Funds in UAE. Chézard Ameer, Ahmed Baladi,  Jean-Pierre Farges and Dirk Oberbracht were all recognized as Leading Individuals. Jérôme Delaurière was listed as a “Next Generation Lawyer.”  

April 9, 2019 |
Five Partners Named to Variety’s 2019 Legal Impact Report

Variety has named five partners to its 2019 Legal Impact Report, an annual list of the leading attorneys in the entertainment industry: Scott Edelman – Co-Chair of Gibson Dunn’s Media, Entertainment and Technology Practice Group, Edelman has first-chaired numerous jury trials, bench trials and arbitrations, including class actions, taking well over twenty to final verdict or decision.  He has a broad background in commercial litigation, including antitrust, class actions, employment, entertainment and intellectual property, real estate and product liability. Ari Lanin – Co-Chair of the firm’s Private Equity practice group, Lanin advises companies, private equity firms and investment banks across a wide range of industries, focusing on public and private merger transactions, stock and asset sales, joint ventures and strategic partnerships, contests for corporate control and public and private (including Rule 144A) capital-raising transactions. Kevin Masuda – Co-Chair of the Media, Entertainment and Technology Practice Group, Masuda represents content companies including motion picture studios and music companies, technology companies, gaming companies, private equity funds, sports and talent agencies, and other clients in various types of business transactions, including mergers and acquisitions, joint ventures, investments, restructurings, public and private securities offerings, licensing agreements, sponsorships, and other strategic agreements. Benyamin Ross – Ross advises companies, private equity and venture capital firms, and high net-worth individuals in mergers and acquisitions, equity investments, joint ventures, restructuring transactions and general commercial agreements.  He works with companies in a broad array of industries ranging from consumer products to energy, and has extensive experience working with media, entertainment and technology companies. Orin Snyder – Co-Chair of the Media, Entertainment and Technology Practice Group, Snyder is one of the country’s leading trial lawyers and litigators.  He represents clients across a wide range of industry sectors and practice areas including both digital and traditional media and entertainment clients, which often seek him out for their bet-the-company cases. The list was published on April 9, 2019.

March 29, 2019 |
Aerospace and Related Technologies Update – Spring 2019

Click for PDF This March 2019 edition of Gibson Dunn’s Aerospace and Related Technologies Update discusses newsworthy developments, trends, and key decisions from 2018 and early 2019 that are of interest to aerospace and defense, satellite, and drone companies; and new market entrants in the commercial space and related technology sectors, including the private equity and other financial institutions that support and enable their growth. Specifically, this update covers the following areas: (1) commercial unmanned aircraft systems (“UAS”), or drones; (2) the commercial space sector; (3) export control; and (4) government contracts litigation involving companies in the aerospace and defense industry.  We discuss each of these areas in turn below. I.    Commercial Unmanned Aircraft Systems Along with changes to the legal landscape affecting drones, which are discussed in detail below, there were a number of noteworthy drone accomplishments this past year.  In 2018, a solar-powered drone maintained a high-altitude flight for nearly 26 days, breaking the world record for long-endurance drone flight.[1]  Companies exploring sustained drone flight hope to penetrate the satellite industry by providing a high-altitude, pseudo-satellite alternative to rocket-launched satellites. Police forces have also continued to find innovative uses for drones.  In the United Kingdom, police officers used drones to catch deer poachers.[2]  And in the United States, police officers used drones to create orthomosaic 3-D maps of the scenes of vehicle accidents,[3] allowing officers to digitally revisit the scene of an accident, and more quickly dismantle the scene and reduce the disruption to traffic. Drones have also continued to assist in natural disaster relief.  In 2018, drones provided assistance and relief following Hurricane Florence, the eruption of Hawaii’s Kilauea volcano, and during the California wildfires. To get you caught up on drone developments, we have provided brief updates on (A) The Federal Aviation Administration (“FAA”) Reauthorization Act, including its impact on the hobbyist exception, privacy, and enforcement, (B) the FAA’s Drone Integration Pilot Program, (C) the FAA’s Low Altitude Authorization and Notification Capability initiative, and (D) the Department of Transportation’s proposed modifications to drone rules. A. FAA Reauthorization Act On October 3, 2018, the U.S. Congress voted to reauthorize the FAA for a period of five years by renewing the FAA Reauthorization Act (“FAARA”),[4] and two days later President Donald Trump signed the Act into law.[5]  The House of Representatives and the Senate previously negotiated the bill’s provisions at length, and reached a final agreement in late September 2018.[6]  The final bill allocated approximately $97 billion to the FAA and its related programming, and represents the longest funding authorization period for FAA programs since 1982.[7] FAARA provides funding for the Federal Aviation Administration through 2023,[8] and includes numerous provisions affecting U.S. drone operations (notably, FAARA also includes numerous provisions affecting commercial space operations, which are discussed later).  Specifically, FAARA affects drone hobbyists, national security, and privacy, while its enforcement may raise concerns regarding federalism. i. Repeal of Hobbyist Exception Section 336 of the FAA Modernization and Reform Act, enacted on February 14, 2017, previously shielded drones operated for recreational purposes (“model aircraft”) from FAA regulation.  Section 336 provided that the FAA “may not promulgate any rule or regulation regarding a model aircraft.”[9] Nevertheless, in 2015 the FAA promulgated the “Registration Rule,” which required owners of model aircraft to register their drones with the FAA.[10]  A model aircraft hobbyist challenged the Registration Rule, arguing that the FAA lacked the statutory authority to require the registration of model aircraft.[11]  In May 2017, the hobbyist won his challenge and the D.C. Circuit held the Registration Rule was unlawful to the extent that it applied to model aircraft due to Section 336.[12] Roughly one year later, in April 2018, the Commercial Drone Alliance (the “CDA”) called for Section 336 to be replaced with new language that would allow the FAA to regulate recreational drones in “a common sense way.”[13]  The Academy of Model Aeronautics—that advocates for the model aircraft community—issued a response to the CDA, arguing that the repeal of Section 336 would overtax the FAA’s limited resources by bringing hundreds of thousands of new drones within its purview, and would slow innovation spurred on by recreational drone enthusiasts.[14] Congress acted in the fall of 2018 when it introduced and signed into law the 1,2017-page FAARA bill.  FAARA incorporated a full repeal of Section 336,[15] and also included Section 349, which gave the FAA the authority to regulate recreational drones. Section 349 of FAARA creates a framework for the operation of model aircraft.  To avoid the need for specific certification or operating authority from the FAA, model aircraft must now (1) be flown strictly for recreational purposes; (2) be operated in accordance with a community-based organization’s set of safety guidelines developed in coordination with the FAA; (3) be flown within the visual line of sight of the operator or a visual observer co-located and in direct communication with the operator;[16] (4) be operated in a manner that does not interfere with manned aircraft; (5) not be flown in Class B, Class C, or Class D airspace or within the lateral boundaries of the surface area of Class E airspace designated for an airport without prior authorization; (6) be flown no higher than 400 feet above ground level; (7) be flown by an operator who has passed an aeronautical knowledge and safety test which is to be developed no later than 180 days after the Act’s passage; and (8) be registered and marked.[17] On October 12, 2018, the FAA released a statement regarding the passage of FAARA.[18]  The FAA acknowledged that, “[t]he Reauthorization Act cannot be fully implemented immediately,” and stated that operators should “follow all current policies and guidance with respect to recreational use of drones” while the FAA works to fully implement the new legislation.[19] ii. Privacy FAARA addresses privacy concerns raised by the unregulated usage of UAS.  It legislates to protect privacy interests with respect to both public and private activity.  On the public side, the law makes it the federal government’s policy to operate UAS “in a manner that respects and protects personal privacy consistent with the United States Constitution and Federal, State, and local law.”[20]  The section clarifies that the relative newness of drone regulation cannot justify unconstitutional and illegal searches.[21] FAARA further prompts the Comptroller General to review “privacy issues and concerns” raised by UAS operation in American airspace.[22]  The review will survey existing federal, state, and local laws protecting individual privacy against UAS intrusions, identify issues and deficiencies in these laws (including in their provision of civil and criminal remedies), and provide recommendations on how to address these issues and deficiencies.[23]  The review will draw from the experience of the Department of Transportation and the National Telecommunications and Information Administration, which have been wrestling with UAS-related privacy concerns since a 2015 executive order issued by former President Obama.[24] On the private side, FAARA suggests, but does not require, that private entities operating UAS for business purposes maintain a publicly available, written privacy policy that meets the federal government’s policy of operating UAS in a manner that respects applicable federal, state, and local law.[25]  FAARA clarifies that this suggestion does not extend to businesses operating for First Amendment purposes, and that the scope of the policy should correspond to the degree that data are collected, used, retained, and disseminated through UAS operations.[26] FAARA further establishes a centralized online database for all data collected from commercial and governmental UAS operators, which will be available at the Department of Transportation’s website no later than 270 days after FAARA’s enactment.[27]  The database will contain any waiver or authorization of UAS operations issued by governments at all levels.  These will be displayed in the system no later than 30 days from issuance.[28]  In addition, the database will contain a spreadsheet of UAS registrations, updated quarterly, which will “includ[e] the city, state, and zip code of each registered drone owner.”[29]  It also will specify the locations, times, and purposes of public UAS operations, as well as public drones’ technical capabilities.[30]  Finally, the database will detail information about each public and private drone that will collect individuals’ personally identifiable information.  The database will describe the circumstances under which each drone will be used, the kinds of information to be collected, and how that information will be used, disclosed, or otherwise handled.[31]  Information related to operations protected by the First Amendment will not be published in the database.[32] iii. Enforcement and Federalism As discussed below, FAARA has codified the U.S. Department of Transportation’s Unmanned Aircraft Systems Integration Pilot Program, seeking to incorporate UAS into American airspace by fostering collaboration between the private sector and federal and local governments.  FAARA, however, contains various other provisions that will mold the balance of state, tribal, and federal power in UAS regulation for years to come.  For starters, FAARA has removed restrictions on tribes’ operation of drones for public purposes such as emergency responses.[33]  In this way, the Act vests tribal authorities with the same rights as their state and local counterparts on matters involving search and rescue missions and the like.[34] FAARA also establishes a pilot program connecting state and local authorities that is designed to “utilize available remote detection or identification technologies” for law enforcement and oversight.[35]  The Act requires that the program establish a nationwide reporting and tracking system for illicit drone usage.[36]  And the Act also requires the FAA Administrator to “establish and publicize a mechanism” allowing both the general public and law enforcement authorities at all levels to report UAS suspected of operating in violation of federal law.[37]  This will likely involve the creation of a central database containing all such reports.[38]  Additionally, the Act requires the Administrator to submit an annual report for each of the five years comprising the duration of the program.[39]  The reports will detail the number of illicit UAS operations and enforcement cases brought by federal agencies, and will provide descriptions of the same.[40]  The reports also will issue recommendations for changes in the law regarding increased safety, mitigation, detection, and identification of unauthorized UAS operations. Finally, FAARA sets the stage for future policymaking through a comprehensive study and report “on the relative roles” of federal, state, local, and tribal governments in regulating low-altitude UAS operations.[41]  The study and report, which shall be submitted to Congress within 180 days of FAARA’s enactment, will consider the current shape of federal, state, local, and tribal low-altitude UAS law, including potential gaps between authorities.[42]  It will also assess the degree of regulatory consistency required for the industry’s safe and financially viable growth, the interests of governments at all levels affected by low-altitude UAS operations, and any infrastructure required for proper UAS monitoring and law enforcement.[43] B. The FAA Commences Its Unmanned Aircraft Systems Drone Integration Pilot Program On October 25, 2017, President Trump directed the U.S. Department of Transportation (“DOT”) to launch the Unmanned Aircraft Systems Integration Pilot Program (“IPP”), in order to test the “safe operation of drones in a variety of conditions” that the DOT currently prohibits, such as “operations over people, beyond line of sight, and at night.”[44]  The goal of the project, which will last three years, is to gather data to “form the basis of a new regulatory framework to safely integrate drones” into the national airspace.[45]   It also aims to balance the “benefits of innovation” against “the need to protect national security, public safety, critical infrastructure and the [National Airspace System].”[46] The IPP operates through unique private/public partnerships at a local level.  Under the IPP’s strictures, government localities partner with private sector businesses, develop concepts on how drones may be used to positively impact their communities, and apply to be one of 10 localities that the FAA selects for the pilot program.[47] Approximately 150 communities (and their private sector partners) applied for consideration under the IPP, and in May 2018, the DOT named the winners, which include state departments of transportation, universities, cities, and a Native American tribe.[48]  These localities partnered with major companies.[49]  The winners received waivers to conduct currently prohibited UAS activities, and will refine their operational concepts, and provide feedback and data to the FAA on their programs pursuant to memoranda of agreement.[50]   The projects include drone applications ranging from medical delivery, emergency management, urban and rural commercial delivery, pipeline inspection, border control, mosquito control, and other agricultural functions.[51] In August 2018, the FAA provided updates on the first four successful IPP test flights, including flights delivering medical supplies, performing certain agricultural functions, and one flight delivering an ice cream cone over a long distance.[52] C. Developments in Low Altitude Authorization and Notification Capability (“LAANC”) System The LAANC system represents a collaboration between the FAA and private companies to facilitate the sharing of airspace data.[53]  The LAANC “automates the application and approval process for airspace authorizations,” or, put simply, it allows for near real-time evaluation and approval of requests to fly drones in controlled airspaces.[54]  The speed with which LAANC is able to review and approve these applications makes the system attractive for frequent drone pilots and operators.  The FAA teams up with air traffic controllers and private companies, or service providers, who share airspace data to permit the speedy review and approval of airspace authorizations.[55] In order to become a service provider under LAANC, private companies must meet certain technical and legal requirements.  In 2018, the FAA approved nine new LAANC service providers, bringing the total number of service providers to 14.[56]  In 2019, the FAA set two windows for service-provider applications.  The first already closed, and was set between January 7 and February 9, and the second window will open on July 8 and close on August 9.[57] D. The Department of Transportation’s Proposed Relaxation of Drone Flight Rules in 2019 On January 14, 2019, the U.S. Department of Transportation unveiled proposed rules that would allow drones to fly over people and at night without a waiver, as is currently required by Part 107, the small-drone rule.[58]  If these rules are passed, certain drones meeting design specifications such as weight and non-exposed propellers, will be exempted from Part 107’s waiver requirements.  The DOT is also proposing changes to the knowledge testing requirement:  in lieu of recurrent knowledge testing, the proposed rules would require recurrent training every 24 months.[59]  However, these proposed rules are contingent on the finalization of other rules and regulations that would allow for remote tracking and identification of drones.[60] II.    Commercial Space Sector A. Creation of Space Force On March 23, 1983, former [GDC1] President Ronald Reagan gave a speech in the Oval Office calling for the creation of the Strategic Defense Initiative system.[61]  Nicknamed “Star Wars,” the Strategic Defense Initiative was intended to address any potential intercontinental ballistic missile attack.  The program called for a “network of ground-based and space-based systems to shield the country.”[62]  Over the course of the next decade, the initiative shifted focus and eventually became known as the Missile Defense Agency.[63] On June 18, 2018, President Donald Trump announced that he was directing the Pentagon to establish a Space Force, which at the time was slated to become the sixth branch of the U.S. military.[64]  While President Reagan’s Strategic Defense Initiative was focused on national defense, President Trump described the Space Force as focused on ensuring that the United States does not fall behind other global superpowers when it comes to its space program.[65]  After President Trump’s announcement, it became clear that a Space Force would require congressional approval, which has not yet been given.[66]  In fact, the Pentagon itself has historically opposed the creation of any space force.[67] Vice President Mike Pence unveiled the four components of the Space Force on August 9, 2018, at the Pentagon.  The first component—the U.S. Space Command—would be a new organization “led by a four-star general and will establish the space war-fighting doctrine, tactics, techniques and procedures.”[68]  The second component, the joint agency, would be called the Space Development Agency, and would contribute to the breakdown of bureaucratic tape that stifles the United States’ ability to innovate.[69]  The third component, the new war community, would be an elite group of “space officers” called “Space Operations Force,” and would provide crucial space-expertise support during “times of crisis and conflict.”[70]  And the final component would require naming a civilian to the post of Assistant Secretary of Defense for Space, who would be charged with bringing the Space Force to fruition, managing the Space Force’s expansion, and helping the critical transition to a fully independent Secretary of the Space Force.[71]  At the unveiling, Vice President Pence noted the need for such an independent space force due to competitors and potential adversaries such as Russia and China, who have developed weaponry and technology designed to destroy or interrupt existing U.S. satellites,[72]  and indicated the need for a new service branch to be approved by Congress. Following President Trump’s announcement, the Department of Defense (“DOD”) began taking the first steps toward creating the Space Force.  Leaders at the DOD planned to “stand up three of the four components” of the Space Force, which included the first three components described above—a new combatant command, a joint agency for the purchasing of satellites, and a new war community that pulls space-centric operators from all of the service branches.[73]  The fourth component, the creation of a separate branch of the U.S. military, is the one that requires congressional approval, but is unlikely to receive such approval for some time.[74] As the Pentagon was preparing plans for the Space Force, the White House changed course:  rather than focus on the creation of an independent, separate Space Force branch of the military, they would instead look at the varying ways in which the military’s space operations could be reorganized.[75]  The turnaround instruction from Scott Pace, the National Space Council’s Executive Secretary, asked the Pentagon to consider four options:  (1) Air Force-owned space corps including only Air Force assets; (2) Air Force-owned space corps that would include space-related troops and assets from the Army and Navy; (3) independent service that takes from the Air Force, Army, and Navy; and (4) an independent service that takes from the Air Force, Army, and Navy, and the intelligence community.[76] On December 18, 2018, President Trump issued a memorandum[77] regarding the establishment of a United States Space Command.  In addition, the memorandum called for the Secretary of Defense to recommend officers for nomination and confirmation as Commander and Deputy Commander of the Space Command.[78]  After months of deliberating, the Pentagon decided to place the Space Force under the Department of the Air Force.[79]  This new service would be overseen by a newly created undersecretary position, that would report to the Joint Chiefs.[80]  And while this legislative proposal is still in draft form, it is believed that the alignment of the Space Force under the Department of the Air Force is consistently supported across the Defense Department.[81]  Indeed, in the first month of 2019, acting Defense Secretary Patrick M. Shanahan reiterated the Pentagon’s stance that the Space Force be under the umbrella of the Air Force and have a “footprint” that is “as small as possible.”[82] B. SpaceX Push for Fully and Rapidly Reusable Rockets Private companies are also pushing ahead with a common goal of making space more accessible.  SpaceX’s Founder and visionary, Elon Musk, has said that the “fundamental breakthrough needed to revolutionize access to space” is reusability.[83]  Consistent with this message, SpaceX has embarked on a mission to develop fully and rapidly reusable rockets that do not burn up on re-entry, but rather can withstand the forces of re-entry and successfully land back on Earth. The company has made great strides since publicly announcing the program back in 2011.  In March 2018, SpaceX President Gwynne Shotwell reiterated that the company intended to fly reused boosters on at least half of the launches in 2018.[84]  Considering that the “technology” for reusable rockets truly emerged only a year ago, using reusable rockets on even half of 2018 flights was a remarkable achievement.[85]  On May 11, 2018, SpaceX debuted its Falcon 9 Block 5 rocket, which was able to flawlessly launch and complete a first-stage landing.  The end-goal, according to Mr. Musk, is to “demonstrate two orbital launches of the same Block 5 vehicle within 24 hours, no later than [2019].”[86]  According to Mr. Musk, perfecting reusable rocket technology could slash costs of spaceflight to the point where goals such as Mars’s colonization are economically feasible.  Accordingly, the technology behind the reusable rockets will eventually become the backbone of the company’s BFR spaceflight system. On October 7, 2018, SpaceX successfully delivered a satellite into orbit using its Falcon 9 rocket with a pre-flown first stage.[87]  And approximately eight minutes after liftoff, the first-stage booster made a successful return to Earth, only about a quarter-mile from its launch pad.[88]  Then, in December 2018, SpaceX launched its SSO-A SmallSat Express, which marked the third reuse of the particular booster on the Falcon 9.[89] In February 2019, SpaceX’s Falcon 9 launched three spacecrafts, including an Israeli moon-lander.  In March, SpaceX took a step towards manned flight when it launched a successful unmanned test mission of its Crew Dragon capsule, which conducted a six-day flight, autonomously docked with the International Space Station, and included a sensor-laden dummy to simulate having an astronaut aboard.  SpaceX plans to conduct another test flight of the capsule, and if also successful may use the capsule for a manned space flight later this year. SpaceX is also pressing forward with its plans for commercialization of space travel,[90] with plans to launch its first private space flight in 2023.[91] C. Updates on Space Law in the United Arab Emirates In October 2018, the United Arab Emirates adopted a new space law intended to facilitate the country’s recent efforts to participate in the global space sector and space exploration, encourage investment and research, form the basis for multilateral affiliations with other nations, and regulate the rapidly developing regional industry.[92]  While details of the new law are not yet publicly available, press reports note that NASA and the UAE space agency (“UAESA”) also signed an implementing agreement on October 2, 2018, in order to facilitate astronaut training and UAESA access to the International Space Station (“ISS”).[93]  The new law follows on the heels of the cooperation agreement signed by NASA and UAESA in June 2016, which formalizes plans to collaborate with respect to aeronautics research and the use of airspace and outer space, including cooperation in the exploration of Mars.[94]  UAE has been strategically expanding its space missions over the past several years:  for example, international note has been taken of its 2021 Mars Hope mission,[95] and a UAE astronaut is currently set to fly to the ISS with Russian space agency Roscosmos in April 2019.[96] D. Update on Outer Space Treaty Amidst rapid technological developments and a shift in international rhetoric surrounding the commercialization and militarization of space, the 1967 Outer Space Treaty is looking increasingly out of date.[97]  Recent moves by several countries to flex military muscle in space races have tested the boundaries of the 50-year-old treaty—developed under the auspices of the Cold War and the Space Race[98]—which bans the placement of weapons of mass destruction in space (although it provides less explicit guidance about other military uses of space), forbids any military action past the atmosphere, and declares the exploration of space a common good for the benefit of all countries.[99] Against this backdrop, the UN Office for Outer Space Affairs (“UNOOSA”) hosted the UN Conference on the Exploration and Peaceful Uses of Outer Space in Vienna on June 18, 2018, during which international delegates passed a Resolution to strengthen global cooperation in space and the use of space for sustainable development.[100]  However, current international efforts fall short of addressing what happens when space rights conflict or when it is lawful for nations to resort to hostilities in or through space.[101]  In the absence of concrete shared norms regulating, for example, the use of conventional weaponry in space or the increased activity by private commercial actors, the gaps in the existing international legal regime loom large. Key assumptions of long-standing space diplomacy are being destabilized, causing uncertainty about how some of the recent developments fit into the existing legal framework.[102]  For example, the EU’s Galileo satellite proposes “more civil-military synergies in European space systems,”[103] and, as noted above, plans for the U.S.’s Space Force are proceeding.[104]  In March 2018, the U.S. House of Representatives approved the American Space Commerce Free Enterprise Bill.  Moreover, the proliferation of space debris and a growing interest in asteroid mining[105] raises issues concerning the treaty’s provision on the prevention of harmful contamination of celestial bodies, and highlights the fact that the treaty does not deal with the issue of mineral rights.[106]  And, constellations of satellites launched for commercial purposes pose a challenge to space traffic management.[107] Currently, the limits of regulatory authority appears to leave space open for the taking,[108] raising inevitable conflict with the Outer Space Treaty’s ideals of public ownership.  Nor is there an internationally agreed-upon legal definition of space and its boundaries, posing an additional challenge to global governance and multilateral regulation and cooperation.[109] E. Overhaul in Commercial Space Licensing i. Overview The general trend of 2018 was toward a more streamlined commercial space licensing process.  On May 24, 2018, President Trump ordered a sweeping regulatory overhaul to encourage commercial space innovation.[110]  The presidential memorandum, titled Space Policy Directive-2 (SPD-2) instructs the Department of Transportation to review the space launch and re-entry licensing process and, by February 2019, implement changes that would make the licensing process more efficient and less burdensome to private enterprise.  The directive specified aspects of the licensing process that ought to receive special attention, including the possibility of requiring just one license for all forms of commercial space launch and re-entry.[111]  In addition, SPD-2 orders Transportation Secretary Elaine Chao to coordinate efforts with the National Space Council, which in February 2018 issued four recommendations regarding commercial space licensing: 1.   The Secretary of Transportation should work to transform the launch and re-entry licensing regime. 2.   The Secretary of Commerce should consolidate its space commerce responsibilities, other than launch and re-entry, in the Office of the Secretary of Commerce. 3.   The National Telecommunication and Information Administration should coordinate with the Federal Communications Commission to ensure the protection and stewardship of radio frequency spectrum necessary for commercial space activities. 4.   The Executive Secretary of the National Space Council, in coordination with members of the National Space Council, should initiate a policy review of the current export licensing regulations affecting commercial space activity.[112] This directive came on the heels of a bill passed by the House of Representatives in April 2018, titled the American Space Commerce Free Enterprise Act (“ASCFEA”), which aimed to streamline the commercial space licensing process by consolidating each step of the process under the authority of the Commerce Department’s Office of Space Commerce.[113]  To put the process as it currently stands into perspective, the FAA handles launch and re-entry licensing issues, the Federal Communications Commission (“FCC”) approves radio communications between the spacecraft and its handlers on the ground, and the National Oceanic and Atmospheric Administration (“NOAA”) oversees satellite operations.[114] Indeed, shortly after the White House unveiled SPD-2, the Department of Commerce announced that it planned to combine several existing offices into a new office called the Space Policy Advancing Commercial Enterprise (“SPACE”) Administration, thus effectuating much of what the ASCFEA sought to accomplish.[115]  Specifically, the SPACE Administration will incorporate the Commercial Remote Sensing Regulatory Affairs (“CRSRA”) office and the Office of Space Commerce, currently part of the NOAA, as well as require liaisons to be assigned to the office from the Bureau of Industry and Security, International Trade Administration, National Institute of Standards and Technology, NOAA, and National Telecommunications and Information Administration. ii. Expedited Review Officials at the CRSRA office, a subset of the NOAA, announced at an April 3, 2018 meeting of the Advisory Committee on Commercial Remote Sensing that they have substantially cut the average review time for commercial Earth imaging system license applications.[116]  In 2017, the CRSRA completed reviews of license applications in 91 days, on average, down from 140 days in 2016 and 210 days in 2015.  Moreover, only two in 16 applications took more than 120 days to review, and those that did usually only took a few additional days.  By contrast, over half of all applications took longer than 120 days to review in 2016, and only one in 15 applications was reviewed within 120 days in 2015. CRSRA officials attributed the more streamlined review process in part to a memorandum of understanding between the Departments of Commerce, State, Defense, the Interior, and the Office of the Director of National Intelligence, which established procedures for interagency reviews of remote sensing license applications.  The office also pointed to the fact that more and more organizations are contacting CRSRA in advance to inquire whether their proposed activities require a license.  In 2017, 47 entities contacted the office (a 14% increase from 2016), 19 of which required a license. On October 23, 2018, the Department of Commerce announced that it had submitted to the Office of Management and Budget (“OMB”) a draft rule that would revise the commercial remote licensing processes.[117]  Acting Deputy Secretary of Commerce Karen Dunn Kelley announced that the proposed rule “will revolutionize the way we regulate the use of cameras in space” by, among other things, creating categories that exempt certain pre-approved activities from the license application process.  The impetus for the new draft rule came at least in part from the public attention the Department attracted earlier in the year, when SpaceX had its livestream of a Falcon 9 rocket launching 10 Iridium Next Satellites into orbit cut off nine minutes after liftoff, after finding out that such activity required a license from NOAA.[118]  Acting Deputy Secretary Kelley referenced the incident in her remarks.  “SpaceX’s GoPro camera, that is used for marketing and shows customers that the payloads have successfully been separated, should not be treated in the same way as the highly technical camera that can see your shoelaces from space,” she said. iii. Developments in Department of Commerce, Including Export Control and Foreign Investment Following the White House’s announcement of SPD-2, Commerce Secretary Wilbur Ross, along with other department officials, stated at the June 18, 2018 meeting of the National Space Council and related events over the following days that the administration is making progress on a number of SPD-2’s areas of focus.[119]  One development was the announcement that the Office of Space Commerce, which for years had gone without a permanent director, would be headed by Kevin O’Connell who is also slated to head the newly announced SPACE Administration once it is formally established. Perhaps more significantly, Secretary Ross announced that interagency discussions were set to begin regarding how to implement space export control reform.  Among the most important topics to be discussed is the issue of which items and technologies ought to remain on the United States Munitions List (“USML”)—which is subject to the jurisdiction of the International Traffic in Arms Regulations (“ITAR”)—and which technologies and items ought to be moved to the Commerce Control List, which is a less-restrictive export control system administered by the Department of Commerce.  Executive Secretary of the National Space Council Scott Pace stated at the Users’ Advisory Group meeting that he believed, generally speaking, what is “on the USML right now probably belongs on the USML,” and hence that the interagency discussions will largely focus on removing from the USML process-related technologies such as outdated computer systems.  In contrast, at the June 14 meeting of the Commercial Space Transportation Advisory Committee (“COMSTAC”), which advises the Federal Aviation Administration’s Office of Commercial Space Transportation, COMSTAC Chairman Mike Gold stated that “we should not rest on our laurels” when it comes to export control reform.  In his view, the goal of interagency discussions would be the “elimination of export controls for technologies that are widely available on the international market.” A second goal of the discussions was encouraging more international investment in, and business for, American space companies.  Although Secretary Ross held a brief armchair discussion with executives from space companies at the SelectUSA Investment Summit, no foreign investment deals were announced.  But in August 2018, Director O’Connell gave a speech at a space conference at Arizona State University, in which he stated that the Office of Space Commerce’s role in advocating for international investment was to ensure that American companies “have fair market access and are able to compete freely” as other countries develop their regulatory approach to space.[120]  We will be sure to discuss the extent to which the Office of Space Commerce succeeds in this advocacy effort in our next update. F. Office of Commercial Space Transportation’s Increased Spending Budget FAARA (previously discussed in Section __, supra) substantially increased the FAA Office of Commercial Space Transportation’s spending budget.  The FAA allotted approximately $22.6 million to the Office in Fiscal Year (“FY”) 2018.  Over the next five years, however, the budget will increase as follows: FY 2019:  $33,038,000 FY 2020:  $43,500,000 FY 2021:  $54,970,000 FY 2022:  $64,449,000 FY 2023:  $75,938,000[121] The funding is not without strings, however.  For example, the bill created an “Office of Spaceports,” which is tasked with licensing commercial launch sites and developing procedures and policies to improve their facilities.[122]  The Office will need to report to Congress on or before October 3, 2019, with recommendations for federal actions to “support, encourage, promote, and facilitate greater investments in infrastructure at spaceports.”[123]  The bill also requires that the head of the Office work with a point-person at the FAA on issues related to national airspace and commercial launch activity.[124] III.    Export control reform act and cfius update The John S. McCain National Defense Authorization Act for Fiscal Year 2019 (“FY 2019 NDAA”), which became law on August 13, 2018, contained two pieces of legislation that will have significant impacts on investment and technology transfers in the aerospace and related sectors for decades to come.  The FY 2019 omnibus bill contained the Foreign Investment Risk Review Modernization Act (“FIRRMA”), which amended the law that provides the Committee on Foreign Investment in the United States (“CFIUS” or “the Committee”) with its authority.  It also included the Export Control Reform Act of 2018 (“ECRA”), and gives the President, acting through the Secretary of Commerce, a mandate and new authorities to restrict the outbound transfer of “emerging and foundational technologies” and requires the Secretary of Commerce to include the health of the U.S. national defense industrial base as a factor when evaluating export control license applications.  Both are likely to have significant effects, including a rerouting of geography of investment flows and cross-border technology collaboration in aerospace and related technologies going forward. A. Expanded Oversight of Inbound Investment Through CFIUS CFIUS is an interagency committee authorized to review the national security implications of investments made by foreign companies and persons in U.S. businesses (“covered transactions”), and to either block or impose measures to mitigate any threats to U.S. national security.[125]  Established in 1975 and last reformed in 2007, the Committee’s ability to review the national security implications posed by an increasing number of Chinese investments targeting sensitive technologies in the United States was viewed by many as stymied by its statutory and regulatory framework. Prior to FIRRMA, CFIUS was limited to reviewing transactions which resulted in the ownership or control of U.S. businesses by foreign persons.  FIRRMA expands the scope of transactions subject to the Committee’s review by granting CFIUS the authority to examine non-controlling investments in U.S. businesses that deal with critical infrastructure, critical technology, or the personal data of U.S. citizens.  These non-controlling investments include any investment by a foreign person in an unaffiliated U.S. business or a “change in the rights that a foreign person has” with regard to any U.S. business that: owns, operates, manufactures, supplies or services critical infrastructure; produces, designs, tests, manufactures, fabricates or develops one or more critical technologies; or maintains or collects sensitive personal data of United States citizens that may be exploited in a manner that threatens national security. The term “critical technologies” is specially, and now more broadly, defined.[126]  It includes:  the defense articles and services described on the International Traffic in Arms Regulations (“ITAR”) United States Munitions List (“USML”); certain technologies identified on the Export Administration Regulations (“EAR”) Commerce Control List (“CCL”); nuclear facilities and equipment identified in 10 C.F.R. Part 110; and select agents and toxins.[127]  While many aerospace and associated technologies are already identified on the USML and the CCL, FIRMA expanded the critical technologies definition to include emerging and foundational technologies (hereinafter, “EFT”).[128]  The critical technologies concept thus includes many existing military and civil aerospace technologies and will now also include many technologies that many companies are relying on to develop the next generation of products in these and related sectors. Indeed, in CFIUS’s recently launched pilot program[129] to implement a new mandatory declaration filing requirement for non-controlling investments in companies involved in critical technologies, multiple sectors relevant to aerospace were targeted, including:  Guided Missile and Space Vehicle Manufacturing; Guided Missile and Space Vehicle Propulsion Unit and Propulsion Unit Parts Manufacturing; Aircraft Manufacturing; Aircraft Engine and Engine Parts Manufacturing; Powder Metallurgy Part Manufacturing; Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing; Secondary Smelting and Alloying of Aluminum; and Turbine and Turbine Generator Set Units Manufacturing. Although FIRRMA contains an express carve-out for completely passive investment structures found in the private equity space, the prospect of CFIUS review of even non-controlling investments is already causing some foreign investors, particularly those in Asia, to forgo attempts to make investments in these sectors. B. Regulation of Outbound Technology Transfer Through Export Controls Part of the impetus behind FIRRMA were studies which showed how non-U.S. companies, and especially Chinese companies, have been participating in a range of venture capital investments in early-stage, innovative technology companies.[130]  Congress was particularly concerned that China was using national investment policies and private sector commercial arrangements to force U.S. companies to provide their Chinese counterparts with access to basic and advanced technologies that would enable China to leapfrog decades of technological development and pose an even larger economic and strategic threat to the United States and its allies.  Indeed, these policies arrangements, such as technology transfer for market access arrangements, have been critical to the development of China’s aerospace sector, among others.[131] Congress also heard from observers who sounded an alarm noting that, over time, certain foreign investors had modified their investment strategies in emerging technologies to venture capital and green field investments,[132] which CFIUS lacked jurisdiction to review and block.  The realization that foreign technology transfers involving critical technologies were being insufficiently monitored and regulated prompted Congress to give the U.S. government new authorities under ECRA to control outbound flows of technology. To help regulate these transfers, ECRA requires the President to establish, in coordination with the Secretaries of Commerce, Defense, Energy, and State, a “regular, ongoing interagency process to identify [EFT]” that are essential to national security but not yet captured by any other critical technology list.  As these EFT technologies are identified, the Secretary of Commerce is to establish controls on the export, re-export, or in-country transfer of such technology, including requirements for licenses or other authorizations. To begin the process of identifying EFT, Commerce’s Bureau of Industry and Security (“BIS”) issued an Advanced Notice of Proposed Rule Making in November 2018, seeking public comments on how to identify emerging technologies, which we discuss at greater length here.[133]  In the notice, BIS broadly describes emerging technologies as “those technologies essential to the national security of the United States that are not already subject to export controls under the [EAR or ITAR].”[134]  The ANPRM suggests that technologies will be considered “essential to the national security of the United States” if they “have potential conventional weapons, intelligence collection, weapons of mass destruction, or terrorist applications or could provide the United States with a qualitative military or intelligence advantage.”[135] Although the ANPRM does not provide concrete examples of “emerging technologies,” BIS provided a list of broad areas of technology it viewed as subject to limited controls that could be considered “emerging” and therefore subject to new, broader controls under ECRA once specific technologies were identified.  These include many that are critical to current day and next generation technologies such as AI and Machine Learning; Position, Navigation and Timing; Microprocessors; Logistics; Robotics; Hypersonics; Additive Manufacturing; and Advanced Materials.  BIS has not yet issued an ANPRM that would show its hand on candidates for “foundational technology” controls. Once specific EFT are identified, companies can expect that their proposed exports of these technologies will be subject to greater scrutiny, and at least for some countries, subject to a licensing policy of denial.  This is because ECRA also obligates Commerce to gather and consider the kinds of information on foreign ownership that would normally be included in CFIUS submissions prior to its grant of an export license for EFT.  For example, if a proposed export transaction involves a joint venture, joint development agreement, or similar collaborative arrangement involving EFT, Commerce is to “require the applicant to identify, in addition to any foreign person participating in the arrangement, any foreign person with significant ownership interest in a foreign person participating in the arrangement.”[136] This requirement will significantly increase the diligence companies working with these technologies will need to conduct on their counterparties, and at least some counterparties are likely to walk away from proposed transactions in order to avoid having to provide sensitive information regarding their ownership.  In addition, the new information gathered on foreign person participation and ownership is likely to lead Commerce to block transactions by denying license applications.  The blocks are likely to impact not just direct transactions with companies in countries that are likely to be targeted with enhanced controls, such as China, but also exports to subsidiaries of Chinese companies located in Europe and elsewhere.  They may also reach inside the United States insofar that Commerce could opt to deny export licenses filed by U.S.-based subsidiaries or affiliates of such companies to export technology back to their parent country or to share technology with their foreign national employees. ECRA also introduced two new policy considerations for export license determinations that arguably shift U.S. export control policy from a more free trade to a protectionist stance.  Historically, Commerce was required to restrict the export of goods or technology that would significantly contribute to the military potential of other countries but to limit export controls to only those items that were militarily critical goods and technologies.[137]  Through these and other express policy objectives, Congress sought to promote export activity and to restrict it only when necessary.  Now under ECRA, Commerce is to regulate exports so as to help preserve the qualitative military superiority of the United States and to build and maintain the U.S. defense industrial base.  In particular, when assessing export license applications, Commerce is to require applicants to provide information that would enable it to determine whether the purpose or effect of the export would be to allow for the production of items relevant to national defense outside of the United States.[138]  If the proposed export would have a “significant negative impact” on the U.S. defense industrial base, Commerce is to deny license applications.  Proposed exports would have such “significant negative impacts” if they meet any one of three criteria: Whether the export would have the effect of reducing the availability or production of an item in the United States that is likely to be required by the DOD or other federal department or agency for the advancement of national security; Whether the export would lead to a reduction in the production of an item in the United States that is the result of research and development carried out, or funded by the DOD or other federal department or agency, or a federally funded research and development center; and Whether the export would lead to a reduction in the employment of U.S. persons whose knowledge and skills are necessary for the continued production in the United States of an item that is likely to be acquired by the DOD or other federal department or agency for the advancement of national security.[139] While it is unclear how Commerce will specifically implement these new policy and licensing directives, we predict that many companies seeking to export many aerospace and EFT will find it more difficult going forward.  Not only will they be required to provide more information regarding their proposed counterparties in their export license applications, such as information on their counterparties’ ultimate ownership and their role in the U.S. defense industrial base, but Commerce will likely deny applications when key strategic competitors of the United States are involved. IV.    GOVERNMENT CONTRACTS LITIGATION IN THE AEROSPACE AND DEFENSE INDUSTRY Gibson Dunn’s 2018 Year-End Government Contracts Litigation Update and 2018 Mid-Year Government Contracts Litigation Update cover the waterfront of the most important opinions issued by the U.S. Court of Appeals for the Federal Circuit, U.S. Court of Federal Claims, Armed Services Board of Contract Appeals (“ASBCA”), and Civilian Board of Contract Appeals among other tribunals.  We invite you to review those publications for a full report on case law developments in the government contracts arena. In this update, we summarize key court decisions related to government contracting from 2018 that involve players in the aerospace and defense industry.  The cases discussed herein, and in the Government Contracts Litigation Updates referenced above, address a wide range of issues with which government contractors in the aerospace and defense industry are likely familiar. A. Select Decisions Related to Government Contracts in the Aerospace and Defense Industry The Boeing Co., ASBCA No. 60373 (July 17, 2018) The ASBCA (D’Alessandris, A.J.) held that software developed with costs charged to technology investment agreements (“TIAs”) pursuant to 10 U.S.C.A. § 2358 constitutes software developed “exclusively at private expense” as it is defined in Defense Federal Acquisition Regulation Supplement (“DFARS”) clause 252.227-7014, Rights in Noncommercial Computer Software and Noncommercial Computer Software Documentation.  The ASBCA also held that the TIAs at issue did not make a blanket grant of government purpose rights in nondeliverable software developed with costs charged to the TIAs.  The dispute arose under a low-rate initial production (“LRIP”) contract, after Boeing delivered software marked with restrictive rights and asserted that the software had been developed exclusively at private expense pursuant to the TIAs.  The government challenged Boeing’s assertion of restricted rights in the software, and asserted that it possessed government purpose rights because the software was developed with mixed funding.  The ASBCA found that a TIA is a cooperative agreement, and not a “contract” as defined in FAR 2.101.  Accordingly, to the extent that the software was funded by the TIAs, the costs were not allocated to a government contract and satisfy the definition of “developed exclusively at private expense” under DFARS 252.227-7014.  For the same reason, the ASBCA found that the expenditures do not satisfy the definition of “developed with mixed funding” because the costs charged to the TIAs were not charged directly to a government contract. Aerospace Facilities Grp., ASBCA No. 61026 (July 19, 2018) The CDA mandates that an appeal of a contracting officer’s final decision must be filed at the Boards of Contract Appeals within 90 days of the contractor’s receipt of the decision, or must be filed at the Court of Federal Claims within 12 months.  41 U.S.C. § 7104. The government terminated Aerospace Facilities Group (“AFG”)’s contract for cause, and AFG filed its notice of appeal at the ASBCA 91 days after receipt of the termination decision by email.  However, following its termination decision, the government engaged in numerous communications with AFG inviting the contractor to discuss proposals to resolve the termination, including the potential delivery of items under the contract that the government had purported to terminate.  The ASBCA (Shackleford, A.J.) denied the government’s motion to dismiss for lack of jurisdiction based on the alleged untimeliness of the notice of appeal (which the ASBCA also questioned sua sponte).  The ASBCA held that the government’s post-termination actions “created a cloud of uncertainty as to the status of the . . . termination.”  As such, the government led AFG to reasonably believe that it was reconsidering the termination decision, thereby vitiating the finality of the “final” decision. Hartchrom, Inc., ASBCA No. 59726 (July 26, 2018) A common issue arising before the tribunals that hear government contracts disputes is whether the contractor appealed a valid CDA claim.  FAR 33.201 defines a “claim” as “a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to this contract.”  Under the CDA, a claim for more than $100,000 must be certified. Hartchrom, Inc. had a lease with a private party allowing Hartchrom to use space at an Army manufacturing facility (the “Arsenal”).  The government was not a party to the lease.  Hartchrom later entered into a contract with the Army for chrome electroplating services, which Hartchrom performed at the Arsenal.  The lessor directed Hartchrom to remove hazardous waste that Hartchrom had discharged into the industrial wastewater treatment plant while performing its Army contract.  Hartchrom submitted a claim to the Army contracting officer for the hazardous waste removal costs, which the contracting officer denied in a final decision.  The ASBCA (Osterhout, A.J.) held that it had jurisdiction over the appeal because the claim was made pursuant to the Army contract and appealing a valid final decision.  However, the ASBCA dismissed the appeal for failure to state a claim upon which relief may be granted, because any relief to which Hartchrom could be entitled would have been under the terms of its lease with the private party.  Indeed, the clause Hartchrom relied upon was a provision in the lease, not in the Army contract.  Thus, the ASBCA had no way to grant Hartchrom any relief, even if it was so entitled under the lease. The Boeing Co., ASBCA Nos. 61387, 61388 (Nov. 28, 2018) The ASBCA (O’Connell, A.J.) denied Boeing’s motion for summary judgment seeking the ASBCA’s interpretation as to whether the contracts at issue allowed Boeing to place certain marking legends on technical data, or whether the only authorized legends for marking technical data under the contracts were those found in DFARS 252.227-7013(f).  The Air Force contracting officer had concluded that because the legends used by Boeing to mark its data did not conform with DFARS 252.227-7013(f) that Boeing must remove them at its own expense and resubmit the data.  Boeing argued that the DFARS clauses, as interpreted by the Air Force, failed to protect its intellectual property rights, whereas the Air Force claimed it would be harmed by use of Boeing’s non-DFARS proposed legends.  In denying Boeing’s motion, the ASBCA agreed with the government’s interpretation of DFARS 252.227-7013(f), finding that the legends authorized by that clause were the only permissible legends for limiting data rights under the contract.  However, the ASBCA also noted that the issue of whether those clauses adequately protect Boeing’s property rights could not be resolved based on the record developed to date.  Accordingly, the Board directed the parties to submit a joint status report proposing further proceedings. Charles F. Day & Associates LLC, ASBCA Nos. 60211, 60212, 60213 (Nov. 29, 2018)   Charles F. Day & Associates LLC (“CFD”) contracted to perform services for the Army in Iraq.  The personnel supplied by CFD performed work outside the scope of the written requirements of CFD’s contract in support of their customer, and later sought additional compensation for those efforts.  CFD submitted a Request for Equitable Adjustment delineating three separate requests for payment, which the Board characterized as “claims,” observing in a footnote that a request for equitable adjustment can be considered a claim under the CDA, regardless of its title, if it otherwise meets the requirements of a claim.  The contracting officer denied CFD’s claims, arguing that there had been no constructive change to the contract and that CFD thus had no entitlement to additional compensation. The government argued that the Board lacked jurisdiction to consider a portion of the case presented by CFD at the hearing, alleging that the basis of that claim (essentially a superior knowledge claim) was so different from that presented to the contracting officer that it should be dismissed.  The Board granted the government’s request to dismiss the additional issue raised at the hearing, noting that while the board is “relatively liberal in permitting appellants to present additional evidence and arguments not presented to the contracting officer and to alter the legal bases for claims on the amount of damages,” “a claim on one matter does not support jurisdiction over an appeal on another” and “a claim must be specific enough and provide enough detail to permit the contracting officer to enter into dialogue with the contractor.”  Although the Board agreed with CFD that the legal theory for the claim presented at trial was the same as in its claim—seeking recovery for out of scope work—the Board nevertheless found that the claim did not arise from the same underlying facts, and thus the factual basis for the claim presented at trial was not brought before the contracting officer in CFD’s written claims. Ballistic Recovery Systems, Inc., ASBCA No. 61333 (Dec. 13, 2018) In 2016, Ballistic Recovery Systems, Inc. (“BRSI”) entered into a fixed-price contract for the supply of parachute deployment sleeves.  Pursuant to the contract, BRSI was supposed to deliver two test units for inspection, as part of the first article test (“FAT”).  Prior to the award of the contract, BRSI sought an FAT waiver based on a prior contract for the same item, however, the waiver was denied because no inspections had been performed on BRSI’s deployment sleeves for almost two years.  After delivery of the two test units, the government found numerous major deficiencies and recommended disapproval.  After BRSI submitted two subsequent test units, the government found further major deficiencies, and issued a show-cause notice for BRSI to state any excusable causes of defects.  Rather than address any of the major deficiencies in the test units, BRSI referred to its earlier contract and argued that its units were “production standard.”  In 2017, the government terminated the contract for default as a result of the multiple FAT disapprovals. Upon the government’s motion for summary judgment, the ASBCA (Paul, A.J.) determined that the government met its initial burden of proving that the termination was reasonable and justified, and evidence that the contractor did not attempt to correct major and critical defects constituted a reasonable basis for default termination.  The ASBCA reasoned that the government had provided ample evidence of the major and critical failures of BRSI’s test units, and had submitted declarations in support thereof, thus, the lack of any substantive attempt by BRSI to address the faulty units constituted a reasonable basis for default termination.  Accordingly, the ASBCA denied BRSI’s appeal. V.    Conclusion We will continue to keep you informed on these and other related issues as they develop.   [1]   Tom Metcalfe, Pseudo-Satellite Drone Flies for 25 Days Straight, Sets Endurance Record, Life Science (Aug. 20, 2018), available at https://www.livescience.com/63378-pseudo-satellite-drone-record.html.   [2]   Malek Murison, UK Police Use Drone to Catch Deer Poachers, Drone Life (Oct. 23, 2018), available at https://dronelife.com/2018/10/23/uk-police-drone-thermal-camera-deer-poachers/.   [3]   Transforming Accident Investigation with Drones, Drone Deploy (July 23, 2018), available at https://blog.dronedeploy.com/transforming-accident-investigation-with-drones-edec7162d8ce.   [4]   Federal Aviation Administration Reauthorization Act (“FAAA”), H.R. 302, 115th Cong. § 2 (2018).   [5]   Ben Mutzabaugh, President Trump signs bill that will regulate airline seat sizes, USA Today (Oct. 5, 2018), available at https://www.usatoday.com/story/travel/flights/todayinthesky/2018/10/05/trump-signs-faa-reauthorization-bill-regulate-seat-sizes/1537513002/.   [6]   Jeff Foust, Congress includes space provisions in FAA bill as industry seeks action on other regulatory issues, Space News (Sept. 23, 2018), available at https://spacenews.com/congress-includes-space-provisions-in-faa-bill-as-industry-seeks-action-on-other-regulatory-issues/.   [7]   Ben Husch, Congress Passes 5-Year FAA Reauthorization Act, National Conference of State Legislatures (Oct. 4, 2018), available at http://www.ncsl.org/blog/2018/10/04/congress-passes-5-year-faa-reauthorization-act.aspx.   [8]   FAA, FAA Reauthorization Bill Establishes New Conditions for Recreational Use of Drones (Oct. 12, 2018), available at https://www.faa.gov/news/updates/?newsId=91844.   [9]   See Taylor v. Huerta, 856 F.3d 1089, 1090 (D.C. Cir. 2017). [10]   Miriam McNabb, Federal Appeals Court Finds Drone Registration Unlawful for Model Aircraft, Drone Life (May 19, 2017), available at https://dronelife.com/2017/05/19/federal-appeals-court-finds-model-aircraft-registration-unlawful/. [11]   See Taylor, 856 F.3d at 1090. [12]   Id. at 1093. [13]   Miriam McNabb, The Argument Over Section 336: AMA Responds for Calls to Repeal, Drone Life (Apr. 5, 2018), available at https://dronelife.com/2018/04/05/argument-section-336-ama-responds-calls-repeal/. [14]   Id. [15]   Miriam McNabb, FAA Reauthorization Explained: Part 1, the Repeal of Section 336, Drone Life (Sept. 25, 2018), available at https://dronelife.com/2018/09/25/faa-reauthorization-explained-part-1-the-repeal-of-section-336/. [16]   Later in October, the FAA approved Avitas Systems’ request to forgo the “line of sight” requirement in order to conduct industrial inspections of oil fields, possibly “setting a new precedent for commercial drone operations.”  Daniel Wilson, FAA OKs Drone Operation With Radar Beyond Line Of Sight, Law360 (Oct. 18, 2018), available at https://www.law360.com/texas/articles/1093243/faa-oks-drone-operation-with-radar-beyond-line-of-sight. [17]   PL 115-254, 2018 HR 302, PL 115-254, October 5, 2018, 132 Stat 3186. [18]   Federal Aviation Administration, FAA Reauthorization Bill Establishes New Conditions for Recreational Use of Drones, FAA (Oct. 12, 2018), available at https://www.faa.gov/news/updates/?newsId=91844. [19]   Id. [20]   FAA Reauthorization Act of 2018, H.R. 302, Division B, § 357 (2018). [21]   Miriam McNabb, FAA Reauthorization Explained: Part 3, Privacy, DroneLife (Sept. 27, 2018), available at https://dronelife.com/2018/09/27/faa-reauthorization-explained-part-3-privacy/. [22]   FAA Reauthorization Act of 2018, H.R. 302, Division B, § 358 (2018). [23]   Id. [24]   Id. [25]   Id. § 378. [26]   Id. [27]   Id. § 379. [28]   Id. [29]   Id. [30]   Id. [31]   Id. [32]   Id. [33]   Id, § 355. [34]   Joel Roberson & Jennifer Nowak, How the FAA Reauthorization Accelerates Drone Integration, Law360 (Nov. 18, 2018), available at https://www.law360.com/articles/1103065/how-the-faa-reauthorization-accelerates-drone-integration. [35]   FAA Reauthorization Act of 2018, H.R. 302, Division B, § 372 (2018). [36]   Miriam McNabb, FAA Reauthorization Explained: Part 2, Enforcement, DroneLife, (Sept. 26, 2018), available at https://dronelife.com/2018/09/26/faa-reauthorization-explained-part-2-enforcement/. [37]   FAA Reauthorization Act of 2018, H.R. 302, Division B, § 372 (2018). [38]   McNabb, supra, note 6. [39]   FAA Reauthorization Act of 2018, H.R. 302, Division B, § 372 (2018). [40]   Id. [41]   Id. § 373. [42]   Id. [43]   Id. [44]   See Unmanned Aircraft Systems Integration Pilot Program, 82 FR 50301 (Oct. 25, 2017), available at https://www.federalregister.gov/documents/2017/10/30/2017-23746/unmanned-aircraft-systems-integration-pilot-program; UAS Integration Pilot Program Overview, U.S. Department of Transportation (May 7, 2018), available at https://www.faa.gov/uas/programs_partnerships/uas_integration_pilot_program/; UAS Integration Pilot Program Selection Announcement, U.S. Department of Transportation (May 9, 2018), available at https://www.transportation.gov/briefing-room/uas-integration-pilot-program-selection-announcement.  The Federal Aviation Administration Reauthorization Act of 2018 grants the FAA the legal authority to implement the IPP.  See H.R. Rep. No. 302 Sec. 351 (2018), available at https://bit.ly/2DLNW0O. [45]   See Miriam McNabb, FAA: Drone Integration Pilot Program Off to an Exciting Start, DroneLife (Aug. 30, 2018), available at https://dronelife.com/2018/08/30/faa-ipp-off-to-an-exciting-start/; see Matt Leonard, Governments Dream of Drone-Based Development, GCN (Feb. 8, 2018), available at https://gcn.com/articles/2018/02/08/drone-ipp-applicants.aspx.  The FAA has also stated that it intends to use the IPP to test “package delivery, detect-and-avoid technologies, counter-UAS security operations, reliability and security of data links between pilot and aircraft, as well as local management of UAS operations subject to FAA oversight.”  Id. [46]   See Integration of Civil Unmanned Aircraft Systems (UAS) in the National Airspace System (NAS) Roadmap, Second Edition, Federal Aviation Administration, at 32 (July 2018), available at https://www.faa.gov/uas/resources/uas_regulations_policy/media/Second_Edition_Integration_of_Civil_UAS_NAS_Roadmap_July%202018.pdf. [47]   See UAS Integration Pilot Program Selection Announcement, U.S. Department of Transportation (May 9, 2018), available at https://www.transportation.gov/briefing-room/uas-integration-pilot-program-selection-announcement; Unmanned Aircraft Systems Integration Pilot Program (UASIPP), Federal Aviation Administration (Dec. 1, 2017), available at https://faaco.faa.gov/index.cfm/announcement/view/28745. [48]   McNabb, supra note 42. [49]   Marco Margaritoff, Here Are the States Joining Trump’s Drone Integration Pilot Program, TheDrive (May 10, 2018), available at http://www.thedrive.com/tech/20750/here-are-the-states-joining-trumps-drone-integration-pilot-program. [50]   Leonard, supra note 42; Patrick C. Miller, U.S. DOT Selects 10 Projects for UAS Integration Program, UAS Magazine (May 16, 2018), available at http://uasmagazine.com/articles/1859/u-s-dot-selects-10-projects-for-uas-integration-program. [51]   Integration Pilot Program Awardees, U.S. Department of Transportation (Sept. 25, 2018), available at https://www.faa.gov/uas/programs_partnerships/uas_integration_pilot_program/awardees/; McNabb, supra note 42 (contains description of each of the ten pilot programs); Miller, supra note 47. [52]   Keith Shaw, FAA Gives Updates on Drone Integration Program, Robotics Business Review (Aug. 31, 2018), available at https://www.roboticsbusinessreview.com/unmanned/faa-gives-updates-on-drone-integration-program-flights/; Marisa Garcia, From Ice Cream To Wild Hogs: FAA Celebrates Successful Drone Trials, Forbes (Aug. 31, 2018), available at https://www.forbes.com/sites/marisagarcia/2018/08/31/from-ice-cream-to-wild-hogs-faa-celebrates-successful-drone-trials/#708645aa6517; see also ND DOT, UAS Partners Complete Test For Flights Over People, UAS Magazine (Aug. 20, 2018), available at http://www.uasmagazine.com/articles/1903/nd-dot-uas-partners-complete-test-for-flights-over-people. [53]   Federal Aviation Administration, UAS Data Exchange (LAANC) (undated), available at https://www.faa.gov/uas/programs_partnerships/data_exchange/. [54]   Id. [55]   Federal Aviation Administration, FAA Approves Nine New LAANC Service Providers (Oct. 1, 2018), available at https://www.faa.gov/news/updates/?newsId=91744. [56]   Id. [57]   Id. [58]   Linda Chiem, DOT Proposal Would Loosen Rules On Some Drone Flights, Law360 (Jan. 14, 2019), available at https://www.law360.com/articles/1118477; Linda Chiem, Autonomous Car, Drone Cos. Navigate New Compliance Risks, Law360 (Jan. 29, 2019), available at https://www.law360.com/transportation/articles/1110342/autonomous-car-drone-cos-navigate-new-compliance-risks?nl_pk=b316a0e5-d830-42d6-ae05-2ff4e3f4b647&utm_source=newsletter&utm_medium=email&utm_campaign=transportation. [59]   FOT UAS Initiatives, Federal Aviation Administration (Jan. 14, 2019), available at https://www.faa.gov/uas/programs_partnerships/DOT_initiatives/. [60]   Linda Chiem, Relaxed Rules Offer Little Clarity On Expanded Drone Flights, Law360 (Jan. 16, 2019), available at https://www.law360.com/transportation/articles/1119268/relaxed-rules-offer-little-clarity-on-expanded-drone-flights?nl_pk=b316a0e5-d830-42d6-ae05-2ff4e3f4b647&utm_source=newsletter&utm_medium=email&utm_campaign=transportation. [61]   Andrew Glass, President Reagan calls for launching ‘Star Wars’ initiative, March 23, 1983, Politico (Mar. 23, 2017), available at https://www.politico.com/story/2017/03/president-reagan-calls-for-launching-star-wars-initiative-march-23-1983-236259. [62]   Id. [63]   Id. [64]   Marcus Weisgerber, What Trump’s Space Force Announcement Means, Defense One (June 18, 2018), available at https://www.defenseone.com/politics/2018/06/what-trumps-space-force-announcement-means/149093/. [65]   Stephanie D. Wilson, Trump’s Space Force vs. Reagan’s Star Wars: Here’s How They Compare, Heavy (June 18, 2018), available at https://heavy.com/news/2018/06/trump-space-force-reagan-star-wars/. [66]   Marina Koren, Trump’s Space Force Will Have to Wait, Defense One (July 24, 2018), available at https://www.defenseone.com/ideas/2018/07/trumps-space-force-will-have-wait/150011/. [67]   Id. [68]   Valerie Insinna, et al., Pentagon Lays Groundwork for Space Force to Blast Off in 2020, Defense News (Aug. 9, 2018), available at https://www.defensenews.com/space/2018/08/09/space-force-will-be-6th-military-branch-by-2020-vice-president-pence-announces/. [69]   Id. [70]   Id. [71]   Id. [72]   Id. [73]   Marcus Weisgerber, Pentagon To Start Creating Space Force – Even Before Congress Approves It, Defense One (July 31, 2018), available at https://www.defenseone.com/politics/2018/07/pentagon-create-space-force/150157/. [74]   Supra, note 63. [75]   Marcus Weisgerber, White House Seeks Alternatives to Independent Space Force, Defense One (Nov. 28, 2018), available at https://www.defenseone.com/politics/2018/11/white-house-seeks-alternatives-independent-space-force/153119/. [76]   Id. [77]   Memorandum from President Donald J. Trump for the Secretary of Defense, Dec. 18, 2018, available at https://www.whitehouse.gov/briefings-statements/text-memorandum-president-secretary-defense-regarding-establishment-united-states-space-command/. [78]   Id. [79]   Valerie Insinna, Trump’s new Space Force to reside under Department of the Air Force, Defense News (Dec. 20, 2018), available at https://www.defensenews.com/space/2018/12/20/trumps-new-space-force-to-reside-under-department-of-the-air-force/. [80]   Id. [81]   Id. [82]   Ben Wolfgang, Why Pentagon planners aim to make Trump’s Space Force ‘as small as possible’, The Washington Times (Jan. 30, 2019), available at https://www.washingtontimes.com/news/2019/jan/30/pentagon-aims-make-space-force-small-possible/. [83]   Reusability:  The Key to Making Human Life Multi-Planetary, SpaceX (June 10, 2015), available at https://www.spacex.com/news/2013/03/31/reusability-key-making-human-life-multi-planetary. [84]   Eric Ralph, SpaceX to fly reused rockets on half of all 2018 launches as competition lags far behind, Teslarati (Mar. 14, 2018), available at https://www.teslarati.com/spacex-use-reused-rockets-50-percent-all-2018-launches/. [85]   Id. [86]   Mike Wall, Elon Musk Says SpaceX Will Reuse A Rocket Within 24 Hours in 2019, Space.com (May 15, 2018), available at https://www.space.com/40581-spacex-reusable-rocket-goal-elon-musk.html. [87]   Mike Wall, SpaceX Aces First-Ever Rocket Landing in California After Spectacular Satellite Launch, Space.com (Oct. 7, 2018), available at https://www.space.com/42056-spacex-aces-1st-california-rocket-landing-saocom-1a-launch.html. [88]   Id. [89]   William Graham, SpaceX Falcon 9 launches SSO-A multi-sat mission, Nasaspaceflight.com (Dec. 3, 2018), available at https://www.nasaspaceflight.com/2018/12/spacex-falcon-9-sso-multi-sat-launch/. [90]   Marcia Smith, SpaceX To Announce First Private Passenger to Moon on BFR, Space Policy Online (Sept. 13, 2018), available at https://spacepolicyonline.com/news/spacex-to-announce-first-private-passenger-to-moon-on-bfr/. [91]   Mike Wall, SpaceX Will Fly a Japanese Billionaire (and Artists, Too!) Around the Moon in 2023 (Sept. 17, 2018), available at https://www.space.com/41854-spacex-unveils-1st-private-moon-flight-passenger.html. [92]   New Space Law to Revolutionize Yet Unexplored Sector, Saudi Gazette (Oct. 9, 2018), available at http://saudigazette.com.sa/article/545224/BUSINESS/New-UAE-space-law-to-revolutionize-yet-unexplored-sector; Noni Edwards, Beyond the Skies, Gulf News (Dec. 4, 2018), available at https://gulfnews.com/uae/science/beyond-the-skies-1.1543922736432. [93]   UAE Space Agency And NASA Sign Implementing Agreement For Joint Space Exploration, SpaceWatch Middle East (Oct. 2018), available at https://spacewatch.global/2018/10/uae-space-agency-and-nasa-sign-implementing-agreement-for-joint-space-exploration/. [94]   NASA, UAE Sign Significant Outer Space, Aeronautics Cooperation Agreement, NASA Press Release (June 12, 2016), available at https://www.nasa.gov/press-release/nasa-uae-sign-significant-outer-space-aeronautics-cooperation-agreement. [95]   Sarwat Nasir, UAE Space Missions Moving Rapidly, says NASA expert, Khaleej Times Dubai, (July 11, 2018), available at https://www.khaleejtimes.com/nation/dubai/uae-space-missions-moving-rapidly-says-nasa-expert. [96]   UAE Space Agency Says it Won’t Break its Roscosmos Contract Despite Soyuz Crash, Sputnik News (Nov. 16, 2018), available at https://sputniknews.com/world/201811161069860111-uae-russia-roscosmos/. [97]   Philip Yiannopoulos, Inside the epic debate on rethinking our 50-year-old Outer Space Treaty, Fast Company (Sept. 24, 2018), available at https://www.fastcompany.com/90240304/inside-the-epic-debate-on-rethinking-our-50-year-old-outer-space-treaty. [98]   See further Matthew Wills, Space Is The Place: The US, USSR, and Space Exploration, JSTOR Daily (Sept. 25, 2014), available at https://daily.jstor.org/space-is-the-place/. [99]   Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, including the Moon and Other Celestial Bodies (Oct. 1967) (“Outer Space Treaty”), UN Office for Outer Space Affairs, available at http://www.unoosa.org/oosa/en/ourwork/spacelaw/treaties/introouterspacetreaty.html. [100] See, e.g., Fifty years since the first United Nations Conference on the Exploration and Peaceful Uses of Outer Space (1968 – 2018): UNISPACE+50, UNOOSA (June 2018), available at http://www.unoosa.org/oosa/en/ourwork/unispaceplus50/index.html. [101] Manual on International Law Applicable to Military Uses of Outer Space (MILAMOS Project), McGill University, available at https://www.mcgill.ca/milamos/. [102] Ann Deslandes, The Bold Future of the Outer Space Treaty, JSTOR Daily (Aug. 1, 2018), available at https://daily.jstor.org/the-bold-future-of-the-outer-space-treaty/. [103] Peter B. de Selding, EU draft space policy calls for more military involvement, SpaceNews (July 18, 2016) available at https://spacenews.com/eu-draft-space-policy-calls-for-more-military-involvement/ [104] Bryan Bender, Space war is coming – and the U.S. is not ready, Politico (Apr. 6, 2018), available at https://www.politico.com/story/2018/04/06/outer-space-war-defense-russia-china-463067 [105] Zoë Corbyn, The Asteroid Rush Sending 21st-Century Prospectors Into Space, The Guardian (June 9, 2018), available at https://www.theguardian.com/science/2018/jun/09/asteroid-mining-space-prospectors-precious-resources-fuelling-future-among-stars [106] Supra note 7, Outer Space Treaty, Article IX (Parties to the treaty shall “avoid [. . .] harmful contamination” of outer space and celestial bodies.). [107] Dr. Laura Grego, 50 years after the Outer Space Treaty: How secure is space?, Space Security Index 2017, 14th ed., 140, available at https://www.ucsusa.org/sites/default/files/attach/2017/12/50-Years-OST-article.pdf. [108] Michael Baumann, Who Gets to Own Outer Space?, The Ringer (Dec. 27, 2017), available at https://www.theringer.com/2017/12/27/16812048/future-of-space-x-nasa-elon-musk-donald-trump. [109] Loren Grush, Why Defining The Boundary of Space May Be Crucial For the Future of Spaceflight, The Verge (Dec. 13, 2018), available at https://www.theverge.com/2018/12/13/18130973/space-karman-line-definition-boundary-atmosphere-astronauts. [110] The White House, Office of the Press Secretary, Presidential Memorandum:  Space Policy Directive-2, Streamlining Regulations on Commercial Use of Space (May 24, 2018), available at: https://www.whitehouse.gov/presidential-actions/space-policy-directive-2-streamlining-regulations-commercial-use-space/. [111] Haley Byrd, Trump Orders Overhaul of Commercial Space Licensing, Weekly Standard (May 25, 2018), available at https://www.weeklystandard.com/haley-byrd/trump-orders-overhaul-of-commercial-space-licensing. [112] The White House, Office of the Press Secretary, Statements & Releases: Moon, Mars, and Worlds Beyond: Winning the Next Frontier (Feb. 21, 2018), available at https://www.whitehouse.gov/briefings-statements/moon-mars-worlds-beyond-winning-next-frontier/. [113] H.R. Rep. No. 2809 (2018), available at https://www.congress.gov/bill/115th-congress/house-bill/2809. [114] Haley Byrd, House Takes Up Space Commerce Legislation, Weekly Standard (Apr. 24, 2018), available at https://www.weeklystandard.com/haley-byrd/house-takes-up-space-commerce-legislation. [115] Jeff Foust, Commerce Department to Create “SPACE” Administration, Space News (May 27, 2018), available at https://spacenews.com/commerce-department-to-create-space-administration/. [116] Jeff Foust, NOAA Speeds Up Remote Sensing License Reviews Amid Broader Regulatory Changes, Space News (Apr. 5, 2018), available at https://spacenews.com/noaa-speeds-up-remote-sensing-license-reviews-amid-broader-regulatory-changes/. [117] Jeff Foust, Revised Remote Sensing Regulatory Rule Nears Release, Space News (Oct. 26, 2018), available at https://spacenews.com/revised-remote-sensing-regulatory-rule-nears-release/. [118] Jeff Foust, NOAA Explains Restriction on SpaceX Launch Webcast, Space News (Apr. 3, 2018), available at https://spacenews.com/noaa-explains-restriction-on-spacex-launch-webcast/. [119] Jeff Foust, Commerce Department Moves Ahead with Space Regulatory Reforms, Space News (June 22, 2018), available at https://spacenews.com/commerce-department-moves-ahead-with-space-regulatory-reforms/. [120] Jeff Foust, New Office of Space Commerce Director to Focus on Advocacy and Regulatory Issues, Space News (Aug. 23, 2018), available at https://spacenews.com/new-office-of-space-commerce-director-to-focus-on-advocacy-and-regulatory-issues/. [121] FAAA, supra note 119. [122] Id. [123] Id. [124] Id. [125] CFIUS operates pursuant to section 721 of the Defense Production Act of 1950, as amended by the Foreign Investment and National Security Act of 2007 (“FINSA”) (section 721) and as implemented by Executive Order 11858, as amended, and regulations at 31 C.F.R. Part 800. [126] NDAA, § 1703(a)(6)(A). [127] The select agents and toxins are detailed under several sections of the Code of Federal Regulations: 7 C.F.R. Part 331, 9 C.F.R. Part 121, and Title 42 of the C.F.R; id. [128] Id. § 1703(a)(6)(A)(vi). [129] Dept. of Treasury, Determination and Temporary Provisions Pertaining to a Pilot Program to Review Certain Transactions Involving Foreign Persons and Critical Technologies, 83 Fed. Reg. 51322 (Oct. 11, 2018). [130] Michael Brown and Pavneet Singh, China’s Technology Transfer Strategy:  How Chinese Investments in Emerging Technology Enable a Strategic Competitor to Access the Crown Jewels of U.S. Innovation, Defense Innovation Unit Experimental (January 2018). [131] Id.; B. Parrett and M. Bruno, Changing the Rules, Aviation Week, Vol. 180, No. 21, at 52-54 (Sept. 2018); Office of the U.S. Trade Representative, Findings of the Investigation into China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation Under Section 301 of the Trade Act of 1974 (Mar. 22, 2018). [132] Green field investments are a kind of foreign investment in which a foreign parent builds new operations in another country from the ground up. [133] Review of Controls for Certain Emerging Technologies, 83 Fed. Reg. 58,201 (advance notice of proposed rulemaking Nov. 19, 2018), available at https://www.gpo.gov/fdsys/pkg/FR-2018-11-19/pdf/2018-25221.pdf (hereinafter, “ANPRM”). [134] ANPRM, supra note 9 at 58,201. [135] Id. [136] ECRA § 1758(a)(3)(C). [137]   Export Administration Act of 1979, §§ 3(2)(A) and 5(d). [138]   ECRA, §§ 1756(d)(1) and (2). [139]   ECRA, § 1756(d)(3)(A)-(C). Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding the issues discussed above. Please contact the Gibson Dunn lawyer with whom you usually work, any of the following in the Aerospace and Related Technologies practice group: Washington, D.C. Karen L. Manos (+1 202-955-8536, kmanos@gibsondunn.com) Lindsay M. Paulin (+1 202-887-3701, lpaulin@gibsondunn.com) Christopher T. Timura (+1 202-887-3690, ctimura@gibsondunn.com) Los Angeles David A. Battaglia (+1 213-229-7380, dbattaglia@gibsondunn.com) Perlette M. Jura (+1 213-229-7121, pjura@gibsondunn.com) William J. Peters (+1 213-229-7515, wpeters@gibsondunn.com) Dhananjay S. Manthripragada (+1 213-229-7366, dmanthripragada@gibsondunn.com) Lauren M. Fischer (+1 213-229-7983, lfischer@gibsondunn.com) Orange County Casper J. Yen (+1 949-451-4105, cyen@gibsondunn.com) Brett Long (+1 949-451-4032, blong@gibsondunn.com) Arturo Pena Miranda (+1 949-451-4081, apenamiranda@gibsondunn.com) Denver Jared Greenberg (+1 303-298-5707, jgreenberg@gibsondunn.com) Jacob Rierson (+1 303-298-5963, jrierson@gibsondunn.com) New York David M. Wilf (+1 212-351-4027, dwilf@gibsondunn.com) San Francisco Matthew Reagan (+1 415-393-8314, mreagan@gibsondunn.com) Andrea Hadjiyianni (+1 415-393-8386, ahadjiyianni@gibsondunn.com) London Mitri J. 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March 27, 2019 |
The Hollywood Reporter Names Scott Edelman, Ben Ross and Orin Snyder to its 2019 Power Lawyers List

The Hollywood Reporter named Century City partner Scott Edelman, Los Angeles partner Ben Ross and New York partner Orin Snyder to its 2019 Power Lawyers list, which features 100 of the most influential entertainment attorneys in the industry.  The feature was published on March 27, 2019.

March 4, 2019 |
Supreme Court Holds That Copyright Owners May Not Sue For Infringement Until Copyright Office Processes Registration

Click for PDF Decided March 4, 2019 Fourth Estate Public Benefit Corp. v. Wall-Street.com, No. 17-571  Today, the Supreme Court held 9-0 that the Copyright Act requires copyright owners to wait until the Copyright Office has approved or denied an application for registration before bringing an infringement action. Background: The Copyright Act allows the owner of a copyright claim to register the claim with the Copyright Office.  Section 411(a) of the Act provides that a suit for copyright infringement may not be filed “until preregistration or registration of the copyright claim has been made” or “refused.”  Petitioner Fourth Estate, a news organization, filed applications with the Copyright Office to register copyright claims for articles written by its journalists.  Before the Copyright Office acted on the applications, Fourth Estate sued Wall-street.com for copyright infringement for displaying the articles on its website without a license.  Wall-street.com moved to dismiss the suit as premature, arguing that Section 411(a) barred Fourth Estate from suing for infringement until the Copyright Office approved or denied its application for copyright registration. Issue:  Has a copyright claim been “regist[ered]” with the Copyright Office, so that the copyright owner can commence an infringement suit, when the copyright owner delivers the required application, deposit, and fee to the Copyright Office, or only once the Copyright Office acts on that application. Court’s Holding: A copyright claim is not “regist[ered]” with the Copyright Office, and the copyright owner may not file an infringement suit, until the Copyright Office has processed the application. “If infringement occurs before a copyright owner applies for registration, that owner may eventually recover damages for the past infringement, as well as the infringer’s profits. . . . She must simply apply for registration and receive the Copyright Office’s decision on her application before instituting suit.” Justice Ginsburg, writing for the unanimous Court What It Means: The Court acknowledged that waiting for the Copyright Office to process an application to register a copyright claim could take “many months,” delaying enforcement and allowing infringement to continue during the delay.  The Court attributed these delays to “staffing and budgetary shortages that Congress can alleviate, but courts cannot cure.” The Court nevertheless emphasized that copyright owners may obtain monetary relief to remedy any infringement that occurs before registration is complete.  That relief could include actual damages or the infringer’s profits.  But the Court did not address the effect of its decision on the more typical remedy, statutory damages.  Section 412 of the Copyright Act limits the availability of that remedy when infringement occurs before the copyright holder registers its copyright claim. To avoid delay, copyright owners now have a greater incentive to seek registration earlier, rather than waiting until litigation is imminent.  Copyright owners can also pay an $800 special-handling fee to expedite processing of their application for registration.  In addition, the Copyright Act provides carve-outs that allow owners of certain works “especially susceptible to prepublication infringement”—including movies, musical compositions, and live broadcasts—to sue for infringement before the Copyright Office has acted on an application. Prior to the decision, some circuits had allowed copyright owners to commence infringement suits while an application for registration was pending, without waiting for the Copyright Office to process the application.  The decision leaves uncertain the effect of the Court’s ruling on currently pending infringement suits in those circuits that would have been considered timely when filed. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the Supreme Court.  Please feel free to contact the following practice leaders: Appellate and Constitutional Law Practice Caitlin J. Halligan +1 212.351.3909 challigan@gibsondunn.com Mark A. Perry +1 202.887.3667 mperry@gibsondunn.com Related Practice: Intellectual Property Wayne Barsky +1 310.552.8500 wbarsky@gibsondunn.com Josh Krevitt +1 212.351.4000 jkrevitt@gibsondunn.com Mark Reiter +1 214.698.3100 mreiter@gibsondunn.com Related Practice: Media, Entertainment and Technology Scott A. Edelman +1 310.557.8061 sedelman@gibsondunn.com Kevin Masuda +1 213.229.7872 kmasuda@gibsondunn.com Orin Snyder +1 212.351.2400 osnyder@gibsondunn.com © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

February 21, 2019 |
Media, Entertainment and Technology Group Outlook and Review – 2019

Click for PDF With an active end to 2018 and a quick start to 2019, we have had no shortage of material to report on for our semi-annual Media, Entertainment & Technology Practice Group Update.  From remasters (of pre-1972 recordings) to remand (“Stairway to Heaven”), and from Tweets (Stormy Daniels v. Trump) to retweets (Joy Reid).  There was M&A and the passage of the MMA—the Music Modernization Act, enacted to facilitate the accounting and payment of royalties in the digital streaming era.  Cert denials cemented notable rulings regarding California’s right of publicity, copyright fair use, and the DMCA.  And in trademark law, the Supreme Court’s 2017 ruling in Matal v. Tam continued to make waves.  Here, then, are the deals, rulings, and regulatory actions that capture current legal trends and will define future industry movement. I.    Transaction & Regulatory Overview A.    M&A 1.    Disney’s Acquisition of Twenty-First Century Fox Races to Completion On July 27, 2018, Disney and Fox shareholders voted to approve the acquisition of the majority of Twenty-First Century Fox, Inc. by The Walt Disney Company for $71.3 billion in cash and stock.[1]  The U.S. Department of Justice had already approved the arrangement between Disney and Fox, on June 27, 2018, with the stipulation that Disney must sell Fox’s regional sports networks.[2] Through the latter half of 2018, a number of foreign regulatory bodies evaluated the Disney-Fox merger.  The Competition Commission of India approved the merger of Star India and related assets (Fox Star Studios and National Geographic channels) in August 2018.[3]  The European Commission’s approval of Disney’s purchase of Twenty-First Century Fox assets followed in November 2018, subject to the condition that Disney discharge its A&E channels in Europe to address concerns that the deal with Fox would remove competition with respect to factual channels.[4]  China unconditionally approved the Disney-Fox deal in November 2018.[5]  Despite lingering approvals required from other regulators, approval from the United States, the European Union, and China were thought to be the most important obstacles to clear.[6] Brazil’s antitrust regulator Cade (Administrative Council for Economic Defense) noted on December 3, 2018 that the Disney-Fox deal raised concerns “about undermining competition in the cable television market,” specifically regarding concentration in the market of cable sports channels.[7]  Cade recommended remedial measures and has until March 2019 to issue a decision (which deadline can be extended for 90 days).[8]  On January 4, 2019, Bloomberg Law reported that Cade is expected to approve the proposed merger between Disney and Fox without asking for any asset sale.[9]  Disney and Fox were expected to present a proposal including offers to change behavior to facilitate approval of the deal.[10]  Regulators returned from year-end recess on January 30, 2019.[11]  Despite meetings between Bob Iger, Disney’s Chief Executive Officer, and representatives of CADE in early February 2019, Cade has not issued a decision as of February 12, 2019.[12]  Brazilian regulators remain divided on whether the deal can be approved without Disney’s sale of one of its two sports channels in the country (Fox Sports and ESPN), with reports that some Cade board members still view behavioral remedies as the path to approval.[13]  Bloomberg reports that the deadline for a decision from Cade is March 17, 2019, though an extension can be requested if the case isn’t discussed at Cade’s upcoming February 27 meeting.[14] At the end of 2018, Disney and Fox also awaited authorization of regulatory authorities in Mexico, with speculation of regulations due to the likelihood that this deal will monopolize sports TV and that Disney, after the acquisition, would own 28% of the content distribution market in Mexico.[15]  On January 31, 2019, Mexico’s Federal Economic Competition Commission approved the Disney-Fox merger after Disney agreed to sell its share of Walt Disney Studios Sony Pictures Releasing de México to Sony Pictures Releasing International Corporation.[16] Twenty-First Century Fox announced its filing of a registration statement for Fox Corporation, the new Fox entity to be spun off in connection with the merger, with the SEC on January 7, 2019.[17]  At the end of January 2019, as per a filing with the SEC, Disney expects the Disney-Fox deal to close by June 2019,[18] though other sources expect the deal to close in February or early March 2019.[19] 2.    Universal and Lionsgate Expand on Prior Collaborations On August 6, 2018, Universal Music Group (“UMG”) announced a multi-year, first-look television deal with Lionsgate.[20] Under the deal, Lionsgate and Polygram Entertainment, UMG’s film and television production and development division, will create original scripted and unscripted television projects drawn from UMG’s catalogue of music, labels, and artists.[21] David Blackman, the head of Polygram Entertainment, stated that “[w]ith this partnership, we’ll continue to expand the definition of music-driven stories—whether that means narratives set against entire scenes of eras of music, or projects driven by our artists’ catalogues.”[22] UMG will also produce soundtrack albums associated with the projects.[23] This deal builds on the companies’ past successful collaborations, which includes film scores and soundtracks to La Land, Hunger Games, and Divergent.[24] Additionally, the announcement came days after Universal Music Publishing Group executed an exclusive administration deal to represent Lionsgate’s music publishing properties and administer its music rights.[25] 3.    Sinclair and Tribune Sue Each Other Over Failed Merger In August 2018, Tribune Media Co. terminated its agreement to be acquired by Sinclair Broadcast Group and filed suit against Sinclair, seeking approximately $1 billion in damages for Sinclair’s alleged failure to fulfill its obligation under their merger agreement to use its reasonable best efforts to obtain regulatory approval.  The $3.9 billion deal, which was announced in May 2017, would have created a company that owned television stations in 108 markets, covering 72% of U.S. homes.[26]  Before the agreement was terminated, the U.S. Federal Communications Commission issued an order stating there were “substantial and material questions of fact” as to whether “Sinclair engaged in misrepresentation and/or lack of candor in its applications with the Commission” and referred review of the acquisition to an administrative law judge.[27] Tribune alleged in its lawsuit that “in an effort to maintain control over stations it was obligated to sell, Sinclair engaged in unnecessarily aggressive and protracted negotiations with the [government] over regulatory requirements, refused to sell stations in the markets as required to obtain approval, and proposed aggressive divestment structures and related-party sales that were either rejected outright or posed a high risk of rejection and delay—all in derogation of Sinclair’s contractual obligations.”[28]  Sinclair has called the lawsuit meritless, saying that it fully complied with its obligations under the merger agreement and that Tribune is trying “to capitalize on an unfavorable and unexpected reaction from the Federal Communications Commission to capture a windfall.”[29]  Sinclair also filed a countersuit against Tribune, alleging Tribune breached its obligation under their merger agreement to use its reasonable best efforts to obtain regulatory approval by prioritizing its litigation strategy against Sinclair at the expense of its cooperation with Sinclair to try to close the merger.[30] 4.    Nexstar Agrees to Acquire Tribune A few months after the failure of its merger with Sinclair, Tribune found a new buyer. In December 2018, Tribune signed a deal to be acquired by Nexstar Media Group for $4.1 billion in cash.[31]  If completed, the deal, which is worth $6.4 billion including the assumption of Tribune’s debt, would make Nexstar the largest regional U.S. TV station operator.[32]  Tribune shareholders will receive an additional 30 cents per share per month in consideration (less any dividends paid by Tribune) if the merger does not close by August 31, 2019.[33]  In order to get U.S. Federal Communications Commission approval for the merger, Nexstar said it plans to divest some of the more than 200 television stations that would be owned by the combined company, including stations in 13 of the 15 markets in which both Tribune and Nexstar currently own stations.[34] 5.    Sky Auction Draws to a Close The nearly two-year battle to acquire the European pay-TV broadcaster Sky PLC drew to an end in September 2018, with Comcast prevailing over Twenty-First Century Fox (which was backed by Disney due to the Fox acquisition).[35]  Fox, which held a 39% stake in Sky, was the first to offer a bid in December 2016, but faced delays due to the prolonged regulatory review in the U.K.[36]  Comcast thereafter made its own offer, with each company making competing bids thereafter until they deadlocked at $34 billion.[37]  The stand-off exceeded the September 22, 2018 deadline imposed by U.K. regulators and triggered a rare blind auction to force the companies to disclose their best offers.[38]  The auction was a one-day bidding process that lasted three rounds and required sealed bids with cash-only offers.[39]  After the bidding closed, it would be left to the Sky shareholders to accept either offer.[40] In the final round in September 2018, Comcast outbid Fox by $3.6 billion, offering a total of $38.8 billion.[41]  Comcast officially acquired Sky on October 9, 2018, by purchasing more than 75% of the company’s shares, including the 39% stake that Fox previously owned.[42] 6.    Microsoft Studios Acquires Six Video Game Development Studios and Founds a Seventh in 2018 On November 10, 2018, Microsoft Studios announced its acquisition of two video game development studios, Obsidian Entertainment and inXile Entertainment, for undisclosed amounts.[43]  Both studios are known for their development of role-playing games (RPGs), such as Obsidian’s Fallout: New Vegas and Star Wars Knights of the Old Republic II: The Sith Lords and inXile’s Wasteland series.[44]  The acquisitions followed the June 2018 announcement of Microsoft’s founding of a new video game studio, The Initiative, and its acquisitions of four other gaming developers: Compulsion Games (We Happy Few), Ninja Theory (Hellblade: Senua’s Sacrifice), Undead Labs (State of Decay series), and Playground Games (Forza Horizon series).[45]  Microsoft now owns thirteen gaming development studios.[46] B.    SVOD Update 1.    Diversification, Even More Original Content, and Increased Competition In July 2018, Netflix collected 112 Emmy nominations (across 40 different shows),[47] further illustrating its prioritization of original content to propel growth and influence in the streaming video on demand (SVOD) industry.  By October, Netflix had spent over $8 billion on content in 2018, and announced plans to offer another $2 billion in senior notes on October 22, 2018 to be used “for general corporate purposes, which may include content acquisitions, production and development, capital expenditures, investments, working capital and potential acquisitions and strategic transactions.”[48] Hulu and Amazon have also positioned themselves for continued growth through expansion of original content in early 2019.  Following Disney’s acquisition of Fox, Disney will own a 60% stake in Hulu, and, along with the potential integration of additional Fox content, Disney plans to use its expanded influence to invest in more original content for Hulu and promote international expansion of the service.[49]  Additionally, a study by Ampere Analysis from September 2018 revealed that Amazon’s current plans for new original programming will almost double its original content, with over 100 upcoming projects that will supplement the 105 original programs currently on its roster.[50] In addition to these efforts to expand original content, the latter half of 2018 was marked by efforts to shake up the SVOD industry with numerous new entrants.  In October 2018, AT&T announced that it would be releasing a streaming service in late 2019;[51] in November 2018, Disney officially confirmed that its upcoming streaming service will be called Disney+ and will be launching in late 2019.[52] 2.    Katzenberg & Whitman Launch Short-Form Streamer Quibi Quibi, a new streaming service led by Jeffrey Katzenberg and Meg Whitman, plans to create a library of high-quality, short-form videos for viewing on mobile devices.  Named for the “quick bites” of entertainment it will broadcast, the service plans to launch at the end of 2019 with 5,000 unique pieces of content, each 10 minutes or less, specifically designed to be viewed on a phone.[53]  Despite being nearly a year away from its anticipated launch date, Quibi is already attracting top talent, including Oscar-winning director Guillermo del Toro, Twilight and Lords of Dogtown director Catherine Hardwicke and Spider-Man director Sam Raimi. Incubated at WndrCo, the consumer technology holding company and venture investor, Quibi raised $1 billion in August 2017 from major Hollywood studios, a number of independent television studios and major technology companies.  The aim of such investments, in part, is to allow Quibi to tap into the studios’ creative talent and resources and the technology companies’ innovations like 5G broadband, big data and analytics.  [Disclosure: Gibson Dunn represents WndrCo and Quibi.] C.    China Update 1.    Open Road Films Files for Chapter 11 Bankruptcy On September 6, 2018, Open Road Films LLC, the North American film distributor known for its release of independent films such as the Best Picture Academy Award-winning film Spotlight, and its affiliated entities filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware, reporting approximately $141 million in liabilities.[54]  In August 2017, Tang Media Partners, the Shanghai and Los Angeles-based investment group, had acquired Open Road Films from AMC Entertainment and Regal Entertainment Group for approximately $28.8 million.[55]  This acquisition followed Tang Media Partners’ previous acquisition in summer 2016 of IM Global, a film finance and sales agency, and the related launch of a television joint venture, IM Global Television, with Chinese technology firm Tencent Holdings.[56]  Announcing its plans to combine Open Road Films, IM Global, and IM Global Television under one brand, Tang Media Partners launched Global Road Entertainment in October 2017 as a global content company with a particular focus on the development, production, and distribution of film and television content that would bridge the U.S. and China markets.[57]  In February 2018, Global Road announced a commitment of $1 billion to production finance over three years,[58] but the studio struggled to raise the capital needed to complete the Global Road restructure and suffered from poor box office performance.[59]  In July 2018, Tang Media Partners cut off additional funds to Open Road Films,[60] and shortly thereafter bank lenders froze its cash assets.[61] On December 19, 2018, the U.S. Bankruptcy Court for the District of Delaware approved the asset sale by Open Road, including its library of around 45 films, for approximately $87.5 million to stalking horse bidder Raven Capital Management.[62] 2.    Tencent’s China Literature Acquires New Classics Media for $2.25 Billion On August 13, 2018, China Literature, the publicly listed e-books company that was spun off by Tencent Holdings in November 2017, announced that it would wholly acquire the film and television production company New Classics Media for approximately $2.25 billion.[63] A prolific production company, New Classics Media is known for producing Chinese television series and blockbuster films, including Hello Mr. Billionaire,[64] which was one of last year’s five highest-grossing films at China’s box office, earning $367 million.[65] In March 2018, Tencent had previously purchased a 27 percent stake in New Classics Media from Beijing Enlight Media, an investment that was designed to unlock content for Tencent’s streaming-video platform, Tencent Video.[66] In announcing the buyout of the remaining equity interest in New Classics Media, Tencent cited its desire to join New Classics Media’s production expertise with China Literature’s extensive literary library, considering that a third of the top 50 films and a quarter of the top TV series in China are literary adaptations.[67] The acquisition marked yet another strategic investment in the entertainment sector by Tencent, which, in addition to its own film distribution and production unit, holds minority equity stakes in a number of entertainment companies, including the China-based studios Huayi Brothers Media and Bona Film Group and the U.S.-based entertainment companies Skydance Media and STX Entertainment.[68] 3.    Tencent Music Entertainment Raises $1.1 Billion in its U.S. IPO Following a delay of its planned IPO in October 2018, due to a downturn in technology stocks and a rise in global market volatility fueled, in part, by U.S.-China trade tensions, Tencent Music Entertainment, the online music division controlled by Tencent Holdings, raised $1.1 billion through its U.S. IPO last December, with an implied valuation of $21.3 billion.[69]  Tencent Holdings created Tencent Music after acquiring a controlling interest in China Music Corporation in 2016, which Tencent Holdings then combined with its own music streaming business.[70]  Tencent Music offers the largest music-streaming service in China, and the company focuses on three main offerings: music streaming, online karaoke, and live-streamed performances.  At the time of its IPO, Tencent Music reported over 800 million unique monthly active users,[71] but, unlike traditional subscription-based models, only a small percentage of these users are paying subscribers.[72]  In Q2 2018, the company earned over 70% of its revenue through in-app tipping, virtual gifts, and other music-related “social entertainment services.”[73] 4.    The Dalian Wanda Group Scales Back AMC Ownership As Chinese regulators continue their efforts to retrench Chinese companies’ foreign investments, it was announced on September 14, 2018 that the Dalian Wanda Group would be curtailing its equity interest in AMC Entertainment,[74] which Wanda acquired in 2012 for $2.6 billion.[75] AMC Entertainment repurchased around a third of the shares owned by Wanda and raised $600 million from private equity firm Silver Lake Partners through the issuance of unsecured convertible notes.[76] Following the transaction, Wanda owns around 50% of AMC shares; however, upon a full conversion of the notes, Wanda’s ownership stake in AMC would fall to around 38%.[77] II.    Legislative & Regulatory Updates A.    Music Modernization Act Enacted into Law In October 2018, the Music Modernization Act, the most sweeping update to copyright law in decades, was signed into law, introducing reforms that were designed to modernize copyright law for the digital streaming era.[78]  The bill unanimously passed both houses of Congress and had widespread support among record labels, musicians, and digital service providers.[79]  The act has three main pieces of legislation combined together: First, the Music Modernization Act creates a formalized non-profit agency, the Mechanical Licensing Collective, run by major music publishers, which creates a comprehensive database of recordings and then administers the mechanical license of recordings streamed on services like Spotify, Amazon Music, Google Play, and Tidal.  Rather than identifying who holds the mechanical license to a particular track, this agency will be responsible for establishing blanket royalty rates that would be used to pay the composers and songwriters for interactive streaming or digital downloads.  The legislation also revamps the rate court process when there are disputes over royalty rates by allowing disputes to be adjudicated by a randomly assigned district judge in the Southern District Court of New York, instead of being assigned to a single rate court judge. Second, the Compensating Legacy Artists for their Songs, Service, and Important Contributions to Society (“CLASSICS”) Act ensures that sound recordings made before 1972 are covered by federal copyright law until February 15, 2067.  Previously, sound recordings made prior to February 15, 1972 did not receive federal copyright law protection.  Because some state laws granted these recordings copyright protection and others did not, the CLASSICS Act is intended to address this patchwork of state laws.  Musicians will now have the opportunity to receive royalties for songs recorded before 1972.  The statute also ensures that older songs will enter the public domain.  Recordings made before 1923 will enter the public domain after a three-year period, with recordings from 1923 to 1956 entering within the next few decades. Finally, the Allocation for Music Producers (“AMP”) Act improves royalty payouts for producers, mixers, and sound engineers from SoundExchange, the non-profit organization established by Congress that distributes royalties on sound recordings, when their sound recordings are used on streaming services or digital downloads.  Notably, this is the first time that music producers have ever been mentioned in federal copyright law.[80] Regulations are currently being drafted to implement the provisions of the Music Modernization Act, and we will be watching closely to see how those regulations give effect to the Act, and how such provisions begin to be interpreted by the courts. B.    DOJ Opens Review of Paramount Consent Decrees In October 2018, the Department of Justice opened a review of the Paramount Consent Decrees that for over seventy years have regulated how certain movie studios distribute films to movie theaters.[81]  In 1938, the DOJ brought an antitrust suit against the major movie picture studios at the time (including Paramount, MGM, Universal, Columbia Pictures (now Sony), 20th Century Fox, United Artists, and Warner Brothers), alleging that they had conspired to control the industry through their ownership of film distribution and exhibition.  A decade later, the Supreme Court ruled in United States v. Paramount Pictures, Inc. that the studios had engaged in a widespread conspiracy and required that each studio enter into a consent decree with the DOJ, now known as the “Paramount Consent Decrees.”[82]  The studios were mandated to divest their distribution operations or movie theaters and, going forward, they were not permitted to both distribute movies and own theaters without prior court approval.  The decree also set limits on other practices such as circuit dealing and setting minimum pricing, and the practice of giving exclusive film licenses for certain geographic areas. The premise of the Department of Justice’s review is that the motion picture industry has changed considerably since the Paramount Consent Decrees were entered.[83]  For example, unlike the movie palaces seventy years ago that had one screen and showed one movie at a time, there are now multiplex theaters that have multiple screens showing movies from numerous different distributors at the same time.  Consumers today are also not limited to watching movies in theaters and have the ability to view movies on cable and broadcast television, DVDs, and over the Internet through streaming services.  The Department of Justice recently completed a thirty-day review period for public comment and is now determining whether these decrees should be modified or terminated altogether, which might lead to structural changes in the industry or encourage consolidation. C.    Supreme Court Declines Appeal Against Net Neutrality Laws On November 5, 2018, the Supreme Court denied a petition for writ of certiorari brought by the Trump administration and the telecommunications industry to overturn a D.C. Circuit ruling that had upheld Obama Administration-era net neutrality rules.[84]  Two years ago, the D.C. Circuit held that the Federal Communications Commission (“FCC”) had proper authority to reclassify broadband internet under Title II of the Telecommunications Act and could promulgate rules requiring internet service providers to offer equal access to all web content regardless of who build the facilities that allow that data to be disseminated.[85]  The Supreme Court’s refusal to take up the appeal does not affect a pending challenge to the 2017 repeal of net neutrality rules by the now Republican-led FCC.  The D.C. Circuit heard oral arguments in that case on February 1, 2019, with a decision expected by this summer.[86] In response to the FCC’s net neutrality repeal, some states have taken legislative action.  In September 2018, California passed a net neutrality bill seeking to restore internet access rules.  The Justice Department swiftly sued the state, alleging that Congress granted the federal government, through the FCC, the sole authority to create rules for internet service providers.[87]  A month later, California reached an agreement with the DOJ to stay the lawsuit until the D.C. Circuit issues its ruling on the pending challenge to the FCC’s 2017 repeal of federal net neutrality rules.[88] III.    Recent Litigation Highlights A.    Music Industry 1.    Ninth Circuit Holds Remasters Do Not Defeat Plaintiff’s Copyright Claims On August 20, 2018, the Ninth Circuit overturned the district court’s grant of summary judgment in favor of CBS Corporation in a state-law copyright infringement suit brought by Plaintiff ABS Entertainment, sending the case back to district court for further proceedings.[89]  On August 17, 2015, plaintiffs had filed a putative class action against CBS alleging violations of California state law that protects plaintiffs’ rights in pre-1972 sound recordings—recordings that precede amendments to federal copyright law that went into effect in 1972.  CBS moved for summary judgment, arguing that the digitally remastered recordings it broadcasted constituted derivative works that were themselves capable of federal copyright protection, thereby preempting plaintiffs’ state-law claims.  After excluding plaintiffs’ expert on the subject under FRE 702, the district court held that there was no dispute of material fact as to whether the remastered recordings constituted derivative works, and granted summary judgment in CBS’s favor. On appeal, the Ninth Circuit reversed both the grant of summary judgment and the exclusion of plaintiffs’ expert.  Applying the Durham test for determining whether a recording constitutes a “derivative work” as defined in the Copyright Act, the Ninth Circuit found that “the district court’s identification of ‘perceptible changes’ between the recordings in characteristics relating to ‘quality’ did not ensure that the remastered versions contained anything of consequence owing its origin to the remastering engineers.”[90]  The appellate court concluded that “[a]lthough we do not hold that a remastered sound recording cannot be eligible for a derivative work copyright, a digitally remastered sound recording made as a copy of the original analog sound recording will rarely exhibit the necessary originality to qualify for independent copyright protection.”[91] 2.    Royalty Streaming Disputes Two class action complaints against Sony Music Entertainment and Warner Music Group were filed at the end of 2018 on behalf of various musical artists alleging that the defendant distributors had failed to pay contractually owed royalties for the digital streaming of plaintiffs’ works abroad. In the Southern District of New York, The Rick Nelson Company, as a representative party of a similarly situated class of music artists, sued Sony Music Entertainment, alleging that Sony has been improperly assessing an “intercompany charge” on revenues collected from its wholly owned foreign affiliates that takes “up to 68% off the top of the international revenue earned from streaming sales” of plaintiffs’ artistic works.[92]  Sony has not yet responded to the complaint. In California, Leonard Williams filed a similar complaint against Warner Music Group in the Los Angeles County Superior Court, alleging that Warner was also assessing improper “intercompany charge[s]” in violation of existing agreements.[93]  Shortly thereafter, Warner Music Group removed to the District Court for the Central District of California and filed a motion to dismiss, arguing that there could be no breach of contract as a matter of law because the contract attached to the complaint “contains no provision for royalties to be paid based upon the digital streaming of sound recordings, let alone the foreign digital streaming of sound recordings,” instead limiting royalties to “sales” of “phonograph records” and “tape albums” by the distributor.[94] 3.    Ninth Circuit Walks “Stairway” Back to District Court In September 2018, the Ninth Circuit overturned a 2016 jury verdict in favor of Led Zeppelin and remanded for a new trial in a copyright infringement suit alleging that Led Zeppelin’s hit “Stairway to Heaven” was substantially similar to plaintiffs’ song “Taurus” (performed by the group Spirit).[95] Although at trial the jury found that plaintiff owns the copyright to “Taurus,” a finding not disputed on appeal, it also found that the two songs were not “substantially similar” under the extrinsic test for unlawful appropriation that requires the factfinder to determine similarity “by breaking the works down into their constituent elements, and comparing those elements.”[96]  On appeal, plaintiff Skidmore argued among other points that the court’s instructions to the jury failed to make clear that the selection and arrangement of unprotectable musical elements are themselves protectable by copyright.  The Ninth Circuit agreed, finding that the district court’s failure to include such an instruction, despite receiving such a proposed instruction from both parties, constituted an abuse of discretion. Defendants argued both that plaintiff had failed to preserve an objection to the exclusion of this instruction and that the error was otherwise harmless.  The panel disagreed, calling the waiver argument “baseless” and noting that the error was substantial in light of Skidmore’s heavy reliance at trial on the theory of selection and arrangement in arguing infringement.[97]  The Ninth Circuit similarly agreed with plaintiff that the court had erred in providing instructions to the jury that “copyright does not protect chromatic scales, arpeggios or short sequences of three notes” and that “any elements from prior works or the public domain are not considered original parts and not protected by copyright.”[98]  The panel noted that “[t]here is a low bar for originality in copyright” that can extend to “an arrangement of a limited number of notes.”[99] In remanding the case for retrial, although the panel confirmed that the scope of the protected copyright under the 1909 Act is defined by the deposit copy of the song, it found that the district court abused its discretion in refusing to allow recordings of “Taurus” to be played in the presence of the jury to prove that Led Zeppelin had access to the song for copying.[100]  The district court had found that, although probative, such recordings would be unduly prejudicial as they do not define the scope of the copyright in deciding whether copying occurred.  The Ninth Circuit held that “[l]imiting the probative value of observation was not proper here, as the risk of unfair prejudice or jury confusion was relatively small and could have been reduced further with a proper admonition.”[101]  A petition for rehearing en banc is currently being briefed, accompanied by several amici. 4.    Bluewater v. Spotify On October 4, 2018, the District Court for the Western District of Tennessee denied Spotify USA Inc.’s motion to dismiss a suit filed by Bluewater Music Services Corporation alleging willful copyright infringement of music compositions published by plaintiff and seeking the maximum $150,000 statutory damage award for each of 2,142 music compositions.[102]  Bluewater’s complaint alleged that Spotify failed to obtain licenses for works it streamed that are owned by Bluewater, including after Bluewater demanded proof of licensing and gave notice to Spotify terminating any rights defendant may have claimed to have.[103]  Spotify moved to dismiss the complaint, arguing that Bluewater had no standing as the mere administrator of the underlying copyrights and that Bluewater lacked copyright registrations for 23 of the music compositions in suit. Regarding standing, the court evaluated Bluewater’s administrative agreements and found that their grant of “the sole and exclusive right . . . to print, publish, sell, dramatize, use and license the use of the Compositions” was sufficient, despite another provision that prohibited Bluewater from executing any mechanical licenses except at the “full statutory rate without prior written consent.”[104]  Regarding the failure to obtain copyright registrations before filing suit, the court acknowledged that existing precedent requires such registration but also expressed judicial-efficiency concerns about the dismissal of only 23 works from the case.[105]  Ultimately, the court denied the motion to dismiss the unregistered works with leave to refile after the Supreme Court decides Fourth Estate Pub. Benefit Corp. v. Wall-Street.com, LLC (No. 17-571), which the court expects will decide whether “a copyright infringement action may be taken after the creative work has been filed with the Copyright Office, but before registration is approved.”[106] 5.    Chris Brown Loses Case Against Philippine Church for Alleged Extortion On December 6, 2018, a Los Angeles Superior Court Judge dismissed all claims brought by the singer Chris Brown against Iglesia Ni Cristo (a Philippine church) and its general counsel for alleged extortion.  Brown had brought suit alleging that following a July 2015 concert he performed in Manila, he was detained at a hotel at the direction of the church, which controls an arena where Brown had previously canceled a New Year’s Eve concert.  Brown alleged that the church sought to extort a payment from him in connection with his release and departure from the Philippines and that Brown had suffered emotional distress as a result. In September 2018, Judge Patricia Nieto of the Superior Court granted defendants’ motion to dismiss Brown’s second amended complaint against the church’s California branch (which was named in the lawsuit in an effort to confer California jurisdiction).  The court found that Brown failed to plead an alter ego theory or single enterprise theory as a matter of law and denied Brown an opportunity to replead the theory.  Later that month, the Philippine parent church organization and its general counsel, as specially appearing defendants, brought a separate motion to quash Brown’s service of summons on these two Philippine defendants for lack of personal jurisdiction.  On December 6, 2018, Judge Nieto granted the motion to quash, finding that Brown had failed to provide competent evidence to confer jurisdiction and held that asserting jurisdiction would violate the Supreme Court’s and California’s governing precedents on general and specific jurisdiction.[107]  After filing a notice of appeal, Brown failed to timely pursue that appeal, which the California Court of Appeal dismissed, on February 6, 2019.  [Disclosure: Gibson Dunn represented Iglesia Ni Cristo, its general counsel, and Iglesia Ni Cristo’s California branch.] 6.    Viktor v. Top Dawg Entertainment LLC On October 24, 2018, Judge Engelmayer of the District Court for the Southern District of New York denied a partial motion for summary judgment that sought to bar the plaintiff Lina Iris Viktor from receiving certain damages in her suit alleging that defendant creators of the music video for the single All the Stars by Kendrick Lamar infringed her copyrights by including her paintings in the music video without permission.[108]  The suit seeks actual damages and indirect profits for infringement of Viktor’s unregistered copyrights in her paintings, which appear in a 19-second part of the music video released in connection with the album accompanying the Black Panther film. Because Viktor’s copyrights are unregistered and therefore not entitled to statutory damages, she bears a burden under the Copyright Act to “demonstrate a causal relationship between the infringement and the defendants’ revenues.”[109]  Defendants sought summary judgment on the basis that “no non-speculative evidence could possibly be mustered that would demonstrate a causal nexus between defendants’ profits and defendants’ alleged infringing use of Viktor’s artwork in the video.”[110]  However, the court found the motion to be premature as discovery had not yet concluded, finding that “a challenge by the defense to this claim for damages is properly resolved on a motion for partial summary judgment following the development of a full factual record.”  The court also deferred a decision as to whether Viktor would be entitled to prove damages for reputational harm, an injury not explicitly recognized in the Copyright Act.[111]  On December 21, the case was dismissed following an apparent settlement.[112] B.    Copyright Fair Use Developments 1.    Fox News Network, LLC v. TVEyes, Inc. Ending a legal battle that began in 2013, the Supreme Court denied the media-monitoring company TVEyes’s petition for certiorari, leaving in place the Second Circuit’s February 2018 decision that TVEyes’s media-monitoring service could not be justified as fair use because it “deprives Fox of revenue that properly belongs to the copyright holder.”[113]  TVEyes recorded television around the clock and provided a searchable database of real-time television clips for its subscribers (which include journalists, politicians, and companies), who pay a monthly fee.  In 2013, Fox News sued TVEyes for copyright infringement.[114] After a lengthy battle in the district court, in February 2018 the Second Circuit reversed the lower court’s ruling that the service was protected by the fair use doctrine.  While the video service was a useful tool, the Second Circuit said it was “not justifiable as fair use” because “at bottom, TVEyes is unlawfully profiting off the work of others by commercially redistributing all of that work that a viewer wishes to use, without payment or license.”[115]  TVEyes had argued that its function of allowing users to search the “vast corpus” of available news material rendered it transformative and thus protected by the fair use doctrine, much like Google’s unauthorized digitization of millions of books, the subject of the landmark decision Authors Guild, Inc. v. Google, Inc.[116]  The Second Circuit agreed that the searchability of the material did weigh in favor of fair use, but that the service “usurped a function for which Fox is entitled to demand compensation under a licensing agreement” by allowing excessive use of the recorded clips and thus defeated the defense of fair use.[117] TVEyes sought to overturn the ruling, writing in its petition for certiorari that the ruling would allow networks like Fox News to “wield copyright law as a shield” against criticism and that the fair use doctrine is the “key first Amendment safeguard to protect the public from such abuses.”[118]  Fox News urged the Supreme Court to pass on the case, accusing TVEyes of trying to “clothe itself in the mantle of media criticism” and emphasizing that the Second Circuit’s decision did not involve political speech or First Amendment issues, but rather was a simple case of “unauthorized distribution of copyrighted content.”[119]  Following denial of certiorari, the parties reached a settlement.[120] 2.    Prince/Warhol In a key case regarding artistic expression, a federal judge in New York City will determine whether Andy Warhol’s iconic colorized images are protected from copyright claims by the fair use doctrine.[121]  In April 2017, Warhol’s estate sued photographer Lynn Goldsmith, asking the court for a declaration that his 1984 paintings of Prince did not violate her copyright in the original photo because, although Warhol often used photographs as inspiration, his works were “entirely new creations.”[122]  Goldsmith filed a counterclaim for copyright infringement shortly afterwards, and dueling motions for summary judgment are currently before the court.[123] Goldsmith argues that the court should grant her copyright claim on summary judgment because Warhol’s work directly copied hers and is not eligible for protection under the fair use doctrine.  “In today’s digital world, anyone can easily modify a photograph on a computer to add high contrast, coloration and artifacts” and Warhol “did little more than that” in the works at issue, Goldsmith argues.[124]  If the court were to find these “superficial revisions” transformative, she says, this would give a “free pass to appropriation artists and destroy derivative licensing markets for commercial photographers whose works are used without permission.”[125] Warhol’s estate, on the other hand, argues that the substantial similarity requirement for copyright infringement centers on protectable elements like lighting, shading, and the “aesthetic effect”—precisely the elements that Warhol manipulates in his works.[126]  After Warhol’s artistic manipulations, Warhol’s estate argued, the only commonality remaining between Warhol’s Prince Series and Goldsmith’s photograph is “the rough outline of Prince’s face—which cannot be copyrightable as a matter of law.”[127]  In addition, Warhol’s estate pointed out that the market for Goldsmith’s work is not harmed by Warhol’s works—fine art collectors who buy Warhol’s work are not “rock-and-roll memorabilia collectors” who buy hers.[128]  Finally, Warhol’s estate’s attorneys warned that a contrary ruling would “create a torrent of doubt and dispute over artists long considered to be transformative” and “chill[] future creativity.”[129]  A ruling is expected sometime this year. 3.    Instagram Art Show Was Fair Use, Richard Prince Says Richard Prince, a famous “appropriation artist,” is pushing to end copyright litigation over his Instagram-themed art exhibit, arguing that he was allowed to display largely unaltered versions of other artists’ images because he utilized them in “a radically different aesthetic context.”[130]  Mr. Prince is facing two separate copyright infringement lawsuits from photographers whose works were featured in “New Portraits”—an installation of large images made to look like Instagram posts, with captions written by Mr. Prince.  He moved for summary judgment in both cases, saying that his use of the images was protected by the fair use doctrine.[131] In both instances, Mr. Prince took images of the artists’ works, blew them up, and placed them in art installations designed to look like Instagram posts.  He acknowledges that his copies do not “cut, mark, paint over, scratch or otherwise obscure” the original photograph, but that this was a feature of his fair use argument, not a problem with it.[132]  Mr. Prince argues that his intent was to “authentically replicate[] in the physical world the virtual world of social media,” and therefore that this is protected by the fair use doctrine.[133]  Rulings are expected sometime this year. C.    DMCA 1.    Supreme Court Denies Certiorari for Porn Copyright Case In late October, the Supreme Court rejected an invitation to clarify the scope of the Digital Millennium Copyright Act’s (“DMCA”) safe harbor provision,[134] which immunizes online service providers from liability for infringing material maintained “at the direction of a user . . . on a system or network controlled or operated by or for the service provider” under certain circumstances.[135] As reported in our 2018 Mid-Year Update, in Ventura Content Ltd. v. Motherless Inc., et al.,[136] the Ninth Circuit rejected an attempt to reverse a grant of summary judgment to Motherless, Inc., a website that allows users to upload pornographic videos for public viewing.  Appellant Ventura Content Ltd. argued that Motherless failed to remove material that it knew or should have known was copyright infringing, and that Motherless did not have a proper policy for removing users who repeatedly infringed copyright.  Relying on a case from the Second Circuit, Capitol Records, LLC v. Vimeo, LLC,[137] the panel rejected the notion that Motherless had actual or constructive knowledge of the infringing material, holding that “[t]he copyright owner must show knowledge” of the specific videos “that infringed its copyright and are the subject of its claim.”[138]  Moreover, the panel affirmed the district court’s determination that there was “no issue of triable fact” as to whether Motherless had “adopted and reasonably implemented” a policy of terminating users who repeatedly posted copyright-infringing materials.[139] After its loss, Ventura filed a petition for certiorari in the Supreme Court, but in November 2018 the Supreme Court rejected Ventura’s petition, leaving the Ninth Circuit ruling in place.[140] 2.    Cox Settles BMG Case, Faces New Claims from Labels and Publishers Just days before trial was set to begin, Cox Communications settled a case brought by BMG Rights Management seeking to hold Cox liable for Cox users’ illegal downloads of BMG’s copyright-protected material.  The suit, which began in 2014, alleged that Cox failed to implement a policy for terminating the service of users who repeatedly downloaded the material at issue, a so-called “repeat infringer” policy, thereby allowing offending users to continue to illegally download the material.  After U.S. District Judge Liam O’Grady ruled that Cox’s failure to enact or enforce such a policy deprived Cox of the shelter of the safe harbor provision,[141] the case went to trial, and in 2015 a jury found Cox liable and awarded BMG a multimillion dollar verdict. The Fourth Circuit reversed, holding that the district judge had given improper jury instructions, but the panel importantly also held that the district court had properly found that Cox had failed to enforce its repeat infringer policy.[142]  The case was remanded to the district court for further proceedings.[143] In late 2018, Cox and BMG reached a settlement, but the settlement does not end Cox’s legal woes.  A case brought against Cox by a number of major record labels, including Sony Music Entertainment, Universal Music Corp., and Warner Bros. Records, raises similar issues and is also being presided over by Judge O’Grady.  Given that the Fourth Circuit has already upheld the ruling stripping Cox of safe harbor protection,[144] and that Judge O’Grady recently denied a motion for transfer of venue,[145] the case warrants ongoing attention, given the potential impact it may have on the liability of internet service providers nationwide. D.    Trademark 1.    Lanham Act Ban on Immoral or Scandalous Matter Unconstitutional? In June 2017, the U.S. Supreme Court decided Matal v. Tam, invalidating the provision of the Lanham Act that permitted the USPTO to refuse registration of a trademark if it contained “disparaging” matter.  The Supreme Court held the provision unconstitutional under the First Amendment.[146]  In the wake of that landmark decision, in December 2017 the Federal Circuit also invalidated under the First Amendment a similar provision of the Lanham Act, which permitted the USPTO to refuse registration of a mark if it contained “immoral” or “scandalous” matter.[147]  In September 2018, the government filed a petition for writ of certiorari to the Supreme Court in that case, which is now captioned Iancu v. Brunetti.[148] The Brunetti case involves the clothing brand FUCT.  The USPTO had refused to register the FUCT mark under the immoral or scandalous provision of the Lanham Act because of its similarity to a popular swear word.[149]  In light of the Supreme Court’s decision in Tam, the Federal Circuit held that the immoral or scandalous provision, like the disparaging provision, violates the First Amendment.  Unlike Tam, which was decided on the basis of impermissible viewpoint discrimination, the Federal Circuit held that the immoral or scandalous provision is unconstitutional as impermissibly content discriminatory, without reaching whether the provision is also viewpoint discriminatory.[150] In its petition for a writ of certiorari, the government argues that Tam is not controlling on the immoral or scandalous provision at a minimum because of this distinction between viewpoint discrimination and the less egregious content discrimination, and it further emphasizes several doctrinal questions not fully decided by Tam, such as whether trademark registration could be viewed as either a government subsidy or commercial speech—either of which would lower the level of constitutional scrutiny that would be applied to the provision.  The Supreme Court granted certiorari on January 4, 2019.[151] 2.    Seattle’s Transit Restriction on Disparaging Bus Ads also Falls The Supreme Court’s Matal v. Tam decision has also found influence in the realm of advertising, as the Ninth Circuit recently cited the Tam decision in striking down Seattle’s law that had allowed the transit authority to reject advertisements to be displayed on public buses if those ads were “disparaging.”[152]  In September 2018, the Ninth Circuit held that Tam applied with “full force” to Seattle’s ban on disparaging bus ads.[153]  The decision was a victory for the far-right group American Freedom Defense Initiative, previously known as the Stop Islamization of America.  The group sued the city after the Metro rejected a proposed advertisement featuring the slogan “Faces of Global Terrorism,” which included mugshots of alleged terrorists primarily of Middle Eastern or Asian descent, on the basis that the ad was disparaging.[154]  In light of Tam, the Ninth Circuit struck down Seattle’s ban on disparaging advertising, holding that it too violated the First Amendment as impermissibly viewpoint discriminatory. 3.    San Diego Comic-Con Wins $4M Fee Award in Trademark Dispute In a suit filed in August 2014, the San Diego Comic Convention (“SDCC”) brought trademark infringement allegations against a rival Utah event called Salt Lake Comic Con.  SDCC, which holds trademarks for its logo and various permutations of the term “Comic-Con,” alleged that the Utah event was infringing its “Comic-Con” mark and capitalizing on SDCC’s many decades of brand building.[155]  In response, the Utah event argued that the mark had been diluted, arguing both that the mark was invalid by virtue of its prior generic use, and that the mark had in any event become generic through SDCC’s broad licensing and failure to police.[156]  The case was tried before a jury in December 2017, and the jury found that the Utah event had infringed SDCC’s trademarks, but the infringement was not willful.  The jury awarded $20,000 in corrective advertising damages.[157] On post-trial motions, U.S. District Judge Anthony Battaglia granted SDCC’s request for a permanent injunction barring the Utah event from using the phrase “Comic-Con” with or without the hyphen, as well as anything that sounds similar.  Judge Battaglia further awarded nearly $4 million in attorneys’ fees, citing the Utah event’s questionable litigation tactics and repeated disregard for court rules.[158]  The Utah event has appealed these post-trial rulings to the Ninth Circuit, where briefing is scheduled to be completed in February 2019. 4.    Coachella Settles Trademark Dispute with Filmchella In August 2017, Coachella sued Filmchella founder Trevor Simms, alleging, among other things, trademark infringement.  U.S. District Judge R. Gary Klausner entered a preliminary injunction barring Simms from using either “Filmchella” or “Filmchilla” for his independent Joshua Tree Film Festival, but Judge Klausner denied Coachella’s motion for summary judgment on the issue of trademark infringement, explaining that a reasonable jury could find no likelihood of confusion between Coachella and Filmchella due to the difference in the nature of the festivals.[159]  Trial was scheduled for October 2018, but the parties reached a resolution just before trial was to begin.  Under the settlement, Simms agreed to forgo use of the term Filmchella and to transfer the domain name to Coachella.[160]  The other terms of the settlement remain confidential. E.    1st Amendment 1.    Media Access a.    CNN & Jim Acosta Prevail Over White House On November 7, 2018, the White House revoked CNN chief White House correspondent Jim Acosta’s hard pass—a type of press pass held by regular White House reporters—after a press conference in which President Trump cut off Mr. Acosta’s questions, ordered him to be seated, and called him a “rude, terrible person” after a White House staffer attempted to take the microphone out of his hands.  The next week, CNN and Mr. Acosta filed a lawsuit, claiming First and Fifth Amendment violations. The United States District Court for the District of Columbia granted CNN and Mr. Acosta’s request for a temporary restraining order and ordered the White House to restore Mr. Acosta’s press pass immediately.  The district court found that CNN and Mr. Acosta had a “First Amendment liberty interest” in Mr. Acosta’s hard pass because the Government had opened the White House to reporters.[161]  The district court concluded that CNN and Mr. Acosta were likely to succeed in showing the White House violated CNN and Mr. Acosta’s Fifth Amendment Due Process rights: the White House’s original reason for the revocation was “likely untrue” and was based on “evidence of questionable accuracy,” the decision-making process regarding whether to revoke the hard pass was “shrouded in mystery,” and the White House failed to provide CNN and Mr. Acosta with adequate notice before taking away his hard pass.[162] Further, the district court held that Mr. Acosta and CNN were harmed “every day” they continued to have their constitutional rights infringed.  Finally, the district court decided the harm Mr. Acosta would suffer from losing his hard pass “outweighed” the Government’s interest in holding “respectful” press conferences, so restoring Mr. Acosta’s hard pass served the public interest.[163]  Following the district court’s order, the White House issued a final decision restoring his hard pass, and he returned to reporting news.  [Disclosure: Gibson Dunn represented CNN and Mr. Acosta.] b.    Gubarev v. BuzzFeed, Inc. On December 19, 2018, the District Court for the Southern District of Florida granted summary judgment to BuzzFeed, Inc., in a defamation lawsuit filed against it by a Cyprus tech CEO, Aleksej Gubarev.[164]  The lawsuit arose from BuzzFeed’s publication of an online article entitled These Reports Allege Trump Has Deep Ties to Russia, which contained a 35-page dossier that included statements about the plaintiffs, such as that Gubarev’s company “XBT/Webzilla and its affiliates had been using botnets and porn traffic to transmit viruses, plant bugs, steal data, and conduct ‘altering operations’ against the Democratic Party leadership.”[165]  The Court ruled that BuzzFeed’s decision to publish the dossier was protected by New York’s fair report privilege, which “exists to protect the media while they gather the information needed for the public to exercise effective oversight of the government . . . even when they report on official action that the government would like to keep secret.”[166]  The Court further held that BuzzFeed’s presentation was fair and true, as required by the fair report privilege, because it reproduced the dossier in full without editorializing. Notably, the ruling came one day after the district judge ruled that Gubarev is not a public figure because he had not involved himself in the ongoing public debate about Russian interference in the 2016 election.[167]  This meant that plaintiffs would have had to meet a lower standard for defamation against BuzzFeed, had the district court not granted summary judgment based on the fair report privilege.  Plaintiffs have filed an appeal of the district court’s fair report ruling in BuzzFeed’s favor. 2.    Right of Publicity a.    Supreme Court Declines to Take Up de Havilland’s Feud Against FX On October 5, 2018, the 102-year-old actress Olivia de Havilland filed a petition for writ of certiorari with the U.S. Supreme Court, asking the high court to take up the California Court of Appeal’s ruling in her lawsuit against FX Network.[168]  De Havilland sued FX in June 2017 over its depiction of her in the docudrama Feud: Bette and Joan, alleging misappropriation, violation of her right of publicity, false light, invasion of privacy, and unjust enrichment.[169]  In response, FX filed an anti-SLAPP motion, which the trial court denied in September 2017.  In March 2018, the California Court of Appeal reversed, rejecting de Havilland’s claims and finding that the First Amendment protects expressive works, regardless of whether they are fact, fiction, or a combination thereof.[170]  De Havilland petitioned the California Supreme Court for review, which it denied on July 11, 2018. In de Havilland’s petition for writ of certiorari before the U.S. Supreme Court, de Havilland argued that the California Court of Appeal’s rulings create “absolute First Amendment immunity for docudramas,” even those that include knowingly false statements.[171]  FX filed its brief in opposition to de Havilland’s petition on November 13, 2018, asserting that the Court of Appeal’s “decision rested on a straightforward application of well-established law” and “that there is nothing cert-worthy about this case.”[172]  On January 7, 2019, the Supreme Court denied de Havilland’s petition without explanation.[173] b.    Second Circuit Lifts Injunction Against Lynyrd Skynyrd Film The Second Circuit recently lifted a district court’s injunction against Street Survivor:  The True Story of the Lynyrd Skynyrd Plane Crash, a movie about the plane crash that killed Lynyrd Skynyrd band members Ronnie Van Zant and Steve Gaines as told through the eyes of surviving band member Artimus Pyle.[174]  After the crash, Van Zant’s widow and two of the three surviving band members, Gary Rossington and Allen Collins, entered into a “blood oath” to never use the name Lynyrd Skynyrd again.[175]  The oath remained intact for ten years, until the surviving band members embarked on a tribute tour in 1987 and Van Zant’s widow, Judith, objected to the band’s use of the Lynyrd Skynyrd name.[176]  Judith filed suit, which ended with the district court entering a consent order restricting how the parties to the suit, including Pyle, could use the name Lynyrd Skynyrd, biographical material of Van Zant, the history of the band, and more.[177] After Pyle and Cleopatra Records, Inc., entered into a deal to create the Street Survivor film, heirs of Van Zant and Gaines, as well as founding lead guitarist Gary Rossington, sued Cleopatra.  In August 2017, the District Court entered a permanent injunction prohibiting the film from being made, asserting that it violated the consent order because of Pyle’s participation in the project.[178]  The Second Circuit reversed.  Although the court stated that the district court’s order did not constitute a “prior restraint” because the injunction was imposed as a result of a private contract rather than government censorship, it held that the order “implicates free speech concerns.”[179]  Moreover, the court held that the injunction could not restrict the actions of Cleopatra, which was not a party to the consent order.[180]  Finally, the court examined the language of the consent order and found that it was insufficiently specific to prohibit the making of the film.[181]  The court therefore lifted the injunction. c.    Daniels v. FanDuel Inc. In October 2018, the Indiana Supreme Court held that the use of players’ names, pictures, and statistics in online fantasy sports contests do not violate Indiana’s right of publicity law.[182]  The decision arose as the result of a class action lawsuit filed by collegiate student-athletes against various fantasy sports website operators, including DraftKings, Inc. and FanDuel, Inc., for using the players’ likenesses without their consent.  The district court dismissed the lawsuit, concluding that two statutory exceptions to Indiana’s right of publicity law permit the companies to use players’ names, likenesses, and statistics without compensation.[183]  On appeal, the Seventh Circuit certified the question “[w]hether online fantasy-sports operators that condition entry on payment, and distribute cash prizes, need the consent of players whose names, pictures, and statistics are used in the contests, in advertising the contests, or both,” to the Illinois Supreme Court.[184]  The Illinois Supreme Court held that no consent was needed because the use of the players’ names, pictures, and statistics fell within the “newsworthy value” exception to Illinois’s right of publicity statute.[185]  Ultimately, the court concluded that the use at issue “bears resemblance to the publication of the same information in newspapers and websites across the nation.”[186] Following the Illinois Supreme Court’s decision, the plaintiffs requested that the Seventh Circuit remand the case to the District Court to address the separate question of whether the fantasy-sports games violate Indiana criminal law.[187]  In a decision written by Judge Easterbrook, the Seventh Circuit stated that it had “nothing to say on the question whether the business of FanDuel or DraftKings violates Indiana’s criminal laws,” ruling that “this civil suit is over.”[188] d.    Can LeBron James License His Own Tattoos? In a case that intertwines the issues of whether and when copyright issues arise following the grant of rights of publicity, Defendants 2K Games, Inc. and Take-Two Interactive Software, Inc. recently moved for summary judgment in a lawsuit filed against them by Solid Oak Sketches, LLC.  Sold Oak brought suit over defendants’ depiction of tattoos on several prominent professional basketball players, including LeBron James, who appear in the videogame NBA 2K16.[189]  Solid Oak had obtained copyright licenses for the tattoos for use in a clothing line that was never produced, and now claims that the use in the videogame constitutes copyright infringement.[190]  In their summary judgment motion, defendants argue, amongst other things, that their use of the tattoos constitutes “fair use.”[191]  In opposition to defendants’ motion, Solid Oak argues that while the professional basketball players granted their rights of publicity to the companies, that does not include the copyright to the artwork in their tattoos.[192]  As to defendants’ fair use argument, Solid Oak asserts that the defense must fail, as “it is clear that Defendants’ appropriated the fundamental essence of the tattoo artists’ works, the copyright attached to same being owned by Plaintiff.”[193]  Defendants filed their reply brief on October 12, 2018, and the motion remains pending. 3.    Defamation a.    Stephanie Clifford’s Defamation Lawsuit Against President Trump Dismissed On October 15, 2018, U.S. District Judge S. James Otero dismissed a defamation lawsuit brought by adult-film actress Stephanie Clifford’s (p/k/a Stormy Daniels) against President Trump.[194]  The basis for the lawsuit was a tweet the president posted on April 18, 2018 from his personal Twitter account, @realDonaldTrump, claiming that the composite sketch Clifford released of a man who had purportedly threatened her in Las Vegas in 2011 was a “total con job” and “about a nonexistent man.”[195] In dismissing Clifford’s suit under the Texas anti-SLAPP statute,[196] the district court agreed with the president that the statements he disseminated through Twitter were mere “rhetorical hyperbole.”  The court reached this conclusion in light of the president’s “incredulous tone” and the fact Clifford had publicly positioned herself “as a political adversary to the President.”[197]  The court also reasoned that if it were to conclude that the president’s tweet was actionable under a theory of defamation, “it would significantly hamper the office of the President” by making any “strongly-worded response” by a president to criticism espoused by another public figure potentially unlawful.[198]  The court also found significant the fact that the president’s tweet was a “one-off” comment and not a “sustained attack” on Clifford’s claims regarding the threatening incident.[199]  Clifford appealed the district court’s order the same day it issued.[200] On December 11, 2018, Clifford was ordered to pay the president approximately $292,000 in attorney’s fees.  The court also ordered Clifford to pay $1,000 in sanctions.[201] b.    Discovery Communications Not Liable to Co-Host of Dual Survival On November 2, 2018, a district court in Arizona granted summary judgment to Discovery Communications in a defamation lawsuit brought by Cody Lundin, one of the original co-hosts of the reality television series Dual Survival.[202]  In the suit, Lundin argued that Discovery edited an episode that depicted his departure from the show in a way that portrayed him in a false light and was defamatory.[203]  The district court disagreed.  It held that none of the eight individual scenes that Lundin contended falsely depicted him as “grossly incompetent” and mentally ill was actionable under either theory.  Specifically, each scene depicted Lundin’s character in a “substantially true” manner even if it contained a number of “minor inaccuracies.”[204] In dismissing Lundin’s defamation lawsuit, the district court also described as “significant” the fact that Dual Survival “more than just occasionally falsely depicted what was actually occurring.”[205]  In one scene, for example, Lundin and his co-host unexpectedly encountered a rattlesnake that had, in reality, been purchased and placed there by the film crew.  The court therefore viewed Lundin’s claims with some level of skepticism given that he was “happy to participate in the charade as long as he was portrayed in the manner he preferred.”[206]  In November 30, 2018, Lundin appealed the summary judgment order.  The appeal remains pending before the Ninth Circuit.[207] c.    Court of Appeals Revives Defamation Lawsuit Against Kylin Pictures On November 27, 2018, a California appeals court reversed the grant of an anti-SLAPP motion in a defamation suit Bliss Media and its CEO Wei Han brought against Kylin Pictures.[208]  The suit arose because Kylin’s CFO Leo Shi Young called Han a “swindler” and Bliss a “shell company” at a press conference in China.  Bliss and Kylin had previously worked together to produce various films, but relations between the two companies soured when Kylin sued Bliss over the acquisition rights to Birth of the Dragon, a movie about Bruce Lee.[209] Kylin filed an anti-SLAPP motion in early 2017, arguing that the allegedly defamatory statements were made in connection with an issue of public interest because the purpose of the press conference was to address a dispute about the production of the Chinese-language version of a separate, critically acclaimed film—Hacksaw Ridge.[210]  The trial court agreed, concluding that the dispute between Bliss and Kylin “concerned the production of a very public thing” and that there “is very little that is private about the movie business.”[211] The California Court of Appeal reversed.  It first noted that the fact the press conference was held to discuss a dispute about Hacksaw Ridge was immaterial, because the alleged defamatory comments were about the plaintiffs’ conduct “concerning financing and rights acquisitions” for two different films, Birth of the Dragon and The King’s Daughter.[212]  It also rejected the defendants’ argument that the public is “specifically interested” in these two films merely because Birth of the Dragon is about Bruce Lee and The King’s Daughter features two movie stars.[213]  Because the alleged defamatory statements “in no way mention[ed] or implicat[ed] Bruce Lee or the movie stars,” the defendants failed to draw “any connection” between the statements and what purportedly made the films at issue of interest to the public.[214]  The appeals court also concluded that Han was not, at the time the statements were made, in the “public eye” simply because she is active in the Chinese film industry and in Hollywood.[215] d.    Retweets and the Communications Decency Act of 1996 On September 25, 2018, Roslyn La Liberte sued MSNBC host Joy Reid in the Eastern District of New York, alleging that several of Reid’s posts on Twitter, Instagram, and Facebook are defamatory.[216]  La Liberte’s original complaint focused primarily on Reid’s retweet of a photograph of La Liberte wearing a “Make America Great Again” hat and seemingly yelling at a high school student.  This photo was accompanied by a caption stating that “[s]he . . . in her MAGA hat” called the student a “dirty Mexican” and warned him that he would “be the first deported.”[217] La Liberte’s complaint alleges that because she never made any racial slurs directed at the student, Reid’s retweet is defamatory.[218]  It also alleges that Reid’s subsequent posts on Facebook and Instagram of the photograph alongside an image dating from the Jim Crow era are defamatory.[219] The allegations in the original complaint raised the question of whether section 230 of the Communications Decency Act of 1996 shielded Reid from civil liability for her retweet.  Section 230 provides, in relevant part, that “[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”[220]  However, La Liberte recently dropped the allegations from her complaint regarding Reid’s retweet.  Section 230 is therefore no longer at issue in the case.[221]  The remainder of the case remains pending before the district court. F.    Profit Participation/Royalties 1.    Back to the Future Royalties Dispute Dismissed In October 2018, after years of disputes between the parties, a New Jersey district judge ruled that John DeLorean’s estate will not be able to collect additional royalties regarding the famous Back to the Future DeLorean from the DeLorean Motor Company (“DMC”) arising out of DMC’s separate licensing agreement with Universal Pictures.[222]  In 2014, John DeLorean’s estate filed a suit alleging that DMC violated the estate’s trademark by designing and selling various items under the estate’s asserted trademarks and by licensing use of the marks to others.[223]  The parties settled the case in 2015, and in relevant part the estate agreed “not to sue [DMC] pertain[ing] to [DMC’s] use of the following words and trademarks: (i) the name DeLorean Motor Company, (ii) the DMC logo, and (iii) the stylized word ‘delorean.’”[224] In 2018, the estate brought another suit against DMC, claiming that DMC had improperly claimed a right to royalty payments arising from an agreement between the Mr. DeLorean and Universal.  That agreement between the estate and Universal gave Universal “the right to use (i) ‘[t]he appearance of the DeLorean automobile,’ (ii) ‘[t]he name ‘DeLorean,’’ and (iii) ‘[t]he logo ‘DMC’ as it appears on the radiator grille of the DeLorean automobile.’”[225]  The estate alleged that DMC had improperly represented to Universal that DMC was entitled to certain royalties arising from the Back to the Future DeLorean, and the estate sought to receive the payments from Universal instead. The court dismissed the estate’s case, finding that the two agreements covered “the same or similar terms” and holding that that because “both agreements pertained to the merchandizing of similar items associated with the DeLorean automobile’s image, brand and related trademarks,” the “Plaintiff’s claims under the Universal Agreement were incorporated in, and therefore barred by, the Settlement Agreement.”[226] 2.    Donald Glover Fights Label Over Royalties Donald Glover (who records and performs as Childish Gambino) is countersuing his music label, Glassnote Entertainment Group, in an ongoing dispute regarding royalties from non-interactive streaming of Glover’s albums Awaken, My Love!, Because the Internet, and Camp.  In 2011, Glover signed a license agreement with Glassnote in which he retained the rights to master recordings of up to three future albums but “granted to Glassnote the exclusive right to exploit the master recordings on those albums” in exchange for a royalty equal to fifty percent of net proceeds.[227]  The license expired in late 2017, at which time Glassnote alleges that Glover “took the position that he was entitled to the entirety of Glassnote’s []share of public performance royalties” and “that Glassnote was not entitled to any such royalty.”[228] In July 2018, Glassnote sued Glover seeking a declaration that it is entitled to 50% of all performance royalties from non-interactive streams on Pandora, Spotify, SiriusXM, and others.  The suit claims that, under the Copyright Act, “it is Glassnote—not Glover—which is ‘the copyright owner of the exclusive right [] to publically perform’ Glover’s sound recordings,” and the statutory royalties due to the copyright holder should therefore belong to Glassnote.[229] In September 2018, Glover countersued Glassnote, alleging that after an audit in 2017, Glover discovered “Glassnote’s multiple breaches under the License Agreement” and “significant amounts that [Glassnote] failed to account and pay to” Glover.[230]  According to Glover, Glassnote agreed “to pay [Glover] a royalty equal to 50% of the ‘Net Proceeds’ realized from the exploitation of each” licensed album.[231]  After a 2017 audit of Glassnote’s accountings and payments to Glover, Glover determined that Glassnote had breached the License Agreement by failing to pay Glover his “share of digital transmission royalties” and by failing to fully pay Glover the share of the “Net Proceeds” to which he was entitled under the License Agreement.[232]  In his countersuit, Glover is seeking a full payment of the royalties Glassnote is alleged to owe and seeking a full accounting from Glassnote that includes any further monies earned from Glover’s albums.[233]  The case remains pending.     [1]    Edmund Lee and Brooks Barnes, Disney and Fox Shareholders Approve Deal, Ending Corporate Duel, N.Y. Times (July 27, 2018), https://www.nytimes.com/2018/07/27/business/media/disney-fox-merger-vote.html.     [2]    Paul Bond, The DOJ said Disney must sell Fox’s regional sports networks, The Hollywood Reporter (June 27, 2018), https://www.hollywoodreporter.com/news/disney-fox-deal-approved-by-department-justice-1123614.     [3]    Urvi Malvania, Fox-Disney deal: CCI approves takeover of Murdoch’s company in India, SmartInvestor (Aug. 12, 2018), https://smartinvestor.business-standard.com/market/Compnews-539887-Compnewsdet-Fox_Disney_deal_CCI_approves_takeover_of_Murdochs_company_in_India.htm.     [4]    Stewart Clarke, E.U. Approves Disney-Fox Deal, With Conditions, Variety (Nov. 6, 2018), https://variety.com/2018/biz/news/eu-approves-walt-disney-21st-century-fox-deal-conditions-1203020918/.     [5]    Patrick Brzeski and Georg Szalai, Disney Gets China Approval for Fox Acquisition, The Hollywood Reporter (Nov. 19. 2018), https://www.hollywoodreporter.com/news/disney-gets-china-approval-fox-acquisition-1162571.     [6]    Jull Disis, Disney gets approval from China for Fox purchase, CNN Business (Nov. 19, 2018), https://www.cnn.com/2018/11/19/media/disney-fox-china-approval/index.html.     [7]    Alberto Alerigi and Lisa Richwine, Brazil antitrust body raises concerns over Disney-Fox deal, Reuters (Dec. 3, 2018), https://www.reuters.com/article/us-fox-m-a-walt-disney-brazil/brazil-antitrust-body-raises-concerns-over-disney-fox-deal-idUSKBN1O22LS.     [8]    Id.     [9]    Brazil Regulator Said to Pass Fox-Disney Deal Without Asset Sale, Bloomberg Law (Jan. 4, 2019), https://news.bloomberglaw.com/tech-and-telecom-law/brazil-regulator-said-to-pass-fox-disney-deal-without-asset-sale-1.     [10]    Id.; see also Jason Aycock, Bloomberg: Brazil expected to OK Fox-Disney deal without divestment, Seeking Alpha (Jan. 3, 2019), https://seekingalpha.com/news/3420509-bloomberg-brazil-expected-ok-fox-disney-deal-without-divestment.     [11]    Aycock, supra note 10.; Jason Aycock, MLex: Brazil decision on Disney/Fox now put off past January, Seeking Alpha (Jan. 23, 2019), https://seekingalpha.com/news/3425253-mlex-brazil-decision-disney-fox-now-put-past-january.     [12]    Mario Sergio Lima and Christopher Palmeri, Disney CEO Flies to Brazil to Seal Fox Deal, Leaves Empty-Handed, Bloomberg (Feb. 12, 2019), https://www.bloomberg.com/news/articles/2019-02-12/disney-s-brazil-meeting-is-said-to-end-without-fox-deal-accord.     [13]    Id.     [14]    Id.     [15]    Carla Martinez, Strict regulation needed for Disney-Fox merger in Mexico, El Universal (Dec. 14, 2018), https://www.eluniversal.com.mx/english/strict-regulation-needed-disney-fox-merger-in-mexico-0.     [16]    Press Release, Comisión Federal de Competencia Económica, Clarification on Disney/Fox Transaction (Feb. 6, 2019), https://www.cofece.mx/wp-content/uploads/2019/02/COFECE-009-2019-English.pdf.     [17]    Dawn C. Chmielewski, 21st Century Fox Files Registration Statement With SEC To Form ‘New’ Fox, Deadline Hollywood (Jan. 7, 2019), https://deadline.com/2019/01/21st-century-fox-files-registration-statement-sec-new-fox-1202530940/; see also Press Release, 21st Century Fox, 21st Century Fox Announces Filing of Registration Statement On Form 10 For Fox Corporation (Jan. 7, 2019), https://www.21cf.com/news/21st-century-fox/2019/21st-century-fox-announces-filing-of-registration-statement-on-form-10-for-fox-corporation/.     [18]    Hannah Shaw-Williams, Disney Now Expects To Complete Fox Purchase By June, ScreenRant (Jan. 31, 2019), https://screenrant.com/disney-fox-deal-complete-june-2019/.     [19]    Cynthia Littleton, Fox Confirms It Won’t Bid on Disney’s Regional Sports Networks, Variety (Jan. 11, 2019), https://variety.com/2019/biz/news/fox-disney-regional-sports-networks-bid-1203105421/.     [20]    Tim Ingham, Universal Music Group Is Making TV Shows in Tandem With Lionsgate, Music Business Worldwide (Aug. 6, 2018), https://www.musicbusinessworldwide.com/universal-signs-deal-to-make-tv-projects-with-lionsgate/.     [21]    Dade Hayes, Lionsgate and Universal Music Group Set First-Look TV Deal, Deadline (Aug. 6, 2018), https://deadline.com/2018/08/lionsgate-and-universal-music-group-set-first-look-tv-deal-1202440406/.     [22]    Id.     [23]    Etan Vlessing, Lionsgate Sets First-Look TV Deal With Universal Music Group, The Hollywood Reporter (Aug. 6, 2018), https://www.hollywoodreporter.com/news/lionsgate-universal-music-group-announce-tv-project-deal-1132308.     [24]    Hayes, supra note 21.     [25]    Lionsgate and Universal Music Publishing Group Sign Exclusive Multiyear Agreement, PR Newswire (Aug. 2, 2018), https://www.prnewswire.com/news-releases/lionsgate-and-universal-music-publishing-group-sign-exclusive-multiyear-agreement-300691060.html.     [26]    Mike Snider, $4 billion TV deal creates nation’s largest broadcaster, USA Today (May 8, 2017), https://www.usatoday.com/story/money/business/2017/05/07/sinclair-broadcasting-buy-tribune-media-4-billion-deal-reports-say/101409222/.     [27]    Hadas Gold, FCC calls out ‘lack of candor’ in Sinclair-Tribune deal, CNN (July 19, 2018), https://money.cnn.com/2018/07/19/media/fcc-hearing-order-sinclair/index.html.     [28]    Press Release, Tribune Media Company, Tribune Media Terminates Merger Agreement with Sinclair Broadcast Group, Inc.; Files Lawsuit For Breach of Contract (Aug. 9, 2018), http://investors.tribunemedia.com/2018-08-09-Tribune-Media-Terminates-Merger-Agreement-with-Sinclair-Broadcast-Group-Inc-Files-Lawsuit-For-Breach-of-Contract.     [29]    Press Release, Sinclair Broadcast Group, Inc., Sinclair Responds to Tribune Lawsuit in Delaware Court of Chancery (Aug. 29, 2018), https://www.prnewswire.com/news-releases/sinclair-responds-to-tribune-lawsuit-in-delaware-court-of-chancery-300704251.html.     [30]    Sinclair’s Answer, Affirmative Defenses, & Verified Countercl. to the Verified Compl., Tribune Media Company v. Sinclair Broadcast Group, Inc., No. 2018-0593-JTL, 2018 WL 4194628 (Del. Ch. Aug. 29, 2018).     [31]    Arjun Panchadar and Sonam Rai, U.S. broadcaster Nexstar to buy Tribune Media for $4.1 billion, Reuters (Dec. 3, 2018), https://www.reuters.com/article/us-tribune-media-m-a-nexstar-media/nexstar-to-buy-tribune-media-in-6-4-billion-deal-idUSKBN1O217Z.     [32]    Id.     [33]    Cynthia Littleton, Nexstar Media Group Vaults Into TV’s Big League With Tribune Media Acquisition, Variety (Dec. 3, 2018), https://variety.com/2018/tv/news/tribune-media-nexstar-acquisition-4-1-billion-1203078104/.     [34]    Id.     [35]    Jim Waterson, Comcast Outbids Rupert Murdoch’s Fox to Win Control of Sky, The Guardian (Sept. 22, 2018), https://www.theguardian.com/business/2018/sep/22/comcast-outbids-rupert-murdochs-fox-to-win-control-of-sky.     [36]    Ben Martin, Comcast and Fox Take $34 Billion Battle for Britain’s Sky to the Wire, Reuters (Sept. 21, 2018), https://www.reuters.com/article/us-sky-plc-m-a-auction/comcast-and-fox-take-34-billion-battle-for-britains-sky-to-the-wire-idUSKCN1M12CV.     [37]    Id.     [38]    Id.     [39]    Georgina Prodhan & Ben Martin, Factbox: How the Auction Process for Sky Will Work, Reuters (Sept. 20, 2018), https://www.reuters.com/article/us-sky-plc-m-a-auction-process-factbox/factbox-how-the-auction-process-for-sky-will-work-idUSKCN1M01RF.     [40]    Spiha Srivastava, et al., Comcast Outbids Fox in a $39 Billion Takeover of Sky, CNBC (Sept. 22, 2018), https://www.cnbc.com/2018/09/22/sky-comcast-fox-36-billion-takeover-auction.html.     [41]    Id.     [42]    Stu Woo & Ben Dummett, Sky Takeover Explained, The Wall Street Journal (Oct. 10, 2018), https://www.wsj.com/articles/sky-takeover-explained-1523539364.     [43]    Keza MacDonald, Microsoft Buys Two More Video Game Studios, The Guardian (Nov. 10, 2018), https://www.theguardian.com/games/2018/nov/10/microsoft-buys-two-new-video-game-studios.     [44]    Id.; see also Stefanie Fogel, Microsoft Acquires Obsidian Entertainment, Variety (Nov. 10, 2018), https://variety.com/2018/gaming/news/obsidian-entertainment-joins-microsoft-studios-1203024898/; Stefanie Fogel, Microsoft Acquires ‘The Bard’s Tale’ Developer inXile Entertainment, Variety (Nov. 10, 2018), https://variety.com/2018/gaming/news/microsoft-acquires-inxile-entertainment-1203024762/.     [45]    Paul Tassi, Microsoft Acquires Ninja Theory, Undead Labs, Playground Games And More For Xbox, Forbes (June 10, 2018), https://www.forbes.com/sites/insertcoin/2018/06/10/microsoft-has-acquired-ninja-theory-undead-labs-and-playground-games/#16aee068277c; see also Stefanie Fogel, Xbox E3 2018: The 10 Biggest Announcements, Variety (June 10, 2018), https://variety.com/2018/gaming/news/e3-2018-biggest-microsoft-announcements-1202839671/.     [46]    MacDonald, supra note 43.     [47]    Cynthia Littleton, Netflix’s Ascent in Emmy Nominations Reflects Broader TV Industry Shakeup, Variety (July 12, 2018), https://variety.com/2018/biz/news/emmys-2018-nominations-netflix-tv-shakeup-1202871387/.     [48]    Annlee Ellingson, Netflix Aims to Raise $2 Billion for More Content, L.A. Business Journal (Oct. 22, 2018), https://www.bizjournals.com/losangeles/news/2018/10/22/netflix-aims-to-raise-2-billion-for-more-content.html.     [49]    Sarah Perez, Disney to Invest In More Original Content for Hulu, Expand Service Internationally, Tech Crunch (Nov. 12, 218), https://techcrunch.com/2018/11/09/disney-to-invest-in-more-original-content-for-hulu-expand-service-internationally/.     [50]    Craig Elvy, Netflix & Amazon Planning to Double Amount of Original Content, Screen Rant (Sept. 26, 2018), https://screenrant.com/netflix-amazon-prime-original-content-movies-shows/.     [51]    Travis Clark, AT&T Will Jump Into the Streaming Bloodbath By Launching a Netflix Competitor Next Year, Business Insider (Oct. 10, 2018), https://www.businessinsider.com/att-launching-streaming-service-next-year-with-hbo-included-2018-10.     [52]    Sarah Toy, Disney’s Netflix Rival Now Has a Name: Disney+, Which Will Launch in 2019. MarketWatch (Nov. 10, 2018), https://www.marketwatch.com/story/disneys-netflix-rival-now-has-a-name-disney-2018-11-08.     [53]    Lizette Chapman & Anousha Sakoui, Jeffrey Katzenberg’s Investment Firm Takes a Risky Bet on Mobile Video, Bloomberg Business (Dec. 20, 2018), https://www.bloomberg.com/news/articles/2018-12-20/hollywood-makes-a-big-bet-on-jeffrey-katzenberg-s-quibi.     [54]    Eriq Gardner and Pamela McClintock, Global Road Files Chapter 11 Bankruptcy for Film Division, The Hollywood Reporter (Sept. 6, 2018), https://www.hollywoodreporter.com/thr-esq/global-road-files-bankruptcy-1140266; Andrew Scurria, Open Road Films Is Placed in Chapter 11 by New Owner, The Wall Street Journal (Sept. 6, 2018), https://www.wsj.com/articles/open-road-films-is-placed-in-chapter-11-by-new-owner-1536265087; Rose Krebs, ‘Spotlight’ Studio Open Road Hits Ch. 11 In Del. With Sale Plan, Law360 (Sept. 6, 2018), https://www.law360.com/articles/1080248/-spotlight-studio-open-road-hits-ch-11-in-del-with-sale-plan.     [55]    Pamela McClintock and Patrick Brzeski, Why Global Road’s Film Studio Is Collapsing Less Than a Year After Launch, The Hollywood Reporter (Aug. 24, 2018), https://www.hollywoodreporter.com/news/why-global-roads-film-studio-is-collapsing-a-year-launch-1137298.     [56]    Patrick Brzeski, IM Global Acquired by Tang Media Partners, Launches TV Joint Venture With Tencent, The Hollywood Reporter (June 2, 2016), https://www.hollywoodreporter.com/news/im-global-acquired-by-tang-898927.     [57]    Mila Galuppo, Tang Media Partners Rebrands as Global Road Entertainment, The Hollywood Reporter (Oct. 30, 2017), https://www.hollywoodreporter.com/news/tang-media-partners-rebrands-as-global-road-entertainment-1053053.     [58]    Patrick Frater, Berlin: Global Road Touts $1 Billion Production Spend, Variety (Feb. 15, 2018), https://variety.com/2018/film/news/berlin-global-road-touts-1-billion-production-spend-1202700062/.     [59]    Krebs, supra note 54.     [60]    Id.     [61]    Scurria, supra note 54.     [62]    Vince Sullivan, Open Road Settles Contract Issues To Get OK On Ch. 11 Sale, Law360 (Dec. 19, 2018), https://www.law360.com/articles/1111145/open-road-films-ch-11-sale-delayed-by-assumption-issue; Eriq Gardner, Open Road Bankruptcy: Auction Called Off; Raven Capital Set to Acquire ‘Spotlight’ Studio, The Hollywood Reporter (Nov. 6, 2018), https://www.hollywoodreporter.com/thr-esq/open-road-bankruptcy-auction-called-raven-capital-set-acquire-spotlight-studio-1158472.     [63]    Patrick Brzeski, China’s Tencent Buys Film Studio New Classics Media for $2.25B, The Hollywood Reporter (Aug. 13, 2018), https://www.hollywoodreporter.com/news/tencents-china-literature-acquires-film-studio-new-classics-media-225b-1134569.     [64]    Id.     [65]    Patrick Brzeski, China Box Office Growth Slows to 9 Percent in 2018, Ticket Sales Reach $8.9B, The Hollywood Reporter (Jan. 2, 2019), https://www.hollywoodreporter.com/news/china-box-office-total-revenue-2018-1172725.     [66]    Patrick Brzeski, Tencent Buys Stake in Chinese Production Company New Classics Media for $524M, The Hollywood Reporter (Mar. 12, 2018), https://www.hollywoodreporter.com/news/tencent-buys-stake-chinese-production-company-new-classics-media-524m-1094124.     [67]    Patrick Frater, Tencent Unit Buys New Classics Media for $2.25 Billion, Variety (Aug. 13, 2018), https://variety.com/2018/biz/asia/tencent-unit-buys-new-classics-media-1202904254/.     [68]    Brzeski, supra note 66.     [69]    Joshua Franklin and Julia Fioretti, China’s Tencent Music Raises Nearly $1.1 Billion in U.S. IPO, Reuters (December 11, 2018), https://www.reuters.com/article/us-tencent-music-ipo/chinas-tencent-music-raises-nearly-1-1-billion-in-u-s-ipo-idUSKBN1OA2GR; Sara Salinas, Tencent Music Ends its First Day of Trading Up 9 Percent, CNBC (December 12, 2018), https://www.cnbc.com/2018/12/12/tencent-music-ipo-tme-stock-starts-trading-on-the-nyse.html.     [70]    Corrie Driebusch and Maureen Farrell, Tencent Music Prices Its IPO at Bottom of Range, The Wall Street Journal (December 11, 2018), https://www.wsj.com/articles/tencent-music-readies-its-ipo-after-a-turbulent-process-11544558237.     [71]    Id.      [72]    Kevin Kelleher, What Tencent Music’s $1.1B IPO Says About China’s Market Downturn, Fortune (December 12, 2018), http://fortune.com/2018/12/11/tencent-musics-ipo-chinas-market-turndown/.     [73]    Cherie Hu, From Social Entertainment to Licensing & Data Challenges: What You Need to Know About Tencent Music’s IPO, Billboard (December 13, 2018), https://www.billboard.com/articles/business/8490089/tencent-music-ipo-analysis-streaming-china-data-trends.     [74]    Paul Bond, Dalian Wanda Scales Back AMC Investment, The Hollywood Reporter (September 14, 2018), https://www.hollywoodreporter.com/news/dalian-wanda-scales-back-amc-investment-1143481; Allison Prang, Chinese Conglomerate Trims Staprake in AMC Entertainment, The Wall Street Journal (September 14, 2018), https://www.wsj.com/articles/chinese-conglomerate-trims-stake-in-amc-entertainment-1536934377.     [75]    Michelle Kung and Aaron Back, Chinese Conglomerate Buys AMC Movie Chain in U.S., The Wall Street Journal (May 21, 2012), https://www.wsj.com/articles/SB10001424052702303610504577417073912636152.     [76]    Prang, supra note 74.     [77]    Id.     [78]    The Orrin G. Hatch-Bob Goodlatte Music Modernization Act, H.R. 1551, 115th Cong. (2018).     [79]    Amy X. Wang, Music Modernization Act Passes, Despite Music Industry Infighting, Rolling Stone (Sept. 18, 2018), https://www.rollingstone.com/music/music-news/music-modernization-act-passes-despite-music-industry-726091/; The Music Modernization Act, SoundExchange, https://www.soundexchange.com/advocacy/music-modernization-act/.     [80]    Dani Deahl, The Music Modernization Act has been signed into law, The Verge (Oct. 11, 2018), https://www.theverge.com/2018/10/11/17963804/music-modernization-act-mma-copyright-law-bill-labels-congress.     [81]    Eriq Gardner, Justice Dept. Reviewing Movie Licensing Restrictions on the Books for Decades, The Hollywood Reporter (Aug. 2, 2018), https://www.hollywoodreporter.com/thr-esq/justice-dept-reviewing-movie-licensing-restrictions-books-decades-1131827; Dawn C. Chmielewski and Dade Hayes, DOJ To Review Paramount Consent Decrees Governing How Studios Distribute Movies to Theaters, Deadline (Aug. 2, 2018), https://deadline.com/2018/08/doj-to-review-paramount-consent-decrees-governing-how-studios-distribute-movies-to-theaters-1202439066/.     [82]    United States v. Paramount Pictures, Inc., 334 U.S. 131 (1948).     [83]    See U.S. Dep’t of Justice, Office of Public Affairs, Department of Justice Opens Review of Paramount Consent Decrees, US Dep’t of Justice (Aug. 2, 2018), https://www.justice.gov/opa/pr/department-justice-opens-review-paramount-consent-decrees.     [84]    Lawrence Hurley, U.S. Supreme Court ends fight over Obama-era net neutrality rules, Reuters (Nov. 5, 2018), https://www.reuters.com/article/us-usa-court-netneutrality/u-s-supreme-court-ends-fight-over-obama-era-net-neutrality-rules-idUSKCN1NA1UW.     [85]    Alina Selyukh, U.S. Appeals Court Upholds Net Neutrality Rules In Full, Nat’l Pub. Radio (June 14, 2016), https://www.npr.org/sections/thetwo-way/2016/06/14/471286113/u-s-appeals-court-holds-up-net-neutrality-rules-in-full.     [86]    Ted Johnson, Net Neutrality Back in Court: Takeaways From Marathon Oral Arguments, Variety (Feb. 1, 2019), https://variety.com/2019/politics/news/net-neutrality-marathon-oral-arguments-1203126249/.     [87]    Cecilia Kang, Justice Department Sues to Stop California Net Neutrality Law, N.Y. Times (Sept. 30, 2018), https://www.nytimes.com/2018/09/30/technology/net-neutrality-california.html.     [88]    Eriq Gardner, California Will Hold Off Enforcing State’s Net Neutrality Law, The Hollywood Reporter (Oct. 26, 2018), https://www.hollywoodreporter.com/thr-esq/california-will-hold-enforcement-states-net-neutrality-law-1155484.     [89]    ABS Entm’t, Inc. v. CBS Corp., 908 F.3d 405 (9th Cir. 2018).     [90]    Id. at 422.     [91]    Id. at 423.     [92]    The Rick Nelson Company, LLC v. Sony Music Entertainment, C.A. No. 1:18-cv-08791-LLS, D.I. 1 ¶ 2 (S.D.N.Y. Sept. 25, 2018).     [93]    Williams v. Warner Music Group Corp., C.A. No. 18STCV00006, 2018 WL 5078046 (Cal. Super. Ct. Oct. 4, 2018).     [94]    Williams v. Warner Music Group Corp., C.A. No 2:18-cv-09691-RGK-PJW, at 7–9 (C.D. Cal. Dec. 7, 2018).     [95]    Skidmore v. Led Zeppelin, et al., No. 16-56057 (9th Cir. Sept. 28. 2018).     [96]    Id., slip op. at 7, 13.     [97]    Id. at 16–18.     [98]    Id. at 18-19.     [99]    Id. at 20.     [100]    Id. at 33–34.     [101]    Id. at 34.     [102]    Bluewater Music Servs. Corp. v. Spotify USA Inc., No. 3:17-CV-01051-JPM, 2018 WL 4714812 (W.D. Tenn. Sept. 29, 2018).     [103]    Id. at *1.     [104]    Id. at *4.     [105]    Id. at *5.     [106]    Id. at *6.     [107]    Brown v. Giongco, et al., No. BC669532, Ruling Re: Motion to Quash Service of Summons for Lack of Personal Jurisdiction, or, in the Alternative, Motion to Dismiss or Stay the Action for Forum Non Conveniens by Specially Appearing Defendants Iglesia Ni Cristo and Glicerio P. Santos IV (LA Super. Ct. Dec. 6, 2018).     [108]    Viktor v. Top Dawg Entm’t LLC, No. 18 CIV. 1554 (PAE), 2018 WL 5282886 (S.D.N.Y. Oct. 24, 2018).     [109]    Id. at *1.     [110]    Id.     [111]    Id. at *4.     [112]    Viktor v. Top Dawg Entm’t LLC, No. 18 CIV. 1554 (PAE), D.I. 125 (S.D.N.Y. Dec. 21, 2018).     [113]    Tiffany Hu, Supreme Court Won’t Hear IP Appeals by TVEyes, DHL, Law360 (Dec. 3, 2018), https://www.law360.com/media/articles/1107209/supreme-court-won-t-hear-ip-appeals-by-tveyes-dhl.     [114]    Bill Donahue, Siding with Fox, 2nd Circ. Says TVEyes Is Not Fair Use, Law360 (Feb. 27, 2018), https://www.law360.com/articles/1016495.     [115]    Id.     [116]    Id.     [117]    Id.     [118]    Hu, supra note 113.     [119]    Id.     [120]    Eriq Gardner, TVEyes Will No Longer Carry Fox News in Negotiated End to Big Copyright Fight, The Hollywood Reporter (Jan. 21, 2019), https://www.hollywoodreporter.com/thr-esq/tveyes-will-no-longer-carry-fox-news-negotiated-end-big-copyright-fight-1177661.     [121]    Ashley Cullins, Photographer Suing Andy Warhol’s Estate Claims His Work Isn’t ‘Transformative’, The Hollywood Reporter (Oct. 15, 2018), https://www.hollywoodreporter.com/thr-esq/photographer-suing-andy-warhols-estate-claims-his-work-isnt-transformative-1152405.     [122]    Id.     [123]    Id.     [124]    Id.     [125]    Id.     [126]    Id.     [127]    Id.     [128]    Id.     [129]    Id.     [130]    Bill Donahue, Instagram Art Show Was Fair Use, Richard Prince Says, Law360 (Oct. 9, 2018), https://www.law360.com/media/articles/1090373/instagram-art-show-was-fair-use-richard-prince-says.     [131]    Id.     [132]    Id.     [133]    Id.     [134]    17 U.S.C. § 512(c).     [135]    Id.     [136]    885 F.3d 597 (9th Cir).     [137]    826 F.3d 78 (2d Cir. 2016).     [138]    885 F.3d at 565.     [139]    Id.     [140]    Denial of Writ of Certiorari, Ventura Content Ltd. v. Motherless Inc., (No. 18-235).     [141]    BMG Rights Mgmt. LLC v. Cox Commc’ns, Inc., 149 F. Supp. 3d 634, 655–56 (E.D. Va. 2015).     [142]    BMG Rights Mgmt. LLC v. Cox Commc’ns, Inc., 881 F.3d 293, 303 (4th Cir. 2018).     [143]    Id.     [144]    Id.     [145]    Sony Music Entm’t v. Cox Commc’ns, Inc., No. 1:18-CV-950, 2018 WL 6059386 (E.D. Va. Nov. 19, 2018),     [146]    137 S. Ct. 1744 (2017).     [147]    See In re Brunetti, 877 F.3d 1330 (Fed. Cir. 2017).     [148]    U.S. Supreme Court Case No. 18-302.     [149]    See Brian Iverson, Supreme Court Asked to Consider Immoral or Scandalous Trademarks, IP Watchdog (Oct. 11, 2018), https://www.ipwatchdog.com/2018/10/11/supreme-court-asked-to-consider-immoral-or-scandalous-trademarks/id=101815/.     [150]    See id.     [151]    Bill Donahue, Supreme Court Will Hear ‘Scandalous’ Trademark Case, Law360 (Jan. 4, 2019), https://www.law360.com/articles/1115566/supreme-court-will-hear-scandalous-trademark-case.     [152]    See Am. Freedom Defense Initiative, et al. v. King County, Case No. 17-35891 (9th Cir. Sep. 27, 2018).     [153]    See Bill Donahue, 9th Cir. Strikes Down Seattle Ban On ‘Disparaging’ Bus Ads, Law360 (Oct. 3, 2018), https://www.law360.com/media/articles/1088992/9th-circ-strikes-down-seattle-ban-on-disparaging-bus-ads.     [154]    See id.     [155]    See San Diego Comic Convention v. Dan Farr Prods. et al., Case No. 3:14-cv-01865 (S.D. Cal. Aug. 7, 2014).     [156]    See Shayna Posses, San Diego Comic-Con Wins TM Use Ban, $4M Fee Award, Law360 (Aug. 24, 2018), https://www.law360.com/media/articles/1076513/san-diego-comic-con-wins-tm-use-ban-4m-fee-award.     [157]    See id.     [158]    See id.     [159]    See Ashley Cullins, Hollywood Docket: Coachella Trademark Fight Settles, The Hollywood Reporter (Oct. 12, 2018), https://www.hollywoodreporter.com/thr-esq/hollywood-docket-coachella-trademark-fight-settles-1145285.     [160]    See id.     [161]    Cable News Network, Inc. et al. v. Trump et al., Case No. 1:18-cv-2610 (D.D.C Nov. 16, 2018) (Trans. of Mot. Hrg.).     [162]    Id.     [163]    Id.     [164]    Gubarev v. BuzzFeed, Inc., Case No. 1:17-cv-60426-UU, Dkt. No. 388 (S.D. Fla. Dec. 18, 2018).     [165]    Id.     [166]    Id.     [167]    Gubarev v. BuzzFeed, Inc., Case No. 1:17-cv-60426-UU, Dkt. No. 385 (S.D. Fla. Dec. 18, 2018).     [168]    Petition for Writ of Certiorari, Olivia de Havilland, DBE v. FX Networks, LLC, No. 18-453.     [169]    de Havilland v. FX Networks, LLC, 21 Cal. App. 5th 845 (2018), review filed (May 4, 2018).     [170]    de Havilland, 21 Cal. App. 5th at 850.     [171]    Petition for Writ of Certiorari, Olivia de Havilland, DBE v. FX Networks, LLC, No. 18-453.     [172]    Opposition to Petition for Writ of Certiorari, Olivia de Havilland, DBE v. FX Networks, LLC, No. 18-453.     [173]    Dominic Patten, Olivia De Havilland Last Hope Petition Over ‘Feud’ Feud Denied By SCOTUS, Deadline (Jan. 7, 2019), https://deadline.com/2019/01/olivia-de-havilland-feud-us-supreme-court-petition-denied-ryan-murphy-1202530510/     [174]    Ronnie Van Zant, Inc. v. Cleopatra Records, Inc., 906 F.3d 253 (2d Cir. 2018).     [175]    Id. at 255.     [176]    Id.     [177]    Id.     [178]    Id. at 256.     [179]    Id. at 257.     [180]    Id.     [181]    Id. at 258.     [182]    Daniels v. FanDuel, Inc., 109 N.E.3d 390, 393 (Ind. 2018).     [183]    Daniels v. FanDuel, Inc., 884 F.3d 672, 674 (7th Cir. 2018).     [184]    Id.     [185]    Daniels, 109 N.E.3d at 394.     [186]    Id. at 396.     [187]    Daniels v. FanDuel, Inc., 909 F.3d 876, 877 (7th Cir. 2018).     [188]    Id. at 878.     [189]    Solid Oak Sketches, LLC v. Visual Concepts, LLC, Case No. 1:16-cv-00724-LTS-SDA, Dkt. 128.     [190]    Id.     [191]    Id.     [192]    Id., Dkt. 148.     [193]    Id.     [194]    Order Granting Defendant’s Special Motion to Dismiss/Strike at 1, Clifford v. Trump, No. 18-6893 (C.D. Cal. Oct. 15, 2018).     [195]    Id. at 1-2.     [196]    The district court applied Texas law to Clifford’s defamation claim and the Defendant’s Special Motion to Dismiss/Strike because Clifford is domiciled in Texas.  Id. at 4.     [197]    Id. at 9-11.     [198]    Id. at 11.     [199]    Id. at 12.     [200]    Notice of Appeal, Clifford v. Trump, No. 18-6893 (C.D. Cal. Oct. 15, 2018).     [201]    Matt Stevens, Stormy Daniels Ordered to Pay Trump $293,000 in Legal Fees, The N.Y. Times (Dec. 11, 2018), https://www.nytimes.com/2018/12/11/us/stormy-daniels-donald-trump.html.     [202]    Eriq Gardner, Discovery Beats Defamation Lawsuit as Judge Ponders What’s True in “Reality” Television, The Hollywood Reporter (Nov. 5, 2018), https://www.hollywoodreporter.com/thr-esq/discovery-beats-defamation-lawsuit-as-judge-ponders-whats-true-reality-television-1158089.     [203]    Order Granting Defendants’ Motion for Summary Judgment at 1, Lundin v. Discovery Commc’ns Inc., No. 16-cv-01568 (C.D. Cal. Nov. 2, 2018).     [204]    See, e.g., id. at 13-14.     [205]    Id. at 2.     [206]    Id.     [207]    Notice of Appeal, Lundin v. Discovery Commc’ns Inc., No. 2:16-cv-01568 (C.D. Cal. Nov. 2, 2018).     [208]    Ashley Cullins, Defamation Lawsuit Against ‘Hacksaw Ridge’ Financier Revived by Appeals Court, The Hollywood Reporter (Nov. 27, 2018), https://www.hollywoodreporter.com/thr-esq/defamation-lawsuit-hacksaw-ridge-financier-revived-by-appeals-court-1164328     [209]    Order at 3, Han v. Kylin Pictures, Inc., No. B282947 (Cal. Ct. App. Nov. 27, 2018).     [210]    Id. at 4.     [211]    Id.     [212]    Id. at 10.     [213]    Id. at 14.     [214]    Id.     [215]    Id. at 11-12.     [216]    Complaint at 12-13, La Liberte v. Reid, No: 1:18-cv-5398 (E.D.N.Y. Sept. 25, 2018); see also Ashley Cullins, MSNBC’s Joy Reid at Center of Free-Speech Legal Fight Over Retweets, The Hollywood Reporter (Nov. 6, 2018), https://www.hollywoodreporter.com/thr-esq/msnbc-s-joy-reid-at-center-free-speech-legal-fight-retweets-1158266.     [217]    Complaint at 12-13, La Liberte v. Reid, No: 1:18-cv-5398 (E.D.N.Y. Sept. 25, 2018).     [218]    Id.     [219]    Id. at 11.     [220]    47 U.S.C. § 230.     [221]    Amended Complaint, La Liberte v. Reid, No: 1:18-cv-5398 (E.D.N.Y. Nov. 27, 2018); see also Eriq Gardner, MSNBC’s Joy Reid to Escape Libel Claim Over Retweet, The Hollywood Reporter (Nov. 14, 2018), https://www.hollywoodreporter.com/thr-esq/msnbcs-joy-reid-escape-libel-claim-retweet-1161090.     [222]    Delorean v. Delorean Motor Co., No. CV 18-8212 (JLL), 2018 WL 4941790 (D.N.J. Oct. 12, 2018).     [223]    Id.     [224]    Id. at *4 (cleaned up).     [225]    Id. at *2.     [226]    Id. at *4.     [227]    Compl., Glassnote Entertainment Group, LLC, v. MC DJ Recording et al., 2018 WL 3327743 (S.D.N.Y. July 6, 2018).     [228]    Id. ¶ 7.     [229]    Id. ¶ 38.     [230]    Countercompl. ¶  37, Glassnote Entertainment Group, LLC, v. MC DJ Recording et al., 1:18-cv-06167-LGS (Sept. 14, 2018).     [231]    Id. ¶ 20.     [232]    Id. ¶¶ 52–53.     [233]    Id. ¶¶ 34–35. The following Gibson Dunn lawyers assisted in the preparation of this client update: Scott Edelman, Howard Hogan, Benyamin Ross, Nathaniel Bach, Jillian London, Corey Singer, Aaron Frumkin, Andrew Blythe, Gatsby Miller, Sara Ciccolari-Micaldi, DeDe Mann, Brittany Schmeltz, Sarah M. Kushner, Aaron M. Smith, Brian Castelloe, Bree Love, and Harrison Korn. Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding these developments.  Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or the following leaders and members of the firm’s Media, Entertainment & Technology Practice Group: Scott A. Edelman – Co-Chair, Los Angeles (+1 310-557-8061, sedelman@gibsondunn.com) Kevin Masuda – Co-Chair, Los Angeles (+1 213-229-7872, kmasuda@gibsondunn.com) Orin Snyder– Co-Chair, New York (+1 212-351-2400, osnyder@gibsondunn.com) Ruth E. Fisher – Los Angeles (+1 310-557-8057, rfisher@gibsondunn.com) Howard S. Hogan – Washington, D.C. (+1 202-887-3640, hhogan@gibsondunn.com) Ari Lanin – Los Angeles (+1 310-552-8581, alanin@gibsondunn.com) Benyamin S. Ross – Los Angeles (+1 213-229-7048, bross@gibsondunn.com) Helgi C. Walker – Washington, D.C. (+1 202-887-3599, hwalker@gibsondunn.com) Nathaniel L. Bach – Los Angeles (+1 213-229-7241,nbach@gibsondunn.com) © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

January 11, 2019 |
2018 Year-End German Law Update

Click for PDF Looking back at the past year’s cacophony of voices in a world trying to negotiate a new balance of powers, it appeared that Germany was disturbingly silent, on both the global and European stage. Instead of helping shape the new global agenda that is in the making, German politics focused on sorting out the vacuum created by a Federal election result which left no clear winner other than a newly formed right wing nationalist populist party mostly comprised of so called Wutbürger (the new prong for “citizens in anger”) that managed to attract 12.6 % of the vote to become the third strongest party in the German Federal Parliament. The relaunching of the Grand-Coalition in March after months of agonizing coalition talks was followed by a bumpy start leading into another session of federal state elections in Bavaria and Hesse that created more distraction. When normal business was finally resumed in November, a year had passed by with few meaningful initiatives formed or significant business accomplished. In short, while the world was spinning, Germany allowed itself a year’s time-out from international affairs. The result is reflected in this year’s update, where the most meaningful legal developments were either triggered by European initiatives, such as the General Data Protection Regulation (“GDPR”) (see below section 4.1) or the New Transparency Rules for Listed German Companies (see below section 1.2), or as a result of landmark rulings of German or international higher and supreme courts (see below Corporate M&A sections 1.1 and 1.4; Tax – sections 2.1 and 2.2 and Labor and Employment – section 4.2). In fairness, shortly before the winter break at least a few other legal statutes have been rushed through parliament that are also covered by this update. Of the changes that are likely to have the most profound impact on the corporate world, as well as on the individual lives of the currently more than 500 million inhabitants of the EU-28, the GDPR, in our view, walks away with the first prize. The GDPR has created a unified legal system with bold concepts and strong mechanisms to protect individual rights to one’s personal data, combined with hefty fines in case of the violation of its rules. As such, the GDPR stands out as a glowing example for the EU’s aspiration to protect the civic rights of its citizens, but also has the potential to create a major exposure for EU-based companies processing and handling data globally, as well as for non EU-based companies doing business in Europe. On a more strategic scale, the GDPR also creates a challenge for Europe in the global race for supremacy in a AI-driven world fueled by unrestricted access to data – the gold of the digital age. The German government could not resist infection with the virus called protectionism, this time around coming in the form of greater scrutiny imposed on foreign direct investments into German companies being considered as “strategic” or “sensitive” (see below section 1.3 – Germany Tightens Rules on Foreign Takeovers Even Further). Protecting sensitive industries from “unwanted” foreign investors, at first glance, sounds like a laudable cause. However, for a country like Germany that derives most of its wealth and success from exporting its ideas, products and services, a more liberal approach to foreign investments would seem to be more appropriate, and it remains to be seen how the new rules will be enforced in practice going forward. The remarkable success of the German economy over the last twenty five years had its foundation in the abandoning of protectionism, the creation of an almost global market place for German products, and an increasing global adoption of the rule of law. All these building blocks of the recent German economic success have been under severe attack in the last year. This is definitely not the time for Germany to let another year go by idly. We use this opportunity to thank you for your trust and confidence in our ability to support you in your most complicated and important business decisions and to help you form your views and strategies to deal with sophisticated German legal issues. Without our daily interaction with your real-world questions and tasks, our expertise would be missing the focus and color to draw an accurate picture of the multifaceted world we are living in. In this respect, we thank you for making us better lawyers – every day. ________________________ TABLE OF CONTENTS 1.      Corporate, M&A 2.      Tax 3.      Financing and Restructuring 4.      Labor and Employment 5.      Real Estate 6.      Compliance 7.      Antitrust and Merger Control 8.      Litigation 9.      IP & Technology 10.    International Trade, Sanctions and Export Controls ________________________ 1.       Corporate, M&A 1.1       Further Development regarding D&O Liability of the Supervisory Board in a German Stock Corporation In its famous “ARAG/Garmenbeck”-decision in 1997, the German Federal Supreme Court (Bundesgerichtshof – BGH) first established the obligation of the supervisory board of a German Stock Corporation (Aktiengesellschaft) to pursue the company’s D&O liability claims in the name of the company against its own management board after having examined the existence and enforceability of such claims. Given the very limited discretion the court has granted to the supervisory board not to bring such a claim and the supervisory board’s own liability arising from inactivity, the number of claims brought by companies against their (former) management board members has risen significantly since this decision. In its recent decision dated September 18, 2018, the BGH ruled on the related follow-up question about when the statute of limitations should start to run with respect to compensation claims brought by the company against a supervisory board member who has failed to pursue the company’s D&O liability claims against the board of management within the statutory limitation period. The BGH clarified that the statute of limitation applicable to the company’s compensation claims against the inactive supervisory board member (namely ten years in case of a publicly listed company, otherwise five years) should not begin to run until the company’s compensation claims against the management board member have become time-barred themselves. With that decision, the court adopts the view that in cases of inactivity, the period of limitations should not start to run until the last chance for the filing of an underlying claim has passed. In addition, the BGH in its decision confirmed the supervisory board’s obligation to also pursue the company’s claims against the board of management in cases where the management board member’s misconduct is linked to the supervisory board’s own misconduct (e.g. through a violation of supervisory duties). Even in cases where the pursuit of claims against the board of management would force the supervisory board to disclose its own misconduct, such “self-incrimination” does not release the supervisory board from its duty to pursue the claims given the preponderance of the company’s interests in an effective supervisory board, the court reasoned. In practice, the recent decision will result in a significant extension of the D&O liability of supervisory board members. Against that backdrop, supervisory board members are well advised to examine the existence of the company’s compensation claims against the board of management in a timely fashion and to pursue the filing of such claims, if any, as soon as possible. If the board of management’s misconduct is linked to parallel misconduct of the supervisory board itself, the relevant supervisory board member – if not exceptionally released from pursuing such claim and depending on the relevant facts and circumstances – often finds her- or himself in a conflict of interest arising from such self-incrimination in connection with the pursuit of the claims. In such a situation, the supervisory board member might consider resigning from office in order to avoid a conflict of interest arising from such self-incrimination in connection with the pursuit of the claims. Back to Top 1.2       Upcoming New Transparency Rules for Listed German Companies as well as Institutional Investors, Asset Managers and Proxy Advisors In mid-October 2018, the German Federal Ministry of Justice finally presented the long-awaited draft for an act implementing the revised European Shareholders’ Rights Directive (Directive (EU) 2017/828). The Directive aims to encourage long-term shareholder engagement by facilitating the communication between shareholders and companies, in particular across borders, and will need to be implemented into German law by June 10, 2019 at the latest. The new rules primarily target listed German companies and provide some major changes with respect to the “say on pay” provisions, as well as additional approval and disclosure requirements for related party transactions, the transmission of information between a stock corporation and its shareholders and additional transparency and reporting requirements for institutional investors, asset managers and proxy advisors. “Say on pay” on directors’ remuneration: remuneration policy and remuneration report Under the current law, the shareholders determine the remuneration of the supervisory board members at a shareholder meeting, whereas the remuneration of the management board members is decided by the supervisory board. The law only provides for the possibility of an additional shareholder vote on the management board members’ remuneration if such vote is put on the agenda by the management and supervisory boards in their sole discretion. Even then, such vote has no legal effects whatsoever (“voluntary say on pay”). In the future, shareholders of German listed companies will have two options. First, the supervisory board will have to prepare a detailed remuneration policy for the management board, which must be submitted to the shareholders if there are major changes to the remuneration, and in any event at least once every four years (“mandatory say on pay”). That said, the result of the vote on the policy will continue to remain only advisory. However, if the supervisory board adopts a remuneration policy that has been rejected by the shareholders, it will then be required to submit a reviewed (not necessarily revised) remuneration policy to the shareholders at the next shareholders’ meeting. With respect to the remuneration of supervisory board members, the new rules require a shareholders vote at least once every four years. Second, at the annual shareholders’ meeting the shareholders will vote ex post on the remuneration report (which is also reviewed by the statutory auditor) which contains the remuneration granted to the present and former members of the management board and the supervisory board in the past financial year. Again, the shareholders’ vote, however, will only be advisory. Both the remuneration report including the audit report, as well as the remuneration policy will have to be made public on the company’s website for at least ten years. Related party transactions German stock corporation law already provides for various safeguard mechanisms to protect minority shareholders in cases of transactions with major shareholders or other related parties (e.g. the capital maintenance rules and the laws relating to groups of companies). In the future, in the case of listed companies, these mechanisms will be supplemented by a detailed set of approval and transparency requirements for transactions between the company and related parties. Material transactions exceeding certain thresholds will require prior supervisory board approval. A rejection by the supervisory board can be overcome by shareholder vote. Furthermore, a listed company must publicly disclose any such material related party transaction, without undue delay over media providing for a Europe-wide distribution. Identification of shareholders and facilitation of the exercise of shareholders’ rights Listed companies will have the right to request information on the identity of their shareholders, including the name and both a postal and electronic address, from depositary banks, thus allowing for a direct communication line, also with respect to bearer shares (“know-your-shareholder”). Furthermore, depositary banks and other intermediaries will be required to pass on important information from the company to the shareholders and vice versa, e.g. with respect to voting in shareholders’ meetings and the exercise of subscription rights. Where there is more than one intermediary in a chain, the intermediaries are required to pass on the respective information within the chain. In addition, companies will be required to confirm the votes cast at the request of the shareholders thus enabling them to be certain that their votes have been effectively cast, including in particular across borders. Transparency requirements for institutional investors, asset managers and proxy advisors German domestic institutional investors and asset managers with Germany as their home member state (as defined in the applicable sector-specific EU law) will be required (i) to disclose their engagement policy, including how they monitor, influence and communicate with the investee companies, exercise shareholders’ rights and manage actual and potential conflicts of interests, and (ii) to report annually on the implementation of their engagement policy and disclose how they have cast their votes in the general meetings of material investee companies. Institutional investors will further have to disclose (iii) consistency between the key elements of their investment strategy with the profile and duration of their liabilities and how they contribute to the medium to long-term performance of their assets, and, (iv) if asset managers are involved, to disclose the main aspects of their arrangement with the asset manager. The new disclosure and reporting requirements, however, only apply on a “comply or explain” basis. Thus, investors and asset managers may choose not to make the above disclosures, provided they give an explanation as to why this is the case. Proxy advisors will have to publicly disclose on an annual basis (i) whether and how they have applied their code of conduct based again on the “comply or explain” principle, and (ii) information on the essential features, methodologies and models they apply, their main information sources, the qualification of their staff, their voting policies for the different markets they operate in, their interaction with the companies and the stakeholders as well as how they manage conflicts of interests. These rules, however, do not apply to proxy advisors operating from a non-EEA state with no establishment in Germany. The present legislative draft is still under discussion and it is to be expected that there will still be some changes with respect to details before the act becomes effective in mid-2019. Due to transitional provisions, the new rules on “say on pay” will have no effect for the majority of listed companies in this year’s meeting season. Whether the new rules will actually promote a long-term engagement of shareholders and have the desired effect on the directors’ remuneration of listed companies will have to be seen. In any event, both listed companies as well as the other addressees of the new transparency rules should make sure that they are prepared for the new reporting and disclosure requirements. Back to Top 1.3       Germany Tightens Rules on Foreign Takeovers Even Further After the German government had imposed stricter rules on foreign direct investment in 2017 (see 2017 Year-End German Law Update under 1.5), it has now even further tightened its rules with respect to takeovers of German companies by foreign investors. The latest amendment of the rules under the German Foreign Trade and Payments Ordinance (Außenwirtschaftsverordnung, “AWV“) enacted in 2018 was triggered, among other things, by the German government’s first-ever veto in August 2018 regarding the proposed acquisition of Leifeld Metal Spinning, a German manufacturer of metal forming machines used in the automotive, aerospace and nuclear industries, by Yantai Taihai Corporation, a privately-owned industry group from China, on the grounds of national security. Ultimately, Yantai withdrew its bid shortly after the German government had signaled that it would block the takeover. On December 29, 2018, the latest amendment of the Foreign Trade and Payments Ordinance came into force. The new rules provide for greater scrutiny of foreign direct investments by lowering the threshold for review of takeovers of German companies by foreign investors from the acquisition of 25% of the voting rights down to 10% in circumstances where the target operates a critical infrastructure or in sensitive security areas (defense and IT security industry). In addition, the amendment also expands the scope of the Foreign Trade and Payments Ordinance to also apply to certain media companies that contribute to shaping the public opinion by way of broadcasting, teleservices or printed materials and stand out due to their special relevance and broad impact. While the lowering of the review threshold as such will lead to an expansion of the existing reporting requirements, the broader scope is also aimed at preventing German mass media from being manipulated with disinformation by foreign investors or governments. There are no specific guidelines published by the German government as it wants the relevant parties to contact, and enter into a dialog with, the authorities about these matters. While the German government used to be rather liberal when it came to foreign investments in the past, the recent veto in the case of Leifeld as well as the new rules show that in certain circumstances, it will become more cumbersome for dealmakers to get a deal done. Finally, it is likely that the rules on foreign investment control will be tightened even further going forward in light of the contemplated EU legislative framework for screening foreign direct investment on a pan-European level. Back to Top 1.4       US Landmark Decision on MAE Clauses – Consequences for German M&A Deals Fresenius wrote legal history in the US with potential consequences also for German M&A deals in which “material adverse effect” (MAE) clauses are used. In December 2018, for the first time ever, the Supreme Court of Delaware allowed a purchaser to invoke the occurrence of an MAE and to terminate the affected merger agreement. The agreement included an MAE clause, which allocated certain business risks concerning the target (Akorn) for the time period between signing and closing to Akorn. Against the resistance of Akorn, Fresenius terminated the merger agreement based on the alleged MAE, arguing that the target’s EBITDA declined by 86%. The decision includes a very detailed analysis of an MAE clause by the Delaware courts and reaffirms that under Delaware law there is a very high bar to establishing an MAE. Such bar is based both on quantitative and qualitative parameters. The effects of any material adverse event need to be substantial as well as lasting. In most German deals, the parties agree to arbitrate. For this reason, there have been no German court rulings published on MAE clauses so far. Hence, all parties to an M&A deal face uncertainty about how German courts or arbitration tribunals would define “materiality” in the context of an MAE clause. In potential M&A litigation, sellers may use this ruling to support the argument that the bar for the exercise of the MAE right is in fact very high in line with the Delaware standard. It remains to be seen whether German judges will adopt the Delaware decision to interpret MAE clauses in German deals. Purchasers, who seek more certainty, may consider defining materiality in the MAE clause more concretely (e.g., by reference to the estimated impact of the event on the EBITDA of the company or any other financial parameter). Back to Top 1.5       Equivalence of Swiss Notarizations? The question whether the notarization of various German corporate matters may only be validly performed by German notaries or whether some or all of these measures may also be notarized validly by Swiss notaries has long since been the topic of legal debate. Since the last major reform of the German Limited Liability Companies Act (Gesetz betreffend Gesellschaften mit beschränkter Haftung – GmbHG) in 2008 the number of Swiss notarizations of German corporate measures has significantly decreased. A number of the newly introduced changes and provisions seemed to cast doubt on the equivalence and capacity of Swiss notaries to validly perform the duties of a German notary public who are not legally bound by the mandatory, non-negotiable German fee regime on notarial fees. As a consequence and a matter of prudence, German companies mostly stopped using Swiss notaries despite the potential for freely negotiated fee arrangements and the resulting significant costs savings in particular in high value matters. However, since 2008 there has been an increasing number of test cases that reach the higher German courts in which the permissibility of a Swiss notarization is the decisive issue. While the German Federal Supreme Court (Bundesgerichtshof – BGH) still has not had the opportunity to decide this question, in 2018 two such cases were decided by the Kammergericht (Higher District Court) in Berlin. In those cases, the court held that both the incorporation of a German limited liability company in the Swiss Canton of Berne (KG Berlin, 22 W 25/16 – January 24, 2018 = ZIP 2018, 323) and the notarization of a merger between two German GmbHs before a notary in the Swiss Canton of Basle (KG Berlin, 22 W 2/18 – July 26, 2018 = ZIP 2018, 1878) were valid notarizations under German law, because Swiss notaries were deemed to be generally equivalent to the qualifications and professional standards of German-based notaries. The reasons given in these decisions are reminiscent of the case law that existed prior to the 2008 corporate law reform and can be interpreted as indicative of a certain tendency by the courts to look favorably on Swiss notarizations as an alternative to German-based notarizations. Having said that and absent a determinative decision by the BGH, using German-based notaries remains the cautious default approach for German companies to take. This is definitely the case in any context where financing banks are involved (e.g. either where share pledges as loan security are concerned or in an acquisition financing context of GmbH share sales and transfers). On the other hand, in regions where such court precedents exist, the use of Swiss notaries for straightforward intercompany share transfers, mergers or conversions might be considered as an alternative on a case by case basis. Back to Top 1.6       Re-Enactment of the DCGK: Focus on Relevance, Function, Management Board’s Remuneration and Independence of Supervisory Board Members Sixteen years after it has first been enacted, the German Corporate Governance Code (Deutscher Corporate Governance Kodex, DCGK), which contains standards for good and responsible governance for German listed companies, is facing a major makeover. In November 2018, the competent German government commission published a first draft for a radically revised DCGK. While vast parts of the proposed changes are merely editorial and technical in nature, the draft contains a number of new recommendations, in particular with respect to the topics of management remuneration and independence of supervisory board members. With respect to the latter, the draft now provides a catalogue of criteria that shall act as guidance for the supervisory board as to when a shareholder representative shall no longer be regarded as independent. Furthermore, the draft also provides for more detailed specifications aiming for an increased transparency of the supervisory board’s work, including the recommendation to individually disclose the members’ attendance of meetings, and further tightens the recommendations regarding the maximum number of simultaneous mandates for supervisory board members. Moreover, in addition to the previous concept of “comply or explain”, the draft DCGK introduces a new “apply and explain” concept, recommending that listed companies also explain how they apply certain fundamental principles set forth in the DCGK as a new third category in addition to the previous two categories of recommendations and suggestions. The draft DCGK is currently under consultation and the interested public is invited to comment upon the proposed amendments until the end of January 2019. Since some of the proposed amendments provide for a rather fundamentally new approach to the current regime and would introduce additional administrative burdens, it remains to be seen whether all of the proposed amendments will actually come into force. According to the current plan, following a final consultancy of the Government Commission, the revised version of the DCGK shall be submitted for publication in April 2019 and would take effect shortly thereafter. Back to Top 2.         Tax On November 23, 2018, the German Federal Council (Bundesrat) approved the German Tax Reform Act 2018 (Jahressteuergesetz 2018, the “Act”), which had passed the German Federal Parliament (Bundestag) on November 8, 2018. Highlights of the Act are (i) the exemption of restructuring gains from German income tax, (ii) the partial abolition of and a restructuring exemption from the loss forfeiture rules in share transactions and (iii) the extension of the scope of taxation for non-German real estate investors investing in Germany. 2.1       Exemption of Restructuring Gains The Act puts an end to a long period of uncertainty – which has significantly impaired restructuring efforts – with respect to the tax implications resulting from debt waivers in restructuring scenarios (please see in this regard our 2017 Year-End German Law Update under 3.2). Under German tax law, the waiver of worthless creditor claims creates a balance sheet profit for the debtor in the amount of the nominal value of the payable. Such balance sheet profit is taxable and would – without any tax privileges for such profit – often outweigh the restructuring effect of the waiver. The Act now reinstates the tax exemption of debt waivers with retroactive effect for debt waivers after February 8, 2017; upon application debt waivers prior to February 8, 2017 can also be covered. Prior to this legislative change, a tax exemption of restructuring gains was based on a restructuring decree of the Federal Ministry of Finance, which has been applied by the tax authorities since 2003. In 2016, the German Federal Fiscal Court (Bundesfinanzgerichtshof) held that the restructuring decree by the Federal Ministry of Finance violates constitutional law since a tax exemption must be legislated by statute and cannot be based on an administrative decree. Legislation was then on hold pending confirmation from the EU Commission that a legislative tax exemption does not constitute illegal state aid under EU law. The EU Commission finally gave such confirmation by way of a comfort letter in August 2018. The Act is largely based on the conditions imposed by a restructuring decree issued by the Federal Ministry of Finance on the tax exemption of a restructuring gain. Under the Act, gains at the level of the debtor resulting from a full or partial debt relief are exempt from German income tax if the relief is granted to recapitalize and restructure an ailing business. The tax exemption only applies if at the time of the debt waiver (i) the business is in need of restructuring and (ii) capable of being restructured, (iii) the waiver results in a going-concern of the restructured business and (iv) the creditor waives the debt with the intention to restructure the business. The rules apply to German corporate income and trade tax and benefit individuals, partnerships and corporations alike. Any gains from the relief must first be reduced by all existing loss-offsetting potentials before the taxpayer can benefit from tax exemptions on restructuring measures. Back to Top 2.2       Partial Abolition of Loss Forfeiture Rules/Restructuring Exception Under the current Loss Forfeiture Rules, losses of a German corporation will be forfeited on a pro rata basis if within a period of five years more than 25% but not more than 50% of the shares in the German loss-making corporation are transferred (directly or indirectly) to a new shareholder or group of shareholders with aligned interests. If more than 50% are transferred, losses will be forfeited in total. There are exceptions to this rule for certain intragroup restructurings, built-in gains and business continuations, especially in the venture capital industry. On March 29, 2017, the German Federal Constitutional Court (Bundesverfassungsgericht – BVerfG) ruled that the pro rata forfeiture of losses (a share transfer of more than 25% but not more than 50%) is incompatible with the constitution. The court has asked the German legislator to amend the Loss Forfeiture Rules retroactively for the period from January 1, 2008 until December 31, 2015 to bring them in line with the constitution. Somewhat surprisingly, the legislator has now decided to fully cancel the pro rata forfeiture of losses with retroactive effect and with no reference to a specific tax period. Currently pending before the German Federal Constitutional Court is the question whether the full forfeiture of losses is constitutional. A decision by the Federal Constitutional Court is expected for early 2019, which may then result in another legislative amendment of the Loss Forfeiture Rules. The Act has also reinstated a restructuring exception from the forfeiture rules – if the share transfer occurs in order to restructure the business of an ailing corporation. Similar to the exemption of restructuring gains, this legislation was on hold until the ECJ’s decision (European Court of Justice) on June 28, 2018 that the restructuring exception does not violate EU law. Existing losses will not cease to exist following a share transfer if the restructuring measures are appropriate to avoid or eliminate the illiquidity or the over-indebtedness of the corporation and to maintain its basic operational structure. The restructuring exception applies to share transfers after December 31, 2007. Back to Top 2.3       Investments in German Real Estate by Non-German Investors So far, capital gains from the disposal of shares in a non-German corporation holding German real estate were not subject to German tax. In a typical structure, in which German real estate is held via a Luxembourg or Dutch entity, a value appreciation in the asset could be realized by a share deal of the holding company without triggering German income taxes. Under the Act, the sale of shares in a non-German corporation is now taxable if, at some point within a period of one year prior to the sale of shares, 50 percent of the book value of the assets of the company consisted of German real estate and the seller held at least 1 percent of the shares within the last five years prior to the sale. The Act is now in line with many double tax treaties concluded by Germany, which allow Germany to tax capital gains in these cases. The new law applies for share transfers after December 31, 2018. Capital gains are only subject to German tax to the extent the value has been increased after December 31, 2018. Until 2018, a change in the value of assets and liabilities, which are economically connected to German real estate, was not subject to German tax. Therefore, for example, profits from a waiver of debt that was used to finance German real estate was not taxable in Germany whereas the interest paid on the debt was deductible for German tax purposes. That law has now changed and allows Germany to tax such profit from a debt waiver if the loan was used to finance German real estate. However, only the change in value that occurred after December 31, 2018 is taxable. Back to Top 3.         Financing and Restructuring – Test for Liquidity Status Tightened On December 19, 2017, the German Federal Supreme Court (Bundesgerichtshof – BGH) handed down an important ruling which clarifies the debt and payable items that should be taken into account when determining the “liquidity” status of companies. According to the Court, the liquidity test now requires managing directors and (executive) board members to determine whether a liquidity gap exceeding 10% can be overcome by incoming liquidity within a period of three weeks taking into account all payables which will become due in those three weeks. Prior to the ruling, managing directors had often argued successfully that only those payables that were due at the time when the test is applied needed be taken into account while expected incoming payments within a three week term could be considered. This mismatch in favor of the managing directors has now been rectified by the Court to the disadvantage of the managing directors. If, for example, on June 1 the company liquidity status shows due payables amounting to EUR 100 and plausible incoming receivables in the three weeks thereafter amounting to EUR 101, no illiquidity existed under the old test. Under the new test confirmed by the Court, payables of EUR 50 becoming due in the three week period now also have to be taken into account and the company would be considered illiquid. For companies and their managing directors following a cautious approach, the implications of this ruling are minor. Going forward, however, even those willing to take higher risks will need to follow the court determined principles. Otherwise, delayed insolvency filings could ensue. This not only involves a managing directors and executive board members’ personal liability for payments made on behalf of the company while illiquid but also potential criminal liability for a delayed insolvency filing. Managing directors are thus well advised to properly undertake and also document the required test in order to avoid liability issues. Back to Top 4.         Labor and Employment 4.1       GDPR Has Tightened Workplace Privacy Rules The EU General Data Protection Regulation (“GDPR”) started to apply on May 25, 2018. It has introduced a number of stricter rules for EU countries with regard to data protection which also apply to employee personal data and employment relationships. In addition to higher sanctions, the regulation provides for extensive information, notification, deletion, and documentation obligations. While many of these data privacy rules had already been part of the previous German workplace privacy regime under the German Federal Data Protection Act (Bundesdatenschutzgesetz – BDSG), the latter has also been amended and provides for specific rules applicable to employee data protection in Germany (e.g. in the context of internal investigations or with respect to employee co-determination). However, the most salient novelty is the enormous increase in potential sanctions under the GDPR. Fines for GDPR violations can reach up to the higher of EUR 20 million or 4% of the group’s worldwide turnover. Against this backdrop, employers are well-advised to handle employee personnel data particularly careful. This is also particularly noteworthy as the employer is under an obligation to prove compliance with the GDPR – which may result in a reversal of the burden of proof e.g. in employment-related litigation matters involving alleged GDPR violations. Back to Top 4.2       Job Adverts with Third Gender Following a landmark decision by the German Federal Constitutional Court in 2017, employers are gradually inserting a third gender into their job advertisements. The Federal Constitutional Court (Bundesverfassungsgericht – BVerfG) decided on October 10, 2017 that citizens who do not identify as either male or female were to be registered as “diverse” in the birth register (1 BvR 2019/16). As a consequence of this court decision, many employers in Germany have broadened gender notations in job advertisements from previously “m/f” to “m/f/d”. While there is no compelling legal obligation to do so, employers tend to signal their open-mindedness by this step, but also mitigate the potential risk of liability for a discrimination claim. Currently, such liability risk does not appear alarming due to the relative rarity of persons identifying as neither male nor female and the lack of a statutory stipulation for such adverts. However, employers might be well-advised to follow this trend, particularly after Parliament confirmed the existence of a third gender option in birth registers in mid-December. Back to Top 4.3       Can Disclosure Obligation Reduce Gender Pay-Gap? In an attempt to weed out gender pay gaps, the German lawmaker has introduced the so-called Compensation Transparency Act in 2017. It obliges employers, inter alia, to disclose the median compensation of comparable colleagues of the opposite gender with comparable jobs within the company. The purpose is to give a potential claimant (usually a female employee) an impression of how much her comparable male colleagues earn in order for her to consider further steps, e.g. a claim for more money. However, the new law is widely perceived as pointless. First, the law itself and its processes are unduly complex. Second, even after making use of the law, the respective employee would still have to sue the company separately in order to achieve an increase in her compensation, bearing the burden of proof that the opposite-gender employee with higher compensation is comparable to her. Against this background, the law has hardly been used in practice and will likely have only minimal impact. Back to Top 4.4       Employers to Contribute 15% to Deferred Compensation Schemes In order to promote company pension schemes, employers are now obliged to financially support deferred compensation arrangements. So far, employer contributions to any company pension scheme had been voluntary. In the case of deferred compensation schemes, companies save money as a result of less social security charges. The flipside of this saving was a financial detriment to the employee’s statutory pension, as the latter depends on the salary actually paid to the employee (which is reduced as a result of the deferred compensation). To compensate the employee for this gap, the employer is now obliged to contribute up to 15% of the respective deferred compensation. The actual impact of this new rule should be limited, as many employers already actively support deferred compensation schemes. As such, the new obligatory contribution can be set off against existing employer contributions to the same pension scheme. Back to Top 5.         Real Estate – Notarization Requirement for Amendments to Real Estate Purchase Agreements Purchase agreements concerning German real estate require notarization in order to be effective. This notarization requirement relates not only to the purchase agreement as such but to all closely related (side) agreements. The transfer of title to the purchaser additionally requires an agreement in rem between the seller and the purchaser on the transfer (conveyance) and the subsequent registration of the transfer in the land register. To avoid additional notarial fees, parties usually include the conveyance in the notarial real estate purchase agreement. Amendment agreements to real estate purchase agreements are quite common (e.g., the parties subsequently agree on a purchase price adjustment or the purchaser has special requests in a real estate development scenario). Various Higher District Courts (Oberlandesgerichte), together with the prevailing opinion in literature, have held in the past that any amendments to real estate purchase agreements also require notarization unless such an amendment is designed to remove unforeseeable difficulties with the implementation of the agreement without significantly changing the parties’ mutual obligations. Any amendment agreement that does not meet the notarization requirement may render the entire purchase agreement (and not only the amendment agreement) null and void. With its decision on September 14, 2018, the German Federal Supreme Court (Bundesgerichtshof – BGH) added another exception to the notarization requirement and ruled that notarization of an amendment agreement is not required once the conveyance has become binding and the amendment does not change the existing real estate transfer obligations or create new ones. A conveyance becomes binding once it has been validly notarized. Before this new decision of the BGH, amendments to real estate purchase agreements were often notarized for the sake of precaution because it was difficult to determine whether the conditions for an exemption from the notarization requirement had been met. This new decision of the BGH gives the parties clear guidance as to when amendments to real estate purchase agreements require notarization. It should, however, be borne in mind that notarization is still required if the amendment provides for new transfer obligations concerning the real property or the conveyance has not become effective yet (e.g., because third party approval is still outstanding). Back to Top 6.         Compliance 6.1       Government Plans to Introduce Corporate Criminal Liability and Internal Investigations Act Plans of the Federal Government to introduce a new statute concerning corporate criminal liability and internal investigations are taking shape. Although a draft bill had already been announced for the end of 2018, pressure to respond to recent corporate scandals seems to be rising. With regard to the role and protection of work product generated during internal investigations, the highly disputed decisions of the Federal Constitutional Court (Bundesverfassungsgericht – BVerfG) in June 2018 (BVerfG, 2 BvR 1405/17, 2 BvR 1780/17 – June 27, 2018) (see 2017 Year-End German Law Update under 7.3) call for clearer statutory rules concerning the search of law firm premises and the seizure of documents collected in the course of an internal investigation. In its dismissal of complaints brought by Volkswagen and its lawyers from Jones Day, the Federal Constitutional Court made remarkable obiter dicta statements in which it emphasized the following: (1) the legal privilege enjoyed for the communication between the individual defendant (Beschuldigter) and its criminal defense counsel is limited to their communication only; (2) being considered a foreign corporate body, the court denied Jones Day standing in the proceedings, because the German constitution only grants rights to corporate bodies domiciled in Germany; and (3) a search of the offices of a law firm does not affect individual constitutional rights of the lawyers practicing in that office, because the office does not belong to the lawyers’ personal sphere, but only to their law firm. The decision and the additional exposure caused by it by making attorney work product created in the course of an internal investigation accessible was a major blow to German corporations’ efforts to foster internal investigations as a means to efficiently and effectively investigate serious compliance concerns. Because it does not appear likely that an entirely new statute concerning corporate criminal liability will materialize in the near future, the legal press expects the Federal Ministry of Justice to consider an approach in which the statutes dealing with questions around internal investigations and the protection of work product created in the course thereof will be clarified separately. In the meantime, the following measures are recommended to maximize the legal privilege for defense counsel (Verteidigerprivileg): (1) Establish clear instructions to an individual criminal defense lawyer setting forth the scope and purpose of the defense; (2) mark work product and communications that have been created in the course of the defense clearly as confidential correspondence with defense counsel (“Vertrauliche Verteidigerkorrespondenz”); and (3) clearly separate such correspondence from other correspondence with the same client in matters that are not clearly attributable to the criminal defense mandate. While none of these measures will guarantee that state prosecutors and courts will abstain from a search and seizure of such material, at least there are good and valid arguments to defend the legal privilege in any appeals process. However, with the guidance provided to courts by the recent constitutional decision, until new statutory provisions provide for clearer guidance, companies can expect this to become an up-hill battle. Back to Top 6.2       Update on the European Public Prosecutor’s Office and Proposed Cross-Border Electronic Evidence Rules Recently the European Union has started tightening its cooperation in the field of criminal procedure, which was previously viewed as a matter of national law under the sovereignty of the 28 EU member states. Two recent developments stand out that illustrate that remarkable new trend: (1) The introduction of the European Public Prosecutor’s Office (“EPPO”) that was given jurisdiction to conduct EU-wide investigations for certain matters independent of the prosecution of these matters under the national laws of the member states, and (2) the proposed EU-wide framework for cross-border access to electronically stored data (“e-evidence”) which has recently been introduced to the European Parliament. As reported previously (see 2017 Year-End German Law Update under 7.4), the European Prosecutor’s Office’s task is to independently investigate and prosecute severe crimes against the EU’s financial interests such as fraud against the EU budget or crimes related to EU subsidies. Corporations receiving funds from the EU may therefore be the first to be scrutinized by this new EU body. In 2018 two additional EU member states, the Netherlands and Malta, decided to join this initiative, extending the number of participating member states to 22. The EPPO will presumably begin its work by the end of 2020, because the start date may not be earlier than three years after the regulation’s entry into force. As a further measure to leverage multi-jurisdictional enforcement activities, in April 2018 the European Commission proposed a directive and a regulation that will significantly facilitate expedited cross-border access to e-evidence such as texts, emails or messaging apps by enforcement agencies and judicial authorities. The proposed framework would allow national enforcement authorities in accordance with their domestic procedure to request e-evidence directly from a service provider located in the jurisdiction of another EU member state. That other state’s authorities would not have the right to object to or to review the decision to search and seize the e-evidence sought by the national enforcement authority of the requesting EU member state. Companies refusing delivery risk a fine of up to 2% of their worldwide annual turnover. In addition, providers from a third country which operate in the EU are obliged to appoint a legal representative in the EU. The proposal has reached a majority vote in the Council of the EU and will now be negotiated in the European Parliament. Further controversial discussions between the European Parliament and the Commission took place on December 10, 2018. The Council of the EU aims at reaching an agreement between the three institutions by the end of term of the European Parliament in May 2019. Back to Top 7.         Antitrust and Merger Control 7.1       Antitrust and Merger Control Overview 2018 In 2018, Germany celebrated the 60th anniversary of both the German Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen -GWB) as well as the German federal cartel office (Bundeskartellamt) which were both established in 1958 and have since played a leading role in competition enforcement worldwide. The celebrations notwithstanding, the German antitrust watchdog has had a very active year in substantially all of its areas of competence. On the enforcement side, the Bundeskartellamt concluded a number of important cartel investigations. According to its annual review, the Bundeskartellamt carried out dawn raids at 51 companies and imposed fines totaling EUR 376 million against 22 companies or associations and 20 individuals from various industries including the steel, potato manufacturing, newspapers and rolled asphalt industries. Leniency applications remained an important source for the Bundeskartellamt‘s antitrust enforcement activities with a total of 21 leniency applications received in 2018 filling the pipeline for the next few months and years. On the merger control side, the Bundeskartellamt reviewed approximately 1,300 merger cases in 2018 – only 1% of which (i.e. 13 merger filings) required an in-depth phase 2 review. No mergers were prohibited but in one case only conditional clearance was granted and three filings were withdrawn in phase 2. In addition, the Bundeskartellamt had its first full year of additional responsibilities in the area of consumer protection, concluded a sector inquiry into internet comparison portals, and started a sector inquiry into the online marketing business as well as a joint project with the French competition authority CNIL regarding algorithms in the digital economy and their competitive effects. Back to Top 7.2       Cartel Damages Over the past few years, antitrust damages law has advanced in Germany and the European Union. One major legislative development was the EU Directive on actions for damages for infringements of competition law, which was implemented in Germany as part of the 9th amendment to the German Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen -GWB). In addition, there has also been some noteworthy case law concerning antitrust damages. To begin with, the German Federal Supreme Court (Bundesgerichtshof, BGH) strengthened the position of plaintiffs suing for antitrust damages in its decision Grauzementkartell II in 2018. The decision brought to an end an ongoing dispute between several Higher District Courts and District Courts, which had disagreed over whether a recently added provision of the GWB that suspends the statute of limitations in cases where antitrust authorities initiate investigations would also apply to claims that arose before the amendment entered into force (July 1, 2015). The Federal Supreme Court affirmed the suspension of the statute of limitations, basing its ruling on a well-established principle of German law regarding the intertemporal application of statutes of limitation. The decision concerns numerous antitrust damage suits, including several pending cases concerning trucks, rails tracks, and sugar cartels. Furthermore, recent case law shows that European domestic courts interpret arbitration agreements very broadly and also enforce them in cases involving antitrust damages. In 2017, the England and Wales High Court and the District Court Dortmund (Landgericht Dortmund) were presented with two antitrust disputes where the parties had agreed on an arbitration clause. Both courts denied jurisdiction because the antitrust damage claims were also covered by the arbitration agreements. They argued that the parties could have asserted claims for contractual damages instead, which would have been covered by the arbitration agreement. In the courts’ view, it would be unreasonable, however, if the choice between asserting a contractual or an antitrust claim would give the parties the opportunity to influence the jurisdiction of a court. As a consequence, the use of arbitration clauses (in particular if inconsistently used by suppliers or purchasers) may add significant complexity to antitrust damages litigation going forward. Thus, companies are well advised to examine their international supply agreements to determine whether included arbitration agreements will also apply to disputes about antitrust damages. Back to Top 7.3       Appeals against Fines Risky? In German antitrust proceedings, there is increasing pressure for enterprises to settle. Earlier this year, Radeberger, a producer of lager beer, withdrew its appeal against a significant fine of EUR 338 million, which the Bundeskartellamt had imposed on the company for its alleged participation in the so-called “beer cartel”. With this dramatic step, Radeberger paid heed to a worrisome development in German competition law. Repeatedly, enterprises have seen their cartel fines increased by staggering amounts on appeal (despite such appeals sometimes succeeding on some substantive legal issues). The reason for these “appeals for the worse” – as seen in the liquefied gas cartel (increase of fine from EUR 180 million to EUR 244 million), the sweets cartel (average increase of approx. 50%) and the wallpaper cartel (average increase of approx. 35%) – is the different approach taken by the Bundeskartellamt and the courts to calculating fines. As courts are not bound by the administrative practice of the Bundeskartellamt, many practitioners are calling for the legislator to step in and address the issue. Back to Top 7.4       Luxury Products on Amazon – The Coty Case In July 2018, the Frankfurt Higher District Court (Oberlandesgericht Frankfurt) delivered its judgement in the case Coty / Parfümerie Akzente, ruling that Coty, a luxury perfume producer, did not violate competition rules by imposing an obligation on its selected distributors to not sell on third-party platforms such as Amazon. The judgment followed an earlier decision of the Court of Justice of the European Union (ECJ) of December 2017, by which the ECJ had replied to the Frankfurt court’s referral. The ECJ had held that a vertical distribution agreement (such as the one in place between Coty and its distributor Parfümerie Akzente) did not as such violate Art. 101 of the Treaty on the Functioning of the European Union (TFEU) as long as the so-called Metro criteria were fulfilled. These criteria stipulate that distributors must be chosen on the basis of objective and qualitative criteria that are applied in a non-discriminatory fashion; that the characteristics of the product necessitate the use of a selective distribution network in order to preserve their quality; and, finally, that the criteria laid down do not go beyond what is necessary. Regarding the platform ban in question, the ECJ held that it was not disproportionate. Based on the ECJ’s interpretation of the law, the Frankfurt Higher District Court confirmed that the character of certain products may indeed necessitate a selective distribution system in order to preserve their prestigious reputation, which allowed consumers to distinguish them from similar goods, and that gaps in a selective distribution system (e.g. when products are sold by non-selected distributors) did not per se make the distribution system discriminatory. The Higher District Court also concluded that the platform ban in question was proportional. However, interestingly, it did not do so based on its own reasoning but based on the fact that the ECJ’s detailed analysis did not leave any scope for its own interpretation and, hence, precluded the Higher District Court from applying its own reasoning. Pointing to the European Commission’s E-Commerce Sector Inquiry, according to which sales platforms play a more important role in Germany than in other EU Member States, the Higher District Court, in fact, voiced doubts whether Coty’s sales ban could not have been imposed in a less interfering manner. Back to Top 8.         Litigation 8.1       The New German “Class Action” On November 1, 2018, a long anticipated amendment to the German Code of Civil Procedure (Zivilprozessordnung, ZPO) entered into force, introducing a new procedural remedy for consumers to enforce their rights in German courts: a collective action for declaratory relief. Although sometimes referred to as the new German “class action,” this new German action reveals distinct differences to the U.S.-American remedy. Foremost, the right to bring the collective action is limited to consumer protection organizations or other “qualified institutions” (qualifizierte Einrichtung) who can only represent “consumers” within the meaning of the German Code of Civil Procedure. In addition, affected consumers are not automatically included in the action as part of a class but must actively opt-in by registering their claims in a “claim index” (Klageregister). Furthermore, the collective action for declaratory relief does not grant any monetary relief to the plaintiffs which means that each consumer still has to enforce its claim in an individual suit to receive compensation from the defendant. Despite these differences, the essential and comparable element of the new legal remedy is its binding effect. Any other court which has to decide an individual dispute between the defendant and a registered consumer that is based on the same facts as the collective action is bound by the declaratory decision of the initial court. At the same time, any settlement reached by the parties has a binding effect on all registered consumers who did not decide to specifically opt-out. As a result, companies must be aware of the increased litigation risks arising from the introduction of the new collective action for declaratory relief. Even though its reach is not as extensive as the American class action, consumer protection organizations have already filed two proceedings against companies from the automotive and financial industry since the amendment has entered into force in November 2018, and will most likely continue to make comprehensive use of the new remedy in the future. Back to Top 8.2       The New 2018 DIS Arbitration Rules On March 1, 2018, the new 2018 DIS Arbitration Rules of the German Arbitration Institute (DIS) entered into force. The update aims to make Germany more attractive as a place for arbitration by adjusting the rules to international standards, promoting efficiency and thereby ensuring higher quality for arbitration proceedings. The majority of the updated provisions and rules are designed to accelerate the proceedings and thereby make arbitration more attractive and cost-effective for the parties. There are several new rules on time limitations and measures to enhance procedural efficiency, i.e. the possibility of expedited proceedings or the introduction of case management conferences. Furthermore, the rules now also allow for consolidation of several arbitrations and cover multi-party and multi-contract arbitration. Another major change is the introduction of the DIS Arbitration Council which, similar to the Arbitration Council of the ICC (International Chamber of Commerce), may decide upon challenges of an arbitrator and review arbitral awards for formal defects. This amendment shows that the influence of DIS on their arbitration proceedings has grown significantly. All in all, the modernized 2018 DIS Arbitration Rules resolve the deficiencies of their predecessor and strengthen the position of the German Institution of Arbitration among competing arbitration institutions. Back to Top 9.         IP & Technology – Draft Bill of German Trade Secret Act The EU Trade Secrets Directive (2016/943/EU) on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure has already been in effect since July 5, 2016. Even though it was supposed to be implemented into national law by June 9, 2018 to harmonize the protection of trade secrets in the EU, the German legislator has so far only prepared and published a draft of the proposed German Trade Secret Act. Arguably, the most important change in the draft bill to the existing rules on trade secrets in Germany will be a new and EU-wide definition of trade secrets. This proposed definition requires the holder of a trade secret to take reasonable measures to keep a trade secret confidential in order to benefit from its protection – e.g. by implementing technical, contractual and organizational measures that ensure secrecy. This requirement goes beyond the current standard pursuant to which a manifest interest in keeping an information secret may be sufficient. Furthermore, the draft bill provides for additional protection of trade secrets in litigation matters. Last but not least, the draft bill also provides for increased protection of whistleblowers by reducing the barriers for the disclosure of trade secrets in the public interest and to the media. As a consequence, companies would be advised to review their internal procedures and policies regarding the protection of trade secrets at this stage, and may want to adapt their existing whistleblowing and compliance-management-systems as appropriate. Back to Top 10.       International Trade, Sanctions and Export Controls – The Conflict between Complying with the Re-Imposed U.S. Iran Sanctions and the EU Blocking Statute On May 8, 2018, President Donald Trump announced his decision to withdraw from the Joint Comprehensive Plan of Action (JCPOA) and re-impose U.S. nuclear-related sanctions. Under the JCPOA, General License H had permitted U.S.-owned or -controlled non-U.S. entities to engage in business with Iran. But with the end of the wind-down periods provided for in President Trump’s decision on November 5, 2018, such non-U.S. entities are now no longer broadly permitted to provide goods, services, or financing to Iranian counterparties, not even under agreements executed before the U.S. withdrawal from the JCPOA. In response to the May 8, 2018 decision, the EU amended the EU Blocking Statute on August 6, 2018. The effect of the amended EU Blocking Statute is to prohibit compliance by so-called EU operators with the re-imposed U.S. sanctions on Iran. Comparable and more generally drafted anti-blocking statutes had already existed in the EU and several of its member states which prohibited EU domiciled companies to commit to compliance with foreign boycott regulations. These competing obligations under EU and U.S. laws are a concern for U.S. companies that own or seek to acquire German companies that have a history of engagement with Iran – as well as for the German company itself and its management and the employees. But what does the EU prohibition against compliance with the re-imposed U.S. sanctions on Iran mean in practice? Most importantly, it must be noted that the EU Blocking Statute does not oblige EU operators to start or continue Iran related business. If, for example, an EU operator voluntarily decides, e.g. due to lack of profitability, to cease business operations in Iran and not to demonstrate compliance with the U.S. sanctions, the EU Blocking Statute does not apply. Obviously, such voluntary decision must be properly documented. Procedural aspects also remain challenging for companies: In the event a Germany subsidiary of a U.S. company were to decide to start or continue business with Iran, it would usually be required to reach out to the U.S. authorities to request a specific license for a particular transaction with Iran. Before doing so, however, EU operators must first contact the EU Commission directly (not the EU member state authorities) to request authorization to apply for such a U.S. special license. Likewise, if a Germany subsidiary were to decide not to start or to cease business with Iran for the sole reason of being compliant with the re-imposed U.S. Iran sanctions, it would have to apply for an exception from the EU Blocking Statute and would have to provide sufficient evidence that non-compliance would cause serious damage to at least one protected interest. The hurdles for an exception are high and difficult to predict. The EU Commission will e.g. consider, “(…) whether the applicant would face significant economic losses, which could for example threaten its viability or pose a serious risk of bankruptcy, or the security of supply of strategic goods or services within or to the Union or a Member State and the impact of any shortage or disruption therein.” As such, any company caught up in this conflict of interests between the re-imposed U.S. sanctions and the EU Blocking Statute should be aware of a heightened risk of litigation. Third parties, such as Iranian counterparties, might successfully sue for breach of contract with the support of the EU Blocking Regulation in cases of non-performance of contracts as a result of the re-imposed U.S. nuclear sanctions. Finally, EU operators are required to inform the EU Commission within 30 days from the date on which information is obtained that the economic and/or financial interests of the EU operator are affected, directly or indirectly, by the re-imposed U.S. Iran sanctions. If the EU operator is a legal person, this obligation is incumbent on its directors, managers and other persons with management responsibilities of such legal person. Back to Top The following Gibson Dunn lawyers assisted in preparing this client update:  Birgit Friedl, Marcus Geiss, Silke Beiter, Lutz Englisch, Daniel Gebauer, Kai Gesing, Maximilian Hoffmann, Philipp Mangini-Guidano, Jens-Olrik Murach, Markus Nauheim, Dirk Oberbracht, Richard Roeder, Martin Schmid, Annekatrin Schmoll, Jan Schubert, Benno Schwarz, Balthasar Strunz, Michael Walther, Finn Zeidler, Mark Zimmer, Stefanie Zirkel and Caroline Ziser Smith. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the issues discussed in this update. The two German offices of Gibson Dunn in Munich and Frankfurt bring together lawyers with extensive knowledge of corporate, tax, labor, real estate, antitrust, intellectual property law and extensive compliance / white collar crime experience. The German offices are comprised of seasoned lawyers with a breadth of experience who have assisted clients in various industries and in jurisdictions around the world. Our German lawyers work closely with the firm’s practice groups in other jurisdictions to provide cutting-edge legal advice and guidance in the most complex transactions and legal matters. For further information, please contact the Gibson Dunn lawyer with whom you work or any of the following members of the German offices: General Corporate, Corporate Transactions and Capital Markets Lutz Englisch (+49 89 189 33 150), lenglisch@gibsondunn.com) Markus Nauheim (+49 89 189 33 122, mnauheim@gibsondunn.com) Ferdinand Fromholzer (+49 89 189 33 121, ffromholzer@gibsondunn.com) Dirk Oberbracht (+49 69 247 411 510, doberbracht@gibsondunn.com) Wilhelm Reinhardt (+49 69 247 411 520, wreinhardt@gibsondunn.com) Birgit Friedl (+49 89 189 33 180, bfriedl@gibsondunn.com) Silke Beiter (+49 89 189 33 121, sbeiter@gibsondunn.com) Marcus Geiss (+49 89 189 33 122, mgeiss@gibsondunn.com) Annekatrin Pelster (+49 69 247 411 521, apelster@gibsondunn.com Finance, Restructuring and Insolvency Sebastian Schoon (+49 89 189 33 160, sschoon@gibsondunn.com) Birgit Friedl (+49 89 189 33 180, bfriedl@gibsondunn.com) Alexander Klein (+49 69 247 411 518, aklein@gibsondunn.com) Marcus Geiss (+49 89 189 33 122, mgeiss@gibsondunn.com) Tax Hans Martin Schmid (+49 89 189 33 110, mschmid@gibsondunn.com) Labor Law Mark Zimmer (+49 89 189 33 130, mzimmer@gibsondunn.com) Real Estate Peter Decker (+49 89 189 33 115, pdecker@gibsondunn.com) Daniel Gebauer (+49 89 189 33 115, dgebauer@gibsondunn.com) Technology Transactions / Intellectual Property / Data Privacy Michael Walther (+49 89 189 33 180, mwalther@gibsondunn.com) Kai Gesing (+49 89 189 33 180, kgesing@gibsondunn.com) Corporate Compliance / White Collar Matters Benno Schwarz (+49 89 189 33 110, bschwarz@gibsondunn.com) Michael Walther (+49 89 189 33 180, mwalther@gibsondunn.com) Mark Zimmer (+49 89 189 33 130, mzimmer@gibsondunn.com) Finn Zeidler (+49 69 247 411 530, fzeidler@gibsondunn.com) Antitrust Michael Walther (+49 89 189 33 180, mwalther@gibsondunn.com) Jens-Olrik Murach (+32 2 554 7240, jmurach@gibsondunn.com) Kai Gesing (+49 89 189 33 180, kgesing@gibsondunn.com) Litigation Michael Walther (+49 89 189 33 180, mwalther@gibsondunn.com) Mark Zimmer (+49 89 189 33 130, mzimmer@gibsondunn.com) Finn Zeidler (+49 69 247 411 530, fzeidler@gibsondunn.com) Kai Gesing (+49 89 189 33 180, kgesing@gibsondunn.com) International Trade, Sanctions and Export Control Michael Walther (+49 89 189 33 180, mwalther@gibsondunn.com) Richard Roeder (+49 89 189 33 218, rroeder@gibsondunn.com) © 2019 Gibson, Dunn & Crutcher LLP, 333 South Grand Avenue, Los Angeles, CA 90071 Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

December 4, 2018 |
Ari Lanin and Benyamin Ross Named to Variety’s Dealmakers Impact Report

Century City partner Ari Lanin and Los Angeles partner Benyamin Ross were named to Variety’s 2018 Dealmakers Impact Report, which profiles the entertainment industry’s top attorneys, executives, managers and financiers.  They were recognized for representing some of the industry’s major players and their deals including WndrCo in the formation of and $1 billion initial capital raise for its NewTV project.  Lanin advises companies, private equity firms and investment banks, focusing on public and private merger transactions, stock and asset sales, joint ventures and strategic partnerships, contests for corporate control and public and private capital-raising transactions.  Ross advises companies, private equity and venture capital firms in mergers and acquisitions, equity investments, joint ventures, restructuring transactions and general commercial agreements.  The issue was published on December 4, 2018.

November 29, 2018 |
Theodore Boutrous Named Lawyer of the Week by The Times

The Times named Los Angeles partner Theodore J. Boutrous Jr. “Lawyer of the week” [PDF] for helping CNN’s Jim Acosta win back his press pass after it was revoked by the White House in November. As both a crisis management strategist and a seasoned appellate and media lawyer, Boutrous has extensive experience handling high-profile litigation, media relations and media legal issues. The profile was published on November 29, 2018.

November 30, 2018 |
Theodore Boutrous and Theodore Olson Named Litigators of the Week

The Am Law Litigation Daily named Los Angeles partner Theodore J. Boutrous Jr. and Washington, D.C. partner Theodore B. Olson as “Litigators of the Week” [PDF] for leading a team that “jumped into action when the White House revoked the press pass of CNN’s Jim Acosta, suing to force the Trump administration to restore his access.”  Boutrous and Olson formed a team with deep knowledge of First Amendment law, including Washington, D.C. partner Joshua S. Lipshutz and New York partner Anne Champion.  The case moved quickly.  Within a few days of the team’s initial filing on Tuesday, November 13, the judge ruled in favor of CNN and Acosta, and by Monday, November 19, the White House restored Jim Acosta’s hard pass permanently.  The profile was published on November 30, 2018. Gibson Dunn is unique among law firms in terms of the depth and breadth of its media, entertainment and technology practice.  The firm has been extensively involved in handling First Amendment issues in virtually all areas of free speech and press and offers counseling, litigation at the trial and appellate levels, prepublication or prebroadcast review, and contractual negotiations among many other services.

November 21, 2018 |
New Export Controls on Emerging Technologies – 30-Day Public Comment Period Begins

Click for PDF On Monday, the Trump administration took the first step toward imposing new controls on the export of cutting-edge technologies.  Pursuant to the Export Control Reform Act of 2018 (“ECRA”), the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) published a request for the public’s assistance in identifying “emerging technologies” essential for U.S. national security that should be subject to new export restrictions.[1]  The advance notice of proposed rulemaking (“ANPRM”) reiterates the general criteria for emerging technologies, provides a representative list of targeted technologies, and provides a 30-day period for comment on which technologies should be subject to these new controls. In response to this notice, companies that operate in certain high technology sectors, such as biotechnology, artificial intelligence, computer processing, and advanced materials, should consider filing public comments and prepare for pending controls.  These companies should start by identifying technologies they possess that are likely to be targeted for new export controls and gather important evidence on the efficacy of potential controls on these technologies.  Companies likely to be affected should  also consider the impact that tighter controls on the transfer of these technologies may have on their business operations.  Additionally, U.S. businesses that engage with emerging technologies must be mindful of new CFIUS regulations that require such businesses to declare certain controlling and non-controlling foreign investments to CFIUS before the investment is made. BACKGROUND On August 13, 2018, President Trump signed the John S. McCain National Defense Authorization Act for Fiscal Year 2019 (“FY 2019 NDAA”), an omnibus bill to authorize defense spending that includes—among other measures—the Export Control Reform Act of 2018 (“ECRA”).[2]  In addition to placing the U.S. export control regime on firm statutory footing for the first time in decades, ECRA significantly expanded the President’s authority to regulate and enforce export controls by requiring the Secretary of Commerce to establish controls on the export, re-export, or in-country transfer of “emerging or foundational technologies.”[3] ECRA was passed alongside the Foreign Investment Risk Review Modernization Act (“FIRRMA”), which reformed the CFIUS review process for inbound foreign investment.[4]  As originally drafted, FIRRMA would have included outbound investments—such as joint ventures or licensing agreements—in the list of covered transactions subject to CFIUS review to limit the outflow of technology important to U.S. national security.  This proposed provision was very controversial and was ultimately removed from the bill.  Instead, the final version of the NDAA included ECRA, which granted BIS the authority to work with the interagency group to identify and regulate the transfer of these emerging and foundational technologies.[5] WHAT ARE EMERGING TECHNOLOGIES? ECRA does not offer a precise definition of the “emerging technologies” to be controlled by BIS.  Instead, it offers criteria for BIS to consider when determining what technologies will fall within this area of BIS control.  Importantly, the definition of “technology” itself in the context of export controls is well established.  Such technology does not, for example, include end-items, commodities, or software.  Instead, technology is the information, in tangible or intangible form, necessary for the development, production, or use of such goods or software.[6]  Technology may include written or oral communications, blueprints, schematics, photographs, formulae, models, or information gained through mere visual inspection.[7]  For example, speech recognition software would not be a technology and therefore would not be subject to these new controls.  However, the source code for such software would be technology that could be considered “emerging,” depending on the criteria BIS applies. The ANPRM broadly describes emerging technologies as “those technologies essential to the national security of the United States that are not already subject to export controls under the Export Administration Regulations (“EAR”) or the International Traffic in Arms Regulations (“ITAR”).”[8]  The ANPRM suggests that technologies will be considered “essential to the national security of the United States” if they “have potential conventional weapons, intelligence collection, weapons of mass destruction, or terrorist applications or could provide the United States with a qualitative military or intelligence advantage.”[9] In narrowing down which of these technologies will be subject to new export controls, BIS will also consider the development of emerging technologies abroad, the effect of unilateral export restrictions on U.S. technological development, and the ability of export controls to limit the spread of these emerging technologies in foreign countries.  In making this assessment and further narrowing the category of affected technologies, BIS will consider information from a variety of interagency sources, as well as public information drawn from comments submitted in response to the ANPRM. Although the ANPRM does not provide concrete examples of “emerging technologies,” BIS does provide a list of technologies currently subject to limited controls that could be considered “emerging” and subject to new, broader controls.  These include the following: (1) Biotechnology, such as: (i)  nanobiology; (ii) synthetic biology; (iii) genomic and genetic engineering; or (iv) neurotech. (2) Artificial intelligence (AI) and machine learning technology, such as: (i) neural networks and deep learning (e.g., brain modelling, time series prediction, classification); (ii) evolution and genetic computation (e.g., genetic algorithms, genetic programming); (iii) reinforcement learning; (iv) computer vision (e.g., object recognition, image understanding); (v) expert systems (e.g., decision support systems, teaching systems); (vi) speech and audio processing (e.g., speech recognition and production); (vii) natural language processing (e.g., machine translation); (viii) planning (e.g., scheduling, game playing); (ix) audio and video manipulation technologies (e.g., voice cloning, deepfakes); (x) AI cloud technologies; or (xi) AI chipsets. (3) Position, Navigation, and Timing (PNT) technology. (4) Microprocessor technology, such as: (i) Systems-on-Chip (SoC); or (ii) Stacked Memory on Chip. (5) Advanced computing technology, such as: (i) memory-centric logic. (6) Data analytics technology, such as: (i) visualization; (ii) automated analysis algorithms; or (iii) context-aware computing. (7) Quantum information and sensing technology, such as: (i) quantum computing; (ii) quantum encryption; or (iii) quantum sensing. (8) Logistics technology, such as: (i) mobile electric power; (ii) modeling and simulation; (iii) total asset visibility; or (iv) distribution-based Logistics Systems (DBLS). (9) Additive manufacturing (e.g., 3D printing). (10) Robotics such as: (i) micro-drone and micro-robotic systems; (ii) swarming technology; (iii) self-assembling robots; (iv) molecular robotics; (v) robot compliers; or (vi) smart Dust. (11) Brain-computer interfaces, such as: (i) neural-controlled interfaces; (ii) mind-machine interfaces; (iii) direct neural interfaces; or (iv) brain-machine interfaces. (12) Hypersonics, such as: (i) flight control algorithms; (ii) propulsion technologies; (iii) thermal protection systems; or (iv) specialized materials (for structures, sensors, etc.). (13) Advanced Materials, such as: (i) adaptive camouflage; (ii) functional textiles (e.g., advanced fiber and fabric technology); or (iii) biomaterials. (14) Advanced surveillance technologies, such as faceprint and voiceprint technologies.[10] BIS REQUEST FOR COMMENT Along with a review of its mandate to regulate emerging technologies and a sample of several potentially affected industries, BIS specifically requested public comments on the following points: how the administration should define emerging technologies what the criteria should be for determining whether there are specific technologies within these general categories that are important to U.S. national security what sources the administration can refer to in order to identify emerging technologies what other general technology categories might be important to U.S. national security and warrant control information about the status of development of the listed technologies in the United States and other countries information about what impact the specific emerging technology controls would have on U.S. technological leadership, and suggestions for other approaches to identifying emerging technologies warranting controls.[11] Comments on these issues are due to BIS by December 19, 2018—only thirty days after the publication of the ANPRM. Critically, comments offered pursuant to this notice will be made public, and there is no express procedure for submitting redacted public comments and complete comments for the agency. HOW TO RESPOND Companies potentially affected by these new controls should simultaneously begin preparing for public comments and for pending controls.  The first step in this process should be the identification of potentially targeted technologies.  Companies should work with in-house engineers, researchers, and product development personnel—as well as export control experts—to begin identifying technology that may be targeted for control. Technologies currently controlled under the ITAR or broadly restricted by the EAR will not be included in the new category of “emerging technologies.”  Given the express limitations provided in ECRA, technologies produced outside of the United States are also unlikely to be targeted by the new controls, as unilateral U.S. export controls would do little to restrict the flow of these technologies.  Once a company identifies such non-controlled technologies predominantly of U.S.-origin, it should evaluate the extent to which it shares or will share this technology with non-U.S. persons and the means by which it makes such transfers. Having identified technology likely to be impacted by the new controls, companies should prepare public comments in response to the request posed in the ANPRM.  For example, companies may wish to suggest a definition for emerging technologies, or a limiting principle for a potential definition, that is based on an evaluation of potentially affected technologies, market concerns, and BIS’s policy objectives.  Concrete evidence of foreign production of comparable technology, the likely impact on U.S. technological superiority of new controls, and the ability of new controls to limit the spread of emerging technologies abroad will also be particularly persuasive.  Where possible, companies may also wish to differentiate their technology from comparable technology that may have conventional weapons, intelligence collection, weapons of mass destruction, or terrorist applications. In addition to providing comments to BIS, companies should also begin preparing to operate under expanded export controls.  Importantly, certain kinds of exports related to emerging technologies will not be subject to new licensing requirements.  For example, the provision of technology associated with the sale or license of finished goods or software will not be subject to a new licensing requirement if the U.S. party to the transaction generally makes the finished items and associated technology available to its customers, distributors, and resellers (e.g., an operation manual exported along with controlled hardware).[12] Similarly, the provision by a U.S. party of technology to a foreign supplier of goods or services to the U.S. party will not be restricted if the foreign supplier has no rights to exploit the technology contributed by the U.S. person other than to supply the procured goods or services.[13]  For example, the provision of blueprints to a foreign manufacturer under these circumstances would not be subject to the new controls.  Additionally, contribution by a U.S. person to an industry organization related to a standard or specification would not generally be subject to the new controls.[14] However, companies should be mindful of the circumstances in which new controls will limit their business operations.  For example, the new controls may limit operations under joint ventures or other cooperative arrangements where emerging technologies are currently exchanged.  In addition, the new controls are likely to limit the availability of certain license exceptions that could be used to facilitate such cooperative arrangements.  Cooperation with individuals and entities in countries subject to U.S. arms embargos, such as China, are likely to be significantly curtailed, as BIS may effectively prohibit exports of emerging technologies to those countries. With these potential impacts in mind, companies should begin evaluating how controls on targeted technologies will affect their operations. WHAT’S NEXT BIS will evaluate public comments offered during the 30-day window provided by the ANPRM, along with additional public and classified information collected through the interagency process, to establish the criteria to be used to identify  “emerging technologies” and related export controls.  As a part of this process, it is likely that BIS will rely on some of its existing mechanisms for monitoring and regulating emerging technologies to provide insight into the appropriate scope and content of the new controls. For example, BIS has indicated it will look to its Emerging Technologies and Research Advisory Committee, an advisory body of academics, industry personnel, and researchers that already assist BIS in identifying new technologies and gaps in existing controls.  BIS may also rely on the surveys and network of company partnerships used by its Office of Technology Evaluation to conduct assessments of defense-related technologies.  Other federal agencies engaged in the development of emerging technologies may also contribute to the identification of emerging technologies and appropriate controls, including for example the various advanced research projects agencies (e.g. DARPA, ARPA-E, and IARPA), the National Science Foundation’s Foundations of Emerging Technologies, and the national laboratories.  The work of these agencies and entities may suggest areas on which BIS could focus new controls. BIS’s current efforts to control emerging technologies and related products may also inform its development of new controls.  In 2012, BIS established a dedicated system for controlling emerging technologies under Export Control Classification Number (“ECCN”) 0Y521.  These new controls were similarly intended to restrict the export of items presenting a significant military or intelligence advantage to the United States.  Technology identified under this ECCN requires a license for export to all destinations, except Canada, with limited license exceptions available.  Although only a few items have been identified for control under this existing mechanism (e.g. X-ray deflecting epoxies, biosensor systems, and tools for tritium production), BIS’s use of the 0Y521 ECCN series may provide further evidence of the types of technologies BIS may target for control and the restrictions it will apply. As it continues to await public comments and identify emerging technologies, BIS plans to publish a similar ANPRM requesting the public’s assistance in identifying and defining “foundational technologies,” which will also be subjected to new ECRA-mandated controls.[15]  Once BIS has arrived at a definition for these terms and a set of potential controls, BIS will likely publish a proposed rule providing this information for another period of public comment.  Those comments will undergo a similar process of interagency review, and BIS will announce its final rule providing the new controls on the export of emerging and foundational technologies. Importantly, any technologies that BIS identifies as emerging or foundational through this rulemaking process will be considered “critical technologies” for the purposes of determining CFIUS jurisdiction.[16]  FIRRMA now requires that certain foreign investment in U.S. companies that deal in these critical technologies receive CFIUS review and approval.  Under CFIUS’s new program to pilot the implementation of these authorities, CFIUS must receive advance notice of certain types of non-controlling foreign investment in U.S. companies that design, test, manufacture, fabricate, or develop critical technologies—including emerging and foundational technologies identified by BIS—for use in one of several listed industries.[17]  In this regard, BIS’s final determination regarding what constitutes “emerging technologies” will also impact the scope of CFIUS’s expanded jurisdiction.    [1]   Review of Controls for Certain Emerging Technologies, 83 Fed. Reg. 58,201 (advance notice of proposed rulemaking Nov. 19, 2018), https://www.gpo.gov/fdsys/pkg/FR-2018-11-19/pdf/2018-25221.pdf [hereinafter, “ANPRM”].    [2]   Export Control Reform Act of 2018, Pub. L. No. 115-232, §§ 1751-1781 (2018).    [3]   Id. § 1758.    [4]   Foreign Investment Risk Review Modernization Act of 2018, Pub. L. No. 115-232, §§ 1701-1728 (2018).    [5]   Export Control Reform Act of 2018, Pub. L. No. 115-232, § 1758 (2018).    [6]   15 C.F.R. § 772.1.    [7]   Id.    [8]   ANPRM, supra note 1 at 58,201.    [9]   Id. [10]   Id. at 58,202. [11]   Id. [12]   Export Control Reform Act of 2018, Pub. L. No. 115-232, § 1758(b)(4)(c)(i) (2018). [13]   Id. § 1758(b)(4)(c)(iv). [14]   Id. § 1758(b)(4)(c)(v). [15]   ANPRM, supra note 1 at 58,202. [16]   Foreign Investment Risk Review Modernization Act of 2018, Pub. L. No. 115-232, § 1703 (2018). [17]   31 C.F.R. § 801.101. The following Gibson Dunn lawyers assisted in preparing this client update: Judith Alison Lee, Adam M. Smith, R.L. Pratt and Christopher Timura. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the above developments.  Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any of the following leaders and members of the firm’s International Trade practice group: United States: Judith Alison Lee – Co-Chair, International Trade Practice, Washington, D.C. (+1 202-887-3591, jalee@gibsondunn.com) Ronald Kirk – Co-Chair, International Trade Practice, Dallas (+1 214-698-3295, rkirk@gibsondunn.com) Jose W. Fernandez – New York (+1 212-351-2376, jfernandez@gibsondunn.com) Marcellus A. McRae – Los Angeles (+1 213-229-7675, mmcrae@gibsondunn.com) Adam M. Smith – Washington, D.C. (+1 202-887-3547, asmith@gibsondunn.com) Christopher T. Timura – Washington, D.C. (+1 202-887-3690, ctimura@gibsondunn.com) Ben K. Belair – Washington, D.C. (+1 202-887-3743, bbelair@gibsondunn.com) Courtney M. Brown – Washington, D.C. (+1 202-955-8685, cmbrown@gibsondunn.com) Laura R. Cole – Washington, D.C. (+1 202-887-3787, lcole@gibsondunn.com) Stephanie L. Connor – Washington, D.C. (+1 202-955-8586, sconnor@gibsondunn.com) Helen L. Galloway – Los Angeles (+1 213-229-7342, hgalloway@gibsondunn.com) Henry C. Phillips – Washington, D.C. (+1 202-955-8535, hphillips@gibsondunn.com) R.L. Pratt – Washington, D.C. (+1 202-887-3785, rpratt@gibsondunn.com) Scott R. Toussaint – Palo Alto (+1 650-849-5320, stoussaint@gibsondunn.com) Europe: Peter Alexiadis – Brussels (+32 2 554 72 00, palexiadis@gibsondunn.com) Attila Borsos – Brussels (+32 2 554 72 10, aborsos@gibsondunn.com) Patrick Doris – London (+44 (0)207 071 4276, pdoris@gibsondunn.com) Penny Madden – London (+44 (0)20 7071 4226, pmadden@gibsondunn.com) Benno Schwarz – Munich (+49 89 189 33 110, bschwarz@gibsondunn.com) Michael Walther – Munich (+49 89 189 33-180, mwalther@gibsondunn.com) Richard W. Roeder – Munich (+49 89 189 33-160, rroeder@gibsondunn.com) © 2018 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

November 1, 2018 |
U.S. News – Best Lawyers® Awards Gibson Dunn 132 Top-Tier Rankings

U.S. News – Best Lawyers® awarded Gibson Dunn Tier 1 rankings in 132 practice area categories in its 2019 “Best Law Firms” [PDF] survey. Overall, the firm earned 169 rankings in nine metropolitan areas and nationally. Additionally, Gibson Dunn was recognized as “Law Firm of the Year” for Litigation – Antitrust and Litigation – Securities. Firms are recognized for “professional excellence with persistently impressive ratings from clients and peers.” The recognition was announced on November 1, 2018.

October 24, 2018 |
Lessons from FTC’s Loss in, and Subsequent Abandonment of, DirecTV Advertising Case

The Federal Trade Commission (“FTC”) is increasingly focusing on the advertising, data privacy/security, and e-commerce processes of prominent companies marketing legitimate, valuable products and services, as compared to the types of fraudsters and shams that have been a central focus of FTC attention in the past. The FTC’s recently concluded action against DirecTV is emblematic of this trend. In FTC v. DirecTV, the FTC alleged that DirecTV’s marketing failed to adequately disclose that (a) the introductory discounted price lasted only twelve months while subscribers were bound to a 24-month commitment; (b) subscribers who cancelled early would be charged a cancellation fee; and (c) subscribers would automatically incur monthly charges if they did not cancel a premium channel package after a free three-month promotional period. On August 16, 2017, after hearing the FTC’s case-in-chief, Judge Gilliam of the U.S. District Court for the Northern District of California granted judgment for DirecTV on the majority of these claims. And earlier this week, the FTC agreed to voluntarily dismiss the remainder of its case with prejudice. Gibson Dunn partners Sean Royall and Rich Cunningham and associates Brett Rosenthal and Emily Riff recently published an article titled Lessons from FTC’s Loss in, and Subsequent Abandonment of, DirecTV Advertising Case in the Washington Legal Foundation’s The Legal Pulse blog. The article describes the case, the FTC’s evidence, and key takeaways for companies crafting advertising and marketing disclosures. Lessons from FTC’s Loss in, and Subsequent Abandonment of, DirecTV Advertising Case © 2018, Washington Legal Foundation, The Legal Pulse, October 23, 2018. Reprinted with permission. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments. Please contact the authors of this Client Alert, the Gibson Dunn lawyer with whom you usually work, or one of the leaders and members of the firm’s Antitrust and Competition or Privacy, Cybersecurity and Consumer Protection practice groups: Washington, D.C. Scott D. Hammond (+1 202-887-3684, shammond@gibsondunn.com) D. Jarrett Arp (+1 202-955-8678, jarp@gibsondunn.com) Adam Di Vincenzo (+1 202-887-3704, adivincenzo@gibsondunn.com) Howard S. Hogan (+1 202-887-3640, hhogan@gibsondunn.com) Joseph Kattan P.C. (+1 202-955-8239, jkattan@gibsondunn.com) Joshua Lipton (+1 202-955-8226, jlipton@gibsondunn.com) Cynthia Richman (+1 202-955-8234, crichman@gibsondunn.com) New York Alexander H. Southwell (+1 212-351-3981, asouthwell@gibsondunn.com) Eric J. Stock (+1 212-351-2301, estock@gibsondunn.com) Los Angeles Daniel G. Swanson (+1 213-229-7430, dswanson@gibsondunn.com) Debra Wong Yang (+1 213-229-7472, dwongyang@gibsondunn.com) Samuel G. Liversidge (+1 213-229-7420, sliversidge@gibsondunn.com) Jay P. Srinivasan (+1 213-229-7296, jsrinivasan@gibsondunn.com) Rod J. Stone (+1 213-229-7256, rstone@gibsondunn.com) Eric D. Vandevelde (+1 213-229-7186, evandevelde@gibsondunn.com) San Francisco Rachel S. Brass (+1 415-393-8293, rbrass@gibsondunn.com) Dallas M. Sean Royall (+1 214-698-3256, sroyall@gibsondunn.com) Veronica S. Lewis (+1 214-698-3320, vlewis@gibsondunn.com) Brian Robison (+1 214-698-3370, brobison@gibsondunn.com) Robert C. Walters (+1 214-698-3114, rwalters@gibsondunn.com) Denver Richard H. Cunningham (+1 303-298-5752, rhcunningham@gibsondunn.com) Ryan T. Bergsieker (+1 303-298-5774, rbergsieker@gibsondunn.com) © 2018 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

October 17, 2018 |
SEC Warns Public Companies on Cyber-Fraud Controls

Click for PDF On October 16, 2018, the Securities and Exchange Commission issued a report warning public companies about the importance of internal controls to prevent cyber fraud.  The report described the SEC Division of Enforcement’s investigation of multiple public companies which had collectively lost nearly $100 million in a range of cyber-scams typically involving phony emails requesting payments to vendors or corporate executives.[1] Although these types of cyber-crimes are common, the Enforcement Division notably investigated whether the failure of the companies’ internal accounting controls to prevent unauthorized payments violated the federal securities laws.  The SEC ultimately declined to pursue enforcement actions, but nonetheless issued a report cautioning public companies about the importance of devising and maintaining a system of internal accounting controls sufficient to protect company assets. While the SEC has previously addressed the need for public companies to promptly disclose cybersecurity incidents, the new report sees the agency wading into corporate controls designed to mitigate such risks.  The report encourages companies to calibrate existing internal controls, and related personnel training, to ensure they are responsive to emerging cyber threats.  The report (issued to coincide with National Cybersecurity Awareness Month) clearly intends to warn public companies that future investigations may result in enforcement action. The Report of Investigation Section 21(a) of the Securities Exchange Act of 1934 empowers the SEC to issue a public Report of Investigation where deemed appropriate.  While SEC investigations are confidential unless and until the SEC files an enforcement action alleging that an individual or entity has violated the federal securities laws, Section 21(a) reports provide a vehicle to publicize investigative findings even where no enforcement action is pursued.  Such reports are used sparingly, perhaps every few years, typically to address emerging issues where the interpretation of the federal securities laws may be uncertain.  (For instance, recent Section 21(a) reports have addressed the treatment of digital tokens as securities and the use of social media to disseminate material corporate information.) The October 16 report details the Enforcement Division’s investigations into the internal accounting controls of nine issuers, across multiple industries, that were victims of cyber-scams. The Division identified two specific types of cyber-fraud – typically referred to as business email compromises or “BECs” – that had been perpetrated.  The first involved emails from persons claiming to be unaffiliated corporate executives, typically sent to finance personnel directing them to wire large sums of money to a foreign bank account for time-sensitive deals. These were often unsophisticated operations, textbook fakes that included urgent, secret requests, unusual foreign transactions, and spelling and grammatical errors. The second type of business email compromises were harder to detect. Perpetrators hacked real vendors’ accounts and sent invoices and requests for payments that appeared to be for otherwise legitimate transactions. As a result, issuers made payments on outstanding invoices to foreign accounts controlled by impersonators rather than their real vendors, often learning of the scam only when the legitimate vendor inquired into delinquent bills. According to the SEC, both types of frauds often succeeded, at least in part, because responsible personnel failed to understand their company’s existing cybersecurity controls or to appropriately question the veracity of the emails.  The SEC explained that the frauds themselves were not sophisticated in design or in their use of technology; rather, they relied on “weaknesses in policies and procedures and human vulnerabilities that rendered the control environment ineffective.” SEC Cyber-Fraud Guidance Cybersecurity has been a high priority for the SEC dating back several years. The SEC has pursued a number of enforcement actions against registered securities firms arising out of data breaches or deficient controls.  For example, just last month the SEC brought a settled action against a broker-dealer/investment-adviser which suffered a cyber-intrusion that had allegedly compromised the personal information of thousands of customers.  The SEC alleged that the firm had failed to comply with securities regulations governing the safeguarding of customer information, including the Identity Theft Red Flags Rule.[2] The SEC has been less aggressive in pursuing cybersecurity-related actions against public companies.  However, earlier this year, the SEC brought its first enforcement action against a public company for alleged delays in its disclosure of a large-scale data breach.[3] But such enforcement actions put the SEC in the difficult position of weighing charges against companies which are themselves victims of a crime.  The SEC has thus tried to be measured in its approach to such actions, turning to speeches and public guidance rather than a large number of enforcement actions.  (Indeed, the SEC has had to make the embarrassing disclosure that its own EDGAR online filing system had been hacked and sensitive information compromised.[4]) Hence, in February 2018, the SEC issued interpretive guidance for public companies regarding the disclosure of cybersecurity risks and incidents.[5]  Among other things, the guidance counseled the timely public disclosure of material data breaches, recognizing that such disclosures need not compromise the company’s cybersecurity efforts.  The guidance further discussed the need to maintain effective disclosure controls and procedures.  However, the February guidance did not address specific controls to prevent cyber incidents in the first place. The new Report of Investigation takes the additional step of addressing not just corporate disclosures of cyber incidents, but the procedures companies are expected to maintain in order to prevent these breaches from occurring.  The SEC noted that the internal controls provisions of the federal securities laws are not new, and based its report largely on the controls set forth in Section 13(b)(2)(B) of the Exchange Act.  But the SEC emphasized that such controls must be “attuned to this kind of cyber-related fraud, as well as the critical role training plays in implementing controls that serve their purpose and protect assets in compliance with the federal securities laws.”  The report noted that the issuers under investigation had procedures in place to authorize and process payment requests, yet were still victimized, at least in part “because the responsible personnel did not sufficiently understand the company’s existing controls or did not recognize indications in the emailed instructions that those communications lacked reliability.” The SEC concluded that public companies’ “internal accounting controls may need to be reassessed in light of emerging risks, including risks arising from cyber-related frauds” and “must calibrate their internal accounting controls to the current risk environment.” Unfortunately, the vagueness of such guidance leaves the burden on companies to determine how best to address emerging risks.  Whether a company’s controls are adequate may be judged in hindsight by the Enforcement Division; not surprisingly, companies and individuals under investigation often find the staff asserting that, if the controls did not prevent the misconduct, they were by definition inadequate.  Here, the SEC took a cautious approach in issuing a Section 21(a) report highlighting the risk rather than publicly identifying and penalizing the companies which had already been victimized by these scams. However, companies and their advisors should assume that, with this warning shot across the bow, the next investigation of a similar incident may result in more serious action.  Persons responsible for designing and maintaining the company’s internal controls should consider whether improvements (such as enhanced trainings) are warranted; having now spoken on the issue, the Enforcement Division is likely to view corporate inaction as a factor in how it assesses the company’s liability for future data breaches and cyber-frauds.    [1]   SEC Press Release (Oct. 16, 2018), available at www.sec.gov/news/press-release/2018-236; the underlying report may be found at www.sec.gov/litigation/investreport/34-84429.pdf.    [2]   SEC Press Release (Sept. 16, 2018), available at www.sec.gov/news/press-release/2018-213.  This enforcement action was particularly notable as the first occasion the SEC relied upon the rules requiring financial advisory firms to maintain a robust program for preventing identify theft, thus emphasizing the significance of those rules.    [3]   SEC Press Release (Apr. 24, 2018), available at www.sec.gov/news/press-release/2018-71.    [4]   SEC Press Release (Oct. 2, 2017), available at www.sec.gov/news/press-release/2017-186.    [5]   SEC Press Release (Feb. 21, 2018), available at www.sec.gov/news/press-release/2018-22; the guidance itself can be found at www.sec.gov/rules/interp/2018/33-10459.pdf.  The SEC provided in-depth guidance in this release on disclosure processes and considerations related to cybersecurity risks and incidents, and complements some of the points highlighted in the Section 21A report. Gibson Dunn’s lawyers are available to assist with any questions you may have regarding these issues.  For further information, please contact the Gibson Dunn lawyer with whom you usually work in the firm’s Securities Enforcement or Privacy, Cybersecurity and Consumer Protection practice groups, or the following authors: Marc J. Fagel – San Francisco (+1 415-393-8332, mfagel@gibsondunn.com) Alexander H. Southwell – New York (+1 212-351-3981, asouthwell@gibsondunn.com) Please also feel free to contact the following practice leaders and members: Securities Enforcement Group: New York Barry R. Goldsmith – Co-Chair (+1 212-351-2440, bgoldsmith@gibsondunn.com) Mark K. Schonfeld – Co-Chair (+1 212-351-2433, mschonfeld@gibsondunn.com) Reed Brodsky (+1 212-351-5334, rbrodsky@gibsondunn.com) Joel M. Cohen (+1 212-351-2664, jcohen@gibsondunn.com) Lee G. Dunst (+1 212-351-3824, ldunst@gibsondunn.com) Laura Kathryn O’Boyle (+1 212-351-2304, loboyle@gibsondunn.com) Alexander H. 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Wagner (+1 650-849-5395, bwagner@gibsondunn.com) Denver Robert C. Blume (+1 303-298-5758, rblume@gibsondunn.com) Monica K. Loseman (+1 303-298-5784, mloseman@gibsondunn.com) Los Angeles Michael M. Farhang (+1 213-229-7005, mfarhang@gibsondunn.com) Douglas M. Fuchs (+1 213-229-7605, dfuchs@gibsondunn.com) Privacy, Cybersecurity and Consumer Protection Group: Alexander H. Southwell – Co-Chair, New York (+1 212-351-3981, asouthwell@gibsondunn.com) M. Sean Royall – Dallas (+1 214-698-3256, sroyall@gibsondunn.com) Debra Wong Yang – Los Angeles (+1 213-229-7472, dwongyang@gibsondunn.com) Christopher Chorba – Los Angeles (+1 213-229-7396, cchorba@gibsondunn.com) Richard H. Cunningham – Denver (+1 303-298-5752, rhcunningham@gibsondunn.com) Howard S. Hogan – Washington, D.C. (+1 202-887-3640, hhogan@gibsondunn.com) Joshua A. Jessen – Orange County/Palo Alto (+1 949-451-4114/+1 650-849-5375, jjessen@gibsondunn.com) Kristin A. Linsley – San Francisco (+1 415-393-8395, klinsley@gibsondunn.com) H. Mark Lyon – Palo Alto (+1 650-849-5307, mlyon@gibsondunn.com) Shaalu Mehra – Palo Alto (+1 650-849-5282, smehra@gibsondunn.com) Karl G. Nelson – Dallas (+1 214-698-3203, knelson@gibsondunn.com) Eric D. Vandevelde – Los Angeles (+1 213-229-7186, evandevelde@gibsondunn.com) Benjamin B. Wagner – Palo Alto (+1 650-849-5395, bwagner@gibsondunn.com) Michael Li-Ming Wong – San Francisco/Palo Alto (+1 415-393-8333/+1 650-849-5393, mwong@gibsondunn.com) Ryan T. Bergsieker – Denver (+1 303-298-5774, rbergsieker@gibsondunn.com) © 2018 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.