prac member news · simon elliott -- global projects (real estate), moscow mike king -- global...

► BAKER BOTTS Discovery, Advance/Newhouse Programming Complete Transactions ► CLAYTON UTZ Advises Syndicate of Banks on $500M Debt Facility ► FRASER MILNER CASGRAIN Acts for Barrick Gold Corp in $410M Acquisition

of Cadence Energy

►GIDE LOYRETTE NOUEL Advises Exeltium on discussion with the European

Commission concerning the implementation of procurement and electricity

supply agreements

► HOGAN & HARTSON Leads European Legal Teams for Gazprom on the

Proposed South Stream Pipeline Mega Project

► LOVELLS advised Columbus McKinnon Corporation on the acquisition of

Pfaff Beteiligungs GmbH

► MUNIZ advises Perenco Peru Limited in Development Heavy Oil Reserves in

Block 67

►RODYK Acts For Raffles Education Corporation in US$100 million India JV

► TOZZINIFREIRE acts for Lincoln Electric Holdings

► SIMPSON GRIERSON Appointed Legal Advisors for the Sale of Matariki Forests

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►Baker Botts Announces 13 Partners ►King & Wood Celebrates Launch of New York Office ►Gide Loyrette Welcomes Back Senior Paris Partner ►Lovells Opens Second Hanoi Office ►Luce Forward Expands in Orange County Office ►Morgan Lewis Boosts Employment & Labour Team ►NautaDutilh Appoint 3 Partners, 5 Associate Partners ►WilmerHale Boosts Anti-Trust Competition in LA ►AUSTRALIA CLAYTON UTZ Proposed Public Interest Test to Apply to All Mining Tenures in Queensland ►BRAZIL TOZZINI FREIRE Proposed Regulation for Offerings of Securities with Limited Placement Offerings ►CHINA KING & WOOD - Judicial Recognition of Well-Known Trademarks in China ►NETHERLANDS NAUTADUTILH Dutch Court Rounds-up the case, Ready® for the ECJ: The scope of protection of DNA patents (II) ►NEW ZEALAND SIMPSON GRIERSON On Line Contracting - Making Sure Its All Wrapped Up ►TAIWAN LEE & LI Reforms to Block Trading System ►THAILAND TILLEKE & GIBBINS Company Registration in Thailand - A Ten Point Checklist ►UNITED STATES DAVIS WRIGHT TREMAINE Congressional Bailout Bill Highlights for Financial Service and Public Reporting Companies ►UNITED STATES HOGAN & HARTSON SEC Update —Third Circuit Reverses Controversial Section 16(b) Decision ►UNITED STATES MORGAN LEWIS - Certain Tax Provisions of the Economic Stability Act of 2008 and IRS Guidance Relating to the Economic Crisis

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MEMBER NEWS P R A C M E M B E R G A T H E R I N G S October 15, 2008 - Allende & Brea Hosted Reception IBA ‘08 Conference - Buenos Aires October 19-22 PRAC Gathering - contact Davis Wright Tremaine Association of Corporate Counsel Annual Meeting Seattle November 15-18, 2008 44th International PRAC Conference - Mumbai Hosted by Mulla & Mulla & Craigie Blunt & Caroe http://www.prac.org/events.php Registration Now Open

COUNTRY ROUNDUPS

October 2008 e-BULLETIN

HOUSTON, October 2, 2008 -- Effective January 1, 2009, 13 lawyers will comprise the 76th group in Baker Botts' 168-year history to become new members of the partnership on New Year's Day, Managing Partner Walt Smith announced today.

"These lawyers have demonstrated exemplary legal skills and a dedication to providing the highest quality of service to our cli-ents that is the hallmark of being a partner at Baker Botts," Smith said. "They add considerable depth to our strong team of lawyers."

2009 new partners for Baker Botts include:

William Beard -- Intellectual Property, Austin Mike Bresson -- Tax (Income Tax), Houston Ryan Bull -- Litigation (Trial), Washington Chad Burkhardt -- Corporate, Dallas Simon Elliott -- Global Projects (Real Estate), Moscow Mike King -- Global Projects (Oil & Gas), Houston Sara Kropf -- Litigation (Trial), Washington Babul Parikh -- Corporate, Riyadh Scott Powers -- Litigation (Trial), Austin Paul Reilly -- Intellectual Property, New York Travis Thomas -- Intellectual Property, Palo Alto Martin Toulouse -- Global Projects, New York Amanda Woodall -- Intellectual Property, Houston For additional information visit www.bakerbotts.com

B A K E R B O T T S L L P A N N O U N C E S 1 3 P A R T N E R S


King & Wood is celebrating the launch its New York Office.

New York is one of the legal and financial capitals of the world and is home to many of our profession’s finest legal minds. Over the last 15 years, King & Wood has developed close working relationships with many prestigious American law firms and companies. We believe our New York office will shorten the distance between the U.S. and China markets, provide an effective platform for assisting our U.S. clients and partners with stronger ties to China, and will also assist our China-based clients when investing abroad.

The New York office is headed by King & Wood Senior Partner, Zhao Bing. At present, this office also has two additional resident partners and two associates.

Address & Contact: 444 Madison Avenue, 42nd FL. New York, NY 10022 Tel : (212) 319 4755 Fax: (212) 421 1101 For additional information visit us at www.kingandwood.com

K I N G & W O O D C E L E B R A T E S L A U N C H O F N E W Y O R K O F F I C E

Thierry Dor rejoins Gide Loyrette Nouel: Gide Loyrette Nouel is pleased to announce the return of Thierry Dor, as a partner specialising in information technology law, to the Firm’s Paris office. Thierry Dor, 43 years old, is a member of the Paris (1992) and New York (1997) Bars. He is a graduate of EDHEC Business School and Columbia University (LL.M.) and holds a postgradu-ate degree (DEA) in business law. He is now practising as a partner in the Intellectual Property, Technology and Electronic Communications Department in which he began his career as a Gide associate in 1990, before being appointed successively as General Counsel of ADP Europe in 1997 and then General Counsel of the Ipsos group in 2006. For all these years, Thierry Dor has been specialising in the legal structuring of information technology projects, includ-ing outsourcing, offshoring, integration, development - and is-sues relating to software protection, personal data processing and international data transfers, the Internet and e-commerce. With the wealth of experience developed through his work with international corporate groups, he is returning to Gide to assist the Firm’s major clients with their information technology legal advice needs. Xavier de Kergommeaux, Managing Partner, stated: “we are delighted by Thierry’s return to the Paris Office. Thierry is not only an information technology law specialist, he is also a prac-titioner who brings us his knowledge of the corporate world and its requirements. His arrival will contribute to the development of our Intellectual Property, Technology and Electronic Communi-cations Department.”

For additional information visit www.gide.com

G I D E L O Y R E T T E N O U E L W E L C O M E S R E T U R N S E N I O R P A R I S P A R T N E R


Prominent California Law Firm Expands Real Estate and Business Litigation Practices in Orange County

September 23, 2008

Luce Forward has announced that has hired two new associates in its Orange County office. Brad B. Grabske and Deanna M. Spelber have joined the firm’s Real Estate Litigation and Business / Complex Litigation practices, respectively. “We are working to expand our Orange County office and know both Brad and Deanna have the expertise and dedication of top-tier attorneys,” said Robert Bell, Luce Forward’s managing partner. “I am confident they will contribute greatly to the strength of our firm and the success of our clients.” Grabske, who primarily focuses on business and real estate litigation, will work with a number of attorneys in the Orange County office who specialize in eminent domain, inverse condemnation and real property litigation. The group is headed by Partner John C. Murphy, a highly regarded leader in the field. Grabske’s additional experience includes an array of complex commercial matters such as unfair competition, fraud, and breach of contract and has also represented clients in numerous employment disputes. Prior to Luce Forward, he was an associate at Nossaman, Guthner, Knox & Elliot, LLP. In 2003, he earned a Juris Doctor degree from the University of Southern California Law School. Spelber is experienced in various aspects of complex litigation and will join Partner George C. Rudolph in representing clients in business and complex litigation matters, including diverse business and tort issues. She has handled cases involving various industries, including hospitality, non-profit, manufacturing, professionals, and financial institutions and recently developed and executed litigation strategies for claims against a prominent Catholic Religious Order. Previously, Spelber was an associate at Sedgwick, Detert, Moran & Arnold, LLP. She earned a Juris Doctor degree from Loyola Law School in 2001.

For additional information visit www.luce.com

L U C E F O R W A R D L L P E X P A N D S O R A N G E C O U N T Y O F F I C E


LOVELLS Second office opening in Hanoi and recruitment of two senior consultants boost the firm's Vietnam practice Lovells is reinforcing its position in the emerging market of Vietnam with the opening of an office in Hanoi to complement its long standing presence in Ho Chi Minh City. This follows on from the recent hire of two senior level consultants, Gregory F. Buhyoff and Nasir PKM Abdul to bolster the firm’s Vietnam presence. Lovells has had an office in Ho Chi Minh City since 1994 and was one of the first foreign law firms to obtain a branch licence to practice in Vietnam in 1996. Since then the office has serviced the needs of the firm’s international clients, advising in relation to large scale M&A and infrastructure projects (in conjunction with Lovells offices in Singapore and Hong Kong) and on intellectual property registration and enforcement strategy, where the firm has a market leading reputation. Vietnam is one of Asia's fastest growing economies and has seen strong domestic growth since its accession to the WTO in Janu-ary 2007. Government, ministries and many state corporations are based in the capital city, Hanoi, making it increasingly important to Lovells' international client base. The expansion of Lovells’ Vietnam practice is aligned with the firm's growth strategy in South East Asia, which has also seen the arrival of several senior lateral hires in Singapore including international arbitrator Richard Tan, intellectual property specialist Chung Nian Lam, corporate of counsel Scott Calver and most recently the high profile hire of leading energy partner Brad Roach. Commenting on the expansion, Asia regional managing partner, Crispin Rapinet said: "Vietnam is an important part of our strategy of expansion in Asia and having a presence in Hanoi and Ho Chi Minh is valuable for us to be able to serve our clients in the region. Our aim is to continue to win international work involving the Vietnam market, work-ing alongside specialist teams in Hong Kong and Singapore, capturing the opportunities for work from the firms' existing clients, many of whom are active in Vietnam." Of Counsel has Greg Buhyoff joined Lovells to spearhead the firm's intellectual property practice in Vietnam. He is a US attorney with extensive IP and IT experience in the USA, Vietnam and the Asian region. Previously a senior attorney with Baker & McKenzie in Ho Chi Minh City, he was responsible for a wide range of matters including foreign direct investment, regulatory matters, project finance, construction, telecommunications, intellectual property and technology transfer/licensing. He has handled a variety of mat-ters, including registration, cancellation, administrative appeals, licensing, unfair competition (including in respect of comparative advertising) and anti-piracy cases for a wide range of multinational clients, including many from the research-based pharmaceutical industry. Greg speaks English, Vietnamese, Chinese and Japanese. Corporate Of Counsel Nasir PKM Abdul has joined from local firm Ngo Migueres & Associes, where he managed the Hanoi and Ho Chi Minh City branch offices, having previously worked with Latham & Watkins in Paris for a number of years. He has substantial experience in representing various European, US and Asian clients in the areas of foreign investments, international contracts, real estate and international arbitration. Nasir is fluent in English and native in French and Vietnamese.

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Notes to editors About Greg Buhyoff Greg received his law degree with distinction from the University of the Pacific McGeorge School of Law. He is a member of the California and Nevada State Bars; ABA Intellectual Property Law Section; the San Francisco Intellectual Property Law Association and INTA (formerly served on the TRIPs Treaty Analysis Committee). Greg is admitted to practise before the U.S. District Court for Nevada; the U.S. District Courts for the Northern, Central and Eastern Districts of California, as well as the U.S. Court of Appeals for the Ninth Circuit. Greg is a regular speaker on IP-related issues. About Nasir PKM Abdul Nasir received his LL.M. from Washington College of Law, American University, Washington D.C, and Graduate Law Degree and Graduate English Degree from University of Paris. He is admitted to practise before the French jurisdictions as an Avocat a la Cour. He is a Registered Foreign Lawyer in Hanoi and Ho Chi Minh City and Registered Foreign Arbitrator at the Vietnam Interna-tional Arbitration Center, Hanoi. Nasir is a regular speaker at various lectures and conferences including at the Maison du Droit in Hanoi, the HCMC Faculty of Law and the Hanoi and HCMC Bar associations. About Lovells With over 3,000 people operating from 26 offices in Asia, Europe, the Middle East and the United States, Lovells is one of the world's leading international law firms. We advise many of the world's largest corporations, financial institutions and governmental organisations. We regularly act on complex, multi jurisdictional transactions as well as some of the most high-profile commercial disputes. Lovells (the "firm") is an international legal practice comprising Lovells LLP and its affiliated businesses. Lovells LLP is a limited liability partnership registered in England and Wales with registered number OC323639. Registered office and principal place of business: Atlantic House, Holborn Viaduct, London EC1A 2FG. The word "partner" is used to refer to a member of Lovells LLP, or an employee or consultant with equivalent standing and qualifications, and to a partner, member, employee or consultant in any of its affiliated businesses who has equivalent standing. For additional information visit www.lovells.com

L O V E L L S C O N T ’ D

NautaDutilh has announced the appointment of three new partners at its annual Shareholder Partners’ meeting on 19th September: Rob van der Hoeven, Arief van Rhee and Teun Struycken. Rob van der Hoeven - Fraud & White Collar crime and Corporate & Commercial litigation, Rotterdam Arief van Rhee - Notarial section commercial property, Amsterdam Teun D. Struycken - Banking & Finance and Litigation, Amsterdam

Following the appointment in September 2008 of three new partners, NautaDutilh has announced the appointment of a further five new associate partners: Jacqueline van Essen, Tycho de Graaf, Frank van der Leeuw, Jacques Meunier and Marian Scheele. Jacqueline van Essen- Corporate & Commercial – Amsterdam Tycho de Graaf - IP/ICT – Amsterdam Frank van der Leeuw - Banking & Finance – Amsterdam Jacques Meunier - Corporate & Finance – Brussel Marian Scheele -Banking & Finance – Amsterdam

For additional information visit www.nautadutilh.com

N A U T A D U T I L H A P P O I N T S 3 N E W P A R T N E R S A N D 5 A S S O C I A T E P A R T N E R S


LONDON, October 6, 2008: Morgan Lewis today announced the appointment of Christopher Hitchins as a partner in its Labour & Employment Practice in the firm’s London office. He joins the firm from the London office of Latham & Watkins.

The firm has further strengthened its London employment team with the appointment of Ashley Brown as an associate. Ashley joins the firm from DLA Piper.

Christopher Hitchins will join the London team of Morgan Lewis’s award-winning Labour & Employment Practice, one of the largest in the United States. The London team represents an exclusively corporate client base with an emphasis in the financial services, technology, and life sciences sectors. The team performs the full range of employment work, including litigation, the employment issues in corporate transactions and outsourcing, restructuring, and multijurisdictional projects, as well as providing significant advice on data privacy issues.

Christopher’s practice covers all aspects of employment work, including the implications of cross-border M&A transactions, outsourcing, employee incentives, redundancy procedures, and pensions. As such, Christopher’s skills and experience are ideally suited to the Morgan Lewis London team.

Christopher is joined at Morgan Lewis by associate Ashley Brown, who will assist Christopher and the rest of the London team advising the firm’s UK and international clients.

Commenting on the new hires, Morgan Lewis’s London office managing partner Bob Goldspink said: “I am delighted that Christopher and Ashley decided to join us. Their appointments are part of the successful expansion of our Labour & Employment Practice in London to add strength and depth on both sides of the Atlantic and to better serve our clients in the UK and Europe.”

About Morgan, Lewis & Bockius LLP Morgan Lewis is an international law firm with more than 1,400 lawyers in 22 offices located in Beijing, Boston, Brussels, Chicago, Dallas, Frankfurt, Harrisburg, Houston, Irvine, London, Los Angeles, Miami, Minneapolis, New York, Palo Alto, Paris, Philadelphia, Pittsburgh, Princeton, San Francisco, Tokyo, and Washington, D.C. For more information visit www.morganlewis.com

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M O R G A N L E W I S B O O S T S E M P L O Y M E N T & L A B O U R T E A M


WILMERHALE WELCOMES ROBERT G. BADAL TO THE LOS ANGELES OFFICE

October 1, 2008 WilmerHale is pleased to announce that Robert G. Badal will join the firm as Partner in its Antitrust and Competition and Intellectual Property Litigation Practice Groups. Badal will be resident in the law firm’s Los Angeles office, bringing with him over 35 years of antitrust, intellectual property and complex litigation experience. Badal was most recently a partner at Heller Ehrman, where he was a member of the antitrust; trade regulation and intellectual prop-erty practice groups. His practice is particularly focused on the intersection of the antitrust and intellectual property laws, and he has represented clients in a variety of litigation matters that relate to these issues. Additionally, he has counseled clients on antitrust compliance and risk avoidance, with a particular focus on licensing and standard setting issues arising from the enforcement of in-tellectual property rights in the technology sectors. “Robert Badal’s leadership qualities and years of antitrust and IP litigation experience will contribute greatly to our strategic growth in California,” said William Lee, co-managing partner at WilmerHale. Randall R. Lee, founding partner of WilmerHale's Los Angeles office, added: “With Bob’s outstanding reputation in the community, his depth of experience in some of WilmerHale’s preeminent practice areas, and his knowledge of the California market, we are taking a significant step forward in the growth of our Los Angeles office. Recently opened in March 2008, the Los Angeles office enhances the firm’s nationally prominent securities enforcement and white collar defense practices, and serves as the Southern California base for WilmerHale’s intellectual property litigation group. Badal’s expertise will not only deepen the intellectual property litigation practice, but will expand the firm’s antitrust and general litigation capabilities in California. WilmerHale has one of the leading antitrust and competition practices in the United States and Europe. With more than 50 years' experience and approximately 70 competition lawyers in the US, Europe and China, the firm has secured antitrust clearance for hundreds of complex mergers and joint ventures, helped clients avoid fines and prison terms in many cartel investigations, and won numerous victories for clients in private and government litigation. Many of the firm’s lawyers have served in high levels of govern-ment in either the United States or Europe, and all have years of experience representing clients across the full range of antitrust issues. The firm’s IP litigation practice is well-known as being one of the best in the nation. In January 2008, The American Lawyer named WilmerHale’s practice as its Intellectual Property Litigation Department of the Year. The practice was also recognized as one of the top four IP litigation practices in the magazine's two previous surveys, conducted in 2004 and 2006. The firm’s leading patent, copy-right and trademark litigation team is backed by the academic and industry experience of more than 140 lawyers and technology specialists with scientific or technical degrees. “I am honored to have the opportunity to work with the remarkable group of professionals at WilmerHale,” said Badal. “I look forward to working with the Los Angeles team in building momentum in the California market.” Badal’s experience includes government service as well as private practice. He has written and spoken extensively on antitrust and IP issues. He received his JD from Harvard Law School and his BA, magna cum laude, in Political Science from the University of Pennsylvania. He is admitted to the bar in California and the District of Columbia. For additional information visit www.wilmerhale.com

W I L M E R H A L E B O O S T S A N T I T R U S T , C O M P E T I T I O N A N D I N T E L L E C T U A L P R O P E R T Y L I T I G A T I O N P R A C T I C E S

Melbourne, 19 September 2008 Clayton Utz' Debt Finance team has advised a syndicate of banks on a facility agreement to refinance the corporate debt of the Sigma Pharmaceuticals group of companies.

Comprising ANZ, CBA, NAB and Westpac as the lead arranging banks and ANZ as the documentation bank, the $500 million syndicated debt facility will help to ease Sigma's refinancing risk.

Melbourne partner Marcus Davenport led the Clayton Utz team which included Special Counsel Greg Potts and lawyer Dominic Murphy advising on the agreement.

The syndicated debt facility is split into two tranches, with $200 million maturing in September 2009 and $300 million maturing September 2011.

For additional information visit www.claytonutz.com


NEW YORK, September 18, 2008 -- Discovery Holding Company (DHC) announced yesterday (September 17, 2008) that DHC has successfully completed the previously announced transactions with Advance/Newhouse Programming Partnership that combined their respective stakes in Discovery Communications, the entity that owns and operates Discovery Channel, TLC, Animal Planet and other Discovery Network cable programming services. As a result of the closing, Discovery has become a public company, and Discovery’s Series A, Series B and Series C common stock (NASDAQ: DISAD, DISBD and DISCK) began trading on the Nasdaq Global Select Market September 18, 2008. As part of the transaction, DHC spun-off to its stockholders Ascent Media Corporation, a provider of creative and network services to the media and entertainment industries. The Ascent Series A common stock began trading on a when-issued basis on the Nasdaq Global Market on September 17, 2008. To read the Discovery Holding Company news release on this announcement, please click here. The Baker Botts team: Buzz McGrath,Bob Murray, Marc Leaf, Jonathan Gordon, Renee Wilm, John Winter, Jake Sabat, Helen Lok, Laxmi Vijaysankar and Joel Hugenberger all of the New York office, and Rob Fowler and LeAnn Vaughn of the Houston office. ### About Baker Botts L.L.P. Baker Botts L.L.P., dating from 1840, is a leading international law firm with offices in Austin, Beijing, Dallas, Dubai, Hong Kong, Houston, London, Moscow, New York, Palo Alto, California, Riyadh and Washington. With approximately 800 lawyers, Baker Botts provides a full range of legal services to international, national and regional clients. For more information, please visit www.bakerbotts.com.

B A K E R B O T T S D I S C O V E R Y , A D V A N C E / N E W H O U S E P R O G R A M M I N G C O M P L E T E T R A N S A C T I O N S

C L A Y T O N U T Z A D V I S E S S Y N D I C A T E O F B A N K S O N $ 5 0 0 M D E B T F A C I L I T Y


On September 4, 2008, Barrick Gold Corporation announced that it had acquired over 94 percent of the outstanding shares of Cadence Energy Inc. pursuant to a take-over bid to acquire all of the Cadence shares for $6.75 cash per share, for a total price of approximately $410 million. Barrick intends to enter into one or more transactions to enable Barrick to acquire the Cadence shares not tendered to the bid.

Prior to Barrick's announcement of the offer, Cadence had entered into an arrangement agreement with Daylight Resources Trust pursuant to which Daylight had agreed to acquire Cadence in exchange for trust units of Daylight, cash or a combination of trust units and cash. Barrick's offer represented a 17.4% premium over the implied value of the Daylight offer, based on Daylight's closing price on July 16, 2008. Daylight elected not exercise its right to match Barrick's offer under the arrangement agreement, and as a result, Cadence terminated the arrangement agreement and paid to Daylight the break fee provided for in the Daylight arrangement agreement.

Following the termination of the Daylight arrangement agreement, Barrick entered into a support agreement with Cadence and lock-up agreements with each of the officers and directors of Cadence, pursuant to which the locked-up shareholders agreed to tender their Cadence shares to Barrick's offer. Barrick commenced its offer on July 30, 2008.

Fraser Milner Casgrain LLP acted as Alberta co-counsel to Barrick, with a team that included Dale Skinner, Bill Jenkins, Michael Rempel and Shannon Ward (corporate) and Miles Pittman (oil and gas).

For additional information visit www.fmc-law.com

F R A S E R M I L N E R C A S G R A I N A D V I S E S B A R R A C K G O L D C O R P I N $ 4 1 0 M A C Q U I S I T I O N O F C A D E N C E E N E R G Y

Gide Loyrette Nouel is advising Exeltium on the implementation of an industrial partnership agreement between Exeltium and the EDF Group. This agreement would allow Exeltium shareholders access to 320 terawatt/hours of electricity over a 24-year period. Founded by major industrial groups, including Air Liquide, Rio Tinto Alcan, ArcelorMittal, Arkema, Rhodia, and Solvay, Exeltium will supply as many as 40 enterprises. Gide participated in exchanges concerning the electricity-supply agreement between EDF and Exeltium, then again in discussions with the European Commission for approval of the legal conditions governing the resale of electricity to Exeltium clients. The European Commission was concerned about a possible monopoly position in the French market as a result of this agreement, given its exceptional duration and the volumes at stake. In addition, the Commission determined that a certain number of resale restrictions might be anticompetitive. As a result of modifications to the contract by EDF and Exeltium (addition of an opt-out clause for members of Exeltium that prefer to buy from another source and removal of resale restrictions), the Commission was able to confirm that both parties had responded satisfactorily to initial concerns, thereby removing doubts about the initial version of this specific contract. Michel Guénaire and Sylvain Bergès worked closely with Gide Brussels office (Stéphane Hautbourg and Sophie Quesson) and in Paris with the following departments: M&A (Hugues Scalbert, Matthieu Roy and Emilie Leygonie), Taxation (Guillaume Goulard and Marina Rodrigues) and Finance (Antoine Cousin).

For additional information visit www.gide.com

G I D E L O Y R E T T E N O U E L A D V I S E S E X E L T I U M O N D I S C U S S I O N S W I T H T H E E U R O P E A N C O M M I S S I O N C O N C E R N I N G T H E I M P L E M E N T A T I O N O F P R O C U R E M E N T A N D E L E C T R I C I T Y S U P P L Y A G R E E M E N T S

LONDON and MOSCOW, October 2, 2008 – Hogan & Hartson announced that it has been appointed to advise Gazprom on the proposed South Stream Pipeline project. This is one of the largest pipeline projects in the world, involving the financing, construction, and operation of a pipeline to transport gas from Russia’s Black Sea coast to Western European markets. Gazprom is the world’s largest gas company, focused on geological exploration, production, transmission, storage, processing, and marketing of gas and other hydrocarbons. The South Stream project is aimed at strengthening European energy security. It is another real step toward executing the Gazprom strategy to diversify the Russian natural gas supply routes. The project will be led by Hogan & Hartson’s London partners Garry Pegg and Hywel Jones, and will involve corporate, regulatory, finance, construction, EU, and competition advice. Ilya Rybalkin (Moscow) and Jonathan Ivinson (London) will lead on associated matters. About Hogan & Hartson Hogan & Hartson is an international law firm founded in Washington, D.C. with more than 1,100 lawyers in 25 offices worldwide. In addition to Abu Dhabi, Hogan & Hartson has offices in Baltimore, Beijing, Berlin, Boulder, Brussels, Caracas, Colorado Springs, Denver, Geneva, Hong Kong, Houston, London, Los Angeles, Miami, Moscow, Munich, New York, Northern Virginia, Paris, Philadel-phia, Shanghai, Tokyo, Warsaw, and Washington, D.C. For additional information visit www.hhlaw.com


H O G A N & H A R T S O N L L P L E A D S E U R O P E A N L E G A L T E A M S F O R G A Z P R O M O N T H E P R O P O S E D S O U T H S T R E A M P I P E L I N E M E G A P R O J E C T

44th International PRAC Conference Hosted by Mulla & Mulla & Craigie Blunt & Caroe

Open to all PRAC Member Firms Formal Registration Now Available

online at www.prac.org

Lovells advised Columbus McKinnon Corporation on the acquisition of Pfaff Beteiligungs GmbH (Pfaff-silberblau) from the EQT Opportunities Fund, members of the Pfaff family and its management. The purchase price is €36 million and the deal is effective from 1 October 2008. The Germany-based Pfaff-silberblau group is a leading European supplier of lifting, material handling and actuator products. It em-ploys more than 300 people, and is represented worldwide through six international subsidiaries as well as numerous regional repre-sentatives, with total revenues of €62 million in 2007. Columbus McKinnon Corporation, listed on NASDAQ, is a leading worldwide designer, manufacturer and marketer of material han-dling products, systems and services. The Lovells team was led by Frankfurt corporate partner Dr. Patrick Kaffiné, with assistance from senior associate Dr. Ina Berg-Winters and associates Dr. Christiane Gans and Stephan Doom (all corporate, Frankfurt); partners Dr. Patrick Ayad (commercial, Mu-nich), Dr. Christian Bahr (competition & EU, Düsseldorf) and Dr. Stephan Geibel (tax, Munich), counsel Dr. Falk Loose (tax, Munich), consultant Dr. Thilo von Bodungen (commercial, Munich), senior associate Dr. Nils Rauer (IP, Frankfurt), and associates Dr. Helen Ghebrewebet and Dr. Lorenz Zabel (both real estate, Frankfurt), David Jüntgen (competition & EU, Düsseldorf), Silke Hesse (corporate commercial, Munich), Klaas van Geijn, Roderik van Putten and Peter Stokking (all corporate, Amsterdam), Nick Palmer (corporate, London) and Dorota Kosela (corporate, Warsaw).

For additional information visit www.lovells.com

Notes for editor About Lovells With over 3,000 people operating from 26 offices in Asia, Europe and the United States, Lovells is one of the world's leading international law firms. We advise many of the world's largest corporations, financial institutions and governmental organisations. We regularly act on complex, multi jurisdictional transactions as well as some of the most high profile commercial disputes. Lovells (the "firm") is an international legal practice comprising Lovells LLP and its affiliated businesses. Lovells LLP is a limited liability partnership registered in England and Wales with registered number OC323639. Registered office and principal place of business: Atlantic House, Holborn Viaduct, London EC1A 2FG. The word "partner" is used to refer to a member of Lovells LLP, or an employee or consultant with equivalent standing and qualifications, and to a partner, member, em-ployee or consultant in any of its affiliated businesses who has equivalent standing.


L O V E L L S A D V I S E D C O L U M B U S M C K I N N O N C O R P O R A T I O N O N T H E A C Q U I S I T I O N O F P F A F F B E T E I L I G U N G S G M B H

Muñiz, Ramírez, Pérez-Taiman & Luna-Victoria Abogados advised PERENCO PERU LIMITED in an investment agreement with PROINVERSION for the development and production of heavy oil reserves.

PERENCO PERU LIMITED, a subsidiary of French company Perenco has entered into an investment agreement with PROINVERSION – the Peruvian Government agency in charge of promoting investments in the country- to invest US$1,037 million for the development and production of heavy oil reserves from Block 67, in the northern jungle of Peru. This is the first development of a Peruvian oil field in the last 30 years. The development of Block 67 reserves will generate additional investments of approximately US$700 million in the North Peruvian Pipeline to allow the transportation of crude oil across the Andes, from the field to the Peruvian coast.

Augusto Astorga from Estudio Muñiz points out that “this transaction confirms the increasing interest of foreign companies in developing natural resources in Peru and marks the active presence of Perenco, an important independent player in the international oil industry, in the country”

This investment agreement is the first agreement of its type entered into by Proinversion with an oil company.

Milagros Fernandez from Estudio Muñiz highlights the fact that “the Perenco development of Block 67 is very likely to trigger the further development of neighboring blocks also known to contain heavy oil reserves, like Block 39 operated by Repsol and Block 1-AB operated by Pluspetrol .

Muñiz, Ramírez, Pérez-Taiman & Luna-Victoria Abogados (Lima, Peru) lawyers involved in the transaction Augusto Astorga (partner) and Milagros Fernandez (senior associate).

For additional information visit www.munizlaw.com


Rodyk acted for Raffles Education Corporation Limited (“REC”) in its joint venture in India with Educomp Solutions Limited to bring REC’s brand of educational programmes and courses to the Indian market. Both parties are expected to pump in US$100 million into this joint venture, which is REC’s first ever partnership in India, thus bringing to the Indian market REC’s campus-based higher education courses in creative arts, design, lifestyle and business management.

REC’s investment in India is yet another example of Singapore companies entering the Indian market to tap into a market that has great potential. As Singapore companies’ knowledge of the Indian market increases over time through cross-border transactions with their Indian counterparts, new heights in Singaporean investments into India should be attained.

For additional information visit www.rodyk.com

R O D Y K & D A V I D S O N A C T S F O R R A F F L E S E D U C A T I O N C O R P O R A T I O N I N U S $ 1 0 0 M I N D I A J O I N T V E N T U R E

M U N I Z A D V I S E S P E R E N C O P E R U L I M I T E D I N D E V E L O P M E N T A N D P R O D U C T I O N O F H E A V Y O I L R E S E R V E S I N B L O C K 6 7

Lincoln Electric Holdings, Inc. has acquired a 90% interest in Pagime Soldas Especiais S.A., owned by Brastak, a leading Brazilian manufacturer of brazing products that has annual sales of approximately $30 million. According to John M. Stropki, Chairman and Chief Executive Officer of Lincoln, the acquisition “represents the expansion of our brazing product line as well as our continued expansion into developing international markets. The Brastak business, previously owned and operated by the Takemoto family, will strengthen our presence in the Brazilian market and provide a platform for servicing the South American region with high quality brazing products."

Tozzini Freire lawyers acting in the transaction: Darcy Teixeira Junior – Partner; Renata Muzzi Gomes de Almeida – Associate; Bruno Hachebe Schiavoni Guarnieri, Associate; Su Jung Ko – Associate. For additional information visit www.tozzinifreire.com

Matariki Forests owns the third largest forest estate comprising approximately 140,000 hectares of high quality Radiata Pine spread throughout New Zealand.

"To be appointed to represent Matariki on this transaction is a high point for our specialist forestry and wood products team, many of whom have worked together for over 20 years," says Peter Stubbs, Commercial Partner, Simpson Grierson. Peter and Michael Pollard, Corporate Advisory Partner, will be lead lawyers on this transaction.

Matariki Forests is owned by a consortium and managed by Rayonier New Zealand, a subsidiary of Rayonier Inc.

Simpson Grierson is also general commercial and forestry legal advisors for Matariki Forestry Group NZ. For additional information visit www.simpsongrierson.com


SEOUL 2007

October 20-24

PRAC Conference Materials Available online at www.prac.org

PRAC e-Bulletin is published monthly.

Member Firms are encouraged to contribute articles for

future consideration. Send to [email protected].

Deadline is 10th of each month.

S I M P S O N G R I E R S O N A P P O I N T E D L E G A L A D V I S O R S F O R T H E S A L E O F M A T R I K I F O R E S T S

T O Z Z I N I F R E I R E A C T S F O R L I N C O L N E L E C T R I C H O L D I N G S I N A C Q U I S I T I O N O F 9 0 % I N T E R E S T I N P A G I M E S O L D A S E S P E C I A I S

alert 09 October 2008

The Mines and Energy Legislat ion Amendment Bi l l 2008 (Bi l l ) ( introduced into the Queensland Parl iament on 7 October 2008) proposes to amend the Mineral Resources Act 1989 (Qld) (MRA) to introduce a public interest test for the approval processes for the grant, renewal and variat ion of, and determinat ion of condit ions for, mining tenements in Queensland. While there has always been some discret ion on the part of the Minister and other relevant decision-makers, this amendment introduces a new element, the potential scope of which is not yet clear.

The Bi l l proposes to amend the MRA by introducing a publ ic interest test in relat ion to, effect ively, al l mining tenures, which moves beyond the current regime where public interest was only expressly applied to some aspects of mining leases. Specif ical ly, the Bi l l amends the provisions of the MRA to require the relevant decision-maker to consider the public interest when making decisions that deal with:

the grant, variat ion, renewal and refusal of mining claims, exploration permits, mineral development l icences and mining leases; the condit ions to apply to mining claims, exploration permits, mineral development l icences and mining leases upon grant, variat ion or renewal; the grant, condit ions and cancel lat ion of prospecting permits; the approval of work programs in relat ion to explorat ion permits; the addit ion of other minerals to exist ing mineral development l icences and mining leases; and the variat ion of the land used to access mineral development l icences and mining leases.

A purpose of the introduct ion of the publ ic interest test in the Bi l l may be to enable the Government to have f lexibi l i ty in relat ion to concerns about oi l shale mining and uranium mining. However, the applicat ion of the public interest test appl ies to al l mining tenements, not merely those relat ing to oi l shale or uranium.

The Bi l l does not def ine the term "publ ic interest". Currently in relat ion to the MRA, the only points of reference as to the public interest considerations that the mining registrar or the Minister might take into consideration are in section 318AK of the MRA (in relat ion to overlapping coal and petroleum tenures) and in l imited case law relat ing to sect ion 269(4)(k) of the MRA.

It is not clear whether this guidance in respect of publ ic interest wi l l be useful in relat ion to these new MRA provisions.

Implications

In the absence of a clear def init ion of "publ ic interest", a level of uncertainty arises as to what wil l be expected when seeking the grant, variat ion or renewal of, or determinat ion of condit ions for, mining tenements in Queensland. Depending on the definit ion or approach adopted, the Government wil l potential ly have broader powers to refuse mining tenures and impose condit ions going forward.

If nothing else, i t confirms that even i f a mining tenement holder has complied with the requirements of the mining tenement, i t should not assume that the mining tenement wil l be renewed.

Other amendments in the Bill

The Bi l l also proposes to make amendments in relat ion to the fol lowing issues:

an effect ive prohibit ion on the venting or f laring of incidental coal seam gas by the holder of a mining lease without f i rst offer ing to give that incidental coal seam gas to the holder of an overlapping

Proposed public interest test to apply to all mining tenures in Queensland

petroleum lease; amendments to introduce a common date for annual rental payments for mining claims, mining leases and mineral development l icences to 31 August; the introduction of a morator ium on the development of the McFarlane oi l shale deposit; and the Government's guaranteed assistance package for Coll ingwood Park landowners whose propert ies have been damaged by subsidence.

I f you have any queries about the Mines and Energy Legislat ion Amendment Bi l l 2008, please contact a member of our Energy and Resources team.

Disclaimer Clayton Utz News Alert is intended to prov ide commentary and general informat ion. I t should not be re l ied upon as legal advice. Formal legal advice should be sought in part icu lar t ransact ions or on mat ters of interest ar is ing f rom this bul let in . Persons l is ted may not be admit ted in a l l states.

For more information please contact:

Name: Keira Brennan - Partner BrisbaneTel: +61 7 3292 7040Fax: +61 7 3221 9669Email: [email protected]

Name: Darren Fooks - Partner BrisbaneTel: +61 7 3292 7113Fax: +61 7 3221 9669Email: [email protected]

Name: Dan Howard - Partner BrisbaneTel: +61 7 3292 7249Fax: +61 7 3221 9669Email: [email protected]

Name: Andrew Smith - Partner Brisbane, Melbourne

Tel: +61 7 3292 7030 (Brisbane), +61 3 9286 6231 (Melbourne)

Fax: +61 7 3221 9669 (Brisbane), +61 3 9629 8488 (Melbourne)

Email: [email protected]

Name: Mark Geritz - Partner BrisbaneTel: +61 7 3292 7221 Fax: +61 7 3221 9669Email: [email protected]

Name: Stuart MacGregor - Partner Brisbane

Tel: +61 7 3292 7623 Fax: +61 7 3221 9669 Email: [email protected]

September 15, 2008 - No 17/2008 www.tozzinifreire.com.br

LATEST ISSUES

Brazil: Registration of Foreign Companies as Issuers of BDRs Without a Simultaneous Public Offering

Brazilian Securities Commission’s Interpretive Statement: Fiduciary Duties In Corporate Reorganizations

Brazil: Public Auction for Sale of Carbon Credits

Brazil: Simplified Registration Procedure for Public Offerings of Securities

Capital Markets

Brazilian Securities Commission: Proposed Regulation for Offerings of Securities with Limited Placement Efforts

The Brazilian Securities Commission (CVM) has submitted to public consultation a draft regulation related to the public offering of securities with restricted efforts.

The CVM’s intentions with the proposed regulation are to reduce costs and facilitate the access of Brazilian issuers of certain securities in the local capital markets.

The draft aims at exempting from registration with the CVM public offerings of certain securities, such as debt instruments, shares of investment funds and certificates of real estate receivables, whenever offered to a restricted number of qualified investors. An offering would be considered to have restricted efforts when the securities are (i) offered to no more than 50 qualified investors; and (ii) subscribed or acquired by no more than 20 qualified investors.

Moreover, the selling efforts should be restricted to the following: (i) personal contact or contact by telephone with specific qualified investors; (ii) letters, fax-similes or electronic-mail sent to each qualified investor on an individual basis; and (iii) presentations to qualified investors invited on an individual basis.

The concept of qualified investor includes, among others, the following:

● financial institutions; ● insurance companies and capitalization companies; ● private pension plans; ● individuals or legal entities that invest in the offering an amount higher than R$ 1,000,000; ● investment funds directed exclusively to qualified investors.

The draft also proposes certain conditions and restrictions applicable to the subsequent negotiation of securities offered with restricted efforts.

Any suggestions to the draft regulation, which is available at the CVM’s website (www.cvm.gov.br), should be submitted to the CVM until October 10, 2008.

Antonio Felix de Araujo Cintra Partner - São Paulo

[email protected]

Ana Carolina de Salles Freire Partner - São Paulo

[email protected]

WWW.TOZZINIFREIRE.COM.BR T 55 11 5086-5000 F 55 11 5086-5555

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2008

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Judicial Recognition of Well-known Trademarks in China

By Xu Jing* and Zhao Ye**

I. Current Situation regarding Judicial Recognition of Well-known Trademarks in China In China, the well-known trademark status can be granted through either administrative or judicial procedures. The Trademark Office and the Trademark Review and Adjudication Board (“TRAB”) can make decisions on the recognition of well-known trademarks during the course of trademark administrative proceedings or when dealing with trademark disputes. The judicial recognition of well-known trademarks is rendered by the People’s Courts at all different levels, which court has jurisdiction over the specific trademark dispute, although this mainly consists of the intermediate or higher courts in most cases. The courts will, depending on the facts and the necessity of such recognition to the outcome of the case, determine whether a trademark should be granted the status of well-known. According to current statistics, during the period from July 2001 to October 2002, there was only one trademark which was recognized as well-known mark through judicial procedures in China. This number increased dramatically from October 2002 to September 2005, when the total number increased to 71; and from October 2005 to September 2006, the number reached 115. In total, more than 300 well-known trademarks have been recognized through judicial procedures from 2001 to 2007.1 The following chart shows that in the past two years, the number of well-known trademarks being recognized through judicial procedures has increased significantly.

Well-known Trademark Recognition Chart

1Cui Wenyu, Speed limitation Needed for Judicial Affirmation of Well-known Trademarks, China Intellectual Property News, April 7, 2007

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The majority of well-known trademarks recognized through judicial channels are those registered by Chinese entities. However, in recent years, more and more marks owned by foreign entities have received the well-known mark status in trademark dispute lawsuits. These include “Rolex’ of The Rolex company, “SAFEGUARD” and “Tide” of P&G Co. Ltd., “DUPONT” of E. I. du Pont de Nemours and Company, and “STARBUCKS” of STARBUCKS Corporation. The number of trademarks being granted the well-known status by various courts varies largely, with the more experienced courts proceeding more cautiously when granting such status upon trademarks. From 2001 to the end of 2006, only six well-known trademarks were affirmed by the courts in Beijing at all levels. In Guangdong province, from July 2001 to June 2006, 18 well-known trademarks were affirmed by the courts of different levels. The Shanghai courts only affirmed two well-known trademarks in recent years. The number of intellectual property cases handled by the courts of the above three regions are among the highest in China, and it is also well-recognized that the judges in these courts dealing with intellectual property disputes are more experienced than their counterparts in other regions of the country. With growing concern over this situation, the courts reviewed the major issues existing in the judicial process of recognizing well-known trademarks and concluded that the main problems lie in the following three areas: first, the professional standards of judges in certain areas are relatively low, and judges would grant a well-known mark status under circumstances in which such recognition was not necessary; second, some companies intentionally fabricate unnecessary trademark disputes in which the two parties collaborate with another during the trial in order to obtain the well-known mark recognition; third, some local governments take the well-known trademark recognition within its administrative jurisdiction as part of their political achievements, and accordingly give monetary rewards to the well-known trademark owners. Such policy also gives improper incentives to the enterprises to chase after the recognition of well-known trademarks.

2001.7-2002.10

0

2002.10-2005.21

2005.10- 2006.35

2006.10- 2007.1244

2001.7-2002.102002.10-2005.92005.10-2006.92006.10-2007.12

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The Supreme People’s Court has noticed that such problems exist in the judicial practices, and therefore issued the Notice on the Establishment of Recordation System on the Judicial Recognition of Well-known Trademarks2 on November 12, 2006, which requests all valid judgments involving recognition of well-known trademarks must be recorded with the Supreme Court. At the same time, the Supreme Court is also considering raising the subject matter jurisdiction level of regional courts in relation to cases involving recognition of well-known trademarks, i.e. only the intermediate courts of the provincial municipal cities and cities with an independent budgetary status can handle cases involving recognition of well-known trademarks. II. Principals and Standards for Judicial Recognition of Well-known Trademarks A Well-known Trademarks Should be Widely Known to the Public in China According to the Regulations on Recognition and Protection of Well-known Trademarks3, “well-known trademarks” refer to trademarks that are widely known to the relevant public and enjoy a relatively high business reputation in China. In judicial practices, the courts usually require the trademarks involved be well-known to the public in all or most part of China. A trademark can not be recognized as a well-known trademark if it is only well-known in part of China, or outside of China. B Courts Will Only Recognize Well-known Marks When Absolutely Necessary The court will decide whether a trademark involved in a case is well-known or not only when the recognition is essential in solving the dispute. According to the current laws and judicial practices, the judicial recognition of well-known trademarks is needed in the following situations: (a) The right owner of an unregistered trademark sues other parties for using its trademark in identical or similar goods or service. For example, in September 2007, the Intermediate Court of Dongguan, Guandong province decided in its judgment in the first instance that the “Wing Wah”（“荣华”） trademark of Hong Kong Wing Wah Cake Shop Ltd. was an unregistered well-known mark. The actions of the defendants, Dongguan Shibo Subsidiary of Guangdong Trust-Mart Co. Ltd. and Zhongshan Jinming Food Co. Ltd., which respectively produced or sold “荣华” moon cakes by using the “荣华” mark on the moon cakes, constituted trademark infringement and unfair competition. In this particular case, the plaintiff should refer to The Anti-Unfair Competition Law of the People's Republic of China4, but not Trademark Law when seeking to claim damages5.

2 Notice on the Establishment of Recordation System on the Judicial Recognition of Well-known Trademarks issued by the Supreme People’s Court on November 12, 2006, effective as of November 12, 2006 3 Regulations on Recognition and Protection of Well-known Trademark, Promulgated by the State Administration for Industry and Commerce on 17 April 2003 and effective as of 1 June 2003. 4 Anti-Unfair Competition Law of the People’s Republic of China, promulgated by Standing Committee of the lst People's Congress on September 2, 1993, effective as of December 1, 1993

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(b) The right owner of a registered trademark seeks protection against use of the mark on dissimilar goods. In one related case Eastman Kodak Company v. Hangzhou Meichi Trading Co., Ltd，Eastman Kodak Company, represented by King & Wood, sued the defendant company for trademark infringement and unfair competition. The Changsha Intermediate Court decided that the trademark “Kodak” registered by the plaintiff in classes 1 and 9 is a well-known trademark. Therefore, the use of the mark by the defendant on sensing thermo-insulation explosion-proof membrane on car windows and glasses of buildings constituted an infringement to the plaintiff’s trademark. Of course, not all claims for the protection of well-known marks on dissimilar goods or service will be supported by the courts. In judicial practices, most courts consider that protection of goods in different classes can not be interpreted as protection in all classes. Certain limitations should be imposed, namely, protection in a different class should be granted only if the use of the mark in this class will cause material damage to the right owner. Furthermore, the level of protection afforded to a well-known mark shall be in compliance with the distinctiveness and the degree of well-known status, that is, the more distinctive and famous the trademark, the broader the protection will be given in respect of dissimilar classes. (c) The right owner of a registered trademark seeks protection against registrations of domain names. Under special circumstances, the court may recognize the registered trademark of the plaintiff as a well-known trademark. However, the judicial practices of recent years show that fewer domain name dispute cases related to the recognition of well-known trademarks. In domain name dispute cases, according to the judicial interpretation of the Supreme Court, the court will only make a decision regarding the well-known mark status of a registered trademark in the event that the website connected with the disputed domain name is found engaging in commercial activities in different classes of goods and services from that of the registered mark. (d) The right owner of a registered trademark seeks protection against use and registration of a company name. According to the Trademark Law, any third party, using a word mark which is identical or similar to a registered trademark as its company name and using the mark prominently on identical or similar goods, will constitute trademark infringement. For well-known trademarks, since the marks contain much marketing efforts of the right owners for the establishment of good reputation, the law provides broader protection, namely, even if the third party does not use the mark as its company name in a prominent manner, as long as such use has caused damage to the well-known trademark, the party shall be liable for trademark infringement or unfair competition. In the “Starbucks” case, the Shanghai courts for the first and second instances both affirmed well-known mark status for “Starbucks” and ruled that the defendant, using the mark as part of its company name constitutes trademark infringement and unfair competition. Accordingly, the courts requested that the defendant change its company name.6

5 Trademark Law, Promulgated by Standing Committee of the People's Congress on 27 October 2001 and effective as of 1 December 2001 6 Shanghai Starbucks Coffee Co. Ltd. and Shanghai Starbucks Coffee Nanjinglu Road Subsidiary brought suit against the U.S. Starbucks Corporation and Shanghai Unite Starbucks Coffee Co. Ltd. for the alleged trademark infringement and unfair competition. The Second Instance Court Decision was rendered on December 20, 2006.

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C Recognition of Marks as Well-known Not Mandatory The owner of a trademark has the right to decide whether to protect the trademark as a common trademark or a well-known trademark. Therefore, the recognition of well-known mark should only be considered when the right owner requests such recognition. D Recognition of Well-known Trademarks Applied on Case by Case Basis The recognition of well-known trademarks must be decided on a case by case basis. If the trademark had been recognized as well-known previously and the party of the current case also accepts such status, the court will not re-examine the matter. However, if the other party does not accept the well-known mark status granted previously, the court then will review the case according to Article 14 of Trademark Law7. E The Recognition of Well-known Trademark is Recognition of Fact The recognition of a well-known trademark is based on the evidence provided by both parties. The decision made by the court is factual determination.. Therefore, application for recognition of well-known trademark status can not be deemed as a claim, and the fact that the mark is recognized as well-known shall not be stated in the court decision of a judgment. III. The Trend of Judicial Recognition of Well-known Trademarks in China Due to the rapid increase of cases in respect of recognition of well-known trademarks through judicial channels, the Supreme Court has established a recordation system to monitor the well-known mark recognition process. Currently, the Supreme Court is also in the process of drafting The Explanation on the Judicial Recognition and Protection of Well-known Trademarks ( ”Draft Explanation”), aimed at further regulating and unifying the procedures for recognizing well-known trademarks. The Supreme Court has engaged in extensive studies for many years regarding this issue and also forwarded the draft for internal discussions within the judicial system during the 2008 All-China Intellectual Property Trial Summit. It is expected that the Explanation will be implemented in 2008. The Draft Explanation will have the following effects on the practice of recognizing well-known trademarks. 7 Article 14 of the Trademark Law: When recognizing a well-known trademark, the following factors shall be considered:

1)the degree of notoriety of the trademark among the relevant public;

2)the length of continuous use of the trademark;

3)the continuous length, degree and geographical scope of the publicity for the trademark;

4)the record of protection of the trademark as a well-known trademark; and

5)other factors associated with the trademark's being well known.

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A The Well-known Trademark System Will Function Mainly on Trademark Protection The Supreme Court will try to dilute the effects of recognizing well-known trademarks, and improve the functional aspect of the system. To those registered trademarks that can obtain protection without the recognition of well-known trademarks, the court will be very conservative when granting a well-known mark status. Therefore, right owners will not likely be able to easily obtain the well-known mark status in the future. B Recognition of Well-known Trademarks to be More Strict, Complete and Unified The recordation system of the Supreme Court and the limitation on courts allowed to handle cases involving recognition of well-known marks will effectively alter the current situation in which courts have been able to recognize well-known trademarks at their own discretion. The recognition system will gradually be standardized and unified, which will afford better protection to high quality trademarks. C Decisions Relating to Recognition of Well-known Trademarks will be More Standardized Specific for

Trademarks with Business Value In a trademark lawsuit, the well-known trademark status offers better protection than a normal mark. This is especially the case in some newly emergent fields where there are no clear regulations, such as the areas of mobile phone domain names, cyber identification and premium Ad placement etc. As the Supreme Court has unified the regulations in relation to the judicial recognition of well-known trademarks, we anticipate that the number of well-known trademarks to be granted through judicial channels will be reduced to the numbers seen in 2003 and 2004. At the same time, since the procedure and criteria for recognition in the future are becoming stricter, decisions regarding recognition will be better respected within the court system as well as with the public. Accordingly, the scope of protection, enforceability and territory of protection will also be enhanced. In other words, well-known trademark owners will be offered better legal protection which will more accurately reflect the true principles and values of the well-known trademark system.

(This article was originally written in Chinese, the English version is a translation.)

*Xu Jing is a partner of King & Wood's IP Litigation Group in Beijing. ** Zhao Ye is an intern of King & Wood's IP Litigation Group in Beijing.

Dutch Court Rounds-up the case, Ready® for the ECJ: thescope of protection of DNA patents (II)

25 September 2008

This newsletter is sent from our Amsterdam office

NautaDutilh represents several soy meal importers in the Dutch chapter of the pan-Europeanlitigation brought by Monsanto in an effort to stop imports of soy meal from Argentina. In its 24September 2008 decision, the District Court of The Hague (having heard the parties' observationsin respect of the draft questions included in its 28 March Decision) refers several questions to theEuropean Court of Justice. At stake is whether the Biotech Directive determines the scope of DNApatents, or whether there is room for a more absolute protection conferred by national patent laws.

Background

Monsanto is the proprietor of European patent EP 0 546 090 relating to glyphosate-tolerant5-enolpyruvylshikimate-3 phosphate synthesis, an invention causing glyphosate (a herbicide)tolerance in soy plants. Argentina is one of the few places in the world where no IP protection forthis invention exists, and farmers in Argentina have adopted this technology. Argentina is one ofthe largest exporters of soy products.

Monsanto's invention results in genetically modified plants and produces benefits at the cropgrowth stage of the production. A large part of the soy beans from these plants are used for theextraction of oil. After oil extraction, the residual parts of the soy beans are then further processedinto soy meal, which is used as cattle feed. Monsanto argues that intact DNA molecules areresidually present in soy meal imported into Europe and that its patent is therefore infringed undernational patent laws in Europe.

The soy meal importers, on the other hand, argue - inter alia on the basis of Article 9 of theBiotech Directive - that the scope of protection of Monsanto's patent does not extend to situationswhere the DNA molecules, if present at all, are residually present and are incapable of performingany function whatever, least of all the function for which the patent was granted: creatingglyphosate tolerance.

The Questions

The District Court decided that it cannot clearly ascertain whether "classic", absolute productprotection would apply for DNA molecules on the basis of national patent laws and that their scopeof protection is unrelated to any function or expression of characteristics within the meaning of theBiotech Directive. It will effectively ask the ECJ whether, under the present circumstances of thecase, the scope of protection of DNA patents is governed exclusively by the Biotech Directive.

The questions referred to the ECJ are as follows:

Should Article 9 of Directive 98/44/EG of the European Parliament and the Council of 6July 1998 on the legal protection of biotechnological inventions (OJ L 213, 30.7.1998, p.0013-0021) be understood in such a way that the protection meant in this Article can alsobe relied upon in a situation such as in these proceedings, whereby the product (theDNA-sequence) is part of a material that is imported in the European Union (soymeal) and

1.

does not perform its function at the time of the stated breach, but has performed it (in thesoyplant) or possibly, after it is isolated from the material and incorporated in the cell of anorganism, might perform its function once again?Assuming the presence of the DNA sequence as described in claim 6 of the patentwith number EP 0 546 090 in soy meal imported into the European Community byCEFETRA and ACTI and assuming that the DNA is incorporated in the soy meal as meantin Article 9 of the Directive 98/44/EG of the European Parliament and the Council of 6July 1998 on the legal protection of biotechnological inventions (OJ L 213, 30.7.1998, p.0013-0021) and that it therein no longer performs its function: Does the protection of apatent for biological material provided for in the directive, especially article 9, stand in theway of the national patent legislation (In Article 53 ROW 95, in so far as relevant here isprovided: A patent gives the patent holder (...) the exclusive right: a. to manufacture thepatented product in or for his business, to use, bring into circulation or further sell, to rentout, to supply or otherwise trade, or to this end offer, import or have in stock). to(additionally) allow absolute protection for the product (the DNA) as such, whether or notthe DNA performs its function, and must the protection provided by article 9 of thedirective therefore be considered to be exhaustive, in the situation meant in that articlethat the product consists of genetic information or contains such information, whichproduct is incorporated in material and in which material the genetic information iscontained?

2.

Does it make any difference for the answer to the previous question that the patent withnumber EP 0 546 090 was applied for and granted (on 19 June 1996) before the Directive98/44/EG of the European Parliament and the Council of 6 July 1998 on the legalprotection of biotechnological inventions (OJ L 213, 30.7.1998, p. 0013-0021) wasadopted and that such an absolute product protection was offered by the national patentlegislation before this directive was adopted?

3.

Can you, on answering the previous questions, take into consideration the TRIPsTreaty, specifically the Articles 27 and 30 thereof? NautaDutilh will refrain fromcommenting on this case as it is involved in this litigation, but will keep you informed of theprogress in this case. It will be the first time that the ECJ reviews the important issue of thescope of protection in the context of DNA patents.

4.

Contact

For more information, please contact John Allen (T: +31 20 7171 902)

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Online Contracting - Making Sure it's all Wrapped Up

The Internet age has changed the way in which many companies now contract with their customers. More than ever, companies are using the Internet to conduct business transactions, frequently requiring customers to agree to standard terms and conditions before agreeing to process any order for goods or services. It is important that appropriate measures are taken to ensure that these online contracts are enforceable. The prevalence of online contracting can be demonstrated by observing the web-surfing habits of a typical Internet user. In any one internet session a user could be engaging in a multitude of online contracts, ranging from signing up for membership of an online social networking site, to subscribing to a news website, to purchasing the week's groceries. With agreements signed in paper form, there is generally a sense of greater certainty around enforceability as there is a general presumption that if terms are printed on a piece of paper that has been physically signed, the signature indicates agreement to those terms. On the Internet, users are not required to sign physical agreements and as such, two important issues arise regarding whether or not these agreements can be enforced: • whether or not adequate notice has been provided to the user of the terms which are

being sought to be enforced so it is reasonable to assume user has accepted them; and

• whether the terms include unusual or particularly onerous terms that would require a

high degree of notice. Two types of contracts are commonly used in the context of the Internet: browse-wrap and click-wrap agreements. New Zealand Courts have not specifically considered the enforceability of such contracts despite their use being widespread. However, the decisions of overseas Courts provide a good indication as to how New Zealand Courts would treat the enforceability of browse-wrap and click-wrap agreements. Browse-wrap Agreements Browse-wrap agreements are generally agreements where terms and conditions are available online, but positive assent (eg by clicking an "I agree" button) is not required before a user is deemed to be bound by them. Typically, the full terms of a browse-wrap agreement are viewed by clicking on a hyperlink on a website which will then direct users to a separate page. There have been a number of U.S. cases that have considered the enforceability of such agreements. They have been upheld in some cases but not others. In Specht v Netscape Communications, Netscape Communications offered software for download from its website on the basis that users were bound to the terms of its licence agreement. Users could download the software by clicking on a download button found on the website. The court held that the licence terms were not enforceable against Specht as a user did not have to acknowledge reading the terms of the licence agreement before downloading the software, nor was it made clear to a user that they would be bound to the terms of the licence agreement by virtue of

http://www.simpsongrierson.com/

http://www.simpsongrierson.com/fyi_x-tech.html

8710603_1.DOC

downloading the software. In fact, the reference to the licence agreement appeared at the bottom of the page, some distance from the download button. The court considered consent to be an essential element as to whether a contract had been formed between Netscape Communications and the user. Failure to bring adequate attention to the terms and not requiring positive action by the user to assent to those terms, meant that there was not the requisite consent for a contract to be formed, and accordingly, the agreement was not enforceable. However, other U.S. cases have held that browse-wrap agreements are enforceable. In Register.com v Verio, Inc1 the court held that there was no requirement for positive assent by a user before a browse-wrap agreement could be held enforceable. The court stated that where a benefit is offered subject to stated terms and conditions, the act of taking the benefit offered would amount to acceptance of the stated terms and conditions. To reduce the prospect of terms of a browse-wrap agreement being found unenforceable it would be prudent to make it obvious to users where browse-wrap terms apply. Click-wrap Agreements Click-wrap agreements differ from browse-wrap agreements in that they require the positive assent of a user to signal acceptance. Click-wrap agreements are often used where software is sold over the Internet. Users will often be required to accept terms and conditions (usually by clicking on a button or icon or checking a check box) either before downloading the software or during the installation process of the software. Generally, U.S. courts have held click-wrap agreements enforceable, provided that a user is made sufficiently aware of the terms and it can be demonstrated that they have accepted the terms. The U.S. case of De John v TV Corporation International2, held that a click-wrap agreement was binding on a user despite the user not reading the terms before clicking the "accept" button. Onerous Terms Despite a general presumption that click-wrap agreements are enforceable, particular care should be taken when trying to enforce unusual or onerous terms. A court may determine that a particularly onerous or unusual term is unenforceable despite unequivocal acceptance, unless that term had been brought to the particular attention of the other party. The ability of a Court to strike out onerous terms despite evidence of positive assent was demonstrated in the decision of Comb v PayPal, Inc3 where the court held that the arbitration clause (which was particularly onerous) in Paypal's User Agreement was not enforceable. Of course, the same care to bring onerous or unusual terms to the attention of the other party will apply equally to browse-wrap agreements. Practical Steps to Ensure Enforceability of Online Contracts In summary, to reduce the prospect of the terms of your online contracts being found unenforceable you should: • provide adequate notice to the other party of the existence of the terms; • ensure the other party positively assents to the terms; and 1 126 F Supp 2d 238 (SDNY 2000). 2 ND III, No. 02 C497, 16 January 2003. 3 (ND CA, 30 August 2002).

8710603_1.DOC

• ensure that any particularly onerous terms are specifically brought to the attention of

the other party. Key Contacts Karen Ngan +64-9-977 5080 [email protected] Karl Loo +64-9-977 5245 [email protected] Note: The information provided in this article is intended to provide general information only. This information is not intended to constitute expert or professional advice and should not be relied upon as such. Specialist legal advice should always be sought for your particular circumstances.

September 2008 © Simpson Grierson

http://www.simpsongrierson.com/our-people/karen-ngan.html

Mailto:[email protected]

Mailto:[email protected]

REFORMS TO BLOCK TRADING SYSTEM◎Lihuei Mao

To promote block trade, and to allow investors to apply greater flexibility in their trading strategies, the Taiwan Stock Exchange Corporation (TSE) has phased in a number of adjustments to its system for block trading, which are outlined below. The changes are expected to facilitate acquisition of shares in companies listed on the TSE and traded on the GreTai Securities Market (OTC market). ‧Additional off-market trading period for paired trades Previously, paired trades could be made during two periods during market trading, and one period after the close of market trading. An additional off-market trading period for paired block trades is now available prior to the start of market trading hours from 8:00 to 8:30 a.m. Information on transactions completed during this period will be disclosed collectively after the start of market trading at 9:00 a.m. ‧Tick size for block trades Previously, the price range for block trades was 3.5% above and below the block trade reference price, and the price increment (up/down tick) was the same as in market trading, i.e. NT$0.1 for prices per share between NT$50 and NT$100, and NT$0.05 for prices between NT$10 and NT$50. The up/down tick is now reduced to NT$0.01 throughout the price range for both paired and non-paired trades. This change will satisfy the need for accurate computation of the total value of completed transactions. ‧Adjusted block trading price range The price range for both paired and non-paired block trades is now 7% above and below the market opening auction reference price (for the majority of securities, the previous day's market closing price), which is the same as the price range for market trading. ‧Block trade thresholds reduced In the past, the minimum quote per trade for paired block trades was at least 1000 trading units or a monetary value of at least NT$30 million for a paired trade in a single stock; and at least five different stocks and a total monetary value of at least NT$30 million for a paired trade in a basket of stocks. The minimum bid or ask quote is now reduced to 500 trading units or a monetary value of at least NT$15 million for a paired trade in a single stock; and at least five different stocks and a monetary value of at least NT$15 million for a paired trade in a basket of stocks. Since these minimums are now the same as for non-paired trades, this change will allow more investors the opportunity to participate in paired block trades, and hence, avoid free-riding risk. ‧Sale of borrowed securities permitted in block trading The previous rules did not allow the sale of borrowed securities in block trades. To allow greater flexibility in the block trading mechanism, in order meet block traders' demands for diversity in trading, the TSE has allowed the borrowing and sale of securities in block trades from 28 July 2008. If securities held by an investor do not meet the criteria for block trading, the investor can use securities borrowing transactions to obtain sufficient securities to conduct a block trade.

Lee and Li Bulletin Issue

LEE AND LI - TAIWAN

Company Registration in Thailand: A 10-Point Checklist

by Kobkit Thienpreecha

Corporate & Commercial Department Tilleke & Gibbins International Ltd.

updated August 2008

1. Name: Reservation of name is the first item to attend to in company formation and can be done online. The name of a company must not be identical to or so nearly resemble the name of any existing registered partnership or company. It is recommended to reserve three names ranked by priority to maximize chances of success.

2. Registered Address: A company must maintain an office in premises which it physically owns or rents or has consent from the landlord to use.

3. Promoters: At least three individuals, who must all sign the Memorandum of Association, are needed to incorporate a company.

4. Registered Capital: Generally, there is no minimum capital requirement for Thai majority- owned companies. Foreign majority-owned companies are required to have at least Baht 2 million or Baht 3 million registered capital, depending on type of business. The capital of the company must be divided into shares, each with an equal par value of at least Baht 5. Minimum paid-up amount on the shares issued is 25%, which can be used as working capital. Alien employment law, however, requires at least Baht 2 million registered capital (fully paid-up) per one work permit.

5. Objectives: It is common to register an extensive list of activities as the objectives of the company. However, for VAT registration purposes, only the actual activities of the company should be registered. It is strongly recommended to check the intended activities against the list of reserved businesses under the Foreign Business Act (FBA) prior to registration for potential effects on shareholding structure.

6. Shareholding Structure: Shares in a company can be 100% owned by foreigners, who can be individuals or entities, unless the intended businesses are reserved for Thai nationals only under the FBA, which requires the company to apply for an alien business license prior to commencement of business.

7. Articles of Association (By-Laws): These are regulations of the company concerning its internal affairs such as share transfer, directors' and shareholders' meetings, and matters requiring approval.

8. Directors: A company is managed by at least one director under the control of the general meeting of shareholders. However, it is more convenient to the operations of the company to have at least two directors in order to convene a board meeting. There are basically no restrictions on nationality of directors.

9. Tax Registration: A newly established company must obtain a taxpayer identification card from the Revenue Office for tax purposes. If it is expected that its gross income will exceed Baht 1.8 million a year, it must also register for Value Added Tax.

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10. Government Fee and Time Frame: The government fee for company formation is charged at the rate of 0.55% of the registered capital, with a maximum of Baht 255,000, plus certification fee and stamp duty of about Baht 1,000. The whole process takes about 2-3 weeks to complete.

Home | Jobs | Links | T&G Events | Textile Collection | Counterfeit Goods Museum | Community | Pictures

Licensed to do business in Thailand and Vietnam Tilleke & Gibbins International Ltd., Bangkok, Thailand

Copyright 2003-2008. All rights reserved. Disclaimer

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10/13/2008http://www.tillekeandgibbins.com/Publications/Articles/corporate/Company%20registrati...

Corporate Finance Advisory

Congressional Bailout Bill: Highlights for Financial Service and Public Reporting Companies

By Ryan J. York [October 2008]

On Oct. 3, 2008, President Bush signed into law the “Emergency Economic Stabilization Act of 2008” or the Bailout Bill; the governmental response to the recent troubles in the financial markets.1 Given the hastiness with which the Bailout Bill was put together by Congress, many of the bill's finer points are yet to be determined and its eventual impact on the financial crisis is unknown. However, several aspects of the bill, summarized below, are expected to have an immediate impact on financial services companies and public reporting companies—particularly those who hold mortgage-backed securities in their portfolios. This bulletin highlights certain major aspects of the Bailout Bill likely to impact financial services and public reporting companies.

Troubled Assets Relief Program

The primary purpose of the Bailout Bill is to create a Troubled Assets Relief Program, or TARP, under which the U.S. Treasury is authorized to purchase, insure, hold and sell certain financial instruments, primarily instruments related to mortgages issued prior to March 14, 2008. Under TARP, up to $700 billion of troubled assets may be purchased by the federal government, with $250 billion immediately available and the balance available upon request by the president and the secretary of the treasury, subject to congressional review.2 The authority to purchase troubled assets under TARP initially expires on Dec. 31, 2009, but can be extended until October 2010 upon action by the U.S. Treasury.3

Limitations on Deductibility of Certain Executive Compensation

The Bailout Bill grants, for the first time, authority to the federal government to regulate executive compensation. Under the bill when the U.S. Treasury purchases assets at auction, an institution that has sold more than $300 million in assets is subject to additional taxes, including a 20 percent excise tax on golden parachute payments triggered by events other than retirement, and tax deduction limits for compensation limits above $500,000.4 The executive compensation standards will apply only while the U.S. Treasury holds a debt or equity position in the affected institutions and do not apply to existing golden parachute arrangements.5

The Bailout Bill also amends Section 162(m) of the Internal Revenue Code to limit the annual tax deduction to $500,000 for compensation paid to the CEO, CFO or one of the other three highest compensated officers of entities in which the federal government acquires $300 million or more of troubled assets under TARP and also amends Section 280G of the Internal Revenue Code in regards to golden parachutes for certain executives whose companies sell assets to the federal government under TARP.6 Those entities which sell assets in excess of $300 million as a result of TARP are prohibited under the Bailout Bill from entering into new employment contracts providing for golden parachutes, but they are not prevented from complying with the terms of existing golden parachute agreements.7

The bill does not define the terms “employment contract” or “golden parachute” and the construction of these terms as well as more definite guidance will be determined by future interpretations from the U.S. Treasury.

FAS 157 and Authority to Suspend “Mark to Market” Accounting Regulations

The Bailout Bill authorizes the U.S. Securities and Exchange Commission to suspend the mark-to-market accounting regulations under Statement of Financial Accounting Standards No. 157, or FAS 157, for any issuer or with respect to any class or category of transaction, if the SEC determines that

the suspension is in the public interest and protects investors.8 The ultimate decision as to whether to suspend FAS 157 lies with the SEC and to date, the SEC has not suspended the application of FAS 157. The Bailout Bill also requires the SEC, in conjunction with the Federal Reserve and the U.S. Treasury, to provide a report to Congress within 90 days detailing the impact of FAS 157 on the quality of publicly available financial information and its impact on bank failures and the balance sheets of financial institutions.9

With the bill's passage, issuers who file reports with the SEC should anticipate additional clarification from the SEC in line with the SEC's Sept. 30, 2008 press release entitled “SEC Office of the Chief Accountant and FASB Staff Clarifications on Fair Market Value Accounting.”10 As issuers begin preparing financial statements for third quarter 2008, close attention should be paid to SEC pronouncements on FAS 157.

Temporary Increases in Deposit Insurance Coverage

The Bailout Bill also temporarily increases Federal Deposit Insurance Corporation, or FDIC, coverage of insured deposits at insured depository institutions and National Credit Union Share Insurance Fund coverage of shares at insured credit unions from $100,000 to $250,000.11 This increase in insurance coverage expires on Dec. 31, 2009.12 The temporary increases in deposit and share insurance are disregarded for purposes of assessing premiums against covered institutions.13

Footnotes

1 The full text of the Emergency Economic Stabilization Act of 2008 (H.R. 1424, 110 th Cong. 2 nd Ses. (2008) (enacted) can be viewed at http://financialservices.house.gov/ essa /essabill.pdf.

2 Section 115.

3 Section 120.

4 Section 111(c).

5 Section 111(d).

6 Section 302.

7 Section 302.

8 Section 132.

9 Section 133.

10 SEC Press Release 2008-234. http://www.sec.gov/news/press/2008/2008-234.htm

11 Section 136(a)(1).

12 Section 136(a)(1).

13 Section 136(a)(2).

For more information, please contact:

Other DWT contacts:

Ryan J. York Seattle, Washington (206) 757-8178 [email protected]

Page 2 of 3

Laura A. Baumann, Seattle, WA, (206) 757-8009, [email protected] Sandra L. Gallagher-Alford, Bellevue, WA, (425) 646-6141, [email protected] Jacob A. Heth, Portland, OR, (503) 778-5396, [email protected] Peter J. Mucklestone, Seattle, WA, (206) 757-8108, [email protected] Michael C. Phillips, Portland, OR, (503) 778-5214, [email protected] Marcus J. Williams, Seattle, WA, (206) 757-8170, [email protected]

This advisory is a publication of the Corporate Finance Group of Davis Wright Tremaine LLP. Our purpose in publishing this advisory is to inform our clients and friends of recent legal developments. It is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may only be given in response to inquiries regarding particular situations. Attorney Advertising. Prior results do not guarantee a similar outcome. Thank you.

Copyright © 2008, Davis Wright Tremaine LLP.

Page 3 of 3

SEC UPDATE | October 10, 2008 | 1

SEC UPDATE Third Circuit Reverses Controversial Section 16(b) Decision On October 1, the U.S. Court of Appeals for the Third Circuit reversed its controversial decision in 2002

in Levy v. Sterling Holding Co., LLC restricting the availability of two important exemptions from Section

16(b) of the Exchange Act, which requires disgorgement of “short-swing” trading profits realized by

public company insiders. The court based the reversal on its belief that clarifying amendments to the

two rules adopted by the SEC in 2005 in response to the original decision resolved ambiguities that had

led to the court’s previous rulings. The reversal removes a cloud of uncertainty that had hung over the

two rules, and will ease planning for future reclassifications and similar corporate transactions of the

type affected by the 2002 decision. In addition, because the Third Circuit decided that the amendments

apply retroactively, the new ruling may protect from challenge past transactions that could have been

vulnerable to attack based on the court’s earlier decision.

Background

Section 16(b) is a prophylactic provision intended to deter public company insiders from using

confidential information about their companies for personal trading gain. It does so by requiring officers,

directors and ten percent owners to disgorge to their company any profits realized by them from “short-

swing” transactions involving a purchase and sale, or sale and purchase, of the company’s equity

securities within less than six months. To mitigate the harshness of the statute, which imposes strict

liability without proof of actual use of confidential information, the SEC has adopted a number of

exemptions from Section 16(b). One of these exemptions, Rule 16b-3, is intended to shield from

Section 16(b) transactions by officers and directors directly with their companies rather than with public

investors. Another exemption, Rule 16b-7, exempts transactions by insiders pursuant to mergers,

reclassifications, consolidations and similar corporate transactions involving a company that, prior to the

transaction, owned at least 85% of the securities of the entities involved in the transaction or at least

85% of their combined assets.

The defendants in Levy resisted a Section 16(b) claim of $72 million by arguing that both Rule16b-3 and

Rule 16b-7 exempted acquisitions of securities by them in 1999 pursuant to a reclassification related to

their company’s initial public offering. In a decision we discussed in our SEC Update of October 16,

2003, the Third Circuit did not agree that the exemptions were available, and denied the defendants’

motion to dismiss the claim. The court held that the defendants could not rely on Rule 16b-3, which until

1996 applied only to transactions under employee benefit plans, because the defendants’ acquisitions

did not have a compensatory purpose, notwithstanding the absence of any reference in the revised rule

Hogan & Hartson LLP


to a compensatory purpose requirement. The court also ruled that Rule 16b-7 was not available for

reclassifications that involve (as did the transactions in Levy) a change in the proportionate interests of

security holders or an alteration of the risks and benefits of their investment, even though the rule makes no

mention of these considerations.

The SEC’s Response

The SEC recognized that the rulings in Levy were contrary to the language and purpose of the two rules,

and would sharply restrict the availability of the rules for insiders of the many public companies domiciled in

Delaware, which is one of the states within the Third Circuit’s jurisdiction. It therefore sought to overturn the

decision soon after it was issued by filing an amicus curiae brief urging the court to vacate its rulings. The

Third Circuit declined en banc to reconsider the decision, however, and the Supreme Court denied the

defendants’ petition for certiorari.

Because no further relief was available from the courts, the SEC took the unprecedented step of proposing

in 2004 and adopting in 2005 amendments to the two rules to mute the effects of the decision. We

discussed the amendments in our SEC Update of August 11, 2005. The amendments clarified that

(1) Rule 16b-3, as revised in 1996, has never had a compensatory purpose requirement, and (2) Rule 16b-7

has never contained requirements for transactions covered by the rule other than the 85% ownership test.

Further, the SEC said that because the amendments constituted clarifications rather than substantive

changes, they were applicable retroactively to the dates on which the current versions of the rules became

effective, which was May 1, 1991 for Rule 16b-7 and August 15, 1996 for Rule 16b-3.

The Controversy

The SEC’s determination to make the clarifying amendments retroactive meant that they applied to the

transactions at issue in Levy, which therefore were exempt under both rules. The plaintiff objected,

contending that the amendments were invalid because the SEC had exceeded its rulemaking authority in

adopting them, and that applying the two rules retroactively to the reclassification transactions was

impermissible.

The Third Circuit responded by acknowledging that it had “struggled to divine” the scope of the two rules in

its earlier decision, and that the rule amendments and the SEC’s explanation of their background and

purpose had made clear that the court’s previous rulings were incorrect. The court rejected the plaintiff’s

argument that the amendments were invalid, explaining that they were “comprehended within the purpose”

of Section 16(b), which is all that is necessary under the SEC’s broad rulemaking authority. The court also

held that the amendments could be applied retroactively because they resolved ambiguities in the rules

without changing their substance, and were consistent both with the text and purpose of the pre-amendment

rules.


Effects of the Court’s Decision

The Third Circuit’s reversal of its 2002 decision undoubtedly was greeted with sighs of relief from many

within the corporate community and at the SEC. The Levy controversy has been ongoing for nearly eight

years and has been a continuing cause of concern because of the possibility that Section 16(b) plaintiffs

might mount similar challenges to other transactions undertaken in reliance on one or both of the rules at

issue. The reversal assures that a reclassification of one class of an issuer’s securities into another class

will always be exempt under Rule 16b-7 because the issuer, as the sole participant in the transaction, will

always satisfy the 85% ownership test. The new decision also makes it clear that Rule 16b-3 has no

compensatory purpose requirement, and that only the stated requirements of the rule must be satisfied in

order to qualify for an exemption under it.

For more information about the topics discussed in this publication, please contact the Hogan & Hartson attorney with whom you work or any of the attorneys listed below.

PETER J. ROMEO (CO-EDITOR) [email protected] 202.637.5805 Washington, D.C. RICHARD J. PARRINO (CO-EDITOR) [email protected] 202.637.5530 Washington, D.C. ALAN L. DYE [email protected] 202.637.5737 Washington, D.C.

This Update is for informational purposes only and is not intended as basis for decisions in specific situations. This information is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. To have your e-mail address added to or removed from the list for distribution of future releases of this newsletter, please send an e-mail to H&[email protected].

Copyright © 2008 Hogan & Hartson LLP. All rights reserved. Hogan & Hartson LLP is a District of Columbia limited liability partnership with offices across the United States and around the world. Some of the offices outside of the United States are operated through affiliated partnerships, all of which are referred to herein collectively as Hogan & Hartson or the firm.

www.hhlaw.com

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mailto://H&[email protected]

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Certain Tax Provisions of the Emergency Economic Stabilization Act of 2008 and IRS Guidance Relating to the Economic Crisis

October 8, 2008

H.R. 1424 (the Act), which was signed into law by President Bush on October 3, 2008, contains tax-related provisions that can have significant implications for financial institutions, certain hedge funds, and investment companies, in addition to a variety of other taxpayers. Specifically, the Act contains provisions that:

(i) provide special rules with respect to executive compensation paid by employers participating in the Troubled Assets Relief Program (TARP);

(ii) treat certain sales of Fannie Mae or Freddie Mac preferred stock by financial institutions

as giving rise to ordinary income or loss; (iii) prevent the deferral of certain compensation from “tax indifferent” parties; (iv) require broker reporting of basis information with respect to securities transactions; (v) retroactively extend through 2009 certain rules relating to regulated investment

companies; and (vi) extend the period during which there is an exclusion from income for certain discharge of

indebtedness income arising from discharges of indebtedness secured by the taxpayer’s principal residence.1

In addition to the changes set forth in the Act, the Internal Revenue Service (IRS) has recently issued a number of pronouncements to address tax issues arising from current economic conditions. The most significant of these are the following:

(i) Notice 2008-83, which provides that, pending further guidance, deductions for losses on loans, or bad debts following an ownership change of a bank will not be treated, for purposes of Section 382(h) of the Code,2 as a built-in loss or deduction attributable to a period prior to the ownership change.

1. This LawFlash primarily addresses tax-related provisions of the Act relating to financial institutions, hedge funds, and investment companies and does not address all tax-related provisions of the Act.

12. References herein to the “Code” are references to the Internal Revenue Code of 1986, as amended.

2

(ii) Revenue Procedure 2008-63, which provides that a lender in a qualified securities

lending transaction that applies collateral to purchase identical securities following a bankruptcy-related borrower default receives the same treatment the lender would have received if the borrower had returned identical securities upon termination of the loan.

(iii) Revenue Procedure 2008-58, which addresses the treatment of certain taxpayers that

participate in settlement offers following failed auctions of auction rate securities.

(iv) Notice 2008-78, which provides that certain capital contributions to loss corporations will be taken into account (and therefore will not reduce the value of the loss corporation) for purposes of determining limitations under Section 382 of the Code on the use of net operating loss carryforwards and built-in losses.

(v) Notice 2008-84, which provides that if the United States acquires a greater than 50

percent interest in a loss corporation the rules under Section 382 of the Code that ordinarily would trigger an ownership change are turned off.

Financial institutions, hedge funds, investment companies, and a variety of other taxpayers should consider how the Act and the recent IRS guidance may affect their business activities and tax planning. I. Key Tax-Related Provisions of the Act

A. Special Rules Relating to Executive Compensation of Employers Participating in the Troubled Assets Relief Program (TARP)

The Act contains a number of tax and nontax provisions relating to executive compensation by employers participating in the TARP. Where auction purchases of troubled assets from a financial institution under the TARP in the aggregate exceed $300 million, the Treasury Department (the Treasury) is to prohibit such financial institution from entering into any new employment contract with a senior executive officer that provides for a golden parachute in the event of involuntary termination, a bankruptcy filing, insolvency, or receivership. In addition, where direct purchases of troubled assets are made from a financial institution under the TARP and in connection with such purchases the Treasury receives a “meaningful” equity or debt position in the financial institution, the Treasury is to require that the financial institution meet appropriate standards for executive compensation and corporate governance. One such standard is that the financial institution may not make a golden parachute payment to a senior executive officer during the period that the Treasury holds an equity or debt position in the financial institution. The Act does not describe what constitutes a “meaningful” position for these purposes. For purposes of the foregoing rules, a “senior executive officer” means an individual who is one of the top five highest paid executives of a public company, whose compensation is required to be disclosed under the Securities Exchange Act of 1934 and the regulations thereunder, and nonpublic company counterparts. In addition, where an employer has had in the aggregate more than $300 million of assets acquired under the TARP, the employer is not permitted a deduction for any applicable taxable year for executive remuneration attributable to services by a “covered executive” for such year to the extent that such remuneration exceeds $500,000. For purposes of these rules, (i) certain related entities are treated as a

3

single employer; (ii) an employer will not be subject to these limitations if its only sales of assets under the TARP have been “direct purchases” under a specified provision of the Act; (iii) a covered executive with respect to an applicable taxable year is an employee who is the CEO, the CFO, an individual acting in either such capacity, or generally, one of the three other highest compensated officers of the employer for the taxable year; and (iv) an applicable taxable year shall generally be any year during the TARP when the amount of troubled assets acquired from the employer under the TARP exceeds $300 million. A series of related rules prevent the use of deferred compensation arrangements to avoid this limitation on the deductibility of executive compensation. The Act would also extend the “golden parachute” rules of Section 280G of the Code to payments to a covered executive of an applicable employer upon severance of employment while the TARP is in effect by reason of the executive’s involuntary termination, or the bankruptcy, insolvency, or receivership of the employer. Employers subject to the limitation on deductibility of executive compensation described in the preceding paragraph are treated as applicable employers for these purposes and “covered executive” has the same meaning as described in the preceding paragraph.

B. Character of Income from Certain Sales of Fannie Mae or Freddie Mac Preferred Stock Generally, gain or loss from the sale of stock is treated as capital gain or loss unless the stock is held as inventory. The Act carves out an exception to this rule. The exception provides that a sale or exchange by a financial institution of Fannie Mae or Freddie Mac preferred stock that either was owned on September 6, 2008 or was sold or exchanged on or after January 1, 2008 and before September 7, 2008 will be treated as giving rise to ordinary income or loss. For these purposes a financial institution is generally defined to include a financial institution described in Section 582(c)(2) of the Code or a depositary institution holding company described in Section 3(w)(1) of the Federal Deposit Insurance Act. A special rule is provided with respect to sales occurring after September 6, 2008 that denies financial institution treatment to an entity that did not qualify as a financial institution at all times during the period beginning September 6, 2008 and ending on the date of the sale or exchange of the preferred stock. Treatment of dispositions of Fannie Mae or Freddie Mac preferred stock as giving rise to ordinary loss can be advantageous to financial institutions disposing of such stock as ordinary losses, unlike capital losses, can be applied against ordinary income and can give rise to net operating losses that can generally be carried back to the two preceding taxable years.

C. Certain Deferred Compensation Benefits Curtailed The Act requires the inclusion in gross income of amounts received from a “nonqualified entity” pursuant to a nonqualified deferred compensation plan when there is no substantial risk of forfeiture of the rights to such compensation. For these purposes, a “nonqualified entity” means (i) a foreign corporation unless substantially all of its income is effectively connected with the conduct of a U.S. trade or business or subject to a comprehensive foreign income tax and (ii) any partnership unless substantially all of its income is allocated to persons other than tax-exempt organizations or foreign persons with respect to whom such income is not subject to a comprehensive foreign income tax. Generally, the income tax of a foreign country is treated as a comprehensive income tax with respect to a foreign person if such person is eligible for the benefits of a comprehensive income tax treaty between the United States and such foreign country, or such person otherwise establishes to the satisfaction of the Treasury that such foreign country has a comprehensive income tax. A “nonqualified deferred compensation plan” generally has the meaning given such term for purposes of Section 409A of the Code,

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except that it also includes a plan that provides a right to compensation based on appreciation in value of equity units of the service recipient. These rules generally do not apply where the compensation is associated with income that is effectively connected with the conduct of a trade or business in the United States (as determined for federal income tax purposes). Rights to compensation are treated as subject to a substantial risk of forfeiture only if the rights are conditioned upon the future performance of substantial services by any individual. The Treasury is authorized to issue regulations providing that compensation is subject to a substantial risk of forfeiture if the compensation is determined solely by reference to gain recognized on the disposition of an investment asset. Where the amount of compensation is not determinable at the time that it otherwise becomes includible in income, then it is to be includible in income when determinable, with the applicable tax increased by an amount equal to 20% of the amount of such compensation, plus an interest charge. While these provisions are generally effective for deferred amounts attributable to services performed after December 31, 2008, a special rule provides that, with respect to deferred amounts attributable to services performed on or before December 31, 2008, if such amounts are not otherwise includible in gross income in a taxable year beginning before 2018, then such amounts shall be includable in gross income in the later of (i) the last taxable year beginning before 2018 or (ii) the first taxable year in which there is no substantial risk of forfeiture of the rights to such compensation (as described above). The Act requires that the Treasury issue guidance providing a period during which a nonqualified deferred compensation arrangement attributable to services performed on or before December 31, 2008 may, without violating Section 409A of the Code, be amended to conform the distribution date under such arrangement to the date on which amounts are required to be included in income. These provisions are expected to impact hedge fund managers who are entitled to receive compensation from nonqualified entities under an arrangement that would be treated as a nonqualified deferred compensation plan.

D. Reporting Requirements for Securities Brokers

The Act provides, generally effective on a phased-in basis beginning with securities acquired on or after January 1, 2011, that where a broker is otherwise required to report gross proceeds from the sale of a “covered security,” it shall also be required to report information about the customer’s adjusted tax basis in the security and whether any gain or loss with respect to such security is long-term or short-term. For these purposes, a “covered security” is any specified security that is acquired on or after the “applicable date,” if such security either was acquired through a transaction in the account in which such security was held or was transferred to the account from an account in which the security was a covered security and, in connection with the transfer, the broker received a specified information statement. Specified securities for these purposes include shares of stock and debt instruments, as well as, to the extent specified by Treasury, commodities, commodities contracts, commodities derivatives, and other financial instruments. The “applicable date” means January 1, 2011 with respect to stock other than stock eligible for the average basis method under Section 1012 of the Code, January 1, 2012 with respect to stock eligible for the average basis method under Section 1012 of the Code, and January 1, 2013 with respect to other securities. The Act includes provisions, which are to be effective only with respect to options granted or acquired on or after January 1, 2013, requiring reporting with respect to options on covered securities. In determining a customer’s adjusted tax basis in securities held in an account, a broker is, in the case of

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securities other than stock eligible for the average basis method, to use a first-in, first-out method unless the customer otherwise notifies the broker by making an identification of the stock sold, and, in the case of stock eligible for the average basis method, to use the broker’s default method unless the customer notifies the broker that the customer is using another permissible method with respect to the account. The Act provides that, in the case of a sale, exchange, or other disposition of a specified security on or after the applicable date, the basis determination methods specified in the Treasury regulations under Section 1012 of the Code will be applied on an account-by-account basis. For these purposes, any stock for which the average basis method is permissible under Section 1012 of the Code (generally, shares in regulated investment companies) that is acquired before January 1, 2012 will be treated as a separate account from any such stock acquired after such date, unless the related fund elects, with respect to one or more stockholders, to treat all stock in such fund held by such stockholder(s) as covered securities without regard to the date of acquisition of such stock. The Act generally extends, effective for returns required to be furnished after December 31, 2008, the date by which gross proceeds or substitute payment information returns must be provided to customers from January 31 to February 15. Where a broker or such other person as may be specified by the Treasury transfers to a broker a security which is a “covered security” in the hands of the transferor, the transferor is required to provide, within 15 days of the transfer, the transferee broker with such information as the Treasury may specify to facilitate the transferee broker’s compliance with the new reporting requirements. The Act also contains provisions requiring reporting by issuers of specified securities with respect to certain transactions. Generally, such issuers are required to file returns describing organizational actions that may affect the basis of a specified security and the quantitative effects of such actions. Such returns are required to be filed not later than the earlier of 45 days after the date of such organizational action or January 15 of the following calendar year. Related information statements must be provided by the issuer to the nominee (or to the holder, if there is no nominee) of the specified security by January 15 of the calendar year after the year in which the organizational action occurred. No returns or statements are required from issuers with respect to actions occurring prior to the applicable date (as described above) for the relevant security.

E. Retroactive Extensions of Certain Tax Provisions Relating to Regulated Investment Companies

The Act extends, retroactive to January 1, 2008, certain provisions of the Code relating to regulated investment companies. First, the Act extends through 2009 the eligibility of distributions by a regulated investment company to qualify as “interest-related dividends” or “short-term capital gain dividends” for purposes of Section 871(k) of the Code. Very generally, Section 871(k) of the Code provides that non-U.S. shareholders of a regulated investment company can, subject to certain exceptions, qualify for an exemption from U.S. federal income tax with respect to interest-related dividends and short-term capital gain dividends. Second, the Act extends through 2009 the look-through rules for determining the extent to which stock of a regulated investment company is to be included for U.S. federal estate tax purposes in the estate of a decedent who is neither a resident nor a citizen of the United States.

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Finally, the Act extends the rules that treat regulated investment companies as “qualified investment entities” under Section 897(h)(4) of the Code. Under Section 897(h) of the Code, a distribution by a qualified investment entity to a non-U.S. person will, to the extent attributable to gain from sales or exchanges of U.S. real property interests, be treated as gain recognized by such non-U.S. person from the sale or exchange of a U.S. real property interest, except that distributions with respect to a class of stock that regularly traded on a U.S. securities market will not be treated as gain from the sale of a U.S. real property interest where the non-U.S. recipient of the distribution did not own more than five percent of such class of stock at any time during the one-year period ending on the date of the distribution. No interest in a “domestically controlled” qualified investment entity is treated as a U.S. real property interest. Where a qualified investment entity is domestically controlled, it is required to recognize the portion of its gain corresponding to its foreign ownership percentage on any distribution of a U.S. real property interest.

F. Extension of the Income Exclusion for Discharges of Indebtedness Secured by Principal Residence

The Act extends the exclusion from income of cancellation of indebtedness income arising from discharges of certain indebtedness secured by the taxpayer’s principal residence to discharges occurring prior to January 1, 2013. This exclusion, which was originally added to the Code in December 2007 by the Mortgage Forgiveness Debt Relief Act of 2007, had previously applied only to discharges occurring prior to 2010. II. Recent IRS Guidance

A. Notice 2008-83 – Loan Losses and Bad Debt Deductions for Banks Not Treated as Built-in Losses or Pre-Ownership Change Deductions

Section 382 of the Code limits the extent to which net operating loss carryforwards and certain other tax items, including, under Section 382(h) of the Code, built-in losses and deductions attributable to pre-ownership change periods, may be utilized by a corporation following an ownership change. In Notice 2008-83, the IRS indicated that it was studying the proper treatment for these purposes of losses on loans and bad debt deductions claimed by banks following an ownership change and that, pending further guidance, deductions with respect to losses on loans or bad debts properly claimed by a bank following an ownership change will not be treated for purposes of Section 382(h) of the Code as built-in losses or deductions attributable to a period preceding the ownership change.

B. Revenue Procedure 2008-63 – Terminations of Securities Loans Recently there have been a significant number of securities loans that have terminated as a result of a default arising from the bankruptcy of the securities borrower or an affiliate thereof. In such circumstances the securities lender has faced the choice of either (i) applying collateral provided under the securities loan to acquire identical replacement securities or (ii) waiting for the securities borrower to provide identical securities to close out the transaction. While the receipt of identical securities from the securities borrower would not, in the case of a securities loan governed by Section 1058 of the Code, result in the recognition of gain or loss by the securities lender, many securities lenders had concluded that application of the collateral by the securities lender to acquire identical securities would be a recognition event. This was a particularly adverse result, since it meant that gains would be recognized but that losses would be disallowed under the wash sale rules.

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Revenue Procedure 2008-63 aligns the tax consequences of the two alternatives facing the securities lender by generally providing, for tax years ending on or after January 1, 2008, that the application of collateral to acquire identical securities will be treated as a nonrecognition event for the securities lender under Section 1058 of the Code. The Revenue Procedure applies, however, only where (i) the original securities loan agreement satisfied the requirements of Section 1058(b) of the Code,3 (ii) the securities loan agreement required that the securities borrower provide collateral to secure its obligations, (iii) the borrower defaults under the securities loan agreement as a result of its bankruptcy or the bankruptcy of an affiliate, and (iv) as soon as is commercially practical following the default (but in no event more than 30 days after the default) the securities lender applies the collateral provided (or cash generated by the sale of such collateral) to acquire identical securities.

C. Revenue Procedure 2008-58 – Auction Rate Securities As a result of failures of auctions of auction rate securities, a number of corporations have made settlement offers to persons (holders) holding auction rate securities that may have claims against such corporations for their conduct relating to such auction rate securities. Revenue Procedure 2008-58 addresses the tax treatment of holders that receive settlement offers with certain terms. Such a settlement offer includes a right for the holder during a specified period (the Window Period) to put the holder’s auction rate securities to the corporation at par upon the holder providing the corporation with notice. If auctions fail during the Window Period (prior to exercise of the put or of any call described below), the holder is entitled to receive the maximum rate specified by the auction rate security. If auctions begin to succeed during the Window Period, then, so long as there has not been an exercise of the put or of the call described below, the holder will receive payments at the reset rate. The auction rate security should not be redeemable upon a fixed date, or, if it is, the fixed date should be at least two years after the close of the Window Period. During the Window Period the holder is entitled to exercise all voting rights associated with the auction rate security and to sell the auction rate security to a third party. The settlement offer may permit the corporation to call the holder’s auction rate security during the Window Period at par so that the corporation can sell the auction rate security and mitigate its potential losses. The settlement offer also may permit the holder to borrow the par amount of the security from the corporation during a period before the end of the Window Period, with the obligation to repay being secured by the auction rate security. Some taxpayers were concerned that the receipt or acceptance of a settlement offer while the taxpayer held a right to put for par was a taxable disposition, especially where the taxpayer borrowed against the security. There was also a concern that a portion of the payments would be treated as ordinary income from a settlement, leaving the remainder of the transaction to generate a capital loss. In Revenue Procedure 2008-58, the IRS indicated that it will not question the position that a taxpayer continues to own the auction rate security upon receiving or accepting (but before actually tendering the security) a settlement offer of the sort described above if (i) the settlement offer is received before June 30, 2009, (ii) the Window Period does not extend beyond December 31, 2012, and (iii) the settlement offer requires the taxpayer to deliver an auction rate security that the taxpayer purchased on or before February 13, 2008. As a result, the taxpayer will not realize any income upon receiving or accepting the settlement offer. The IRS also indicated that the taxpayer’s amount realized from the sale of the auction rate security

3. Generally, Section 1058(b) of the Code requires that the securities lending agreement (i) provide for the return to the lender of securities identical to those loaned; (ii) require that payments be made to the securities lender in amounts equivalent to all interest, dividends, and other distributions that the owner of the securities is entitled to receive during the term of the loan; (iii) not reduce the risk of loss or opportunity for gain for the securities lender with respect to the securities transferred; and (iv) meet such other requirements as may be specified in regulations.

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during the Window Period to the corporation offering the settlement is the full amount of the cash proceeds received (and therefore no portion is treated as settlement income).

D. Notice 2008-78 – Capital Contributions and Ownership Changes Under Section 382(l)(1)(A) of the Code, capital contributions received by a loss corporation prior to an ownership change are not taken into account (that is, the value attributable to such capital contributions is disregarded, with the effect that there is reduced ability to use, following the ownership change, pre-change losses and other attributes) in determining the limitation on post-change use of net operating loss carryforwards and other tax items, if the contribution is part of a plan whose principal purpose is to avoid or increase the Section 382 limitation. Section 382(l)(1)(B) provides that a capital contribution made during the two-year period ending on the date of the ownership change will be presumed to be part of a plan with such principal purpose. Notice 2008-78 relaxes these rules by providing, effective for ownership changes occurring in any taxable year ending on or after September 26, 2008, safe harbors for when capital contributions will not be considered part of such a plan even if they otherwise occur within the two-year period ending on the date of the ownership change. The following safe harbors are identified in the notice:

• (i) The contribution is made by a person who is neither a controlling shareholder (determined immediately before the contribution) nor a related party; (ii) no more than 20% of the total value of the loss corporation's outstanding stock is issued in connection with the contribution; (iii) there was no agreement, understanding, arrangement, or substantial negotiations at the time of the contribution regarding a transaction that would result in an ownership change; and (iv) the ownership change occurs more than six months after the contribution.

• (i) The contribution is either (x) made by a related party, with no more than 10% of the total

value of the loss corporation’s stock issued in connection with the contribution or (y) made by an unrelated party; (ii) there is no agreement, understanding, arrangement, or substantial negotiations at the time of the contribution regarding a transaction that would result in an ownership change; and (iii) the ownership change occurs more than one year after the contribution.

• The contribution is made in exchange for stock issued in connection with the performance of

services, or stock acquired by a retirement plan, under the terms and conditions of Treasury Regulation Section 1.355-7(d)(8) or (9), respectively.

• The contribution is received on the formation of a loss corporation (not accompanied by the

incorporation of assets with a net unrealized built-in loss), or it is received before the first year from which there is a carryforward of a net operating loss, capital loss, excess credit, or excess foreign taxes (or in which a net unrealized built-in loss arose).

E. Notice 2008-84 – No Section 382 Ownership Changes While the Government

Owns More Than 50% of the Loss Corporation As noted above, Section 382 of the Code limits the amount of loss carryforwards or certain other tax attributes that may be claimed in a taxable year following an ownership change. The dates on which a loss corporation is required to determine whether an ownership change has occurred are referred to as “testing dates.” Generally, testing dates include all dates on which there is a change in the ownership of the corporation by any 5% or greater shareholder and the dates on which certain “equity structure shifts” occur. Notice 2008-84 changes these rules by providing that, for any taxable year ending on or after

September 23, 2008, no date at the end of which the United States owns, directly or indirectly, a more than 50% interest in a loss corporation will be treated as a testing date. For these purposes a more than 50% interest includes (i) stock representing more than 50% of the voting power or value of the corporation’s stock or (ii) an option to acquire such stock. Taken together, the Act and the recent guidance raise significant issues and compliance requirements for financial institutions, certain hedge funds, and investment companies, among others. To view other briefings previously released by the Morgan Lewis Financial Crisis Working Group, please visit http://www.morganlewis.com/financialcrisis. If you have any questions concerning these important legal developments or would like copies of any of the documents mentioned, please contact any of the following Morgan Lewis attorneys: Philadelphia Gary B. Wilcox 215.963.5043 [email protected] William P. Zimmerman 215.963.5023 [email protected] Wendy C. Unglaub 215.963.5281 [email protected] New York Michael P. Walutes 212.309.6278 [email protected] About Morgan, Lewis & Bockius LLP

Morgan Lewis is a global law firm with more than 1,400 lawyers in 22 offices located in Beijing, Boston, Brussels, Chicago, Dallas, Frankfurt, Harrisburg, Houston, Irvine, London, Los Angeles, Miami, Minneapolis, New York, Palo Alto, Paris, Philadelphia, Pittsburgh, Princeton, San Francisco, Tokyo, and Washington, D.C. For more information about Morgan Lewis or its practices, please visit us online at www.morganlewis.com. IRS Circular 230 Disclosure To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. For information about why we are required to include this legend in emails, please see http://www.morganlewis.com/circular230.

This LawFlash is provided as a general informational service to clients and friends of Morgan, Lewis & Bockius LLP. It should not be construed as, and does not constitute, legal advice on any specific

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