iPad legal fight highlights China's trademark minefield

By Katie Hunt

Apple is locked in a high-stakes legal fight over the rights to its
iPad brand in China, but the technology giant is just one of many
multinational companies to have come unstuck while trying to navigate
the country's complex trademark system.

Drug company Pfizer, auctioneer Sotheby's, luxury fashion house Hermes
and coffee chain Starbucks, along with many others, have fought court
battles over trademarks and logos in China - with mixed results.

Legal experts describe a situation where the law favours opportunistic
"trademark squatters", who register trademarks - often by the hundred
- in the hope of turning a quick profit, rather than the companies who
actually use them to do business.

"It's a first-to-file jurisdiction, so foreign companies with
well-known brands are advised to come in here as soon as possible and
register their trademarks," says Stan Abrams, a US lawyer, who teaches
intellectual property law at Beijing's Central University of Finance
and Economics.

By contrast, the US operates a "first-to-use" system meaning that the
party that files for a trademark has to show that is has used, or
intends to use, the trademark for business purposes.

Infringements
Reports suggest that Facebook is working hard to solve trademark
infringements in China as it prepares for its massive share listing.
Individuals can also encounter problems.

Apple is locked in a high-stakes legal fight over the rights to its
iPad brand in China, but the technology giant is just one of many
multinational companies to have come unstuck while trying to navigate
the country's complex trademark system.

Drug company Pfizer, auctioneer Sotheby's, luxury fashion house Hermes
and coffee chain Starbucks, along with many others, have fought court
battles over trademarks and logos in China - with mixed results.

Legal experts describe a situation where the law favours opportunistic
"trademark squatters", who register trademarks - often by the hundred
- in the hope of turning a quick profit, rather than the companies who
actually use them to do business.

"It's a first-to-file jurisdiction, so foreign companies with
well-known brands are advised to come in here as soon as possible and
register their trademarks," says Stan Abrams, a US lawyer, who teaches
intellectual property law at Beijing's Central University of Finance
and Economics.

By contrast, the US operates a "first-to-use" system meaning that the
party that files for a trademark has to show that is has used, or
intends to use, the trademark for business purposes.

Infringements
Reports suggest that Facebook is working hard to solve trademark
infringements in China as it prepares for its massive share listing.
Individuals can also encounter problems.

The technology giant says it bought the rights to the iPad name in
China and nine other countries from the Taiwan unit of a now
struggling Hong Kong electronics company called Proview International
for £35,000 in 2009.

Proview International had registered the name back in 2001 and used it
to develop its own device, which was not a big success.

However, a Chinese court in Shenzhen ruled in November that the
trademark belonged to Shenzhen Proview, a mainland Chinese unit of
Proview International. Apple's appeal in that case begins on
Wednesday.

Apple maintains that the 2009 contract gave it worldwide rights to the
iPad name and Proview "refuses to honour their agreement with Apple in
China" while Shenzhen Proview has claimed to be unaware that the
Taiwan unit signed away the trademarks.

Apple declined to comment further given that their case is still
pending in China, while Roger Xie, a Chinese lawyer representing
Shenzhen Proview contacted by BBC News, said he was too busy to answer
questions about the case.

Time pressure?
Experts say that Apple's problems most likely stem from a lack of due
diligence on the 2009 trademark deal.

"My personal guess is that they were under immense time pressure,"
says Eugene Low, a trademark lawyer at Mayer Brown JSM in Hong Kong.

"It's very surprising that they overlooked this problem. Anyone can go
to the PRC trademark office's online database and do a simple search
that would reveal the owner."

While Proview still claims ownership of the iPad brand and is asking
commercial authorities to ban iPad sales in some Chinese cities, Mr
Low says ultimately it is in the interests of the company and its
creditors to settle the case.

"It's not in their interest for Apple to stop selling iPads in China.
They want to realise whatever assets Proview has."

Mr Abrams says the sticking point is likely to be the amount Proview
is prepared to settle for.

"I have a feeling what they (Proview) can live with and what Apple can
live with are very far apart. It's the only asset left for this
company essentially... and there are rumours that Proview is being
manipulated by its creditors."

According to a report by Bloomberg news agency, Shenzhen Proview is
controlled by its creditors, including two of China biggest banks -
Bank of China and China Minsheng Banking Corp.

Politics?

Mr Abrams says that Apple and its contractors employ millions of
workers in China and this will work in the technology giant's favour
should the case "turn political", as he puts it.

"Who is more important as a company to this country?" he asks. "Apple
is a big employer, the products are popular, it's a big multinational,
it pays taxes. Proview is a non-entity"

"If politics are involved at all, then Apple looks pretty good."

Many foreign companies have weathered disputes over their intellectual
property in China.

Earlier this week Hermes lost a Shanghai court case over a translation
of its name and Pfizer fought and lost a long court battle over the
Chinese name of its Viagra brand, which was registered first by a
Chinese company.

Starbucks and Sotheby's, however, both won their cases against Chinese
companies using translations of their names.

While the Proview case is embarrassing and could ultimately prove
costly for Apple, it is unlikely to deal a devastating blow to its
business in China, where fights have broken out as customers scrambled
to purchase new Apple products.

"Worst-case scenario is rebranding in China but even with that people
are still going to buy their products. It's not going to kill them,"
says Mr Abrams.

"If there's any lessons to be learned it's due diligence and making
sure your lawyer doesn't screw up when you sign your contract."

For more information on these matters, please call our office at 305
548 5020, option 1.

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Assessing the Global Business Outlook for Data Privacy

By, Catherine Dunn

According to a new White House report on consumer data privacy
protection, trust is worth a lot of money to U.S. businesses—users
have to know their data will be protected if the economic engine of
digital innovation is to keep roaring. Ergo, the U.S. needs a privacy
framework that's "flexible" enough to accommodate industry innovation,
and comprehensive enough that consumers will feel safe—and keep
clicking.

But trust between consumers and companies in the U.S. is only part of
the equation. There's another important element, too: how compatible
U.S. safeguards are with those of the rest of the world, and
particularly Europe. This new proposal arrives a month ahead of a
conference on data protection between E.U. and U.S. officials in
Washington, D.C., leading to questions about whether Europe and the
U.S. are any closer to getting on the same page when it comes to data
privacy.

The answer not only depends on who you ask, but also what section of
the White House's report you're looking at. The white paper lists
seven principles and stresses that these principles should form the
basis of voluntary codes of conduct adopted by industry. Once adopted,
the Federal Trade Commission would have the power to enforce
compliance to those codes. The paper also includes a call for Congress
to pass legislation based on these principles, and devotes a section
to "international interoperability"—which considers how data can be
sent across international borders without violating laws on either
side of the transaction.

Let's start with the Consumer Privacy Bill of Rights. As Joseph
Turrow, a professor at the Annenberg School for Communication at the
University of Pennsylvania, told NPR's Fresh Air, even the wording of
the report's title is a noteworthy choice:

[Europeans] believe in privacy as [a] human right. And that's the
interesting thing about how [the upcoming] Commerce Department report
is positioned: as a right. There are some advocates who don't like
what they see in the policy because they think it's too loose. But the
very fact that it's called a right is interesting rhetorically. Some
people would say they're moving in the right direction.

Privacy expert Lisa Sotto says that while the seven rights derive from
the Fair Information Practice Principles—which were issued by the U.S
Department of Education, Health, and Welfare in the 1970s—this updated
version also reflects contemporary European ideals: "A number of the
principles would seek to import European data protection standards to
the U.S., such as the right to access and correct data," says Sotto,
head of the global privacy and data security Practice at Hunton &
Williams in New York.

Next up: FTC enforcement and voluntary codes of conduct, which might
be a harder sell to Europeans. In fact, argues Jeffrey Chester, head
of the Center for Digital Democracy, the whole notion of
self-regulation by industry undercuts the basic tenants of the
European regulatory regime. "The Europeans are building a
comprehensive online privacy framework that places the interests of
citizens first," he says, while the U.S. self-regulatory approach
advances the interests of U.S. data mining companies. "This is digital
apples and oranges."

The section on interoperability, says Stuart Levi, a partner at
Skadden, Arps, Slate, Meagher & Flom in New York, can be read as a
signal to Europe: "We want you to recognize what we do here, and
accept what we do here."

"The U.S. is hedging its bets," adds Levi, co-head of the firm's
intellectual property and technology group. In other words, even if
the U.S. doesn't get a comprehensive data privacy and protection
policy passed into law, the Obama administration at least wants the
E.U. to recognize that a self-regulatory regime is valid and worthy of
respect.

The topic of global privacy regulations is now at a new pivot point.
Are the new E.U. framework and White House "Bill of Rights" the
beginning of a more global approach to data privacy, or are both sides
far enough down the digital road that it will be nearly impossible to
reconcile the legal and philosophical differences? For multinational
companies and web brands that rely on global access to data and
customers, the answer will be crucial to their success in a
21st-century marketplace.

For more information on these matters, please call our office at 305
548 5020, option 1.

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Jefferson County sets public hearing on sexually oriented business law

PORT TOWNSEND — An ordinance regulating sexually oriented businesses
in Jefferson County appears to be headed for approval next month after
nearly seven years of delays.

Jefferson County commissioners have been considering the ordinance
that would cover such businesses as strip clubs and sex novelty shops
since March 2005, when nine moratoriums on such establishments going
into business until county regulations were approved.

What could be a final public hearing on the final draft of the
ordinance was scheduled on Monday for 10:15 a.m. March 12 when the
three commissioners will consider final approval of the proposal.

That hearing is to be conducted before the commissioners in their
chambers at the county courthouse, 1820 Jefferson St., in Port
Townsend.

"I would dearly love to see these moratoriums come to an end," said
county Commissioner Phil Johnson who pointed out that the ordinance
would allow such businesses in more than one place in the county.

County Associate Planner David Wayne Johnson, who has taken the lead
on the developing the ordinance for the county Department of Community
Development, said such businesses would be allowed in areas zoned for
rural village centers, convenience centers, crossroad centers and
light industrial zones.

Both Quilcene and Brinnon are zoned as rural village centers and Glen
Cove Industrial Park south of Port Townsend is a light industrial
zone.

All are areas where sexually-oriented businesses could be established
under the law.

Commissioner Johnson said it "seemed odd" that such businesses would
be allowed to be "scattered" around the county.

Planner Johnson said the county had to zone sexually-oriented
businesses in more than one location because otherwise, the action
could be interpreted as creating a "red light district" and construed
as unconstitutional.

County Administrator Philip Morley said if all goes well there will be
no need to extend the moratorium once again.

"I am pleased to see we are getting to this point, quite frankly,"
said county Commissioner David Sullivan.

Some of the ordinance borrows from the city of Port Townsend law that
was adopted seven years ago and allows such businesses in the downtown
historic district.

As proposed, the ordinance requires that adult businesses be 1,000
feet away from churches and schools.

The county sheriff would administer licensing and the county hearing
examiner would hear any appeals of license denials, Morley said.

Johnson said the sheriff's office must take a role in review of
applications for adult-oriented because of the fear that such
businesses could be fronts for organized crime, including money
laundering and prostitution.

The county first discussed an adult business ordinance in early May
2005, but the matter fell by the wayside, with other issues taking
priority.

There is no county adult business law now in place.

"We think that this is a good final cut for the code for the
licensing," planner Johnson said.

"I think we can get this all done and have the public hearing" before
the moratorium expires.

The latest moratorium expires April 24.

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Business concerns stall House's foreign law bill

By Kathy Adams

RICHMOND — A proposal to ban the use of foreign law in Virginia was on
its way to passing the House of Delegates, despite objections from
religious groups that it was a back-door attack on Islam that could
also harm followers of other faiths.

Then business interests expressed concern and legislators decided to
take a closer look.

For now, the measures have been sent back to the drawing board, but
supporters say they plan to try again next year.

House Bill 825, from Rep. Bob Marshall, R-Prince William County, would
have prohibited judges and state administrators from using any legal
code established outside the United States to make decisions. It was
one of two proposals this year to address that issue.

Muslim advocates condemned the effort, calling it a thinly veiled
attack on Shariah law, their religious tenets. Other members of the
religious community joined in, including the Jewish Community
Federation, saying the ban also would infringe on their rights,
especially to settle certain family matters, such as wills and
divorces, according to their faith.

Nonetheless, the House Courts of Justice Committee approved the bill
10-6 and sent it to the full House for consideration.

But when legislators started hearing from business groups concerned
about how the proposal could affect their dealings abroad and foreign
companies located here, they sent the bill back to committee.

"I had some business concerns," said Del. Terry Kilgore, R-Scott
County, after making the motion Thursday to kick back the bill. "It's
just something that needs more work."

A subcommittee voted Friday to carry the measure over to next year,
when the assembly will also take up a broader version, HB 631, from
freshman Del. Richard Morris, R-Isle of Wight County.

The Council for American-Islamic Relations attacked Morris' bill
first, pointing to language in it that was identical to a measure
drafted by anti-Shariah activist David Yeralshami. Although Marshall's
bill was more narrow, it seemed to have the same anti-Muslim
undertones, said the council and outside legal experts.

"This one is more cautiously drafted than a lot of these bills because
it doesn't mention Shariah law," said Douglas Laycock, a
constitutional law professor at the University of Virginia. "Although
everyone knows what it's about."

"I think the goal and the objectives are still the same, and that's to
stigmatize the Muslim community," said Gadeir Abbas, staff attorney
for the Council for American-Islamic Relations. "The business
community doesn't want it, the religious community doesn't want it and
it's not good for Virginia."

Marshall and Morris dispute that their bills target Muslims.

"All we're saying is that this legislature is absolutely going to be
in charge of how the courts incorporate foreign law," he said. "This
doesn't target any specific individual, religion or country's set of
laws."

In the past two years, 20 states have considered similar legislation.
Last month, the 10th U.S. Circuit Court of Appeals struck down
Oklahoma's version as discriminatory because it specifically mentioned
Shariah law.

Del. Greg Habeeb, R-Salem, said Marshall's proposal was different,
especially because it didn't mention any specific religion. Habeeb and
Marshall are both Christians.

"We could go down a really dangerous path with this type of
legislation, which is why we've spent hours and hours of analysis,"
Habeeb said during a hearing. "This is not the bogeyman bill. †It's
a statement of public policy."

Proponents of the legislation, such as the conservative Center for
Security Policy, argue it's intended to prevent foreign law from
infringing on Americans' rights, although their discussion focuses
only on Shariah law.

A study by the center reported finding 50 cases in 23 states during
the past two years where judges used Shariah law in their decisions.
Three were in Virginia: two marriage cases and one child custody
dispute, according to the report.

There's no widespread evidence of judges using foreign law in Virginia
or elsewhere, said Corey Saylor, national legislative director for the
Council for American-Islamic Relations.

"It's a nonissue," he said. "The Constitution is the law of the land,
and to my knowledge no one's questioning that."

Where the proposals would have applied is in family settlements, said
Morris' staff and religious leaders. For example, Jewish couples often
go to a rabbinical court to decide a divorce agreement and then ask a
domestic relations court to enforce it.

Marshall's bill would have banned that, as well as the use of Muslim
Shariah law or Catholic canon law, opponents said.

"It could have unintended consequences on legal practices in the
religious community throughout the commonwealth," said Charles
Swadley, interim president of the Virginia Interfaith Center for
Public Policy.

"We're afraid of it," added Richard Samet, an attorney who testified
against the bill on behalf of the Jewish Community Federation.

The chairman of the House Courts of Justice Committee, Del. Dave Albo,
R-Fairfax County, voted against the bill due to concerns it could
invalidate foreign adoptions, international letters of credit and
certain international contracts.

The proposals could have created a nightmare for Virginia's courts,
UVa's Laycock said. The American Civil Liberties Union of Virginia
agreed, saying the bills would have caused uncertainty for businesses,
litigants and people involved in family disputes.

"The idea that there can be no reliance on foreign law in a Virginia
court is utterly impractical," he said. "You cannot be a state with
commercial enterprises in a global economy and not deal with foreign
law."

Several subcommittee members said they weren't comfortable signing off
on Marshall's bill with so many legal questions unanswered.

"This is a very serious issue," said freshman Del. Peter Farrell,
R-Henrico County. "I don't want foreign law dominating me as an
American citizen. But the drafting does not seem to be correct and
we're being asked to rush this."

For more information on these matters, please call our office at 305 548 5020.

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8 Legal Steps for Starting Your Business

American Express Forum

With each new year, budding entrepreneurs look to turn their vision
into a business. These startups are often overflowing with tremendous
ideas, energy and optimism — but don't always have a roadmap for the
legal aspects involved in starting a business. In the flurry of
drumming up new customers, getting ready for a website launch and
building the first prototype, it's all too easy to put off some of the
less glamorous, more administrative aspects of running a company.

Yes, company filings and regulations are not the most exciting parts
of your startup. Yet they're critical to the health of your business
and personal finances. Here's a quick rundown of eight administrative
aspects you need to consider for your startup or small business. Of
course, depending on your situation and type of business, hiring a tax
accountant and/or good attorney with specific experience in your
industry can go a long way to helping you steer clear of trouble.

1. Did You Pick a Name? Make Sure You're Legally Permitted to Use It

Before you start printing out business cards, make sure the great new
name you thought of isn't infringing on the rights of an already
existing business. In most cases, you don't need an attorney for this
task, as you can perform a free search online that looks at business
names registered with the Secretary of State — that will tell you if
the name is available in your state. Then, take your search to the
next level and conduct a no-conflict, free trademark search to see if
your name is available for use in all 50 states.

And considering you can still infringe on someone else's trademark
even if they've never formally registered it with the U.S. Patent and
Trademark Office, you should also do a comprehensive search into all
state and local databases (look for an affordable online service to
help you with this).

2. Register a Fictitious Business Name/DBA

Ever notice those endless fictitious name announcements in the
classifieds of your local paper? You may need one, too. A DBA (Doing
Business As) must be filed whenever your company does business under a
different name. If you've got a sole proprietorship or general
partnership, a DBA is needed if your company name is different from
your own name. For an LLC or corporation, a DBA must be filed to
conduct business using a name that's different from the official
Corporation or LLC name you filed. For example, my company is
officially incorporated as CorpNet, Inc., so we needed to file DBAs
for the variations CorpNet.com and CorpNet. These are typically filed
at the state and/or county level.

3. Incorporate Your Business or Form an LLC

Forming an LLC or corporation is an essential step to protect your
personal assets (such as your personal property or your child's
college fund) from any liabilities of the company. Each business
structure has its own advantages and disadvantages, depending on your
specific circumstances. Three popular options are: the LLC (great for
small businesses that want legal protection, but minimal formality), S
Corporation (great for small businesses that can qualify), or C
Corporation (for companies who plan to seek funding from a VC or go
public).

And one other word of advice, Delaware and Nevada are two popular
states for business incorporation. However, if your business has less
than five shareholders, you're better off forming an LLC in the state
where you operate your business (i.e. where you live).

4. Get a Federal Tax ID Number

To distinguish your business as a separate legal entity, you'll need
to obtain a Federal Tax Identification Number, also referred to as an
Employer Identification Number (EIN). Issued by the IRS, the tax ID
number is similar to your personal social security number and allows
the IRS to track your company's transactions. If you're a sole
proprietor, you're not obligated to get a Tax ID number, but it's
still good practice as you won't have to provide your personal social
security number for business matters.

5. Learn About Employee Laws

Your legal obligations as an employer begin as soon as you hire your
first employee. You should spend time with an employment law
professional to fully understand your obligations for these (and
other) procedures: federal and state payroll and withholding taxes,
self-employment taxes, anti-discrimination laws, OSHA regulations,
unemployment insurance, workers' compensation rules, and wage and hour
requirements.

6. Obtain the Necessary Business Permits and Licenses

Depending on your business type and physical location, you may be
required to have one or more business licenses or permits from the
state, local or even federal level. Such licenses include: a general
business operation license, zoning and land use permits, sales tax
license, health department permits, and occupational or professional
licenses.

7. File for Trademark Protection

You're not actually required by law to register a trademark. Using a
name instantly gives you common law rights as an owner, even without
formal registration. However, as expected, trademark law is complex
and simply registering a DBA in your state doesn't automatically give
you common-law rights. In order to claim first use, the name has to be
'trademarkable' and in use in commerce.

Since you've spent untold hours brainstorming the ideal name, and
you'll be putting even more effort into cultivating name recognition,
you should consider registering your trademark for proper legal
protection. Registering a trademark makes it exponentially easier to
recover your properties, like if someone happens to use your company
name as their Twitter handle. Having the right documentation means you
have the legal right to that handle, and Twitter will take steps to
give it to you.

8. Open a Bank Account to Start Building Business Credit

When you rely on your personal credit to fund your business, your
personal mortgage, auto loan and personal credit cards all affect your
ability to qualify for a business loan (and for how much). Using
business credit separates your personal activities from that of the
business. To begin building your business credit, you should open a
bank account in the name of your company, and the account should show
a cash flow capable of taking on a business loan.

Get Your Legal Ducks in a Row

No matter how busy things with your startup get, set aside some time
to address these matters and take your legal obligations seriously.
Getting your legal ducks in a row right from the start will help you
avoid any pitfalls down the road, and will help you scale your
business successfully as you grow.

For more information on these matters please call our office at 305
548 5020, option 1.

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Opponents: Congress went too far in healthcare law

WASHINGTON (Reuters) - Congress went beyond its powers by requiring
Americans to buy insurance under President Barack Obama's sweeping
healthcare overhaul, opponents told the U.S. Supreme Court on Monday
in arguing the law's centerpiece provision should be struck down.
In separate written briefs, 26 states and an independent business
group argued Congress overstepped its authority under the Constitution
to regulate interstate commerce by mandating that individuals buy
health insurance or pay a penalty by 2014.
They were responding to Obama administration arguments, filed with the
high court last month, that defended the provision, known as the
individual mandate, as a constitutional attempt to address a crisis in
the national health care market.
The court has scheduled three days of oral arguments on the healthcare
battle for March 26-28, with an election-year ruling likely by late
June on the law that aims to provide more than 30 million uninsured
Americans with coverage.
The 26 states and the National Federation of Independent Business
called it an unprecedented move by Congress to force individuals to
buy insurance. The states say the entire law would be invalid if the
Supreme Court strikes down the mandate.
A ruling striking down the law would be a huge political and legal
defeat for Democrat Obama ahead of the Nov. 6 election, when he seeks
another four-year term. A ruling upholding his signature domestic
achievement would be a major vindication.
Paul Clement, a former solicitor general under the Bush administration
who is arguing for the states, said Congress may not circumvent
constitutional limits by enacting a comprehensive regulatory scheme.
"The individual mandate is an unprecedented law that rests on an
extraordinary and unbounded assertion of federal power," he wrote in
the brief, arguing that the mandate "was not a valid exercise of
Congress' Commerce power."
Attorneys for the independent business group said the predominant
purpose of the mandate was to force the uninsured to get coverage and
to provide an annual subsidy of $28 to $39 billion to insurers and
their customers.
They said Congress can regulate interstate commerce by setting rules
that govern commercial activity between the states, but the powers
were limited and Congress cannot force individuals to buy a product
like health insurance.
"Forcing people into commerce does not regulate commerce. Otherwise,
Congress could compel the purchase of any product," they said in the
written brief.
One of the attorneys, Gregory Katsas, told reporters Congress had
never before in U.S. history made such a requirement. If the Supreme
Court upholds the mandate, Congress next could force people to buy a
specific car model, he said.
The legal arguments by the states and the business group were
substantially the same to those they previously have made in the legal
battle over the healthcare law.
The Supreme Court cases are National Federation of Independent
Business v. Sebelius, No. 11-393; U.S. Department of Health and Human
Services v. Florida, No. 11-398; and Florida v. Department of Health
and Human Services, No. 11-400.

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Alabama Legislature Considers Immigration Law Tweaks

Birmingham--The Alabama Legislature begins its regular session today
and one of the big issues lawmakers will consider is changing the
state's immigration law. That law, HB56, is considered the nation's
toughest crackdown on illegal immigrants. When it passed last year it
got very little attention from Alabama's business community, but as
WBHM's Tanya Ott reports, business leaders are driving the latest
efforts to modify the law.

Whoever said "All publicity is good publicity" probably never had
dozens of protestors gathered in front of their office calling them
Hitler. At lunch time, in Birmingham's business district, students
from several local colleges held a mock funeral in front of a bank.
They accuse the company of funding private detention centers where,
they claim, illegal immigrants have died. University of Alabama at
Birmingham Student William Anderson organized the event.

"Everybody that voted for HB56 should be ashamed of themselves. And
they should all be pushing for full repeal, not tweaking anything. You
can't tweak hate."

It's not likely the legislature will repeal the law, but there is
mounting pressure to tweak it. Among other things, the law requires
schools to record the legal status of all students. It also requires
proof of citizenship to renew a driver's license or enter into any
government contract.

"The problem the governments have run into is the law is very broad in
its definition of contractor or subcontractor."

Cindy Crawford is editor of the Birmingham Business Journal.

"So to follow the law and cover all their bases, governments have sent
paperwork requests to just about every company they do business with."

The Business Journal itself received a notice from a local city that
subscribes to the newspaper asking for the immigration status of all
newspaper employees and subcontractors. It's the law of unintended
consequences. Long lines at the courthouse to renew car license tags
and vegetable crops rotting in the fields since workers fled.

Business leaders got caught flat-footed when the law passed. It was
soon obvious it would have a significant effect on economic
development. Especially after two foreign autoworkers -- a German
executive with Mercedes Benz and a Japanese worker at a Honda plant –
were detained under the law. The St. Louis Post Dispatch newspaper ran
an editorial inviting companies to relocate to the "Show Me State" …
not the "Show Me Your Papers" state. Brian Hilson is the CEO of the
Birmingham Business Alliance.

"It's not like business prospects are sounding an alarm and coming to
us and telling us that they are rethinking their plans to do business
in Alabama. It's the unknown. It's what they're not saying to us."

Hilson says there's no way to know how much business the state is
losing, but researchers at the University of Alabama peg the cost at
up to $11 billion in lost jobs and income and sales tax revenues.
Scott Beason rejects that number and any efforts to significantly
change the law. Beason is the Republican state senator who
co-sponsored the original bill.

"If people begin to cave from political pressure, that donors want
something changed, they'll have to do it against the vast majority of
the people in their district and go with the small special interest
group that makes their decision based on profit."

A public opinion poll conducted last week found 42% of respondents say
they support the law, but think it goes too far. Already, several
legislators have introduced bills to modify it and the courts have
ruled some provisions unconstitutional. Still, there's no disputing
supporters of the law have achieved their main goal: driving illegal
immigrants out of Alabama.

~ Tanya Ott

For more information on these matters, please call our office at 305
548 5020, option 1.

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Business Law: Creditors still free to challenge gifts, trusts

The abolition of gift duty in October 2011 generated much public
interest given the number of family trusts that have been established
in New Zealand. The abolition essentially means that, from October 1
last year, it is possible to make gifts of unlimited value.

In the context of family trusts, this means that assets (most commonly
the family house) are able to be transferred to a trust in full by way
of gift for no value.

While that makes things tidier on the balance sheet and avoids the
need for an annual gifting programme as required previously, it also
means creditors will have less substantial assets available to satisfy
their claims if default situations arise, since considerable personal
value can now be transferred away outright by gift.

However, as with many things, nothing is as simple as it first
appears. Under the Property Law Act and the Insolvency Act creditors
are able to challenge gifts in certain circumstances.

Section 60 of the Property Law Act 1952 (which has now been replaced
by section 346 of the Property Law Act 2007) provides that a transfer
of property with "intent to defraud creditors" is able to be
challenged by that creditor. This topic was recently considered by the
Court of Appeal in the case of Taylor v Official Assignee.

The Taylors (T) had established their family trust in 2000 after Mr T
became involved in a new IT business venture.

The evidence was that the Taylors had approached their lawyer to set
up the trust following advice from their accountant that it would be a
sensible move given the new business. They established a trust and
transferred their family house into that trust at market value - and
then started an annual gifting programme of $27,000 each per annum to
forgive the purchase price debt owed by the trust.

That type of structure was common practice for the establishment of a
family trust except in this case, at the time the trust was
established, Mrs T owed Inland Revenue Department $4800 in tax
arrears.

By the time the house was transferred to the trust the IRD debt had
been reduced to $3000 and then paid off entirely by December 15, 2000.
Problems arose later when Mrs T's health deteriorated and she incurred
new tax arrears in 2002 which eventually resulted in her being
declared bankrupt in 2006 owing approximately $123,000 to IRD.

The Official Assignee sought to have all the trust transactions
(including the original transactions in 2000) cancelled on the basis
they were undertaken with intent to defraud IRD. The judge in the High
Court accepted this and essentially decided that the Taylors were
lying when they said they established the trust in order to protect
assets in light of the new business venture - instead he decided the
motivation was Mrs T's desire to defraud IRD.

The Court of Appeal, however, rejected that interpretation and instead
accepted that the Taylors were being truthful when they said the trust
was established for asset protection purposes - as indicated by the
fact that Mrs T's tax arrears in 2000 were less than 3% of their
assets, the arrears were paid off in full that year and the form of
the trust transaction was a standard and common form.

In certain circumstances, evidence of fraud at a later time can permit
an inference of fraud at an earlier time (which would expose trust
transactions to being challenged). However, in this case the Court of
Appeal was sympathetic to the significant health problems subsequently
suffered by Mrs T which contributed to the post-2002 tax arrears. The
court decided the trust was established for legitimate purposes and
the later tax arrears did not void the standard trust transactions.

Though each situation will depend on its own facts, the Taylor
decision will be of comfort to many people who have established family
trusts for legitimate purposes and who subsequently encounter
financial difficulties.

For more information on these matters please call our office at 305 548 5020.

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