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Introduction to the Foreign Investments in US – ABC about Condominium
- Owning a Condo in US
In US, the most common form of ownership, when a homeowner purchases a home, is the fee simple absolute. Often, however, a condominium or cooperative is purchased. A condominium is a statutory creation which is characterized as real property. When one purchases a condominium he purchases one unit in fee simple and also obtains the right to use the common areas. Each unit has its own tax bill, deed, mortgage and ownership rights but shares in the maintenance of the common areas (through special condominium Acts).
- History of Condo
English Common law tradition holds that real property ownership must involve land, whereas the French civil law tradition recognized condominium ownership as early as the 1804 (Napoleonic Code); thus, it is notable that condominiums evolved in the United States via a hybrid common-civil legal system. Section 234 of the 1961 of National Housing Act allowed the Federal Housing Administration to insure mortgages on condominiums, and leading to condominium laws in every state by 1969. In recent years, the residential condominium industry has been booming in all of the major metropolitan areas such as Miami, Seattle, Boston and New York.
- What is a Condo in Legal Sense
Typically, a condominium consists of multi-unit dwellings where each unit is individually owned and the common areas, such as hallways and recreational facilities, are jointly owned usually as "tenants in common" by all the unit owners in the building. In general, condominium unit owners can rent their home to tenants, although leasing rights may be subject to conditions or restrictions set forth in the declaration such as a rental cap for the total number of units in a community that can be leased at one time or otherwise as permitted by local law.
- Comparison with Co-op
A confusing form of ownership, popular in the United States but found also in other common law jurisdictions, is the "housing cooperative" corporation, also known as "company share" or "co-op", in which the building has an associated legal corporation company and ownership of shares gives the right to a lease for residence of a unit. A cooperative apartment house is owned by a corporation whose stock is owned by the tenants. Condo or Co-op is often referred to as “apartment” by Chinese community people. But they are very different. They are surely not the same as civil law joint property ownership is undivided co-ownership where the owners own a percentage of the entire property but have exclusive possession of a specific part of the property and joint possession of other parts of the property; distinguished from joint tenancy with right of survivorship or a tenancy in common of common law.
- Watch-outs for Condo Transactions, and Restrictions
Condominiums are usually owned in fee simple title, but can be owned in ways that other real estate can be owned, such as title held in trust. In some jurisdictions, there are "leasehold condominiums". A homeowners association, consisting of all the members, manages the condominium through a board of directors elected by the membership. The same concept exists under different names depending on the jurisdiction, such as "unit title". Another variation of this concept is the "time share" although not all time shares are condominiums, and not all time shares involve actual ownership of (i.e., deeded title to) real property. The restrictions for condominium usage are established in a document commonly called a "Declaration of Condominium". Rules of governance are usually covered under a separate set of Bylaws. However, a set of Rules and Regulations providing specific details of restrictions and conduct are established by the Board and are more readily amendable than the Declaration or Bylaws. Typical rules include mandatory maintenance fees, pet restrictions, and color/design choices visible from the exterior of the units.
- Can Foreigners Own a Condo
In a multinational transaction (whether M&A or foreign investments), purchase a condo in US is commonly seen. Generally, the regulation of the rights of individuals who are not citizens ("Non-Nationals") of the United States to hold real property is left to the states. There are not many federal restrictions on Non-Nationals owning or investing in real property in the United States. A few of these are as follows: The Agricultural Foreign Investment Disclosure Act of 1978 (FIDA); The International Investment Survey Act of 1976 (IISA); The Foreign Investment in Real Property Tax Act of 1980 (FIRPTA). One will see the Federal government concerns the special lands (like farms, mineral lands etc.), and Tax paid to the government. Many states impose major land ownership and use restrictions on foreigners. Some states limit the number of acres for which the land may be used. Other states extend to foreigners the same treatment US citizens are given in the foreigner's home country. Under New York law, for instance, a Non-National may take, hold, convey and devise real property.
The acquisition and use of real estate by foreign entities/persons are involving a complex pattern of federal and state laws. Professional advice should be sought before investments in US.
Applicability of Attorney-Client Privilege to In-House Counsels under US Law
Dear Sirs and Madams,
Many corporate counsels and managements in technology related industries or business involving intellectual property issues are often concerned about how to protect company confidential information from unnecessary disclosure in the severest and most painful discovery proceeding in the United States when the company is forced to be a party to a US litigation.
The reasons why the company confidential information is so critical are usually because such information involves sensitive pricing, quantity, clients/suppliers list and internal assessment of legal liability, and often times, the parties to such litigation include the market competitors, clients and suppliers in the product chain, of the company.
Imagining that, all the related business partners buying your company’s products or selling parts to your company suddenly become known of your costs, revenues, buying/selling quantity and PROFITS. More important, any internal assessment of legal liability (e.g., whether the products are infringing licensor’s patents) is likely to be discovered in a proceeding to be argued by opposing party to constitute an ADMISSION of liability as solid evidence.
Therefore, it is imperative to establish several mechanisms within a company so as to minimize disclosure of confidential information, in case that the company is involved in a US litigation. One of the ways is to use the best of the Attorney-Client privilege doctrine under US laws to resist the disclosure. Yet, does such doctrine apply to the communications between in-house counsels and business persons in a company?
Attorney-Client privilege applies to communications with in-house counsel subject to certain limitation.
This has long been established in the US, including by the Supreme Court in the case of Upjohn Co. v. U.S., 449 US 383 (1981), and elaborated in many subsequent cases. However, because in-house attorneys perform both legal and business duties for their employer, there are limitations and one must be careful to preserve the privilege.
Under the Federal Rules of Civil Procedure, a party may obtain discovery “regarding any matter, not privileged, that is relevant to the claim or defense. . .” The party claiming the privilege bears the burden of establishing that the privilege applies. Therefore, in any case, the court will decide on a case by case basis whether each particular piece of evidence is privileged (and may be excluded from discovery) or not.
In the Upjohn case, the Court set out the following factors to determine whether the privilege exists for in-house counsel:
- The communication must be with a client or prospective client (including the employer);
- The communication must be with a lawyer who is a member of a bar, or his/her subordinate;
- The lawyer must be acting in a capacity as a lawyer, not as a business person;
- The communication must be for the purpose of obtaining or providing legal advice, not business advice;
- The communication cannot be made in the presence of strangers;
- The communication cannot be for the purpose of committing a crime or a tort;
- The privilege must have been claimed (e.g., state “privileged & confidential” on written communications); and
- The privilege must not have been waived.
Based on the above factors, the following are some guidelines one would recommend a company (with possibility to be involved in US litigation) to follow to preserve such privilege and keep sensitive documents out of the hands of opposing parties in litigation:
- When it is necessary for Legal Department to advise for or against a business decision, one should do so in a memo that states legal bases for that decision.
- Always state “Privileged & Confidential” on sensitive legal documents and correspondence.
- Do not over-use that legend on ordinary communications, as it may dilute one’s claim to the privilege. The opposing party may use such argument.
- Copy on sensitive legal communications only those people who have an absolute need to know, so that to minimize the quantity of such documents existing.
- If it is not necessary to put something in writing (ie, if it can be communicated orally instead), don’t put sensitive information in writing; Please be noted under the discovery proceeding in US, a party is under the obligation to disclose all the documents and information lawfully requested. If a party is cheating and hiding documents lawfully requested, it may be held contempt of court or sanctioned by the court, in worse scenario, the cheating could impair the party’s case or even lose the case.
- When requesting information from business persons, state on the request something like this: “For the Purpose of Providing Legal Advice.”
- Ideally, when the business persons send in-house information, they are recommended to write on their communication: “For the Purpose of Obtaining Legal Advice.”
- In-house counsels should use the title like Chief Legal Officer, General Counsel, Attorney, Legal Manger, or Associate Legal Officer, etc in all sensitive communications and not the title of Vice President, or Assisting Manager.
There are other ways to protect company confidential information from unnecessary disclosure, and no international company could afford to ignore the issue of confidential information protection in daily operation. We have specialized in assisting international companies to that end, and providing related advice.
Should you need further information on the above, please do not hesitate to contact us at any time.
At your services and with regards,
2007 US Supreme Court Review– A Precedent
about Section 1 of Sherman Act (Antitrust Law) Established for 96 years has been
Overturned by Justice Anthony Kennedy in 2007
The US
Supreme Court in June 2007 overturned a year of 1911 precedent -- known by law students
everywhere as the Dr. Miles rule -- under which minimum retail prices established
by manufacturers were deemed to be an automatic or per se violation of the Sherman
Act.
The ruling was
in Leegin Creative Leather Products v. PSKS Inc 2007. PSKS sued in District Court,
claiming illegal price fixing. The jury, adopting the Dr. Miles per se rule, awarded
PSKS $3.6 million in damages and $375,000 in attorney fees. The 5th U.S. Circuit
Court of Appeals affirmed, and the Supreme Court reversed.
In Leegin case2007,
Leegin Creative Leather Products, Inc. (Leegin), designs, manufactures, and distributes
leather goods and accessories. In 1991, Leegin began to sell belts under the brand
name Brighton.” PSKS, Inc. (PSKS), operates Kay’s Kloset, a women’s apparel store
in Lewisville, Texas. Kay’s Kloset buys from about 75 different manufacturers. It
first started purchasing Brighton goods from Leegin in 1995. Once Brighton was the
Store’s most important brand and once accounted for 40 to 50 percent of its profits.
In 1997, Leegin instituted the Brighton Retail Pricing and Promotion Policy: Leegin
refused to sell to retailers that discounted Brighton goods below suggested prices.
The policy contained an exception for products not selling well that the retailer
did not plan on reordering. Leegin adopted the policy to give its retailers sufficient
margins to provide customers the service central to its distribution strategy. It
also expressed concern that discounting harmed Brighton’s brand image and reputation.
Years after, during a Leegin employee’s visit to the Kay’s Kloset store Leegin found
Kay’s Kloset placed Brighton products on sale. Kay’s Kloset contended to compete
with nearby retailers who also were undercutting Leegin’s suggested prices. Leegin,
nonetheless, requested that Kay’s Kloset cease discounting. Its request refused,
Leegin stopped selling to the store. The loss of the Brighton brand had a considerable
negative impact on the Kay’s Kloset’s revenue from sales.
In Dr. Miles
Medical Co. v. John D. Park & Sons Co., 220 U. S. 373 (1911), the Court established
the rule that it is per se illegal under §1 of the Sherman Act, 15 U. S. C. §1,
for a manufacturer to agree with its distributor to set the minimum price the distributor
can charge for the manufacturer’s goods. It is called “Dr. Miles” rule. It has come
under increasing attack in recent years as being too rigid to take into account
market factors that argue for minimum price setting. The rule has been a attack
target of the free-market-oriented "Chicago School" of economists. Six years ago,
influential 7th Circuit Judge Richard Posner called the Dr. Miles rule " a sad mistake."
The issue presented
in 2007 Leegin case is whether the Court should overrule the per se rule and allow
resale price maintenance agreements to be judged by the rule of reason, the usual
standard applied to determine if there is a violation of §1.
First time for
96 years, the Supreme Court clearly abandoned the rule of per se illegality for
other vertical restraints a manufacturer imposes on its distributors. It further
concluded that vertical price restraints can have procompetitive effects.
Supreme Court
Justice Anthony Kennedy wrote for the 5 to 4 majority that the per se rule was of
"slight relevance" and no longer valid. Instead, he said, "Vertical price restraints
are to be judged according to a rule of reason." Roberts, C. J., and Scalia, Thomas,
and Alito, JJ., joined the opinion. Justice Stephen Breyer led the dissenters and
recited excerpts from the bench, lamenting the Court’s cavalier treatment of a long-obeyed
precedent. Justices John Paul Stevens, David Souter, and Ruth Bader Ginsburg joined
the dissenting opinion.
The Court major
rationales include: the antitrust laws primarily are designed to protect interbrand
competition from which lower prices can later result. Setting minimum resale prices
may also have anticompetitive effects; and unlawful price fixing, designed solely
to obtain monopoly profits, is an ever present temptation. Resale price maintenance
may, for example, facilitate a manufacturer cartel or be used to organize retail
cartels. It can also be abused by a powerful manufacturer or retailer. Thus, the
potential anticompetitive consequences of vertical price restraints must not be
ignored or underestimated. Notwithstanding the risks of unlawful conduct, it cannot
be stated with any degree of confidence that retail price maintenance “always or
almost always tend[s] to restrict competition and decrease output... ” Vertical
retail-price agreements have either procompetitive or anticompetitive effects, depending
on the circumstances in which they were formed. Kay’s Kloset’s argument overlooks
that, in general, the interests of manufacturers and consumers are aligned with
respect to retailer profit margins.
"The only safe
predictions to make about today's decision are that it will likely raise the price
of goods at retail and that it will create considerable legal turbulence," Breyer
said. He suggested that the decision could cost an American family of four up to
$1,000 a year in higher costs for products in retail stores, the result of minimum
prices set by manufacturers. The decision brought a range of reactions, with some
analysts predicting a shutdown of discount retailers nationwide. However, the decision
was limited, especially because minimum price-setting can still be attacked in courts
under the rule of reason standard. The ruling does not legalize resale price maintenance.
It merely puts the practice with other acceptable restraints that some manufacturers
may impose on dealers. Resale price maintenance is still likely to be illegal, and
subject to triple damages and attorneys' fees, if the manufacturer provides no reasonable,
pro-competitive justification for it.
It is worth
knowing that in Taiwan, the current law on the same issue remains governed by Article
18 of the Fair Trade Act of 2002. Such Article 18 states: “ Where an enterprise
supplies goods to its trading counterpart for resale to a third party or such third
party makes further resale, the trading counterpart and the third party shall be
allowed to decide their resale prices freely; any agreement contrary to this provision
shall be void.” Up to June 2007, it remained clearly emphasized by the Taiwan Fair
Trade Commission which is the quasi-judicial authority for the antitrust anti-competition
matters in Taiwan. The Commission by issuing an administrative order (order kon-chou
No. 096101 dated June 1, 2007) to a baby milk powder trader, sanctioned the trader
by NT$4million (about US$125,000) fine for trader’s violation of such Article 18
in fixing the resale price of its milk powder products in contracts with its resellers.
It other wards, any agreement fixing the resale price of the distributed products
to a third party shall be illegal per se and subject to fines (Article 41). By the
way, there is a similar law regarding treble damages for intentional violations
of Fair Trade Act in Article 32.
All in all, fixing
price of others in contracts will remain a critical issue for corporate entities
to consider before action, especially for international trading involving different
jurisdictions of antitrust laws like US, European Commission, European countries
and other Asian countries.
US judge directs White House to preserve backup tapes
containing millions of e-mails
According to a report
of Associated Press, Washington, U.S. District Judge Henry Kennedy,
a federal judge, ordered the White House (Executive Office of
the President) on Monday (November 12, 2007) to preserve copies
of all its e-mails in response to two lawsuits that seek to determine
whether the White House has destroyed e-mails in violation of
federal law. The US Federal Records Act details strict standards
prohibiting the destruction of government documents, including
electronic messages, unless first approved by the archivist of
the United States.
The two lawsuits were brought by private groups, Citizens for
Responsibility and Ethics in Government and the National Security
Archive. The organizations alleged that 5 million White House
e-mails have disappeared. Bush administration lawyers had argued
strongly against the order, and is seeking dismissal of the lawsuits.
The White House has provided little public information about the
matter, saying that some e-mails may not have been automatically
archived on a computer server for the Executive Office of the
President. It is said that relevant e-mails could be missing because
of an archiving problem at the White House. The White House has
said its Office of Administration is looking into whether e-mails
were not automatically archived, and if there is a problem, the
necessary action will be taken to address it.
One would wonder whether Taiwan has a similar law to prohibit
the destruction of government documents, including electronic
messages.
In fact, Taiwan has an
authority called National Archives Administration, under the executive
Yuan, established in accordance with the Organization Act of the
National Archives Administration of October 24, 2001. National
Archives Administration is the authority in the Central Government
level of Taiwan governing the matters related to the planning
and establishment of archive policies, proposing laws and management
systems, and the classification, compilation, publication, examination,
preservation, and destruction of the archives of government files/records.
The fundamental law nationwide
is the Archives Act, promulgated December 15, 1999. There are
over 100 regulations, rules, and guidelines down the line concerning
the management, preservation and destruction of government files
and records at various levels of local and city governments, including
the recognizing the electronic files and microfilmed data as a
files and records defined in the laws.
Under Article 12
of the Archives Act, government records shall not be destroyed
before the expiration of the preservation period or contrary to
the procedure as provided in the relevant regulations. Each record
has its own preservation time limit set by certain regulations,
and certain valuable documents of records will be classified as
“preserved permanently” (under Article 10 of the Archives Act).
The destruction plan for any records shall be submitted to competent
authorities for approval in accordance with the laws. Potentially,
and in addition to subject to criminal punishments for fraudulent
behavior or corruption misconducts under Anti-Corruption Statute,
as amended on February 6, 2003, and the Criminal Code of Taiwan,
where the facts warrant, the persons committing unauthorized destructions
of government records are in violation of Article 24 of the Archives
Act, subject such persons to the life imprisonment penalty up
to 2 years.
SanDisk
Sued 25 companies alleging the infringement of its patents in
the US
Consumer
electronics manufacturer, SanDisk Corp. has initiated two lawsuits
against 25 companies, including LG Electronics Inc., Japanese
firm Buffalo, Apacer Technology (a Taiwanese affiliate of Acer)
and California-based Kingston Technology, for allegedly infringing
patents used in a variety of products including multimedia cards,
CompactFlash cards and other portable storage products used in
mobile phones, digital cameras, MP3 players, USB flash drives
and other similar devices.
SanDisk also filed a complaint
with the U.S. International Trade Commission (ITC) asking that
these companies be barred from importing products to the U.S.
The two lawsuits were
filed in the U.S. District Court, Western District of Wisconsin.
One suit covers five patents, the other suit involves two different
patents. The five patents in the first lawsuit are also involved
in the ITC action, and the two additional patents in the second
one are not.
It is not unusual for
the patent holders to file lawsuits with District Courts of the
United States against domestic and foreign manufacturers and sellers
under 35 USC 271 alleging those defendants infringing the US patents.
In § 271 (a) …whoever
without authority makes, uses, offers to sell, or sells any patented
invention, within the United States or imports into the United
States any patented invention during the term of the patent therefor,
infringes the patent . In § 271 (b) …whoever actively induces
infringement of a patent shall be liable as an infringer. In §
271 (c) …whoever offers to sell or sells within the United States
or imports into the United States a component of a patented machine,
manufacture, combination or composition, or a material or apparatus
for use in practicing a patented process, constituting a material
part of the invention … shall be liable as a contributory infringer.
In § 271 (g) …whoever without authority imports into the United
States or offers to sell, sells, or uses within the United States
a product which is made by a process patented in the United States
shall be liable as an infringer.
In parallel and in addition
to the rights under 35 USC 271, a patent holder can file with
ITC alleging acts of those manufacturers and sellers falls in
the unlawful activities which are defined in 19 USC 1337, Section
(a) (1) (B) (i): the importation into the United States, the sale
for importation, or the sale within the United States after importation
by the owner, importer, or consignee, of articles that infringe
a valid and enforceable United States patent or a valid and enforceable
United States copyright registered under title 17.
From time to time, Taiwan
companies are listed as defendants in such lawsuits and ITC proceedings
with or without prior notice, since many end products of Taiwan
companies are exported to US, and potentially may contain alleged
patented inventions or methods. While some of the products are
licensed for the Taiwan companies’ activities, some are not.
The question for a Taiwan
company who is doing business in US usually to ask itself nowadays
is whether obtaining a patent for its products or licensing is
necessary, and even sometimes it is necessary, whether such costs
for a patent or licensing would be too high to continue the business
of that product line. Therefore, for a Taiwan company who is doing
business in US, a patent strategy, not necessarily an offensive
one to develop and obtain core patents, but also a defensive one
to receive useful patents at a cost-efficient manner, will be
more and more important in the future.
Such defensive patent
strategy must be researched, updated, and determined periodically
at the company taking into account at least the products marketing
directions, other pricing factors of the products, technologies
involved, patented technology trend worldwide and company image
and branding. It is an on-going efforts and indeed not an easy
task.
With a right strategy,
such Taiwan company when involved in a request for licensing or
litigation for alleged infringement, will then have a better position
to negotiate with litigate against the plaintiff/patent holders.
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