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Pillsbury Winthrop Shaw Pittman LLP

New Excise Taxes and Disclosure Rules With Respect to Potentially Abusive Tax Shelter Transactions Involving Tax-Exempt Entities
On May 17, 2006, Congress enacted the Tax Increase Prevention and Reconciliation Act of 2005 ("TIPRA"), which includes new excise taxes and disclosure rules targeting potentially abusive tax shelter transactions to which a tax-exempt entity is a party. TIPRA creates a new section 4965 and amends sections 6033(a)(2), 6011(g) and 6652(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code"). The TIPRA amendments have broad application to tax-exempt entities and their managers; entities that may be affected by the new provision include, but are not limited to, charities, state and local governments, qualified pension plans, individual retirement accounts, health savings accounts, and similar tax-favored savings arrangements. The manager of these entities, and in some cases the entities themselves, may be subject to excise taxes if the entity is a party to a prohibited tax shelter transaction.

07-25-2006

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Woodcock Washburn LLP

Supreme Court to Review Patent Case on Standard for Obviousness
For the first time in over 40 years, the Supreme Court has decided to substantively address the standard for obviousness. Specifically at issue is whether the Federal Circuit's test requiring there to be some teaching, suggestion, or motivation in the prior art to combine references is a correct application of the Supreme Court's 1966 Graham v. John Deere obviousness standard.

07-25-2006

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Woodcock Washburn LLP

The Eastern District of Texas denied a request for a permanent injunction in z4 Techs., Inc. v. Microsoft Corp
In an opinion last week, a federal court in Texas became the first to deny permanent injunctive relief under the eBay standard. In z4 Techs., Inc. v. Microsoft Corp., 6:06-CV-142, slip op. (E.D.Tex. Jun. 14, 2006) (J. Davis), the court declined to grant a permanent injunction despite a jury finding of willful infringement of a valid patent owned by a patentee that had attempted to commercialize the patented technology.

07-25-2006

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Ulmer & Berne LLP

New Air Pollution Law Enacted to Streamline Ohio Air Permitting Process
Governor Bob Taft recently signed Senate Bill 265, legislation that significantly revises the Ohio Pollution Control Law and streamlines the state's air permitting process. The Ohio Environmental Protection Agency (EPA) currently applies the Best Available Technology (BAT) requirements for air contaminant sources during review of the permit to install application on a case-by-case basis. Under the Senate Bill 265 revisions, the Ohio EPA director must promulgate rules that establish BAT requirements to be included in permits to install. Establishing BAT in rule will eliminate the case-by-case review and hopefully accelerate the permit review process. Senate Bill 265 also changes certain aspects of the Ohio Pollution Control Law regarding the list of air contaminants, costs of complying with rules, and air pollution monitoring, record-keeping and reporting.

07-25-2006

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Ulmer & Berne LLP

Ohio Attorney General Jim Petro Issues Proposed Rules for Charitable Organizations
Ohio Attorney General Jim Petro has proposed a new set of rules for Ohio charities with the intent to make charities more transparent and accountable to the public. The 46-page set of proposed rules was unveiled on June 29, 2006, and is available for public comment until August 21, 2006. If enacted, the proposed rules will impose substantial new obligations on charitable organizations that are considered "charitable trusts" as defined in Section 109.24 of the Ohio Revised Code. The new requirements include reporting, conflicts of interest, executive compensation and reimbursement, community benefit measurements (for large charities), and fair billing and collection practices (for charitable hospitals and nursing homes). Moreover, the proposed rules require that many charities, including charitable hospitals, register with the Attorney General as a charitable organization and file an annual report, while they have had no such obligation to do so until now.

07-25-2006

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Ulmer & Berne LLP

U.S. Supreme Court Establishes Standard for "Materially Adverse Action" in Retaliation Cases
The federal employment discrimination laws prohibit retaliation against employees or applicants who either complain about alleged discrimination against themselves or others or participate in discrimination proceedings. Federal courts, however, have disagreed over whether the employer's alleged retaliatory action has to be employment or workplace related and how harmful that action must be to constitute retaliation. In a much-awaited decision, the U.S. Supreme Court, in Burlington Northern & Santa Fe Railway v. White, No. 05-259, 2006 U.S. LEXIS 4895 (June 22, 2006), resolved that conflict in a way that changes the standards for employers in most parts of the country and also could make it easier for plaintiffs to establish retaliation claims.

07-25-2006

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Thelen, Reid, Brown, Raysman & Steiner, LLP

Federal Agency Allowed to Use Online Reverse Auction for Procurement
A government agency that requires annual physical inspections of its rental housing units issued a notice of intent to conduct an online reverse auction under the simplified acquisition procedures of Federal Acquisition Regulation Part 13. FAR Part 13 governs procedures for acquisitions with a value below the simplified acquisition threshold of $100,000 and/or micro-purchase threshold of $2,500.

Under the agency’s reverse auction procedure, participants submit bids to a Web site, which displays the property to be inspected, the current lowest bid and the time remaining in the auction. The Web site does not display the names of vendors, other identifying information or the time at which bids are submitted. At the close of the auction, competing vendors can view all submitted bids in addition to the winning bid. The agency provides unsuccessful vendors with the name of the winning vendor and its quotation but not the identity of the unsuccessful vendors.

A vendor protested that the reverse auction procedure violates the Office of Federal Procurement Policy Act, 41 USC §423 (a), which “prohibits government officials and those acting on behalf of the government from knowingly disclosing contractor quotation or proposal information before award.” The Comptroller General of the United States determined that the reverse auction was a proper method of procurement by the Department of Housing and Urban Development. Matter of: MTB Group, Inc., 2005 WL 433615, 2005 U.S. Comp. Gen. LEXIS 34.

First, the Comptroller General determined that an online reverse auction is proper under FAR Part 13. FAR does not expressly prohibit reverse auctions, and under §1.102(d), procurement procedures are permissible when not specifically prohibited. Moreover, FAR Part 13 encourages using simplified acquisition procedures when they would be the most suitable, efficient and economical manner based on circumstances (§13.003(g)); when the value of the acquisition is below the simplified acquisition threshold (§13.002); or in furtherance of the policy of using innovative procedures to the maximum extent possible. (§13.003(h)). FAR Part 13 also encourages electronic purchasing techniques (§13.003(d)) and electronic commerce where practicable and cost effective. (§13.003(f)). Thus, FAR Part 13 supports the use of online reverse auctions.

The Comptroller General then addressed the vendor’s specific objection that a reverse auction would violate the Act by disclosing vendors’ prices.

First, the Comptroller General held that because the Act does not prohibit vendors from disclosing their own prices and because vendors, not the agency, would be submitting their bids to the Web site, the disclosure at issue is not prohibited by the Act. But, because submitting bids to the Web site is a condition to participate in the auction, the Comptroller General recognized that government disclosure could be implied.

Accordingly, the Comptroller General determined that the reverse auction falls within an exception to the Act: “the Act specifically provides that it does not ‘restrict disclosure of information to, or its receipt by, any person or class of persons authorized in accordance with applicable agency regulations or procedures, to receive the information.’ ” (41 USC §423 (h) (2)). Because the disclosure at issue would be “pursuant, and integral, to the reverse auction procurement procedures established by the agency… disclosure [would be] to persons authorized by agency procedures to receive the information, consistent with the exception language.”

In making the above findings, the Comptroller General noted that this issue was one of first impression and that it found no judicial or other authoritative interpretation regarding the exception language of the Act.

In response, the vendor argued that the exception language of the Act was meant to refer only to contractor personnel assisting in proposal evaluation and related activities. The Comptroller General rejected this argument, finding that it lacked support and was “untenable” in light of the Act’s stated purpose – “prevent[ing] government officials from disclosing sensitive procurement information in exchange for gratuities or future employment opportunities.”

Finally, the vendor argued that the agency improperly divided the single requirement for inspection services into several smaller requirements in order to reach the threshold amounts of FAR Part 13. To support its argument, the vendor pointed to previous large regional procurements and a provision of FAR Part 13 that admonishes agencies not to divide aggregate work into several below-threshold purchases for the sole purpose of using its simplified procedures.

The Comptroller General held that these arguments were without merit. It gave no weight to what the agency did on other procurements. It accepted the agency’s explanation that its purpose in dividing this procurement was the inclusion of smaller inspectors who would not otherwise bid on multiple inspections. The agency also stated that, in its experience, smaller requirements resulted in lower inspection prices overall. Lastly, the Comptroller General noted that the vendor could not show any prejudice, nor was it precluded from competing for any of the contracts.

In a footnote, the Comptroller General stated that it does not consider the reverse auction procedure to be any different than other procurement procedures where all bidders’ prices are revealed at the public bid opening. It noted that “[t]he disclosure of prices – and any competitive advantage that inures to competitors as a result – is simply an inherent feature of the transparency in any public competition for a federal contract award.

07-25-2006

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