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Timestamp: 2018-06-20 03:37:36
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Matched Legal Cases: ['§ 1227', '§ 1201', '§ 42', '§ 1227', '§ 1201', '§ 1101', '§ 1400', '§ 1391', '§ 1400', '§ 1400', '§ 1391', '§ 1391', '§ 1400', '§ 1391', '§ 3', '§ 2', '§ 10', '§ 8', 'art 107', 'art 107', 'art 107', 'art 107', 'art 107', 'art 107', 'art 107', 'art 107', 'art 107', 'art 107', 'art 107', 'art 107', 'art 107']

Gibson Dunn previously issued several client alerts regarding President Trump’s January 27, 2017, Executive Order restricting entry into the United States for individuals from certain nations and making other immigration-related policy changes. This client alert addresses the replacement Executive Order entitled "Protecting the Nation from Foreign Terrorist Entry into the United States," signed on March 6, 2017.[1] It also addresses a recent announcement suspending expedited processing of H-1B visas. I. Overview of March 6, 2017 Replacement Executive Order The new order is in some regards narrower than the prior order, and its scope appears to be more clearly defined. However, there is still some ambiguity as to the process for obtaining waivers, and the order continues to provide for the possible extension or expansion of the travel ban. The order and the accompanying official statements also include considerably more material seeking to justify the provisions than contained in the prior order.[2] The Department of Homeland Security has released detailed Q&As[3] and a fact sheet regarding the new order;[4] additional guidance from the Department of State is expected.[5] Key features of the new order include: Effective Date. The effective date of the order is deferred for 10 days; the order goes into effect at 12:01 am ET on March 16, 2017. Sec. 14. Status of Prior Order. The new order fully rescinds and replaces the January 27 order. Sec. 13. Travel Ban For 6 Countries. Like the prior order, the new order suspends for 90 days entry for nationals of a number of Muslim-majority countries: Iran, Libya, Somalia, Sudan, Syria, and Yemen. Sec. 1(e). Exclusions and Exceptions to Travel Ban. The travel ban and related provisions have been narrowed and clarified in various respects: Iraq. Iraq is no longer identified among the affected countries. The other six nations designated in the original order are still covered. However, the order specifically calls for additional review when an Iraqi national who holds a visa applies for "admission," meaning upon arrival to the U.S. Secs. 1(g), 4. Lawful Permanent Residents. Lawful permanent residents (green-card holders) are explicitly excluded from the order. Sec. 3(b)(i). Current Visa Holders. Existing visas are not revoked by the order, and they can be used during the 90-day period otherwise covered by the order by the visa-holders under their existing terms, regardless of whether the visa-holder has previously been to the United States or is arriving for the first time. Those who had a visa physically marked as cancelled as result of the January order are also entitled to admission. Secs. 3(a), 12(c)-(d); Q&As 3, 5, 7. Dual-Citizens. Dual citizens of one of the designated nations are also explicitly excluded from the order provided that they are travelling on a passport of a country other than the six designated. For example, a dual-citizen of Somalia and the United Kingdom would still be eligible for admission to the United States if travelling on his U.K. passport. Sec. 3(b)(iv). Refugees, Asylees, and Convention Against Torture. Foreign nationals who are granted asylum status prior to the March 16 effective date, refugees already admitted, and those granted withholding of removal, advance parole, or protection under the Convention Against Torture are not barred from entry into the U.S. Sec. 3(b)(vi). Note, however, that under existing law, individuals with those statuses may need certain advance permission or authorization if they wish to leave and return to the United States without jeopardizing that status. Certain Diplomatic and Related Visas. As in the January order, diplomatic and diplomatic-type visas, NATO visas, C-2 (United Nations) visas, and G-1 through G-4 visas are excluded from the order. Sec. 3(b)(v) Travel Ban Waivers. The new order provides authority to certain Department of State and Homeland Security officials to grant waivers to the travel ban’s limitations on a case-by-case basis. The new order identifies nine scenarios in which such treatment "could be appropriate." These include a variety of hardship scenarios which arose under the January order, such as those needing urgent medical care or those who can document that they have "provided faithful and valuable service" to the United States government (e.g. foreign translators). Sec. 3(c). Importantly, these are still case-by-case waivers, not automatic exemptions. It is also not yet clear if individuals seeking waivers will be allowed to board flights to the U.S. Suspension of Visa Interview Waiver Program. As before, the Visa Interview Waiver program (often used by repeat business travelers from certain nations) is suspended. Sec. 9. Suspension of Refugee Admission Program. As in the January order, the Refugee Admission Program is suspended for 120 days, with a cap of 50,000 entrants for the current fiscal year upon resumption. Sec. 6. Unlike the January order, the new order does not indefinitely halt refugee admissions from Syria or prioritize religious minorities upon resumption. The treatment of those already granted refugee status but not yet in the United States is somewhat unclear. The DHS Q&A says such individuals "whose travel was already formally scheduled by the Department of State … are permitted to travel to the United States and seek admission," and they are covered by the text of the carve-out in Section 3(b)(vi). See Q&A 10. But the Q&A also says those individuals "are exempt from the Executive Order." Q&A 27. Admission thus may require a case-by-case waiver. Possible Expansion and Extension. Like the prior order, this order requires a global review to identify categories of individuals appropriate for further limitations. Secs. 2(e)-(f). Another provision requires re-alignment of any visa reciprocity programs, under which the United States offers visas of similar validity period and type (e.g. multiple-entry) on the basis of those offered to U.S. citizens. Sec. 10. II. Impact on Current Litigation There are approximately 20 active lawsuits challenging aspects of the January order. Additional, key parts of that Order are currently subject to a preliminary injunction issued by the United States District Court for the Western District of Washington. The Ninth Circuit declined to temporarily stay that injunction pending a fuller appeal.[6] The Eastern District of Virginia has also issued a preliminary injunction against certain parts of the January order as it applies to Virginia residents and institutions. There are hearings and briefing deadlines scheduled in both the Washington and Ninth Circuit proceedings, as well as in many of the other cases. Because the new order rescinds the old order, effective March 16, those challenges may become moot, and the Department of Justice has said it will be seeking dismissal.[7] However, it is highly likely that some of the existing complaints and requests for relief will be amended to challenge the new ban. New challenges to the newly announced Executive Order are also anticipated. It is difficult to predict how the courts will approach litigation, either substantively or procedurally. Given that the new order does not go into effect until March 16, there will be opportunity for more substantive (although expedited) proceedings than was the case with the original order. Gibson Dunn will continue to monitor challenges for possible impacts on the new order. III. Issues for Companies to Consider As with the January order, there is no "one size fits all" approach for companies addressing employee and business issues related to the new Executive Order. Accordingly, companies should again evaluate whether they will need to develop strategies to deal with the impact of the replacement Executive Order, both internally and as it relates to potential shareholder and business relations. In the immediate term, companies should consider outreach to their employees, particularly those who are or may be affected by the Executive Order. Companies should also consider whether plans or policies are needed for travel by executives, employees, or other stakeholders. In many ways, the new order is clearer than the January order, but as we describe in more detail below it not clear how all aspects of the order will be implemented. Accordingly, employers may want to consider the following: Outreach to employees who may be affected. Companies should consider proactively identifying and reaching out to all employees who may be affected. As noted above, the Executive Order, on its face, applies to both immigrants and non-immigrants from the six covered countries. Thus, employees traveling for business or leisure may be equally affected. Note that different employees’ immigration statuses may compel differing guidance on how to approach any issues that arise in the enforcement of the Order. Outreach to employees who may have family members affected. It is important to remember that some of your employees, even if not directly impacted by the Executive Order, will have family and loved ones who are or may be impacted. Companies may consider providing counseling and support for employees with these concerns. Communicating with employees. Companies should consider identifying employees who frequently travel to and from the affected countries or who are visa holders from affected countries, to explain company plans with respect to the Executive Order. Given issues that arose for travelers in connection with the implementation of the original Executive Order in January, employees from affected countries who are currently outside the United States, but have a legal right to enter, should be advised to stay in communication with individuals in the United States about their travel plans, in the event they have difficulty re-entering the country, and have a plan to obtain appropriate assistance in that event. Identifying a point of contact. Consider identifying a contact point for any employee questions or concerns regarding the Executive Order. Furthermore, ensure that this contact is prepared to field questions from affected or potentially affected employees, to discuss visa renewal or travel to and from the affected countries, and to refer employees with specific issues to the appropriate resources. Communicating with shareholders, business partners and other stakeholders. Companies should consider whether communications with shareholders, business partners or other stakeholders regarding potential impacts on business as a result of enforcement of the Executive Order are appropriate. Modifying travel and meeting obligations. Companies should consider modifying (or allowing for employee choice regarding) employee travel obligations, as appropriate to the company’s business needs, to avoid potential difficulties with travel to and from the United States. Likewise, if companies have board members or executives affected by the Executive Order, or business stakeholders who will not be able to enter the United States due to the Executive Order, consider whether meetings can be conducted remotely or outside the United States. Companies involved in pending litigation that may require employee travel to the United States should consider seeking the advice of litigation counsel to determine what, if any, notice to the relevant court or parties may be advisable at this stage. Reviewing non-discrimination policies. Companies may wish to send reminders of applicable equal employment policies. Many employers included such statements in communications regarding the original Order. Companies may also wish to consider how their policies apply to employment and hiring decisions in light of travel restrictions. This list addresses just some of the issues that companies will face in light of the Executive Order. Gibson, Dunn & Crutcher’s lawyers, including its employment, securities, administrative law, constitutional law, and sanctions teams, are available to assist clients with navigating these and other issues that arise with respect to enforcement of the March 6 Order. IV. Suspension of Expedited Processing for H-1B Visas On March 3, U.S. Citizen and Immigration Services (USCIS) announced it will suspend "premium processing" of applications for H-1B visas.[8] This change is effective April 3, 2017, the first date for filing FY18 applications. The agency says that this is necessary to process back-logged petitions. It also says that "expedited" processing is still available for applications meeting certain criteria, and subject to "the discretion of office leadership." Applications that remain eligible for premium processing include those involving: Severe financial loss to company or ​person​;​ Emergency situation;​ Humanitarian reasons;​ Nonprofit organization whose request is in furtherance of the cultural and social interests of the United States​;​ Department of Defense or ​national ​interest ​​situation; USCIS error; or​ compelling interest of USCIS.​[9] * * * Gibson Dunn will continue to monitor these rapidly developing issues closely. [1] "Executive Order Protecting The Nation From Foreign Terrorist Entry Into The United States," Mar. 6, 2017, https://www.whitehouse.gov/the-press-office/2017/03/06/executive-order-protecting-nation-foreign-terrorist-entry-united-states. [2] See, e.g., Letter from Attorney General and Sec’y of Homeland Security, Mar. 6, 2017, https://www.dhs.gov/sites/default/files/publications/17_0306_S1_DHS-DOJ-POTUS-letter.pdf [3] U.S. Dep’t of Homeland Security, "Q&A: Protecting the Nation From Foreign Terrorist Entry To The United States," Mar. 6, 2017, https://www.dhs.gov/news/2017/03/06/qa-protecting-nation-foreign-terrorist-entry-united-states. [4] U.S. Dep’t of Homeland Security, "Fact Sheet: Protecting the Nation From Foreign Terrorist Entry To The United States," Mar. 6, 2017, https://www.dhs.gov/news/2017/03/06/fact-sheet-protecting-nation-foreign-terrorist-entry-united-states. [5] U.S. Dep’t of State, "Executive Order on Visas," Mar. 6, 2017, https://travel.state.gov/content/travel/en/news/important-announcement.html. [6] http://cdn.ca9.uscourts.gov/datastore/general/2017/02/27/17-35105%20-%20Motion%20Denied.pdf; https://cdn.ca9.uscourts.gov/datastore/opinions/2017/02/09/17-35105.pdf. [7] http://www.politico.com/story/2017/03/trump-releases-new-travel-ban-executive-order-235720. [8] U.S. Citizenship and Immigration Services, "USCIS Will Temporarily Suspend Premium Processing for All H-1B Petitions," Mar. 3, 2017 https://www.uscis.gov/news/alerts/uscis-will-temporarily-suspend-premium-processing-all-h-1b-petitions. [9] U.S. Citizenship and Immigration Services, "Expedite Criteria," https://www.uscis.gov/forms/expedite-criteria. Gibson Dunn’s 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 or any of the following: Theodore J. Boutrous, Jr. – Los Angeles (+1 213-229-7000, tboutrous@gibsondunn.com)Rachel S. Brass – San Francisco (+1 415-393-8293, rbrass@gibsondunn.com)Anne M. Champion – New York (+1 212-351-5361, achampion@gibsondunn.com)Ethan Dettmer – San Francisco (+1 415-393-8292, edettmer@gibsondunn.com) Theane Evangelis – Los Angeles (+1 213-229-7726, tevangelis@gibsondunn.com) Kirsten Galler – Los Angeles (+1 213-229-7681, kgaller@gibsondunn.com) Ronald Kirk – Dallas (+1 214-698-3295, rkirk@gibsondunn.com)Joshua S. Lipshutz – Washington D.C. (+1 202-955-8217, jlipshutz@gibsondunn.com) Katie Marquart, Pro Bono Counsel & Director – New York (+1 212-351-5261, kmarquart@gibsondunn.com) Samuel A. Newman – Los Angeles (+1 213-229-7644, snewman@gibsondunn.com) Jason C. Schwartz – Washington D.C. (+1 202-955-8242, jschwartz@gibsondunn.com) Kahn A. Scolnick – Los Angeles (+1 213-229-7656, kscolnick@gibsondunn.com) © 2017 Gibson, Dunn & Crutcher LLP Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.
On Monday, January 30, 2017, Gibson Dunn issued a client alert regarding President Trump’s January 27 Executive Order restricting entry into the United States for individuals from certain nations, and making other immigration-related policy changes. On February 1, Gibson Dunn issued an updated client alert, covering subsequent developments relating to the Executive Order including: (1) coverage of dual citizens; (2) provisional revocation of certain visas; and (3) reciprocal policy changes abroad. This update describes yesterday’s Ninth Circuit decision in State of Washington v. Trump, which denied the Government’s request to stay the nationwide temporary restraining order, as well as other recent developments relating to the various legal challenges to the Executive Order. On February 10, the Ninth Circuit issued a sua sponte request that the parties brief whether en banc review by the Ninth Circuit is appropriate. At the same time, news reports indicate that the Trump administration may issue a revised executive order, rather than appeal the decision.[1] This update also provides considerations for companies and others as they continue to deal with the aftereffects of the Executive Order and the various court challenges to it. This alert is informational only, and you should, of course, seek legal advice specific to any particular situation. I. Ninth Circuit Decision in State of Washington v. Trump, No. 2:17-cv-141 On February 3, in an action brought by the State of Washington and the State of Minnesota, the United States District Court for the Western District of Washington (Hon. James L. Robart) issued a nationwide temporary restraining order against enforcement of the Executive Order. The next day the federal defendants filed an emergency motion for an immediate administrative stay and for a stay pending appeal. The Ninth Circuit denied an immediate stay and held telephonic oral argument on Tuesday, February 7. On Thursday, February 9, the three-judge panel issued its unanimous opinion holding that, "the Government has not shown a likelihood of success on the merits of its appeal, nor has it shown that failure to enter a stay would cause irreparable injury, and we therefore deny its emergency motion for a stay." Opinion at 3.[2] A. Jurisdiction and Standing The Court determined it had appellate jurisdiction due to the extraordinary circumstances of the case, even though it generally does not review temporary restraining orders. The Court rejected the Government’s argument that the plaintiff States lack Article III standing, finding that, for purposes of this stage of the proceedings, the States adequately alleged that the Executive Order caused concrete harm to their state universities, faculty and students. Opinion at 12. B. Reviewability of the Executive Order While recognizing the deference owed to the executive branch on matters of immigration and national security, the Court rejected the Government’s argument that the Executive Order was not subject to judicial review, stating that such a claim "runs contrary to the fundamental structure of our constitutional democracy." Opinion at 14. The Court went on to cite a number of instances in which federal courts have reviewed and, in some instances invalidated, executive actions taken in the name of national security. Opinion at 14-18. C. Legal Reasoning and Opinion In deciding whether to stay the temporary restraining order, the Court examined four factors: (1) whether the federal government was likely to succeed on the merits; (2) whether the federal government would be irreparably harmed absent a stay; (3) whether the stay would irreparably injure the plaintiff States; and (4) what is in the public interest. As to success on the merits, the Court concluded that the federal government had not demonstrated that it was likely to succeed on the merits, at least with respect to the States’ due process claims. With respect to the due process claims, the federal government failed to show that the Executive Order provided notice and a hearing prior to restricting an individual’s ability to travel. The Court rejected the federal government’s assertion that the Executive Order no longer applies to lawful permanent residents, as that clarification came from the White House counsel, who is "not known to be in the chain of command for any of the Executive Departments." Opinion at 22. With respect to those without legal status, the court found potential claims of due process violations existed as well. The Court also noted that the States’ religious discrimination claims raised "serious allegations and present significant constitutional questions," but reserved consideration of those claims until the merits are fully briefed. Opinion at 26. With respect to the likelihood of irreparable harm, the Court found that the federal government failed to show that a stay was necessary to avoid unnecessary injury stating, "the Government submitted no evidence to rebut the States’ argument that the district court’s order merely returned the nation temporarily to the position it has occupied for many previous years." Opinion at 26. The Court found that the States had offered ample evidence of irreparable harm, including separating families and stranding individuals traveling abroad. Opinion at 28. Finally, the court found that there were competing public interests at play here such that irreparable harm alone could not justify a stay. Opinion at 28-29. The Court also declined the federal government’s proposed alternative relief, including modification or narrowing of the existing temporary restraining order either in geographic scope or as to what categories of covered individuals. Opinion at 23-24. On the day after the Ninth Circuit issued its ruling, it issued an order that the parties submit simultaneous briefs setting forth their positions on whether en banc review by an 11-judge panel of the Ninth Circuit is appropriate. At the same time, as stated above, recent news reports indicate that the White House may not seek to appeal the decision and will instead draft and issue a revised executive order.[3] II. Status of Other Legal Challenges Since the January 27 Executive Order was issued, dozens of legal challenges have been brought in an effort to stay or invalidate the Executive Order. Many of these suits have resulted in orders staying or limiting the Executive Order itself, including by judges in Massachusetts, Brooklyn, and Virginia. See, e.g., Louhghalam v. Trump, No. 1:17-cv-10154-NMG (D. Mass. Feb 3, 2017); Darweesh v. Trump, 17 Civ. 480 (AMD) (E.D.N.Y. Jan. 28, 2017); Aziz v. Trump, No. 1:17-cv-116 (E.D.Va. Jan. 28, 2017). One decision refused to offer temporary injunctive relief against the effectiveness of the Executive Order. Louhghalam, 2017 WL 479779 (D. Mass. Feb. 3, 2017). At least one case seeking to enjoin enforcement of the Executive Order has been stayed pending today’s decision by the Ninth Circuit. State of Hawaii v. Donald J. Trump et al., No. 1:17-cv-50 (D. Haw. February 3, 2017). Other lawsuits filed over the course of the last week have sought to challenge the Executive Order as whole, as well as its impact on specific populations. See, e.g., Pars Equality Ctr. v. Trump, No. 1:17-cv-255 (D.D.C. Feb. 9, 2017) (suit by several Iranian-American groups seeking a broad permanent injunction and alleging that the Executive Order reflects "invidious discrimination"); Int’l Refugee Assistance Project v. Trump, No. 8:17-cv-00361 (D. Md. Feb. 7, 2017) (seeking declaration that "the entire Executive Order is unlawful and invalid"). III. Issues for Consideration Despite the temporary clarity provided by the Ninth Circuit’s ruling, there are, as described above, multiple legal challenges still outstanding and the likelihood of further appeals of the Ninth Circuit decision issued on Thursday, February 9. As such, companies and others should still consider the guidance provided in our earlier client alerts on this topic, until the courts or the administration provide more certainty on this issue. For example, companies should still consider modifying (or allowing for employee choice regarding) employee travel obligations, as appropriate to the company’s business needs, to avoid potential difficulties with travel to and from the United States. Likewise, if companies have officers, employees, contractors, or others affected by the Executive Order, or business stakeholders who will not be able to enter the United States due to the Executive Order, consider whether meetings can be conducted remotely or outside the United States. [1] http://www.cnn.com/2017/02/10/politics/immigration-executive-order-white-house/index.html [2] In addition to the filings by the parties, 20 amicus briefs were filed by a variety of entities and individuals. Sixteen of the briefs supported the States, and were submitted by various nonprofit organizations, several other states, labor organizations, a group of law professors, and a group of over 120 technology companies. Three briefs filed by a variety of nonprofit organizations support the government. These briefs are available on the Ninth Circuit’s website, at https://www.ca9.uscourts.gov/content/view.php?pk_id=0000000860. [3] http://www.cnn.com/2017/02/10/politics/immigration-executive-order-white-house/index.html Gibson Dunn’s 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 or any of the following: Theodore J. Boutrous, Jr. – Los Angeles (+1 213-229-7000, tboutrous@gibsondunn.com)Rachel S. Brass – San Francisco (+1 415-393-8293, rbrass@gibsondunn.com)Anne M. Champion – New York (+1 212-351-5361, achampion@gibsondunn.com)Ethan Dettmer – San Francisco (+1 415-393-8292, edettmer@gibsondunn.com) Theane Evangelis – Los Angeles (+1 213-229-7726, tevangelis@gibsondunn.com) Kirsten Galler – Los Angeles (+1 213-229-7681, kgaller@gibsondunn.com) Ronald Kirk – Dallas (+1 214-698-3295, rkirk@gibsondunn.com)Joshua S. Lipshutz – Washington D.C. (+1 202-955-8217, jlipshutz@gibsondunn.com) Katie Marquart, Pro Bono Counsel & Director – New York (+1 212-351-5261, kmarquart@gibsondunn.com) Samuel A. Newman – Los Angeles (+1 213-229-7644, snewman@gibsondunn.com) Jason C. Schwartz – Washington D.C. (+1 202-955-8242, jschwartz@gibsondunn.com) Kahn A. Scolnick – Los Angeles (+1 213-229-7656, kscolnick@gibsondunn.com) © 2017 Gibson, Dunn & Crutcher LLP Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.
On Monday, January 30, 2017, Gibson Dunn issued a client alert regarding President Trump’s January 27 Executive Order restricting entry into the United States for individuals from certain nations and making other immigration-related policy changes. This update describes further developments relating to the Executive Order involving (1) coverage of dual citizens; (2) provisional revocation of certain visas; and (3) reciprocal policy changes abroad. It also provides updates on the status of various legal challenges to the Executive Order.[1] In particular, it describes a decision from earlier today that broadly prohibits enforcement of the Executive Order, on an interim basis. I. Coverage of Dual Citizens, Certain Special Immigrants Clarified The Department of Homeland Security ("DHS") announced that dual citizens are not affected by the ban on entry of individuals from the seven countries covered by the Executive Order. According to new guidance, "travelers are being treated according to the travel document they present," and will be admitted if they "apply for entry based on their citizenship from one of the countries NOT on the list" and are otherwise eligible.[2] The Acting Commissioner of Customs & Border Protection stated that "[t]ravelers will be assessed … based on the passport they present, not any dual-national status. So if you’re a citizen of the United Kingdom, you present your United Kingdom passport and the executive order does not apply to you upon arrival."[3] However, as a practical matter, travelers who are also nationals of one of the seven covered countries may be subject to additional screening both when applying for a visa (if applicable) under their non-affected passport, or upon arrival in the United States. Relatedly, DHS announced that holders of "special immigrant visas" (which could include translators for the U.S. armed forces in Iraq), will be treated similarly to lawful permanent residents from the covered countries. Although covered by the ban, they will generally be allowed entry under the "case-by-case" waiver provision.[4] II. Revocation of Existing Visas On Tuesday, January 31, in one of the cases challenging the Executive Order, the government publicly filed a January 27 Department of State order that "provisionally revoke[d] all valid nonimmigrant and immigrant visas of nationals of Iraq, Iran, Libya, Somalia, Sudan, Syria, and Yemen."[5] It is not currently clear to what extent this order is being enforced. Like the Executive Order, this State Department order recognizes the possibility of exceptions made on a "case-by-case" basis, but does not provide information on the process for obtaining such an exception. While application of this order remains unclear, revocation of a visa has potentially significant implications. For example, once a nonimmigrant visa is revoked, the visa holder becomes deportable.[6] The rule regarding immigrant visas is less clear, although there is some risk that an immigrant whose visa has been revoked could be subject to deportation.[7] If the government seeks to deport an individual on the basis of a visa revocation, that individual has the right to judicial review prior to removal.[8] While no guidance has been issued, the order may mean that individuals who entered on a valid multi-entry visa prior to the Executive Order will not be able to enter again under the same visa, even after the 90-day ban expires. Instead, individuals in this category will likely need to obtain a new visa, or a waiver from the revocation. In addition, individuals in the United States under a previously issued visa may be deported. III. Reciprocal Action in Other Nations At least two of the seven nations covered by the Executive Order are implementing or moving toward reciprocal bans on travel from the United States, although details of the scope of these bans, and possible exceptions, are unclear at this time. Iran has announced a ban.[9] Iraq’s parliament has passed a non-binding recommendation to take similar action if the U.S. ban remains in effect, in line with criticism of the Executive Order from the foreign ministry there.[10] IV. Status of Legal Challenges A. Badr Dhaifallah Ahmed Mohammed et al v. United States of America et al, 2:17-cv-00786 (C.D. Cal. January 31, 2017) On January 31, the United States District Court for the Central District of California (Hon. André Birotte Jr.) entered an Order enjoining the President, DHS, CBP, and other defendants from enforcing the Executive Order "by removing, detaining, or blocking the entry of Plaintiffs, or any other person from" the seven countries named in the Executive Order "with a valid immigrant visa." The court further: (i) enjoined the defendants from cancelling the plaintiffs’ validly obtained and issued visas; (ii) ordered the defendants, and the State Department in particular, to return "to Plaintiffs their passports containing validly issued immigrant visas so that Plaintiffs may travel to the United States on said visas,"; and (iii) ordered defendants to immediately "inform all relevant airport, airline, and other authorities at Los Angeles International Airport and International Airport in Djibouti that Plaintiffs are permitted to travel to the United States on their valid immigrant visas." Although the court’s order prohibits the "blocking of entry" of anyone from the seven countries who possesses "a valid immigrant visa," regardless of whether the individual is a plaintiff in the case, it is unclear what impact this will have beyond the named plaintiffs in light of the Department of State’s order provisionally revoking all such visas as discussed above. B. State Government Actions Four state governments have also sued to enjoin the Executive Order or moved to intervene in cases challenging the Order, one new class action was filed challenging the Executive Order, and two potentially significant hearings are scheduled for this Friday. Several States have gone to court to challenge the ban. The State of Washington filed a challenge in the Western District of Washington.[11] Similarly, Massachusetts,[12] Virginia,[13] and New York,[14] moved to join existing lawsuits pending in federal court in their states. The Northwest Immigrant Rights Project filed a class action in the Western District of Washington seeking invalidation of the Executive Order. Abdiaziz v. Trump, No. 2:17-cv-135. Finally, two hearings are set for this Friday, February 3. The District of Massachusetts hearing in Tootkaboni v. Trump, No. 17-cv-10154, will further consider the temporary restraining order that court entered last weekend. The Western District of Washington will consider the state government’s request for a temporary restraining order in its recently filed case, State of Washington v. Trump, No. 2:14-cv-141. * * * Gibson Dunn will continue to closely monitor these rapidly developing issues. [1] On January 30, shortly after the release of our earlier client alert, the Acting Attorney General announced guidance that the Justice Department would not defend the Executive Order, explaining that she is not "convinced that the Executive Order is lawful." (http://documents.latimes.com/message-acting-attorney-general). The White House relieved the Acting Attorney General of her duties, stating that the Acting Attorney General had "betrayed the Department of Justice by refusing to enforce a legal order designed to protect the citizens of the United States." See White House, Statement on the Appointment of Dana Boente as Acting Attorney General, Jan. 30, 2017 (https://www.whitehouse.gov/the-press-office/2017/01/30/statement-appointment-dana-boente-acting-attorney-general). The new Acting Attorney General promptly announced that he was rescinding his predecessor’s guidance regarding the Executive Order. See U.S. Dept. of Justice, "Acting Attorney General Boente Issues Guidance to Department on Executive Order," Jan. 30, 2017 (https://www.justice.gov/opa/pr/acting-attorney-general-boente-issues-guidance-department-executive-order). [2] U.S. Customs & Border Protection, "Protecting the Nation from Foreign Terrorist Entry into the United States," Jan. 31, 2017 (https://www.cbp.gov/border-security/protecting-nation-foreign-terrorist-entry-united-states). [3] U.S. Dept. of Homeland Security, "Transcript of Media Availability on Executive Order with Secretary Kelly & DHS Leadership," Jan. 31, 2017 (https://www.dhs.gov/news/2017/01/31/transcript-media-availability-executive-order-secretry-kelly-and-dhs-leadership). [4] U.S. Dept. of Homeland Security, "Transcript of Media Availability on Executive Order with Secretary Kelly & DHS Leadership," Jan. 31, 2017 (https://www.dhs.gov/news/2017/01/31/transcript-media-availability-executive-order-secretry-kelly-and-dhs-leadership). [5] U.S. Dept. of State, Order, Jan. 27, 2017. This document is not currently available on a government website, but can be found at http://www.politico.com/f/?id=00000159-f6bd-d173-a959-ffff671a0001 . [6] See 8 U.S.C. § 1227(a)(1)(B) ("Any alien who is present in the United States in violation of this chapter or any other law of the United States, or whose nonimmigrant visa (or other documentation authorizing admission into the United States as a nonimmigrant) has been revoked under section 1201(i) of this title, is deportable."). [7] See 8 U.S.C. § 1201(i); 22 C.F.R. § 42.82(b); see also 8 U.S.C. § 1227(4)(c)(i) ("An alien whose presence or activities in the United States the Secretary of State has reasonable ground to believe would have potentially serious adverse foreign policy consequences for the United States is deportable."). [8] 8 U.S.C. § 1201(i) ("There shall be no means of judicial review … of a revocation … except in the context of a removal proceeding if such revocation provides the sole ground for removal…"). [9] Asas Fitch, et al., "Iran Halts Visas to Americans As Iraq Keeps Doors Open," Wall Street J., Jan. 31, 2017 (https://www.wsj.com/articles/iran-stops-issuing-visas-to-americans-1485870515). [10] Qassim Abdul-Zahra, "Iraqi Lawmakers Urge Ban On Americans After Trump Order," Associated Press, Jan. 30, 2017 (http://www.kcbd.com/story/34378139/iraqi-lawmakers-urge-ban-on-americans-after-trump-order). [11] Washington State Office of the Attorney General, "AG Ferguson Seeks Halt to Trump’s Immigration Executive Order," Jan. 30, 2017 (http://www.atg.wa.gov/news/news-releases/ag-ferguson-seeks-halt-trump-s-immigration-executive-order). [12] Attorney General of Massachusetts, "AG Healey Announces Lawsuit Against President Trump’s Executive Order on Immigration," Jan. 31, 2017 (http://www.mass.gov/ago/news-and-updates/press-releases/2017/2017-01-31-ag-lawsuit-president-eo.html). [13] Attorney General of Virginia, "Virginia Brings Action Against President Trump for Unlawful and Unconstitutional Executive Order on Immigration," Jan. 31, 2017 (http://www.oag.state.va.us/media-center/news-releases/879-january-31-2017-virginia-brings-action-against-president-trump-for-unlawful-and-unconstitutional-executive-order-on-immigration). [14] Attorney General of New York State, "A.G. Schneiderman Joins Lawsuit Against President Trump’s Immigration Executive Order, Jan. 31, 2017 (https://ag.ny.gov/press-release/ag-schneiderman-joins-lawsuit-against-president-trumps-immigration-executive-order). Gibson Dunn’s 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 or any of the following: Theodore J. Boutrous, Jr. – Los Angeles (+1 213-229-7000, tboutrous@gibsondunn.com)Rachel S. Brass – San Francisco (+1 415-393-8293, rbrass@gibsondunn.com)Anne M. Champion – New York (+1 212-351-5361, achampion@gibsondunn.com)Ethan Dettmer – San Francisco (+1 415-393-8292, edettmer@gibsondunn.com) Theane Evangelis – Los Angeles (+1 213-229-7726, tevangelis@gibsondunn.com) Kirsten Galler – Los Angeles (+1 213-229-7681, kgaller@gibsondunn.com) Ronald Kirk – Dallas (+1 214-698-3295, rkirk@gibsondunn.com)Joshua S. Lipshutz – Washington D.C. (+1 202-955-8217, jlipshutz@gibsondunn.com) Katie Marquart, Pro Bono Counsel & Director – New York (+1 212-351-5261,kmarquart@gibsondunn.com) Samuel A. Newman – Los Angeles (+1 213-229-7644, snewman@gibsondunn.com) Jason C. Schwartz – Washington D.C. (+1 202-955-8242, jschwartz@gibsondunn.com) Kahn A. Scolnick – Los Angeles (+1 213-229-7656, kscolnick@gibsondunn.com) © 2017 Gibson, Dunn & Crutcher LLP Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.
On Friday January 27, 2017, President Trump issued an Executive Order entitled "Protecting the Nation from Foreign Terrorist Entry into the United States Executive Order." (Available here.) The Executive Order imposes, among other things, a 90-day ban on entry into the United States for any purpose by non-U.S. citizens from Iran, Iraq, Libya, Somalia, Sudan, Syria, and Yemen. The State Department has advised individuals from the affected countries seeking visas to enter the United States not to schedule or attend interviews, or pay fees for such visas, until further notice.[i] Over the weekend, three federal courts blocked implementation of various parts of the Executive Order. Additionally, the Administration has announced that implementation of the Executive Order will be somewhat relaxed for U.S. lawful permanent residents. However, confusion persists at airports both here and abroad. For example, it has been reported that some individuals have not been permitted to board U.S.-bound flights, and that upon arrival in the United States, other individuals have been subjected to inconsistent treatment, including detention by Customs and Border Protection ("CBP") officers or often lengthy screenings. Additionally, in some cases, individuals are reportedly unable to communicate with their family members or legal counsel. Although the legal landscape is continuing to evolve, as we describe below, this Client Alert provides an overview of the Executive Order, the district court decisions enjoining portions of the Executive Order, and guidance that may assist companies and others impacted by the Executive Order. As we understand that responding to inquiries involving the Order may be our clients’ most pressing concern, we start with a brief background of the Executive Order and provide guidance companies may want to consider. We then provide an overview of the legal landscape that exists as of Monday, January 30, 2017. This alert is informational only, and you should, of course, seek legal advice specific to any particular situation. Please note that we have published a supplement to this Client Alert regarding later relevant events, which is available here. I. Overview of the Executive Order The Executive Order has the stated purpose of "protect[ing] the American people from terrorist attacks by foreign nationals admitted to the United States." Among its provisions are the restriction of "immigrant and nonimmigrant" entry of non-citizens from seven countries for 90 days, suspension of all refugee admission for 120 days, and indefinite prohibition of refugees from Syria. A. Individuals Covered and Not Covered by the 90-day Ban Section 3(c) of the Executive Order "suspend[s] entry into the United States, as immigrants and nonimmigrants" for 90 days of "aliens" from Iran, Iraq, Libya, Somalia, Sudan, Syria, and Yemen. Subject to certain exceptions, this suspension applies regardless of travel origin, type of visa, or U.S. immigration status. The Executive Order provides that the "the Secretaries of State and Homeland Security may, on a case-by-case basis, and when in the national interest, issue visas or other immigration benefits to nationals of countries for which visas and benefits are otherwise blocked." Sec. 3(g). The Executive Order also explicitly exempts only certain categories of visas for diplomats, NATO business, United Nations business (C-2), and international organization staff (G-1, G-2, G-3, G-4)). Sec. 3(c). The Executive Order is drafted broadly enough to cover lawful permanent residents (i.e., green-card holders), and there are reports that in the first 36 hours of implementation, the CBP officers denied re-entry to such individuals. However, on Sunday, January 29, the Department of Homeland Security ("DHS") announced that "absent significant derogatory information indicating a serious threat to public safety and welfare, lawful permanent resident status will be a dispositive factor in our case-by-case determinations" under Section 3(g) of the Order.[ii] Since that announcement, reports from across the country suggest that such individuals are now being admitted under this discretionary authority, after extended screening upon arrival. The Executive Order also implicates dual citizens who are not U.S. citizens. However, exactly how such individuals will be addressed by CBP is uncertain. There are some indications that such individuals will be treated similarly to green-card holders–subject to increased scrutiny, but generally admitted. However, admission appears to be discretionary, and, as of now, there is no clearly announced policy. The United Kingdom Foreign Office announced on Sunday, January 29 that the United States is not applying the ban to individuals who are dual citizens of the United Kingdom and one of the banned countries, if such individuals are travelling from the United Kingdom.[iii] On Monday, January 30, the U.S. Embassy & Consulates in the United Kingdom made a similar announcement, confirming that "[d]ual nationals of the United Kingdom and one of [the seven covered] countries are exempt from the Executive Order when travelling on a valid United Kingdom passport and U.S. visa."[iv] In addition, various news outlets have reported–quoting Canadian government officials–that the United States is not applying the ban to individuals who are dual citizens of Canada and one of the banned countries.[v] U.S. officials, however, have yet to make a similar announcement. U.S. citizens are not covered by the language of the Executive Order. As described below, however, non-U.S. citizens from countries other than the seven covered countries may still be affected by the Executive Order’s suspension of the Visa Interview Waiver Program. Suspension of this program is likely to increase the time necessary for issuance of U.S. visas. B. Other Provisions A few other provisions of the Executive Order should also be noted, as they may hinder travel to the United States by those not directly affected by the country-specific ban. The Executive Order suspends the Visa Interview Waiver Program, which allows those renewing certain types of visas to skip a consular interview under certain circumstances. See Sec. 8(a). This program is commonly used by low-risk travelers, including many employment-based visa applicants, in order to expedite the time in which visas are obtained for travel to the United States. Suspension of this program is likely to slow, perhaps significantly, the process of renewing a visa, as it appears to impose a requirement that all visa applicants be interviewed in person. The Executive Order requires the Secretary of State to review "all non-immigrant visa reciprocity agreements." Sec. 9. This raises the prospect that certain visas will be scaled back in the future, such as by reducing the number of allowed visits in a period or the length of an allowed stay under a visa. The Executive Order suspends the U.S. Refugee Admissions Program for 120 days (Sec. 5), and indicates certain priority for religious minorities upon its limited resumption. This is generally understood to apply to Christian refugees from Muslim-majority nations. Finally, it is possible that the list of affected countries will expand after the 90-day ban period. The Executive Order directs the DHS to submit for inclusion a list of any other countries that "do not provide adequate information" regarding admission of their citizens. Sec. 3(b). At the end of the 90-day period, DHS or the State Department may also "submit to the President the names of any additional countries recommended for similar treatment." Sec. 3(f). II. Issues for Companies to Consider There is no "one size fits all" approach for companies addressing employee and business issues related to the Executive Order. In the immediate term, companies should consider preparing a uniform communications plan for their employees, particularly those who are or may be affected by the Executive Order. Companies should also consider whether plans or policies are needed for travel by executives, employees, or other stakeholders. Although this situation is fluid and continues to develop, as further described below, we believe companies should also be mindful of whether they will need to develop strategies to deal with the impact of the Executive Order, both internally and as it relates to potential shareholder and business relations. Specific questions that companies may want to consider with respect to the Executive Order include: Outreach to employees who may be affected. Although the administrative and judicial interpretation of the Executive Order continues to evolve, meaning that the full scope of individuals who may be affected is in flux, companies should consider proactively identifying and reaching out to all employees who may be affected. As noted above, the Executive Order, on its face, applies to both immigrants and non-immigrants from the seven covered countries. Thus, employees traveling for business or leisure may be equally affected. In addition, as discussed above, there have been indications that lawful permanent residents may be subject to additional questioning when entering the United States from one of the seven covered countries, even if those individuals are not subject to detention. Note that different employees’ immigration statuses may compel differing guidance on how to approach any issues that arise in the enforcement of the Order. Outreach to employees who may have family members affected. It is important to remember that for some of your employees, even if they are not directly impacted by the Executive Order, they will have family and loved ones who are directly impacted. We have received reports of many family members detained and separated from other family members upon arrival at an airport. We have heard reports about family members traveling abroad who are now fearful of not being able to return home to reunite with a family member. Companies may consider providing counseling and support for your employees who are facing these concerns. Communicating with employees. Companies should consider identifying employees who frequently travel to and from the affected countries or who are visa holders from affected countries, to explain company plans with respect to the Executive Order. In particular, employees from affected countries who are currently outside the United States, but have a legal right to re-enter, should be advised to stay in communication with individuals in the United States about their travel plans, in the event they have difficulty re-entering the country, and have a plan to obtain appropriate assistance in that event. For employees currently in the United States but who are from the affected countries or frequently travel to the affected countries, consider whether travel abroad is necessary before the full scope of enforcement of the Executive Order is known and understood. Identifying a point of contact. Consider identifying a contact point for any employee questions or concerns regarding the Executive Order. Furthermore, ensure that this contact is prepared to field questions from affected or potentially affected employees, to discuss visa renewal or travel to and from the affected countries, and to refer employees with specific issues to the appropriate resources. Communicating with shareholders, business partners and other stakeholders. Companies should consider whether communications with shareholders, business partners or other stakeholders regarding potential impacts on business as a result of enforcement of the Executive Order are appropriate. Modifying travel and meeting obligations. Companies should consider modifying (or allowing for employee choice regarding) employee travel obligations, as appropriate to the company’s business needs, to avoid potential difficulties with travel to and from the United States. Likewise, if companies have board members or executives affected by the Executive Order, or business stakeholders who will not be able to enter the United States due to the Executive Order, consider whether meetings can be conducted remotely or outside the United States. Companies involved in pending litigations that may require employee travel to the United States, should consider seeking the advice of litigation counsel to determine what, if any, notice to the relevant court or parties may be advisable at this stage. Reviewing non-discrimination policies. Companies may wish to send reminders of applicable equal employment policies. Many employers have included such statements in communications regarding the Order. Companies may also wish to consider how their policies apply to employment and hiring decisions in light of travel restrictions. This list addresses just some of the issues that companies will face in light of the Executive Order. Gibson, Dunn & Crutcher’s lawyers, including its employment, securities, administrative law, constitutional law, and sanctions teams, are available to assist clients with navigating these and other issues that arise with respect to enforcement of the Order. III. District Court Orders Blocking Implementation of the Executive Order As of the morning of January 30, three district courts–in New York, Massachusetts, and Virginia–have issued orders of varying general applicability temporarily (a) halting deportations resulting from the Executive Order and (b) providing certain other relief. Other federal courts, including those in the Central District of California and the Western District of Washington have issued relief specific to individual applicants. A. Nationwide Stay of Removal–Darweesh v. Trump, No. 17 Civ. 480 (AMD) (E.D.N.Y. Jan. 28, 2017). On Saturday, January 28, two visa holders of Iraqi origin detained at JFK Airport in New York filed suit relief on behalf of themselves and others similarly situated, along with a petition for writ of habeas corpus. They also asked the court for an emergency stay of removal of similarly situated people nationwide. Judge Ann Donnelly of the Eastern District of New York granted relief that evening, enjoining the President, DHS, CBP, and other respondents from removing (i) refugees, (ii) visa-holders, and (iii) individuals from the nations affected by the Executive Order. The court found that the petitioners–two individuals who were detained at JFK, along with all others similarly situated–"have a strong likelihood of success" with respect to their Due Process and Equal Protection challenges to the Executive Order. The court also found that, absent the stay, there was an "imminent danger that . . . there will be substantial and irreparable injury" to those subject to the Executive Order. On Sunday, January 29, petitioners filed a motion for clarification and enforcement of the order. The motion cited reports that similarly situated people "have been placed on planes, possibly deported, and subject to intimidation to sign removal orders after the issuance of the Court’s Order." Among other things, petitioners seek confirmation that the court’s order applies to all similarly situated people nationwide. On Monday, January 30, the case was assigned to Judge Carol Bagley Amon. B. Nationwide Stay of Removal and Detention —Tootkaboni v. Trump, No. 17-cv-10154 (D. Mass. Jan. 29, 2017). On Saturday, January 28, two lawful permanent residents of Iranian origin who were detained at Logan Airport in Boston filed a similar action for relief, and also applied for an emergency stay on a nationwide basis. Early Sunday, Judge Allison D. Burroughs and Magistrate Judge Judith Dein of the District of Massachusetts issued a temporary restraining order ("TRO") prohibiting removal and detention of those subject to the Executive Order (i.e., refugees, visa-holders, and individuals from the affected nations). The court made the same findings as the Darweesh Court, described above. The TRO is in effect for seven days, with the court to set a further hearing date prior to its expiration. The court also directed respondents to limit secondary screening–an airport security measure that some critics have associated with profiling–to comply with the regulations and statutes in effect prior to the Executive Order, including 8 U.S.C. § 1101(a)(13)(C), the statute providing the standards by which a lawful permanent resident may be regarded as "seeking admission" into the United States. The court also issued instructions to CBP, apparently intended to address the issue of airlines turning away passengers on international flights destined for Logan Airport, stating that CBP "shall notify airlines that have flights arriving at Logan Airport of this Order and the fact that individuals on these flights will not be detained or returned based solely on the basis of the Executive Order." C. Stay of Removal of Lawful Permanent Residents at Dulles–Mohammed Aziz v. Trump, No. 1:17-cv-116 (E.D. Va. Jan. 28, 2017) On Saturday, January 28, two brothers of Yemeni origin detained at Dulles International Airport filed an emergency application seeking a stay of removal on behalf of themselves as lawful permanent residents and others similarly situated at that same airport, as well as seeking access to counsel. Judge Leonie M. Brinkema of the Eastern District of Virginia issued a TRO forbidding removal of any lawful permanent residents from Dulles for seven days. The court also directed that respondents "shall permit lawyers access to all legal permanent residents being detained at Dulles International Airport." On January 30, petitioners filed a First Amended Complaint, adding new allegations that they were coerced into surrendering their green cards and then flown to Addis Ababa airport in Ethiopia.[vi] D. Other Court Actions and Orders Individuals seeking relief on an individual basis only, and not on behalf of others similarly situated, have sought habeas corpus and/or other relief in a number of other district courts with jurisdiction over relevant international airports. For instance, on Saturday, January 28, a visa holder of Iranian origin detained at LAX in Los Angeles filed suit in the Central District of California, seeking habeas corpus, declaratory, and injunctive relief. See Vayeghan v. Kelly, No. CV 17-0702 (C.D. Cal. Jan. 28, 2016). Before the court could consider the emergency application for a TRO, however, "he was placed on a flight to Dubai to be removed to Iran." But Judge Dolly M. Gee issued a TRO on January 29, directing respondents to "transport Petitioner back to the United States and admit him under the terms of his previously approved visa." The court found, among other things, "a strong likelihood of success" on the petitioner’s claims under the Equal Protection Clause, Establishment Clause, and Immigration and Nationality Act, and also pointed to "the public interest in upholding constitutional rights." The court set a hearing to show cause regarding preliminary injunctive relief for Friday, February 10. On Saturday, January 28, Judge Thomas S. Zilly of the Western District of Washington granted an emergency stay of removal with respect to two petitioners being detained at Seattle-Tacoma International Airport. A full hearing on the stay is set for Friday, February 3. The matter is Doe v. Trump, No. C17-126 (W.D. Wash. Jan. 28, 2017). In addition, there are at least two broad-based suits being filed today. First the Council on American-Islamic Relations ("CAIR") has filed suit in the Eastern District of Virginia, focusing on the Executive Order’s "apparent purpose and underlying motive . . . to ban people of the Islamic faith from Muslim-majority countries from entering the United States."[vii] The case raises challenges under the Establishment, Free Exercise, and Due Process Clauses, and seeks broad injunctive relief against most aspects of the Executive Order restricting travel to the United States. See Sarsour v. Trump, No. 1:17-cv-00120 (E.D. Va. Jan. 30, 2017). Second, the attorney general of Washington State has announced he will file a suit in the Western District of Washington, also seeking to have key provisions declared unconstitutional and requesting injunctive relief.[viii] Finally, we are aware of other actions being filed in the Northern District of Illinois (Chicago O’Hare International Airport); the Northern District of California (San Francisco International Airport); the Central District of California (LAX); and the Northern District of Texas (Dallas-Fort Worth International Airport). Additionally, there are at least fifteen actions pending in the Eastern District of New York, including the Darweesh matter discussed above. IV. On-the-Ground Observations at Airports Nationwide Although deportations appear to have stopped and DHS has indicated it will comply with the court orders described above, reports from airport observers indicate that confusion continues regarding the implementation of the Executive Order and compliance with these court orders. The Administration, however, has contradicted these reports, but has acknowledged that some individuals were affected and slowed down in their travel.[ix] Attorneys at various airports around the country have reported denial of access to detainees. Despite court orders mandating attorney access to potential clients, CBP has reportedly refused to allow some detainees to speak in person with counsel.[x] Other lawyers have reported that CBP has been averse to inquiries for information. In Los Angeles, for example, CBP closed its airport office, making it difficult to determine the number, identity, and legal status of potential detainees. Detainees have reported extensive examinations and confiscations of luggage and personal belongings.[xi] Multiple reports circulated detailing investigations into detainees’ social media accounts and corresponding questioning regarding personal religious beliefs and political views, particularly related to President Trump and his administration. Some detainees stated that individuals wearing headscarves were targeted for additional vetting. Wait times varied widely, from half a day or longer to an hour or less. There have also been reports that some detainees have been pressured into renouncing their lawful status under threat of being banned from re-entry for up to five years.[xii] Finally, many individuals have reported undergoing more rigorous screening at the point of embarkment. As part of that process, individuals may be denied permission to board if there is an expectation they will not be admitted to the United States upon arrival.[xiii] * * * The issues described in this Client Alert are rapidly changing. Gibson Dunn is dedicated to staying at the forefront of these issues for the benefit of our friends and clients, and will update you with significant developments. [i] U.S. State Dept., "Urgent Notice: Executive Order on Protecting the Nation from Terrorist Attacks by Foreign Nationals," Jan. 27, 2017 (https://travel.state.gov/content/visas/en/news/executive-order-on-protecting-the-nation-from-terrorist-attacks-by-foreign-nationals.html). [ii] U.S. Dept. of Homeland Security, "DHS Statement On Compliance With Court Orders And The President’s Executive Order," Jan. 29, 2017 (https://www.dhs.gov/news/2017/01/29/dhs-statement-compliance-court-orders-and-president%E2%80%99s-executive-orders). [iii] U.K. Foreign & Commonwealth Office, "Press Release, Presidential Executive Order on Inbound Migration to United States," Jan. 29, 2017 (https://www.gov.uk/government/news/presidential-executive-order-on-inbound-migration-to-us). [iv] U.S. Embassy & Consulates in the U.K., "Updated Guidance on Executive Order on Protecting the Nation from Terrorist Attacks by Foreign Nationals," Jan. 30, 2017 (https://uk.usembassy.gov/updated-guidance-executive-order-protecting-nation-terrorist-attacks-foreign-nationals/). [v] See, e.g., Daniel Dale & Emily Mathieu, "Canadian dual citizens exempted from Trump’s travel ban," Toronto Star, Jan. 28, 2017 (https://www.thestar.com/news/world/2017/01/28/passport-holders-of-7-muslim-majority-countries-cant-board-air-canada-flights-to-us.html). [vi] As of Sunday night, it is unclear how the matters in Massachusetts and Virginia, brought by lawful permanent residents, are affected by DHS’s statement on January 29 that "the entry of lawful permanent residents is in the national interest." [vii] Council on American-Islamic Relations, "CAIR to Announce Constitutional Challenge to Trump’s ‘Muslim Ban’ Executive Order," Jan. 27, 2017 (https://www.cair.com/press-center/press-releases/14062-cair-to-announce-constitutional-challenge-to-trump-s-muslim-ban-executive-order.html). [viii] KOMO Staff, "State attorney general to file lawsuit against Trump immigration order," KOMO News, Jan. 30, 2017 (http://komonews.com/news/local/state-attorney-general-plans-major-announcement-on-trump-immigration-plan). [ix] E.g., Berkeley Lovelace Jr, "White House spokesman Sean Spicer says immigration ban ‘small price to pay’ for safety," CNBC, Jan. 30, 2017 (http://www.cnbc.com/2017/01/30/white-house-spokesman-sean-spicer-immigration-ban.html). [x] See, e.g., Edward Helmore, et al., "Border agents defy courts on Trump travel ban, congressmen and lawyers say," Guardian, Jan. 29, 2017 (https://www.theguardian.com/us-news/2017/jan/29/customs-border-protection-agents-trump-muslim-country-travel-ban). [xi] See, e.g., Nadel Issa, et al., "As hundreds protest, attorneys seek info on how many are detained," Chicago Sun-Times, Jan. 29, 2017 (http://chicago.suntimes.com/politics/calm-before-the-storm-ohare-quiet-sunday-morning/). [xii] See, e.g., Joseph Goldstein, et al., "Lives Rewritten With the Stroke of a Pen," New York Times, Jan. 29, 2017 (https://www.nytimes.com/interactive/2017/01/29/nyregion/detainees-trump-travel-ban.html?_r=0). [xiii] See, e.g., Evan Perez, et al., "Inside the confusion of the Trump executive order and travel ban," CNN, Jan. 30, 2017 (http://www.cnn.com/2017/01/28/politics/donald-trump-travel-ban/). Gibson Dunn’s 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 or any of the following: Theodore J. Boutrous, Jr. – Los Angeles (+1 213-229-7000, tboutrous@gibsondunn.com)Rachel S. Brass – San Francisco (+1 415-393-8293, rbrass@gibsondunn.com)Anne M. Champion – New York (+1 212-351-5361, achampion@gibsondunn.com)Ethan Dettmer – San Francisco (+1 415-393-8292, edettmer@gibsondunn.com) Theane Evangelis – Los Angeles (+1 213-229-7726, tevangelis@gibsondunn.com) Kirsten Galler – Los Angeles (+1 213-229-7681, kgaller@gibsondunn.com) Ronald Kirk – Dallas (+1 214-698-3295, rkirk@gibsondunn.com)Joshua S. Lipshutz – Washington D.C. (+1 202-955-8217, jlipshutz@gibsondunn.com) Katie Marquart, Pro Bono Counsel & Director – New York (+1 212-351-5261,kmarquart@gibsondunn.com) Samuel A. Newman – Los Angeles (+1 213-229-7644, snewman@gibsondunn.com) Jason C. Schwartz – Washington D.C. (+1 202-955-8242, jschwartz@gibsondunn.com) Kahn A. Scolnick – Los Angeles (+1 213-229-7656, kscolnick@gibsondunn.com) © 2016 Gibson, Dunn & Crutcher LLP Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.
This past month the Supreme Court decided to review two cases that could change the patent litigation landscape in important ways, and that may have broad implications for the licensing and distribution of patented goods, domestically and internationally. They have the potential to narrow the range of venues available to patent plaintiffs, and to broaden the geographic scope of the exhaustion defense for patent defendants. Below, we review the issues presented in each case, and how the Court’s decisions may affect business interests in the United States and abroad. Our intellectual property, appellate, and technology transactions attorneys are available to discuss further and to advise on these issues at your convenience. I. Executive Summary On December 14, 2016, the Supreme Court announced that it had granted certiorari in TC Heartland LLC v. Kraft Food Brands Group LLC, No. 16-341 (Fed. Cir., 821 F.3d 1338). The Heartland case concerns the range of venues available to patent plaintiffs. Specifically, the issue is whether a plaintiff may sue a corporation for patent infringement in any district where the defendant is subject to personal jurisdiction (as the United States Court of Appeals for the Federal Circuit has long held), or only in the districts where the defendant is incorporated, or has committed acts of infringement and has a regular and established place of business (as the petitioner and several amici have argued). Under the current approach to venue, patent plaintiffs have enjoyed relatively broad latitude in choosing a forum, and many have gravitated to certain districts such as the Eastern District of Texas and the District of Delaware. The Supreme Court is being asked to interpret a jurisdictional statute to restrict the available venues in patent cases, an invitation which, if accepted, could lead to a dramatic change in where such suits are filed. The Supreme Court’s decision to review Heartland comes just shortly after the Court granted certiorari in Impression Products, Inc. v. Lexmark International, Inc., No. 15-1189 (Fed. Cir., 816 F.3d 721; cert. granted Dec. 2, 2016). The Lexmark case concerns patent exhaustion, a doctrine that limits a patentee’s rights regarding activities that occur after the initial authorized sale of a patented item. The exhaustion doctrine is analogous to the first-sale doctrine in copyright law, which allows buyers of books and other copyrighted materials to resell them without risk of copyright liability (provided that the initial purchase was authorized by the copyright owner). In a recent decision, the Supreme Court held that the first-sale doctrine applies to copyrighted items made or sold abroad, not only to items made or sold in the United States. Kirtsaeng v. John Wiley & Sons, Inc., 133 S. Ct. 1351, 1363 (2013). One issue now before the Court in Lexmark is whether the patent exhaustion doctrine likewise applies to foreign sales, such that an authorized sale of a patented article outside of the United States exhausts the U.S. patent rights in that article. The Federal Circuit held below that patent exhaustion does not apply to foreign sales–notwithstanding Kirstsaeng–and the Supreme Court will review that holding. The second issue before the Court in Lexmark is whether a patentee can avoid the patent exhaustion doctrine by employing a "conditional sale" that transfers title to the patented item while specifying post-sale restrictions on the article’s use or resale. Below, we provide more information about Heartland and Lexmark, and the implications that different outcomes could have for the business community. II. Heartland – Venue in Patent Infringement Cases In Heartland, the Supreme Court has decided to consider where venue is proper in a patent infringement case against a corporate defendant. Before addressing the facts and possible outcomes in Heartland, it is useful to review the statutory venue framework at issue and how it has been interpreted to date. A. Venue Before Heartland The United States Code contains a special venue statute for patent cases (28 U.S.C. § 1400(b)), and a general venue statute for federal cases (28 U.S.C. § 1391). The patent-specific venue statute provides that "[a]ny civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business." 28 U.S.C. § 1400(b). In 1957, the Supreme Court held in the Fourco case that the patent-specific venue statute is controlling, and that the general venue statute does not apply to patent cases. Fourco Glass Co. v. Transmirra Prods. Corp., 353 U.S. 222, 229 (1957) ("We hold that 28 U.S.C. § 1400(b) is the sole and exclusive provision controlling venue in patent infringement actions, and that it is not to be supplemented by the provisions of 28 U.S.C. § 1391(c)."). The Court also clarified in Fourco that for corporate defendants, the language "where the defendant resides" (in the patent-specific statute) refers to the corporation’s place of incorporation. Thus, under Fourco, venue in a patent case against a corporate defendant is limited to (1) the defendant’s state of incorporation, or (2) where the defendant has committed acts of infringement and has a regular and established place of business. Fourco remained settled law for over three decades. Then, in 1988, Congress amended the general venue statute to provide that "[f]or purposes of venue under this chapter, a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced." 28 U.S.C. § 1391(c) (1988). Two years later, the Federal Circuit held in the VE Holding case that this 1988 amendment superseded the Fourco decision, and supplied a definition of where a corporate defendant "resides" for purposes of not only the general venue statute, but also the patent-specific venue statute in section 1400(b). VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1579 (Fed. Cir. 1990) ("Section 1391(c) as it was in Fourco is no longer."); id. at 1580 ("[As amended,] Section 1391(c) applies to all of chapter 87 of title 28, and thus to § 1400(b), as expressed by the words ‘For purposes of venue under this chapter.’"). Thus, under VE Holding, venue in a patent case against a corporate defendant is proper not only in the districts identified by Fourco, but also in any other district where the defendant is subject to personal jurisdiction at the time the action is commenced. Many corporations sell products that reach most, and often all, districts of the United States, and such corporations can expect to be held subject to personal jurisdiction in patent cases in a wide range of districts. See, e.g., Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1566 (Fed. Cir. 1994). Under VE Holding, venue is proper in any such district – i.e., once personal jurisdiction is established, venue is automatically proper. Twenty-one years after VE Holding, in 2011, Congress again amended the general venue statute. The provision "[f]or purposes of venue under this chapter," was replaced with "[f]or all venue purposes" in section 1391(c), and a new provision "Applicability of Section. – Except as otherwise provided by law" was added in section 1391(a). 28 U.S.C. § 1391. These latest amendments are at issue in the Heartland case, explained below. B. Heartland and the Issue Under Review The defendant in the Heartland case, TC Heartland LLC, is incorporated and headquartered in the state of Indiana. The plaintiff, Kraft Foods Group Brands LLC, sued Heartland for infringement of three Kraft patents in the United States District Court for the District of Delaware. Kraft Foods Grp. Brands LLC v. TC Heartland, LLC, No. 14-28-LPS (D. Del. Aug. 13, 2005). Heartland moved to dismiss the case for lack of personal jurisdiction, and to dismiss for improper venue or alternatively to transfer venue to the Southern District of Indiana. In relevant part, Heartland argued that Congress’ 2011 amendments to the general venue statute nullified VE Holding and re-confirmed the narrower venue rule of Fourco, under which venue for this suit would not be proper in the District of Delaware. The district court denied Heartland’s motions, and Heartland then petitioned the Federal Circuit for a writ of mandamus. In re TC Heartland LLC, 821 F.3d 1338 (Fed. Cir. 2016). The Federal Circuit denied Heartland’s petition, holding in relevant part that the VE Holding decision from 1990 is still controlling and was not displaced by the 2011 amendments. Id. at 1341-43. Specifically, the Federal Circuit held that the definition of corporate residency in section 1391(c) continues to apply in patent infringement actions despite the 2011 amendments, and therefore venue in a patent suit against a corporate defendant is proper anywhere the defendant is subject to personal jurisdiction. Id. After the Federal Circuit denied its mandamus petition, Heartland petitioned the Supreme Court for a writ of certiorari. Heartland argued that the Federal Circuit’s venue decision in VE Holding conflicts with Fourco and should be overruled. Heartland also argued that Congress’ 2011 amendments eliminated any basis for the Federal Circuit to continue relying on VE Holding, in two ways: First, Congress removed the general venue introductory language "[f]or purposes of venue under this chapter" (which the Federal Circuit had relied on in VE Holding) and replaced it with "[f]or all venue purposes" (which is closer to the statutory language "for venue purposes" that existed at the time of Fourco). Second, Congress added a new provision that the general venue statute applies "[e]xcept as otherwise provided by law." Heartland argued that the patent-specific venue statute, as interpreted by the Supreme Court in Fourco, satisfies this exception and thus controls over the general venue statute. Gibson Dunn filed a brief for amici Dell Inc. and the Software & Information Industry Association in support of Heartland’s petition. Several other amici also filed briefs urging review, and on December 14, 2016, the Supreme granted certiorari. TC Heartland LLC, No. 16-341. C. Possible Effects of Supreme Court Review in Heartland Looking ahead, depending on how the Supreme Court rules on the merits of the venue question in Heartland, the patent landscape could change in important ways for patentees and corporate defendants. Under the Federal Circuit’s existing interpretation of venue in VE Holding, patent plaintiffs have many options for where to file infringement suits, and often gravitate to certain districts perceived to be plaintiff-friendly, such as the Eastern District of Texas. Corporate defendants often move for transfer out of such districts and into districts that are more convenient for their employees and witnesses. But the transfer analysis is complex, and district courts retain discretion to deny transfer motions in many cases, such that defendants are often required to litigate in districts that they contend have little or no connection to the facts and witnesses at issue. If the Supreme Court affirms in Heartland, this regime will continue. However, if the Supreme Court reverses the Federal Circuit in Heartland, then patent plaintiffs may not be able to file as often in their preferred districts. Instead, plaintiffs will have to file either where the defendants are incorporated, or where the defendants have both committed acts of infringement and have regular and established places of business. That may mean that new patent cases will be spread more evenly across a broader range of districts than they are at present. But it may also encourage the concentration of cases in certain districts. For example, the District of Delaware is already a popular venue for patent cases, but it may become even more so if the Supreme Court reinstates Fourco, as many potential defendants are incorporated in Delaware even if they do not maintain regular places of business there. Alternatively, or in addition, some patent plaintiffs may decide to continue filing in their preferred districts regardless of Heartland, by invoking the "regular and established place of business" prong of the patent-specific venue statute. This approach risks dismissal for improper venue, however, depending on how this prong of the statute is applied on a case-by-case basis. See, e.g., In re Cordis Corp., 769 F.2d 733, 737 (Fed. Cir. 1985) (denying petition for mandamus seeking dismissal for improper venue) ("[I]n determining whether a corporate defendant has a regular and established place of business in a district, the appropriate inquiry is whether the corporate defendant does its business in that district through a permanent and continuous presence there and not as Cordis argues, whether it has a fixed physical presence in the sense of a formal office or store."). Finally, regardless of how the Court resolves the venue question on the existing statutes, Congress may adjust venue in patent cases by legislation; affirmance in Heartland could give further impetus to legislative change. Bills are currently pending in both the House and the Senate which could result in modifications to the patent venue statute. See H.R. 9, 114th Cong. § 3(g) (2015); S. 2733, 114th Cong. § 2 (2016). Previous bills addressing the issue have failed to pass both houses, however. See H.R. 1908, 110th Cong. § 10(c) (2007) (proposing corporate residence be defined under section 1400 as the "judicial district in which the corporation has its principal place of business or in the State in which the corporation is incorporated"); S. 3818, 109th Cong. § 8 (2006) (same). III. Lexmark – Patent Exhaustion In Lexmark, the Supreme Court will consider (1) whether patent exhaustion applies to foreign authorized sales, and (2) whether a patentee may contract around exhaustion via a "conditional sale." As with Heartland, the Court’s decision on the merits of Lexmark could change the patent landscape in the United States. But it could also affect business interests abroad. These cases also present the Court an opportunity to provide guidance on critical patent licensing issues in light of Quanta and Kirtsaeng. Below, we review the exhaustion doctrine, the key facts and issues in Lexmark, and possible outcomes. A. Exhaustion Before Lexmark Under the common law patent exhaustion doctrine, the initial authorized sale of a patented article generally extinguishes the patentee’s right to bring an infringement action as to post-sale use of that article. Nonetheless, judicial decisions have articulated limits on the scope of the doctrine in particular contexts. As relevant to the Lexmark case, certain conditional sales have been held not to trigger exhaustion. In 1938, the U.S. Supreme Court held in General Talking Pictures Corp. v. Western Electric Co. that a patentee’s rights are not exhausted by a licensee’s unauthorized sale when the licensee knows the sale is outside the scope of its license. See 304 U.S. 175, 181-83 (1938). In 1992, the Federal Circuit held in Mallinckrodt, Inc. v. Medipart, Inc. that a patentee may also preserve its rights to bring an infringement action after the first sale by imposing, and clearly communicating, a single-use or resale restriction on the patented article. 976 F.2d 700, 709 (Fed. Cir. 1992). However, in 2008 the U.S. Supreme Court held in Quanta Computer, Inc. v. LG Electronics, Inc. that a patentee’s right to bring an infringement action was exhausted upon a licensee’s sale of a product substantially embodying the patentee’s method patent when the patentee had granted the licensee unrestricted authorization to make, use, or sell products embodying the patent, notwithstanding separate obligations upon the licensee to notify downstream customers of purported post-sale restrictions on combinations of the licensed products. 553 U.S. 617, 636-37 (2008) (distinguishing General Talking Pictures, 304 U.S. 175). Further, the exhaustion doctrine has historically been focused on domestic sales. As early as 1890, the U.S. Supreme Court observed in Boesch v. Graff that "[t]he sale of articles in the United States under a United States patent cannot be controlled by foreign laws." 133 U.S. 697, 703 (1890). Relatedly, in 2001, the Federal Circuit held in Jazz Photo Corp. v. International Trade Commission that the foreign sale of a U.S. patented article does not exhaust U.S. patent rights. 264 F.3d 1094, 1105 (Fed. Cir. 2001) (citing Boesch, 133 U.S. at 703). However, without reference to Jazz Photo or the patent exhaustion doctrine, in 2013 the Supreme Court held in Kirtsaeng v. John Wiley & Sons, Inc. that a copyright owner’s rights over a copy of its copyrighted work are exhausted under the first-sale doctrine in section 109(a) of the Copyright Act even when the copy is manufactured abroad. 133 S. Ct. at 1355-56. B. The Lexmark Case Plaintiff Lexmark International, Inc. owns a variety of patents covering certain printer cartridges and their use. Lexmark manufactures and sells the patented cartridges both in the United States and abroad. Some of the cartridges sold by Lexmark are subject to express post-sale restrictions on reuse and resale. Without affirmative authorization from Lexmark, defendant Impression Products, Inc. acquired restricted Lexmark cartridges, some of which had been modified to enable refilling and reuse, and resold the cartridges in the United States. A number of the cartridges resold by Impression were acquired abroad and imported into the United States. Lexmark brought suit against Impression alleging infringement based on the reuse and resale of the restricted cartridges acquired both in the United States and abroad. Lexmark Int’l, Inc. v. Impression Products, Inc., 816 F.3d 721, 727-28 (Fed. Cir. 2016). The district court dismissed Lexmark’s infringement claim regarding cartridges Lexmark initially sold in the United States, but denied Impression’s motion to dismiss as to the cartridges Impression acquired abroad. See generally Lexmark Int’l, Inc. v. Ink Techs. Printer Supplies, LLC, No. 1:10-CV-564, 2014 WL 1276133 (S.D. Ohio Mar. 27, 2014); Lexmark Int’l, Inc. v. Ink Techs. Printer Supplies, LLC, 9 F. Supp. 3d 830 (S.D. Ohio 2014). The district court first held that, despite imposing post-sale restrictions, Lexmark’s patent rights were exhausted at the initial domestic sale. Lexmark, 2014 WL 1276133, at *6-7 (citing Quanta, 533 U.S. 617). However, relying on the Federal Circuit’s 2001 decision in Jazz Photo, the district court held that Lexmark’s foreign sales of the cartridges did not exhaust its patent rights. Lexmark, 9 F. Supp. 3d at 833; see also Jazz Photo, 264 F.3d 1094. The parties agreed to a stipulated final judgment and cross-appealed to the Federal Circuit. After oral argument, the Federal Circuit sua sponte decided to review the Lexmark case en banc. The en banc court then reversed the district court in part, holding that a patentee can retain patent law rights after the sale of a patented article by expressly specifying restrictions on post-sale use or resale, but affirmed the district court’s analysis of Jazz Photo, holding that, regardless of whether restrictions are attached, foreign sales of a U.S.-patented article do not exhaust United States patent rights. Lexmark, 816 F.3d at 726-27. 1. Post-Sale Restrictions In reaching its decision that a patentee may preserve certain exclusive rights by imposing post-sale restrictions on its initial sale of a patented article, the Federal Circuit noted that the patent exhaustion doctrine arises under section 271(a) of the Patent Act, which provides that infringement occurs when an individual "without authority" makes, uses, or sells a patented article in the United States. Lexmark, 816 F.3d at 742. The court reasoned that by imposing express post-sale restrictions, a patent owner withholds "authority" from the purchaser (or licensee), and therefore preserves its right to bring a subsequent infringement action under section 271(a). See id. at 742-43 (noting that absent an express restriction, the sale presumptively grants authority to the purchaser to use and resell the patented article). The Federal Circuit’s holding reaffirmed its prior decision in Mallinckrodt that a clearly communicated restriction imposed on the first sale of a patented article can preserve the patentee’s right to later bring an infringement action. Id. at 726. The court rejected the district court’s determination that Mallinckrodt had been implicitly overruled by the Supreme Court’s 2008 decision in Quanta. The Federal Circuit distinguished Quanta in affirming its Mallinckrodt rule, noting that in Quanta there were no restrictions on the licensee’s sales. Id. at 737-38. The Federal Circuit held that the Mallinckrodt rule therefore applied, and that the doctrine of patent exhaustion does not foreclose a patentee’s right to bring an infringement action after the initial sale of a patented article that was subject to a clearly communicated and otherwise lawful post-sale restriction. Id. at 735. 2. Foreign Sales The Federal Circuit then affirmed the district court’s holding that a patentee’s foreign sale neither conclusively nor presumptively waives the patentee’s U.S. patent rights under the exhaustion doctrine. Id. at 753-54. In reaching this determination, the court reaffirmed its earlier decision in Jazz Photo, and rejected Impression’s argument that Jazz Photo had been overruled by the Supreme Court’s recent decision in Kirtsaeng. Id. at 754-56. The Federal Circuit reasoned that Kirtsaeng’s holding was limited to the copyright context, and therefore did not affect the exhaustion doctrine under the Patent Act. Id. at 757-58. Therefore, the court affirmed the Jazz Photo rule, and held that a foreign sale does not foreclose U.S. patent rights under the exhaustion doctrine. Id. at 754. C. Possible Effects of Supreme Court Review in Lexmark The Supreme Court’s decision to review Lexmark has the potential to affect a variety of industries and markets, including secondary markets for patented goods generally, and markets for products containing components designed, manufactured, or assembled abroad. First, the Court’s decision could significantly affect secondary markets for patented goods. Generally, the patent exhaustion doctrine protects participants in these secondary markets by limiting a patentee’s ability to bring an infringement claim for downstream use or resale after the patentee’s own sale (or an authorized sale) of the patented good. However, the Federal Circuit’s decisions in Lexmark and Mallinckrodt permit patent holders to retain the right to bring such claims if they impose post-sale restrictions at the time of the initial sale. If the Supreme Court reverses this Federal Circuit holding, then a patent holder’s right to enforce use or resale restrictions could be curtailed. Patentees might still be able to assert breach-of-contract claims against parties who fail to abide by contractual restrictions on post-sale activity, but would no longer be able to assert patent infringement claims based on secondary market sales. As some commentators have noted, if relief is limited to contract claims, then patentees may face challenges establishing standing against downstream buyers, and injunctive relief may be harder to obtain. The Court’s decision in Lexmark could provide guidance regarding the requirements for purported post-sale restrictions to be effective. Second, the Court’s decision to review Lexmark could affect the markets for products sold at different prices in different countries, and for products that include components purchased abroad (such as consumer electronics). The Court may reverse the Federal Circuit’s holding in Lexmark and Jazz Photo regarding foreign sales, and may hold that foreign sales do indeed exhaust domestic patent rights, either conclusively or presumptively. A brief filed by the Solicitor General on behalf of the United States advocates such a presumption. See Brief for the U.S. as Amicus Curiae at 16-17, Impression Products, Inc. v. Lexmark Int’l, Inc., No. 15-1189, (filed Oct. 12, 2016). Either would make it more difficult for patentees to maintain different prices for patented products in foreign versus domestic markets, by allowing others to engage in price arbitrage. And while a reversal could align patent law with the copyright rule adopted in Kirtsaeng, it might have different effects on the markets for patented goods as compared to copyrighted works. For example, many components of complex technology products sold in the United States are designed, manufactured, or sold abroad before assembly into the finished products. A reversal of the Jazz Photo rule could affect the incentives for choosing where to manufacture or sell these components, as patentees consider how best to retain rights under a new exhaustion rule. Patentees may consider expressly reserving their U.S. patent rights in future foreign sale contracts, to rebut the presumption of exhaustion if the Court adopts the Solicitor General’s proposed approach. IV. Conclusion Between Heartland and Lexmark, the upcoming Supreme Court term has the potential to change the patent landscape significantly in ways that will affect courts, rights-holders, defendants, and indeed all participants in the intellectual property economy. Our intellectual property, appellate, and technology transactions attorneys are available to advise on these issues at your convenience. The following Gibson Dunn lawyers assisted in the preparation of this client update: Stuart Rosenberg and Emma Strong. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the issues discussed in this update. Please contact the Gibson Dunn lawyer with whom you usually work, author Stuart M. Rosenberg in Palo Alto (650-849-5389, srosenberg@gibsondunn.com), any member of the firm’s Intellectual Property,Appellate and Constitutional Law orTechnology Transactions practice groups, or the following practice leaders and members: Intellectual Property Group:Josh Krevitt – New York (212-351-4000, jkrevitt@gibsondunn.com)Wayne Barsky - Los Angeles (310-552-8500, wbarsky@gibsondunn.com)Mark Reiter – Dallas (214-698-3100, mreiter@gibsondunn.com) Appellate and Constitutional Law Group:Mark A. Perry – Washington, D.C. (202-887-3667, mperry@gibsondunn.com)James C. Ho – Dallas (214-698-3264, jho@gibsondunn.com) Caitlin J. Halligan – New York (212-351-4000, challigan@gibsondunn.com) Technology Transactions Group:David H. Kennedy – Palo Alto (650-849-5304, dkennedy@gibsondunn.com)Shaalu Mehra – Palo Alto (650-849-5282, smerhra@gibsondunn.com)John A. Squires – New York (212-351-4089, jsquires@gibsondunn.com)David Angel – New York (212-351-2329, dangel@gibsondunn.com) © 2017 Gibson, Dunn & Crutcher LLP Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.
After more than a year of considering public comments on its February 23, 2015 proposed rules regulating the commercial use of small (weighing less than 55 pounds) unmanned aircraft systems ("UAS" or "drones"), the United States Federal Aviation Administration ("FAA") on June 22, 2016 issued its final rule, bringing the use of drones one step closer to mainstream commercial integration. While the personal and commercial use of drones has mushroomed in recent years, a practical regulatory framework has lagged behind the technological innovation and economic demand driving the boom. Proponents of the commercial use of drones have argued that this regulatory lag was stifling the growth of a market that is estimated to generate over $80 billion in the U.S. economy by 2025. Under FAA regulations, drones fall under the broad definition of "aircraft," and therefore have been subject to the same regulations as a 747 passenger airliner. These regulations include certification requirements for both the aircraft and the pilot before an aircraft can be operated in the national airspace, but the FAA acknowledged that the processes for obtaining these certifications were not designed for the unique considerations associated with small UAS. In 2012, Congress passed the FAA Modernization and Reform Act of 2012 (Public Law 112-95) ("Reform Act") in part to address these issues. Section 332 of the Reform Act directed the FAA to develop a regulatory framework for the civil use of small UAS. And until the framework was finalized, Section 333 of the Reform Act allowed the agency to make determinations on a case-by-case basis that a standard FAA airworthiness certification would not be required for a particular use of small UAS. Although the Section 333 certification process was tailored specifically to address small UAS, and hence was a definite improvement over the general FAA airworthiness certification process, any commercial use of a small UAS still required a certification from the FAA nonetheless. On February 23, 2015, the FAA released its proposed rules pursuant to Section 332 of the Reform Act. After considering public comments (over 4,600 comments, as reported by the agency), the FAA published the final rule on June 22, 2016, which will go into effect after a 60-day public comment period. Overview of the Final Rule – Part 107 The FAA final rule adds a new Part 107 to Title 14 of the Code of Federal Regulations to allow routine commercial operations for small UAS without the need for airworthiness certification, exemption or other certificates of waiver or authorization (e.g., pursuant to Section 333). In order to qualify for a Part 107 general authorization, the UAS and the UAS operator must satisfy several criteria set forth in the new regulations. With a few exceptions, many of these criteria remain unchanged in their terms as set forth in the February 23, 2015 proposed rules. Some of the key requirements are as follows: As in the proposed rule, the UAS must weigh less than 55 pounds, and fly at groundspeeds of less than 100 miles/hour; The maximum altitude for authorized small UAS use was lowered in the final rule from 500 to 400 feet, with a new exception that the UAS can break the 400-foot ceiling if it remains within 400 feet of a structure (i.e., to allow drones to inspect structures taller than 400 feet); The UAS can only be operated within daylight hours, although the final rules make an allowance for operation during "civil twilight" hours (30 minutes prior to sunrise and 30 minutes post sunset) if the UAS utilizes anti-collision lighting; The minimum age of a drone pilot was lowered from 17 to 16; and UAS pilots must obtain a remote pilot certification in order to operate a small UAS (or operate under the supervision of a certified holder). Critically, particularly for certain segments of the commercial sector, the final rule did not change certain restrictions floated in the proposed rules which will have a significant limiting effect on the scope of commercial UAS use, namely: The UAS must be operated within the line-of-sight ("LOS") of the pilot or a "visual observer;" A UAS cannot be flown over persons not involved in the operation of the UAS; and If property is attached to the UAS, it cannot be flown across state or national boundaries, or the pilot would be deemed by the Department of Transportation to be an "air carrier" engaged in "air transportation," which is not covered by Part 107. Response from Industry: A Good First Step but More Is Needed Although the final rules have been fairly well received by drone manufacturers and industry trade associations as an important milestone in the commercialization of drone use, the general consensus even among proponents is that Part 107 is merely a first step in an ongoing process, and that much yet remains to be done in order to fully take advantage of and support growth of the burgeoning UAS sector. To be sure, certain commercial users of drone technology, including those engaged in television and film production, agriculture, rural real estate development, and surveying and inspection activities, are more pleased with the current state of regulation under Part 107 than are others, as Part 107 largely authorizes their needs. Many other commercial players are not so content, particularly those who would like to use drones in some of the ways that have garnered more attention and discussion in the media – such as cross-country package delivery, an activity which arguably represents one of the largest potential growth areas for commercial use of UAS. The current restrictions, particularly LOS restrictions, place these aspirations on hold for now. In addition, the current ‘overflight’ restrictions significantly curtail the use of drones in metropolitan areas for a wide variety of potential users, including journalists, media and entertainment companies, urban real estate developers, and many others. Many of those dissatisfied with the pace or results of regulatory change addressing UAS in the United States often point to parallel regulatory efforts in Europe by the European Aviation Safety Agency as both an example and a warning. Set to be finalized later this year or in early 2017, the European legislation governing the commercial use of drones is expected to be more lenient than the rules set forth this week in Part 107, setting up (some argue) an uneven playing field for U.S. companies operating at home. Finally, in the United States, federal lawmakers and regulators are not the only game in town when it comes to regulating commercial use of UAS. Various state and local authorities will continue to have their input as well, and in fact, in its final rule the FAA explicitly denied to invoke federal preemption, stating instead that "[p]reemption issues involving small UAS necessitate a case-specific analysis that is not appropriate in a rule of general applicability." This lack of general federal preemption likely will create, at least in the short run, a potentially complex patchwork of federal and state regulations that commercial drone operators will need to navigate in the United States. What’s Next: Slow and Steady The limitations still present in Part 107 are in some measure intentional. The FAA has acknowledged that the final rule does not address all of the current issues related to commercial use of small UAS, or the concerns of industry. But rather than delay rulemaking further until a comprehensive framework could be developed (which to be fair may be a bit of a moving target considering the pace of technological change in the industry), the FAA has noted that its rulemaking is intended to be "incremental" "to enable certain small UAS operations to commence upon adoption of this rule and accommodate technologies as they evolve and mature." In addition, the waiver process for deviations from the standard Part 107 requirements still exists. Part 107 includes a process for obtaining ad hoc certificates of waiver from the FAA for proposed uses of small UAS outside the standard guidelines. The FAA has noted it will be creating an online portal to enable and streamline this process. In addition, the release of the final rules marks commencement of another 60-day comment period, providing the public and industry with another opportunity to advocate for further last-minute amendments before the rule becomes effective in late August. Conclusion In sum, for many companies eager to reap the practical and economic benefits of UAS in the United States, the FAA’s final rules embodied in Part 107 represent a welcome step in the right direction by doing away with the certification requirement for drone use that stays within the firm guidelines. However, LOS and overflight restrictions still contained in Part 107 likely will continue to act as a significant obstacle to full realization of the potential of commercial drone use in the United States. Industry will almost certainly want to continue to engage both federal and state regulators to advocate for broader authority in the commercial sector, particular if forthcoming European regulations addressing UAS create a marked disadvantage for companies in the United States. 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, or the authors of this alert: Perlette Michèle Jura – Los Angeles (+1 213-229-7121, pjura@gibsondunn.com)William J. Peters – Los Angeles (+1 213-229-7515, wpeters@gibsondunn.com)David A. Wolber – Washington, D.C. (+1 202-887-3727, dwolber@gibsondunn.com) Please also feel free to contact any of the following leaders and members of the firm’s International Trade Practice Group: United States:Judith A. Lee – Co-Chair, Washington, D.C. (+1 202-887-3591, jalee@gibsondunn.com)Ronald Kirk – Co-Chair, 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)Alexander H. Southwell – New York (+1 212-351-3981, asouthwell@gibsondunn.com)Daniel P. Chung – Washington, D.C. (+1 202-887-3729, dchung@gibsondunn.com)Adam M. Smith – Washington, D.C. (+1 202-887-3547, asmith@gibsondunn.com)Mehrnoosh Aryanpour – Washington, D.C. (+1 202-955-8619, maryanpour@gibsondunn.com)David A. Wolber – Washington, D.C. (+1 202-887-3727, dwolber@gibsondunn.com)Nicholas A. Klein – Denver (+1 303-298-5795, nklein@gibsondunn.com)Kamola Kobildjanova – Palo Alto (+1 650-849-5291, kkobildjanova@gibsondunn.com)Lindsay M. Paulin – Washington, D.C. (+1 202-887-3701, lpaulin@gibsondunn.com) Asia:Robert S. Pé – Hong Kong (+852 2214 3768, rpe@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 (0) 89 189 33 110, bschwarz@gibsondunn.com)Mark Handley – London (+44 (0) 207 071 4277, mhandley@gibsondunn.com) © 2016 Gibson, Dunn & Crutcher LLP Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.
The Indian economy continues to be an attractive investment destination due to its sustained stable growth and implementation of further liberalization policies by the Government of India ("Government"). The Government’s focus remains on improving the ease of doing business in India and many effective steps have been taken in this direction. Following our nine-month update dated October 21, 2015 (which sets out an overview of key legal and regulatory developments in India from January 1, 2015 to September 30, 2015), this update provides a brief overview of the key legal and regulatory developments in India from October 1, 2015 to April 30, 2016. Key Legal and Regulatory Developments Foreign Direct Investment Policy 1. November 2015 Amendments to the Foreign Direct Investment Policy: On November 24, 2015, the Government effected several important amendments[1] to India’s consolidated foreign direct investment policy ("FDI Policy"). These amendments enable increased levels of foreign direct investment in a number of business sectors and simplify various sector-specific conditions under the FDI Policy. For a detailed analysis, please refer to our client alert dated December 8, 2015 at http://www.gibsondunn.com/publications/pages/Indian-Government-Amends-Foreign-Direct-Investment-Policy-Dec2015.aspx. 2. Foreign Direct Investment in Insurance[2]: Total foreign investment ownership through any means, including portfolio investment, in an Indian insurance company (which includes insurance brokers, insurance third party administrators, surveyors and loss assessors), directly or indirectly (through one or more holding companies), is now permitted up to 49% without the prior approval of the Government ("Automatic Route"). Previously, foreign investment not exceeding 26% was permitted under the Automatic Route and foreign investment beyond 26% and up to 49% required the prior approval of the Government (through the Foreign Investment Promotion Board ("FIPB"). Prior approval of the Insurance Regulatory and Development Authority is required in all circumstances where there is any change in shareholding of an Indian insurance company. The ownership and control of an Indian insurance company (including the appointment of the CEO) must remain in the hands of resident Indians at all times. "Control" is defined to mean the right to appoint a majority of the directors on the board of the company or the power to control the management or policy decisions of a company by virtue of shareholding, management rights, shareholders agreements or voting rights agreements. 3. Foreign Direct Investment in Pension Funds[3]: In line with the policy on foreign investment in the insurance sector, the Government has permitted foreign investment in Indian pension funds up to 49% under the Automatic Route . Previously, 26% was permitted under the Automatic Route and foreign investment beyond 26% and up to 49% required the prior approval of the Government (through the FIPB). Foreign investment in the Indian pension sector continues to be subject to the conditions set out in the Pension Fund Regulatory and Development Authority Act, 2013. 4. Foreign Investment in E-Commerce Activities[4]: The Government, on March 29, 2016, has clarified the position on foreign direct investment in e-commerce trading entities and e-commerce market place entities. There is no restriction on foreign investment in companies engaged in B2B e-commerce activities. In respect of companies engaged in B2C e-commerce activities, the key provisions are as follows: (a) E-commerce has now been defined as the buying and selling of goods and services, including digital products, through a digital and electronic network. (b) The term ‘digital and electronic network’ has been defined to include a ‘network of computers, television channels and any other internet application used in automated manner such as web pages, extranets, mobiles, etc.‘ (c) The Government has drawn a distinction between an ‘inventory-based’ model of e-commerce ("Inventory Model") and a ‘marketplace based’ model of e-commerce ("Marketplace Model"). Inventory Model has been defined as an e-commerce business model where the inventory of goods and services is owned by an e-commerce entity and is sold to the consumers directly. Marketplace Model has been defined as the provision of an information technology platform by an e-commerce entity on a digital and electronic network to act as a facilitator between a buyer and a seller. (d) The Government has clarified that foreign investment of up to 100% is permitted under the Automatic Route in companies that have a Marketplace Model. No foreign investment is permitted in companies that have an Inventory Model. (e) Some of the key conditions that companies operating the Marketplace Model must comply with are: (i) Not more than 25% of the total sales of the company can be undertaken on its marketplace by a single vendor or such vendor’s group companies; (ii) The company is permitted to provide support services to sellers in respect of warehousing, logistics, order fulfilment, call centres, payment collection and other similar services; and (iii) The company cannot directly or indirectly influence the sale price of goods or services and are obligated to maintain a level playing field. While the above clarifications have removed ambiguities in relation to foreign investment in entities engaged in B2C ecommerce activities, there are certain grey areas that have arisen as a result of these clarifications. For example, (a) services have now been included within the definition of e-commerce – the presumption earlier was that this only includes goods, (b) there is also no guidance on what constitutes ‘influencing the sale price of goods directly or indirectly’ or how a ‘level playing field’ should be maintained by companies that have a Marketplace Model. Further clarity is required on these aspects. 5. Foreign Investment in Asset Reconstruction Companies[5]: The Government has permitted foreign investment in asset reconstruction companies up to 100% under the Automatic Route. Previously, foreign investment of up to 49% was permitted under the Automatic Route and foreign investment beyond 49% and up to 100% required the prior approval of the Government (through the FIPB). Insurance On October 19, 2015, the Insurance Regulatory and Development Authority issued the "Guidelines on Indian Owned and Controlled" Insurance Companies (the "Guidelines") to further clarify the requirements with regard to Indian ownership and control of Indian insurance companies. The Guidelines apply to all Indian insurance companies that receive foreign investment. The Guidelines state that the ownership and control of an Indian insurance company (including the appointment of the CEO) must remain in the hands of resident Indians at all times. "Control" is defined to mean the right to appoint a majority of the directors on the board of the company or the power to control the management or policy decisions of a company by virtue of shareholding, management rights, shareholders agreements or voting rights agreements. For detailed analysis, please refer to our client alert dated October 22, 2015 at http://www.gibsondunn.com/publications/pages/Ownership-and-Control-of-Indian-Insurance-Companies-with-Foreign-Investment.aspx. Financing The Reserve Bank of India ("RBI") has promulgated the External Commercial Borrowings ("ECB") Policy-Revised Framework ("Revised Framework"). The Revised Framework lays down a more liberal approach for ECBs, whether they are long-term foreign currency denominated ECBs or Indian Rupee denominated ECBs. The Revised Framework expands the list of eligible borrowers, recognised lenders and reduces the restrictions on use of proceeds (i.e., end-use of the ECB). The Revised Framework became effective on December 2, 2015 with the publication of the relevant regulatory notifications in the Official Gazette of India. Borrowers were permitted to receive ECBs under the previous ECB regime until March 31, 2016 (if they had already executed the ECB agreement prior to the date of effectiveness of the Revised Framework). Additionally, borrowers that were in negotiations with lenders (at the time the Revised Framework became effective) were also permitted to execute ECB agreements under the previous ECB regime until March 31, 2016 for certain specific purposes such as working capital for airlines, loans for low cost affordable housing projects, etc. For detailed analysis, please refer to our client alert dated January 4, 2016 at http://www.gibsondunn.com/publications/Pages/Reserve-Bank-of-India-Introduces-Revised-ECB-Framework.aspx. Start-ups 1. The Government launched a new initiative on January 17, 2016 aimed at providing various benefits to start-up companies in India. The following are key provisions in relation to start-up companies: (a) A "start-up" has been defined to mean an entity incorporated/ registered in India (i) for a period of up to 5 years from the date of its incorporation/ registration and (ii) its turnover in any financial year has not exceeded INR 250,000,000 (approx. USD 3.67 Million) and (iii) it is working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property. (b) The Government has clarified that a business would be considered a start-up only if it aims to develop and commercialize (i) a new product or service or (ii) significantly improves an existing product, service or process that will create and add value for customers. (c) The RBI has made appropriate amendments to its foreign exchange regulations to state that Foreign Venture Capital Investors ("FVCIs") are now permitted to invest in all start-ups, regardless of the sector that the start-up is engaged in. Prior to this amendment, FVCIs were permitted to only invest in a list of permissible sectors. Certain other benefits announced by the RBI for start-ups include (i) transfer of shares with deferred consideration, escrow or indemnity arrangements for a period of 18 months; (ii) simplification of the process for dealing with delayed reporting of FDI; (iii) easing access to rupee denominated loans under the ECB framework; and (iv) easing operational restrictions on overseas subsidiaries of start-ups. (d) Start-ups are also exempted from certain statutory provisions relating to inspection under certain labour legislations in India by self-certifying compliance with such legislations. (e) Eligible start-ups (established between April 2016 and March 2019) are entitled to a tax deduction of one hundred per cent of the profits and gains derived by them, for a period of three years, from a business involving innovation development, deployment or commercialisation of new products, processes or services driven by technology or intellectual property. Real Estate The Real Estate (Regulation and Development) Act, 2013 ("RERA") was notified on March 27, 2016. RERA seeks to establish a regulatory framework to govern transactions between buyers and promoters/sellers of real estate projects. It establishes state level regulatory authorities with the objective of (a) ensuring that residential projects are registered, and their details uploaded on the authorities’ website; (b) ensuring that buyers, sellers, and agents comply with obligations under the RERA; and (c) advising the government on matters related to the development of real estate. RERA also imposes a requirement that at least 70% of the funds collected for a particular real estate project from buyers will be invested solely in such project. It seeks to protect buyers by prohibiting advertisements promoting real estate projects which have not obtained all regulatory approvals along with an additional provision for penalties for delay in construction. Antitrust On March 4, 2016, the Government, through the Ministry of Corporate Affairs issued a number of notifications (the "Notifications") which have substantially (a) amended and increased the merger control thresholds and, (b) amended as well as extended the existing target based exemption under the merger control regulations in India for another five years. 1. Target Based Exemption: On March 4, 2011, the Government had introduced a de minimis target based exemption (i.e., based on the valuation of assets or turnover of the target company) which excluded certain transactions from the provisions of Section 5 of the [Indian] Competition Act, 2002 (the "Competition Act") for a period of five years. Transactions that fell below the threshold did not have to be notified to the Competition Commission of India ("CCI"). The Government, through the Notifications has extended the exemption for another five-year period, i.e., until March 4, 2021. The values of asset/turnover thresholds under this exemption have also been raised. 2. Merger Control Thresholds: Section 5 of the Competition Act sets out the asset and turnover thresholds that are required to be satisfied for a transaction to qualify as a "combination". A qualifying combination is required to be mandatorily notified to the CCI for prior approval, unless the target based-exemption discussed above is applicable. The Notifications have amended and increased these thresholds. Please refer to our client alert dated March 15, 2016 for more details, including these revised thresholds: http://www.gibsondunn.com/publications/Pages/Indian-Government-Amends-Merger-Control-Regulations.aspx. Arbitration The Arbitration & Conciliation (Amendment) Ordinance, 2015 ("Ordinance") was promulgated on October 23, 2015 to introduce substantial changes to the [Indian] Arbitration & Conciliation Act, 1996 (the "Arbitration Act"). The Ordinance was approved by both houses of the Indian Parliament and was published in the official gazette on January 1, 2016 after receiving Presidential assent as the Arbitration and Conciliation (Amendment) Act, 2015 ("Amendment Act"). The primary objective of the Amendment Act is to encourage expeditious resolution of disputes and transparency in arbitration proceedings. The Amendment Act has reformed domestic arbitrations, foreign seated international commercial arbitrations (in so far as the Arbitration Act applies to them) and international commercial arbitrations seated in India by reducing delays and limiting the scope of judicial intervention. For detailed analysis, please refer to our client alert dated November 10, 2015 at http://www.gibsondunn.com/publications/pages/Government-of-India-Amends-Indian-Arbitration-and-Conciliation-Act–1996.aspx. [1] http://dipp.nic.in/English/acts_rules/Press_Notes/pn12_2015.pdf [2] http://dipp.nic.in/English/acts_rules/Press_Notes/pn1_2016.pdf [3] http://dipp.nic.in/English/acts_rules/Press_Notes/pn2_2016.pdf [4] http://dipp.nic.in/English/acts_rules/Press_Notes/pn3_2016.pdf [5] http://dipp.nic.in/English/acts_rules/Press_Notes/pn4_2016.pdf Gibson, Dunn & Crutcher lawyers are available to assist in addressing any questions you may have regarding these issues. For further details, please contact the Gibson Dunn lawyer with whom you usually work or the following authors in thefirm’s Singapore office: India Team:Jai S. Pathak (+65 6507 3683, jpathak@gibsondunn.com)Priya Mehra (+65 6507 3671, pmehra@gibsondunn.com)Bharat Bahadur (+65 6507 3634, bbahadur@gibsondunn.com)Karthik Ashwin Thiagarajan (+65 6507 3636, kthiagarajan@gibsondunn.com)Sidhant Kumar (+65 6507 3661, skumar@gibsondunn.com) © 2016 Gibson, Dunn & Crutcher LLP Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.
It has been a busy week for U.S. regulators and policymakers as they continue to wrestle with how to effectively manage the myriad issues related to the growing and evolving use of unmanned aerial systems ("UAS"), or "drones," both domestically and abroad. Beginning February 15, 2015, the Obama Administration announced a series of new rules and policies affecting the commercial use of drones domestically, as well as the ability of U.S. manufacturers to export both commercial and military drones. Federal Aviation Administration Rules On February 15, 2015, the Department of Transportation’s Federal Aviation Administration ("FAA") released long-awaited proposed rules for regulating the commercial use of UAS ("Proposed Rules").[1] In the main, the Proposed Rules would authorize the use of commercial drones in the United States with some of the following restrictions: The drone must weigh less than 55 lbs. Flights must remain under a 500 feet ceiling and travel at speeds of under 100 mph. Flights can only occur in daylight and must remain in the line of sight of the operator or other visual observer at all times.[2] Operators of a drone must be at least 17 years in age, and must pass an initial aeronautical knowledge test administered at an FAA-approved testing center and be vetted by the Transportation Security Administration. Once a UAS operator certificate is obtained, the operator would need to pass the aeronautical knowledge test every two years to remain certified. However, a UAS operator would not be required to obtain a private pilot license. The Proposed Rules do not address model aircraft and do not affect previously issued FAA guidance related to the recreational use of drones. While the proposed rules are more lenient in certain respects than had been anticipated by many parties tracking developments in this area, they do not go as far as many in the commercial sector would have hoped, particularly in terms of the line-of-sight restrictions. The FAA will seek public comment to the Proposed Rules for 60 days from their publication in the Federal Register. Until publication of the final rules, which many commentators do not expect until late 2015/early 2016, the FAA’s previous, more stringent unmanned aircraft rules remain in place. Presidential Memorandum on Privacy and Civil Rights Concurrently on February 15, 2015, President Obama issued a Presidential Memorandum ("Memorandum") to federal department and agency heads establishing policies intended to address privacy and civil liberty concerns in the Government’s use of drones.[3] The Memorandum sets forth several guidelines that federal agencies utilizing UAS must establish and follow, particularly when concerning the collection, use and retention of personal data, and to safeguard First Amendment protections and other civil rights and liberties.[4] The Memorandum requires federal agencies, within 180 days, to provide a status report to the President on the implementation of these policies, and, within one year, to publish information on how the public can access these policies and procedures.[5] Finally, the Memorandum establishes "a multi-stakeholder engagement process to develop and communicate best practices for privacy, accountability, and transparency issues regarding commercial and private UAS use," and requires the Department of Commerce, National Telecommunications and Information Administration, to initiate the process within 90 days.[6] Export Policy Subsequent to the February 15 actions relating to the commercial use of drones within the U.S., the Department of State on February 17, 2015 announced that the U.S. Government was opening up its policy relating to the export of U.S.-origin military drones.[7] Under this new policy, the details of which remain largely unpublished and partially classified, the Department of State will now allow exports of military drones, including armed drones, to certain foreign governments under strict conditions and on a case-by-case basis after undergoing Department of Defense Technology Security and Foreign Disclosure process reviews. Decision-making for authorizing exports of military UAS would follow the guidelines and criteria set forth in the U.S. Conventional Arms Transfer Policy,[8] and authorizations would require end-use certification and monitoring from a purchasing nation that the drones will be used in compliance with international law, including human rights law, and will not be used in unlawful surveillance against their domestic population or unlawful use of force.[9] The State Department will maintain a strong presumption of denial for exports of UAS that meet certain specifications (UAS that are capable of a range of at least 300 kilometers and are capable of carrying a payload of at least 500 kilograms) as these drones may be restricted by current U.S. commitments made under the Missile Technology Control Regime ("MTCR"). Such exports would only be authorized in "rare occasions," as justified by guidelines contained in the MTCR.[10] The State Department announcement also notes that the new policy supplements and builds on the controls governing exports of commercial drones found in the Export Administration Regulations and administered and enforcement by the Department of Commerce, Bureau of Industry and Security. However, at the time of publication of this alert, no further details could be found in Department of Commerce publicly available documents. [1] See Operation and Certification of Small Unmanned Aircraft Systems: Notice of Proposed Rulemaking, 80 Fed. Reg. 9543 (Dep’t of Transp. Feb. 15, 2015), available at http://www.gpo.gov/fdsys/pkg/FR-2015-02-23/pdf/2015-03544.pdf. [2] See FAA, Overview of Small UAS Notice of Proposed Rulemaking (Feb. 15, 2015), available at http://www.faa.gov/regulations_policies/rulemaking/media/021515_sUAS_Summary.pdf. [3] The White House, Presidential Memorandum: Promoting Economic Competitiveness While Safeguarding Privacy, Civil Rights, and Civil Liberties in Domestic Use of Unmanned Aircraft Systems (Feb. 15, 2015), available at http://www.whitehouse.gov/the-press-office/2015/02/15/presidential-memorandum-promoting-economic-competitiveness-while-safegua. [4] Id., Sec. 1(a)-(b). [5] Id., Sec. 1(e). [6] Id., Sec. 2. [7] See U.S. Dep’t of State, Fact Sheet U.S. Export Policy for Military Unmanned Aerial Systems (Feb. 17, 2015), available at http://www.state.gov/r/pa/prs/ps/2015/02/237541.htm. [8] The White House, Presidential Policy Directive/PPD-27 United States Conventional Arms Transfer Policy (Jan. 15, 2014), available at http://www.whitehouse.gov/the-press-office/2014/01/15/presidential-policy-directive-united-states-conventional-arms-transfer-p. [9] U.S. Dep’t of State Fact Sheet, supra note 7. [10] Id. Gibson, Dunn & Crutcher’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, or the authors of this alert: Judith A. Lee – Washington, D.C. (202-887-3591, jalee@gibsondunn.com)William J. Peters – Los Angeles (213-229-7515, wpeters@gibsondunn.com)David A. Wolber – Washington, D.C. (202-887-3727, dwolber@gibsondunn.com) Please also feel free to contact any of the following members of the firm’s International Trade Practice Group: Jose W. Fernandez – New York (212-351-2376, jfernandez@gibsondunn.com)Marcellus A. McRae – Los Angeles (213-229-7675, mmcrae@gibsondunn.com)Alexander H. Southwell – New York (212-351-3981, asouthwell@gibsondunn.com)Daniel P. Chung – Washington, D.C. (202-887-3729, dchung@gibsondunn.com)Andrea Farr – Washington, D.C. (202-955-8680, afarr@gibsondunn.com)Eric B. Lorber – Washington, D.C. (202-887-3758, elorber@gibsondunn.com)Lindsay M. Paulin – Washington, D.C. (202-887-3701, lpaulin@gibsondunn.com)Michael Willes - Los Angeles (213-229-7094, mwilles@gibsondunn.com) Annie Yan – Washington, D.C. (202-887-3547, ayan@gibsondunn.com) © 2015 Gibson, Dunn & Crutcher LLP Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.
2013 proved to be another active year in the outsourcing and technology transactions marketplace. We continued to see a steady flow of traditional information technology outsourcing transactions mixed with an ever expanding variety of business process outsourcing transactions. We also saw an increase in the adoption of cloud-based solutions, including SaaS, IaaS and PaaS. Outlined below are a few trends we have observed during the past year and some considerations for the future. Practice Observations on 2013 and Some Thoughts for 2014 S. 744 – Immigration Reform: The U.S. Senate’s proposed "Border Security, Economic Opportunity, and Immigration Modernization Act" (S. 744) H-1B visa reform provisions would have significantly affected the U.S. outsourcing industry and India-based service providers in particular. Among other requirements, S. 744 capped the percentage of an entity’s U.S.-based workforce that could consist of H-1B visa holders, increased the cost of obtaining H-1B visas and prohibited the deployment of H-1B visa holders at customer locations by certain H-1B-dependent service providers. While gridlock in Washington prevented the bill from proceeding through the House, we anticipate that immigration reform generally, and H-1B visa reform in particular, is one area that may be ripe for political compromise in 2014. Data Security: Popular interest in governmental and private sector data collection practices, media attention to data breaches and the correspondingly large notification and remediation costs have raised the stakes for both service providers and customers. In 2013, these factors drove heavy negotiation of provisions allocating responsibility and authority for resolving data breaches, with provisions becoming increasingly customized to particular situations. This trend will likely continue into 2014, and may accelerate if regulators increase enforcement efforts or if the plaintiffs’ bar is able to overcome hurdles to class certification for claims by data subjects. EU Data Privacy: Data protection reform continues to advance in the European Parliament, with proponents hoping to see their 2012 proposal for changes to the EU Data Protection Directive enacted in 2014. The contemplated changes would offer some benefits for global outsourcing deals, such as increased uniformity and "one stop shopping" in the EU (enabling global enterprises to work with a single data protection authority in the EU instead of many). The potential downsides include significantly increased sanctions for non-compliance and the new "right to be forgotten," which may require substantial changes to technology and re-examination of existing agreements to allocate responsibility for implementation. Cloud Computing: The ease of administration and attractive economics of cloud computing have led to more deals with cloud computing components, as even businesses with highly sensitive data are testing the waters with providers and services geared towards their needs. We expect use of cloud computing to further expand in 2014, as more providers work through how to meet the needs of regulated businesses and adopt approaches that address the security challenges faced by their customers. SaaS: Although SaaS providers remain more resistant to negotiating terms and conditions than traditional outsourcing providers, in 2013 we were increasingly successful in negotiating key legal terms for our clients. As more activities migrate towards the SaaS model, we are seeing increased customization of both the services offered and the legal agreements that can be negotiated, and we expect this trend to continue into 2014. Negotiation Results: The notion that there would be a convergence among service providers in the outsourcing marketplace regarding terms and conditions was debunked once again in 2013. We observed a wide-ranging difference in the terms and conditions service providers were willing to accept. Additionally, customers who raised key terms and conditions earlier in the negotiating process (e.g., pre-down select) were generally able to obtain more favorable terms and to move to closing in a more expeditious manner. Solution Mix: In 2013, customers continued to deploy multi-service provider, multi-platform solutions. Moving beyond "anchor" service providers, we observed many clients implementing task-based or process-specific solutions, often leveraging SaaS or other cloud-based offerings. We expect this trend to continue as customers gain comfort with more complex governance and data security concerns associated with the cloud. Disputes: Our outsourcing disputes practice remained active in 2013. The dueling forces of increased focus on contract governance and cost savings by customers and the rapid expansion and margin squeeze experienced by service providers have led to disputes that we have helped resolve successfully through negotiated settlements and restructurings. Gibson Dunn’s Practice Gibson Dunn’s Strategic Sourcing and Technology Transactions Practice in particular enjoyed one of its busiest years ever and represented clients on some of the largest and most complex transactions completed in 2013. In addition, the practice’s team of attorneys continued its steady expansion, adding members at both the partner and associate levels. Below are some highlights regarding the practice in 2013. The practice was ranked by Chambers & Partners in Band 1 nationally. We are very pleased that Shaalu Mehra, as a partner, and three lateral associates, joined the practice in 2013, deepening our expertise in both technology transactions and outsourcing. In 2013, we advised on more than 50 significant strategic sourcing and technology transactions with a total contract value in excess of $2 billion. Our clients came from a wide variety of industries, including Apparel, Automotive, Chemical, Consumer Products, Energy, Financial Services, Food, Government, Healthcare, Hospitality, Insurance, Life Sciences, Pharmaceutical, Publishing and Technology. Within the United States, we represented clients based in California, Colorado, Delaware, Georgia, Maryland, New Jersey, New York, Oregon, Tennessee, Texas, Washington and Wisconsin. Looking outside the U.S., we represented clients based in Bahrain, Canada, Denmark, France, Germany, Ireland, Singapore, Switzerland and the United Kingdom and in several instances transactions that involved more than 65 countries. Consistent with past years, in 2013, we worked with a broad range of clients, from mature public companies (over 35% of our clients were in the Fortune 500), to middle market and emerging growth companies. Last year marked one of our busiest years to date representing clients in technology transactions, including patent portfolio acquisitions, contract manufacturing, technology-related services arrangements and cloud-based services transactions. Below are some of the more notable transactions that Gibson Dunn’s practice handled in 2013. Information Technology Outsourcing Transactions A Fortune 500 hospitality company in a series of global IT outsourcing transactions with Accenture, IBM, Mindtree, TCS and Xerox. A Fortune 500 life sciences company in the renegotiation of a global application development and maintenance transaction with Accenture. A Fortune 500 energy services company in an IT outsourcing transaction. A global specialty chemicals company in a full scope IT outsourcing transaction with HCL. A global financial services and communications company in an application development and maintenance transaction with TCS. An international media company in a renegotiation of an IT infrastructure transaction with HCL. A Fortune 500 IT distributor in multiple enterprise software distribution agreements and telecommunications hardware distribution agreements. A Fortune 500 technology company in the outsourcing of certain application development and maintenance services to Capgemini. Business Process Outsourcing Transactions A Fortune 500 hospitality company in the sale of its captive shared services center and the outsourcing of its back-office support functions to Accenture. A Fortune 500 consumer products company in the outsourcing of certain financial and accounting services to Capgemini. A Fortune 500 insurance company in the outsourcing of certain claims processing services to Alliance-One Services (a subsidiary of CSC). A Fortune 500 financial services company in the outsourcing of its print procurement functions to Williams Lea. A hedge fund in the outsourcing of its back-office asset management services to SEI. A publisher in the outsourcing of its supply chain to RR Donnelley. A Fortune 500 company in the outsourcing of quality assurance services. Cloud/SaaS Transactions An international food distribution company in the implementation of a global cloud-based human resource information system with SuccessFactors Inc. (an SAP company). A Fortune 500 chemicals company in a global, cloud-based enterprise human resources SaaS transaction with Workday. A leading apparel retailer in connection with a cloud-based enterprise human resources SaaS transaction with Workday. A Fortune 500 technology company in its outbound cloud services agreements. A Fortune 500 technology company in a multinational telecommunications services agreement with British Telecom. Other Significant Technology Transactions An investment bank in a global asset management services agreement. A Fortune 500 office technology company in the sale and licensing-back of certain patents and related know-how. A manufacturer of high performance computing solutions in a contract manufacturing transaction with Jabil. A Fortune 500 technology company in multiple enterprise-wide software licenses. Gibson, Dunn & Crutcher lawyers are available to assist in addressing any questions you may have regarding the outsourcing and technology transactions marketplace. Please contact the Gibson Dunn lawyer with whom you usually work, or any of the following members of the Strategic Sourcing and Technology Transactions Practice Group: Daniel R. Mummery – Palo Alto (650-849-5318, dmummery@gibsondunn.com)William J. Peters – Los Angeles (213-229-7515, wpeters@gibsondunn.com)Stephen D. Nordahl – New York (212-351-2442, snordahl@gibsondunn.com)Shaalu Mehra – Palo Alto (650-849-5282, smerhra@gibsondunn.com) © 2014 Gibson, Dunn & Crutcher LLP Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.