Category Archives: Publications

Preccelerator Program Event: Accelerators, Incubators & Co-Working Spaces: Which One is Right For You?

This panel, hosted by the SAM Preccelerator Program, discusses  the differences and benefits of accelerator, incubator and co-working spaces from the accelerator, legal and entrepreneur viewpoints.

For more information about the Preccelerator Program, contact Heidi Hubbeling at (310) 746-9803 or


Earlier this month, Brand Development & Content Protection co-chairs Tony Keats and Konrad Gatien attended the annual meetings of the International AntiCounterfeiting Coalition and the International Trademark Association in Hong Kong.  In addition, Tony Keats traveled to Shanghai, Xi’an and Beijing.  During their trip to China, they witnessed several issues that blatantly affect brand protection efforts of high-fashion design and consumer product companies.


Tony Keats  reports on visiting Beijing’s notorious Silk Market Building  with some 1,700 vendors, over 3,000 salespeople, 10 sales floors, and located on seven floors  at Yonganli, in the Chaoyang District. Here, the sales personnel openly flaunt the availability of enormous volumes of counterfeit apparel and luxury goods.  In the prior decade, famous brand owners from Burberry, Louis Vuitton, Chanel  and Gucci, to The North Face and LaCoste had achieved ground-breaking legal successes  obtaining relief against the owner/landlord of Beijing’s Silk Market complex, including obtaining injunctive relief, signage requirements, and even small amounts of damages. However, less than a decade later, this litigation has had little impact as Tony Keats was shown back-rooms of various stores with floor to ceiling inventories of counterfeit luxury products. On the first floor, vendors selling unlicensed apparel were not even hiding the merchandise in backrooms but were openly displaying enormous quantities without any effort to cover up their sales. Tony also reports that dozens of tour buses unloaded anxious buyers at the Silk Market while he was at the market. It is reported that there are approximately 20,000 visitors on the weekdays and between 50,000 to 60,000 shoppers on weekends.







It has been suggested that as China develops more of its own famous brands which are counterfeited, that the IP community will see greater enforcement efforts by the authorities in that country.  For example, on May 14, the state paper The China Daily reported that customs officials in  Jiangmen City in  Guangdong Province recently seized nearly 3 million fake batteries with a value of US $90,000. The counterfeits, which were to be shipped to Dubai, have a graphic logo very similar to that of SUNWATT, a famous brand owned by Chinese manufacturer, Guangxi company.

SAM’s Brand Development and Content Protection group was able to assist client Stanley Black & Decker in shutting down a counterfeit battery manufacturer in Fushon City, which was producing counterfeit DeWalt brand batteries used with the companies power tools.


On May 1, 2014, revisions of the trademark law went into effect. One provision prohibits the use of “well-known trademarks” in advertising and on packaging. The state paper The China Daily reported that the new law was causing a number of companies to change their labels and even destroy products. One Chinese company, Jing Wu Agribusiness Group, a company specializing in food and feed processing, which won the title of most well-known trademark in China in January 2013, has now recalled and destroyed nearly 2 million packages at a cost of approximately US $500,000.


The state China Intellectual Property News proclaimed that agencies nationwide investigated more than 4,700 intellectual property infringements in the first quarter of 2014 that had a combined potential retail value of US $43.25 million. Enforcement officials claimed to have checked a wide range of sectors including garments, electric appliances, toys, shoes and furniture. They claim in March alone, 183 shipments of food and six shipments of cosmetics were proven counterfeit, then destroyed or returned to exporters. These efforts are at best a step in the right direction but a paltry amount in light of the size of the Chinese counterfeiting problem.

It was reported by The China Daily on May 21st, that a district court in Beijing handed jail and monetary penalties against seven men convicted of illegally offering movies and TV downloads in what was described as China’s largest copyright piracy case.  The president of the company that operated the website was sentenced to five years in jail and fined US $160,200. The other six defendants were given jail sentences ranging from one to three years., founded in 2008, had seven managers and 140 website administrators, becoming the largest portal of pirated movies, TV shows, and music in China. The parent company also had two brick and mortar stores in Beijing. The website had more than 20 million downloads.

For more information about Stubbs Alderton & Markiles’ Brand Development & Content Protection Practice, contact Tony Keats at or (310) 746-9802, or Konrad Gatien at or (310) 746-9810.

SAM Partner Scott Alderton Featured in Article “Find an Attorney Who Will Be in Your Corner With These 3 Tips”


SAM Co-Founder and Managing Partner, Scott Alderton was featured in today’s article “Find an Attorney Who Will Be in Your Corner With These 3 Tips.”  Author Adam Callinan of Beachwood VC outlines some of the early questions you should be asking and warning signs you should be recognizing when searching for new legal counsel.

Scott Alderton states that you need “a lawyer with a deep contextual understanding of both the substantive nature of your evolutionary path (i.e. they understand and do the exact type of transactions you are going to be engaging in) and a broad understanding of your industry.” 

To read the full article, click here.

For more information on our Emerging Growth practice, and for information about our Start-up Fixed Fee Legal Package, contact Scott Alderton at (818) 444-4501 or


Stubbs Alderton & Markiles Featured in LA Business Journal Article Regarding Tech Growth in the Legal Industry


The Los Angeles Business Journal featured the recent expansion of Stubbs Alderton & Markiles’ Business Litigation practice in its March 31 edition regarding tech growth in the Los Angeles legal market. To view the full article, click here.

For more information about our Business Ligitation practice, contact SAM Partner Michael Sherman, at or 818-444-4528.

Unfair Competition – Lexmark Int’l, Inc. v. Static Control Components, Inc.

Unfair CompetitionWashington, D.C. – This dispute between printer ink cartridge suppliers has encountered a blotchy area of the law. Lexmark, a laser printer manufacturer, encrypts the ink cartridges it manufactures for use in its printers with a microchip. Static Control Components engineered a microchip that allowed competing ink cartridge manufacturers to have access to Lexmark printers. Lexmark sued Static Control for copyright infringement, among other things, and Static Control countered with a false advertising claim against Lexmark. Lexmark sought summary judgment on the false advertising claim, alleging that Static Control did not have standing to sue under the Lanham Act. On Tuesday, March 25, 2014, a unanimous Supreme Court resolved a split of authority amongst the Circuit Courts over the issue of standing in false advertising claims brought under the Lanham Act, 15 U.S.C. § 1125(a). Who has standing to bring a false advertising claim under the Lanham Act? Justice Scalia’s opinion answers this question by establishing a two-prong test for interpreting the Act to determine whether a particular plaintiff “falls within the class of plaintiffs whom Congress has authorized to sue under §1125(a).” Lexmark at 9. First, a plaintiff’s interests must “fall within the zone of interests protected by the law invoked.” Id at 10. The Court explains that this “Zone of Interest” requirement “applies to all statutorily created causes of action… unless it is expressly negated” by Congress. Id at 10. However, “the breadth of the zone of interests varies according to the provisions of law at issue” for any particular statute. Id at 11. Second, “a statutory cause of action is limited to plaintiffs whose injuries are proximately caused by violations of the statute.” Id at 13. This “Proximate Cause” requirement asks “whether the harm alleged has a sufficiently close connection to the conduct the statute prohibits.” Id at 14. The Court explains that this second requirement “generally bars suits for alleged harm that is ‘too remote’ from the defendant’s unlawful conduct.” Id.

Applying the first prong to a false advertising claim under the Lanham Act, the Court identified the “interests protected by the Lanham Act” by referring to the “’unusual, and extraordinarily helpful,’ detailed statement of the statute’s purposes.”

Section 45 of the Act, codified at 15 U. S. C. §1127, provides:

“The intent of this chapter is to regulate commerce within the control of Congress by making actionable the deceptive and misleading use of marks in such commerce; to protect registered marks used in such commerce from interference by State, or territorial legislation; to protect persons engaged in such commerce against unfair competition; to prevent fraud and deception in such commerce by the use of reproductions, copies, counterfeits, or colorable imitations of registered marks; and to provide rights and remedies stipulated by treaties and conventions respecting trademarks, trade names, and unfair competition entered into between the United States and foreign nations.” Id at 12.

Although “[m]ost of the enumerated purposes are relevant to false association cases,” the Court explains that “a typical false-advertising case will implicate only the Act’s goal of ‘protect[ing] persons engaged in [commerce within the control of Congress] against unfair competition.’” Id. Justice Scalia looks to the common law for the definition of “unfair competition,” stating that it was “understood to be concerned with injuries to business reputation and present and future sales.” Id. Thus, a plaintiff comes within the zone of interests in a suit for false advertising under §1125(a) when that plaintiff “allege[s] an injury to a commercial interest in reputation or sales.” Id at 13.

Applying the second prong, the Court explained that the “[p]roximate cause analysis is controlled by the nature of the statutory cause of action,” and asks “whether the harm alleged has a sufficiently close connection to the conduct [that] the statute prohibits.” Id at 14. The Court held that, when suing for false advertising, a plaintiff “ordinarily must show economic or reputational injury flowing directly from the deception wrought by the defendant’s advertising.” Id at 15. This occurs when a defendant’s deception causes “consumers… to withhold trade from the plaintiff.” Id. Several examples include “afford[ing] relief under §1125(a) not only where a defendant denigrates a plaintiff ’s product by name… but also where the defendant damages the product’s reputation by, for example, equating it with an inferior product.” Id at 19. Further, a defendant who “‘seeks to promote his own interests by telling a known falsehood to or about the plaintiff or his product’” may be said to have proximately caused the plaintiff ’s harm. Id at 20.

The Lexmark decision is important in two aspects. Narrowly, in order to have standing under the Lanham Act for a false advertising claim, “a plaintiff must plead (and ultimately prove) an injury to a commercial interest in sales or business reputation proximately caused by the defendant’s misrepresentations.” Id at 25. Broadly, the decision adopts a two-prong test for evaluating standing under any statutorily created cause of action, and provides a rubric for analyzing each prong. It will be interesting to watch the development of the jurisprudence of standing as lower courts apply Zone of Interest and Proximate Causation to false association claims under the Lanham Act and extend this analysis to other federal statutes.


For more information about our Brand Development & Content Protection Practice, contact Konrad Gatien ( or Tony Keats (

SAM Partner Tony Keats Co-Authors “Protecting the Brand: Counterfeiting and Grey Markets”

SAM Partner, and Co-Chair of the Firm’s Brand Development & Content Protection Practice, Tony Keats has Co-Authored the book, “Protecting the Brand: Counterfeiting and Grey Markets.” For more information regarding our Brand Development and Counterfeiting expertise, contact Tony at (310) 746-9802 or  For order information and discount codes, please see the below flyer.

Protecting the Brand Flyer for Author_Page_1

Important Business News from Stubbs Alderton & Markiles, LLP – New California “Do Not Track” Law Goes into Effect January 1, 2014


Important Business News


Stubbs Alderton & Markiles, LLP

New California “Do Not Track” Law Goes into Effect January 1, 2014


Beginning January 1, 2014, AB 370, an amendment to the California Online Privacy Protection Act (CalOPPA), will require owners of commercial websites to disclose how they respond to “do not track” signals and to inform users of these websites if their online activities are being tracked. “Do Not Track” technology enables a web browser to express the user’s preference not to be tracked by websites. When this feature is activated, a user’s browser signals to advertising networks and other websites the user’s choice to opt out of being tracked.

This new law does not make it illegal to ignore “do not track” settings on web browsers. Instead, it requires each business to disclose whether or not they ignore these settings. The law also requires each business to disclose whether its website tracks over time and across other websites the online activity of consumers residing in California who visit the website or if the business allows third parties to track the website’s visitors. Failure to comply with the new law could lead to significant fines enforced by the California Attorney General.

Here are some suggested business practices for adapting to the new law:

  • Conduct an audit of your website. Determine how your website responds to “do not track” browser settings and signals and whether your business permits third parties to conduct tracking activities on your website.
  • Update your website’s privacy statement. California business owners should update their website’s privacy statement by January 1, 2014 to include disclosures about how the website responds to “do not track” signals.

How Stubbs Alderton & Markiles, LLP can help. We are a business law firm with particular expertise in privacy and Internet law. Our attorneys have extensive experience in developing effective and legally compliant privacy statements for websites. Please contact us directly if you would like assistance in updating your website’s privacy statement to comply with the new “Do Not Track” law.

For any questions, please contact Kevin DeBré, Scott Alderton or Stephen McArthur.

Kevin DeBré

Scott Alderton

Stephen McArthur

3 Questions with Jason Lee

Jason_Lee_FIXJason Lee is an associate of the Firm. His practice focuses on corporate transactions, including mergers and acquisitions, private equity transactions, and general corporate matters for both public and private clients, focusing on middle-market and emerging growth companies. In addition, Jason counsels companies in connection with company formation process, SEC reporting requirements and registrations, federal and state securities laws and compliance, corporate governance matters, joint ventures, employee incentive plans and executive employment agreements.  Below, Jason evaluates exclusive dealing arrangements under Section 1 of the Sherman Act.


Q.  What does Section 1of the Sherman Act seek to prevent?

A.   Section 1 of the Sherman Act prohibits unreasonable restraints on trade.  Section 1 of the Sherman Act prohibits any contract, combination or conspiracy that unreasonably restrains trade.  Restraints are typically analyzed by two standards: per se or the rule of reason.  Certain restraints are so unreasonably harmful that they are per se illegal.  Others require court analysis under the rule of reason.

 Q.  What are the elements a plaintiff must establish to prove a violation under Section 1 of the Sherman Act for an exclusive dealing contract?

 A.   A plaintiff bringing a claim of violation of Section 1 must establish that an agreement between two or more parties exists, there is an effect on interstate or foreign commerce and the agreement places an unreasonable restraint on trade.  The agreement between the parties can made among competitors or among parties at different levels within a certain distribution chain.  In addition, an agreement can exist even if there is no written contract.

 Under the rule of reason, a plaintiff must define the relevant market restrained by the challenged agreement, show that the defendant has market power in the relevant market and establish that such agreement adversely effects competition in the relevant market.  For exclusive dealing agreements, courts examine the effects of competition on a relevant market by determining if such an arrangement forecloses a substantial portion of any competing supplier’s distribution channels.

Q. What factors do courts use to review the impact of foreclosure of competitors to distribution channels?

 A.  To assess the competitive impact of foreclosure, courts measure the percentage of foreclosure and several qualitative factors listed below.

 –          Percentage of foreclosure. Courts generally find that an arrangement that forecloses 20% or less of the relevant market presumptively does not adversely affect competition. However, the percentage of foreclosure is not a definitive factor.  Under the qualitative substantiality standard, courts evaluate agreements and the percentage of foreclosure in light of conditions in the market.

 -          Market position of the seller imposing the restraint.  Courts will require that the seller and party to the agreement has a dominant position.

 -          Duration and terminability of the exclusive arrangement.  Courts generally hold agreements that have a term of one year do not have substantial anticompetitive effects and are presumptively legal.  Likewise, if agreements are easily terminated by the distributor, even if its term is longer than one year, courts are likely to find the agreement reasonable.

-          Level in the distribution chain where restraint is imposed and whether alternative methods of distribution exist.  Courts review the level of the distribution chain where the restraint exists.  If the restraint involves a middleman distributor, as opposed to consumers, courts tend to require a higher amount of foreclosure percentage because it is less obvious the restraint will affect competition at the consumer level.  Courts will also look to see if there are alternative outlets for competitors to reach consumers.  If such alternative outlets exist, courts are reluctant to find an exclusive dealing arrangement illegal.

 -          Whether there has been entry into or withdrawal from the supplier market. If there is a successful recent entry into the supplier’s market, courts are less likely to find that an exclusive dealing arrangement substantially foreclosed competition.  Conversely, if there is evidence competitors have not been able to enter the market because of an exclusive dealing arrangement, the agreement is more likely to be found anticompetitive and illegal.

 –          Prevalence of exclusive dealing arrangements in the industry.  Courts will review how prevalent exclusive dealing arrangements are in the relevant market.

 –          Whether the exclusive dealing arrangement was the product of competition.  Courts also consider whether exclusive dealing arrangements result from vigorous competition as opposed to anticompetitive behavior.  If there is a bidding process where a retailer or distributor sought exclusivity, courts are unlikely to find that agreement unreasonable because courts generally view a buyer seeking exclusivity obligations to be an indicator that the arrangement is procompetitive.  If the arrangement exists because the defendant offers a better product or better price to the distributor than competitors, courts tend to uphold the agreement as legal.

 Ultimately, a plaintiff must show that the supplier’s action forecloses competitors in such a way that allows the supplier to either raise prices, restrict output or otherwise harm consumers.


For more information about the Sherman Act and other corporate matters, contact Jason Lee at (818) 444-4506 or

Taxation of Intellectual Property – By: Michael Shaff


IP TaxThis summary can only hit some of the more prominent aspects of the taxation of the development, purchase and sale of intellectual property.

 1.          What is intellectual property for purposes of this analysis?

            a.     Copyrights, literary, musical or artistic compositions or similar property are expressly identified under the Internal Revenue Code for special “non-favorable” treatment on sale by the creator.[1]   Video games, books, movies, television shows all fall into this category of asset in the hands of the developer.[2]

            b.    Another class of intellectual property, including trade secrets, formulas, know how and other methods, techniques or processes that are the subject of reasonable efforts to maintain secrecy fall within the general class of intangible assets that may be treated as a capital asset on sale but are subject to special rules on the useful life over which to amortize the cost of the intangible asset, as discussed below.[3]

 2.        How is the developer or owner of intellectual property treated?

         a.        In general, self-created copyrights, literary, musical or artistic compositions are not eligible for capital gain treatment on sale.[4]  As an example, the Tax Court has held that the concept for a television show was not eligible for capital gain treatment.[5]

              b.       Purchased intellectual property is generally eligible to be treated as a capital asset on sale unless the owner holds the intellectual primarily for sale to customers in the ordinary course of business, as in the case of a software or game developer selling individual, non-custom programs.  The sale of the copyright and the code to the program would not be treated as capital gain in the hands of the developer but could yield capital gain if the copyright and the software had been purchased.

             c.     The exclusion from capital asset treatment does not necessarily apply to a self-created invention that can be patented[6].  The treatment on disposition of such assets may depend on whether the cost of development was capitalized and amortized or whether the development costs were expensed and deducted in the course of development as well as whether the asset is held for sale to customers (not a capital asset) or is used in the taxpayer’s business (in which case it may be eligible for capital gain/ordinary loss treatment).

           d.     A transaction in which the developer is compensated has to be analyzed to distinguish a license arrangement from a sale.[7]  An agreement cast in the form of an exclusive license may be treated as a sale for tax purposes even if title remains with the grantor.  The key question is whether the transferor retained any rights which, in the aggregate, have substantial value.[8]

 3.      How is the purchaser of intellectual property treated?

             a.     The purchaser of the intellectual property may capitalize and amortize the cost of developing the intellectual property if the intellectual property is to be used in the creator’s business.[9]  Computer software is automatically accorded three year straight line amortization if the developer or purchaser opts to amortize the cost of the software.[10]  If the development of the software qualifies as research and development in the laboratory or experimental sense, the costs are deductible currently.[11]

           b.     The purchaser of the intangible assets used in the purchaser’s trade or business (other than computer software as provided above) is permitted to amortize the cost of purchase allocated to most forms of intellectual property over 15 years on a straight line basis.[12]   Section 197 assets include goodwill, going concern value, workforce in place, operating systems, information bases, customer based intangibles, vendor based intangibles, licenses, trade marks, trade names, and franchises.[13]

          c.     The purchaser of the stock of a company that owns intellectual property is subject to the treatment to which the company is already subject unless the purchaser and seller of the stock elect to treat the stock sale as an asset sale[14].

 4.     Sales and Use Tax.  Of the states that impose sales and use tax, most impose the tax on the sale of tangible personal property.  In California, the sale of a custom written computer program is not subject to sales tax.[15]  In the case of the sale of a prewritten program to customers, the sales tax is imposed if the software is sold on compact discs or on other media stored in tangible form.[16]  Software that the buyer downloads from a website and that is not otherwise delivered on tangible media is not a sale of tangible personal property subject to the California sales tax.[17]

 5.     Conclusion.  The tax treatment of intellectual property is determined by the nature of the intellectual property and how the taxpayer obtained the intellectual property.  The cost of developing self-created intellectual property may be eligible for immediate expensing or may have to be capitalized and carried on the taxpayer’s books, not eligible for either deduction or amortization depending on its purpose, the nature of the assets’ development and the assets’ useful life.  The cost of purchasing intangible assets used in a business is amortized on a straight line over 15 years except for acquired computer software, which is written off over three years.  The cost of other purchased intangible assets may be eligible for amortization using the income forecast method.  The sale of intellectual property generally results in capital gain or loss unless the property is a self-created copyright or an asset held primarily for sale in the taxpayer’s business.


Michael ShaffMichael Shaff joined Stubbs Alderton & Markiles, LLP in 2011 as Of Counsel. He is chair person of the Tax Practice Group.  Michael specializes in all aspects of federal income taxation. Mr. Shaff has served as a trial attorney with the office of the Chief Counsel of the Internal Revenue Service for three years. Mr. Shaff is certified by the Board of Legal Specialization of the State Bar of California as a specialist in tax law. Mr. Shaff is the past chair of the Tax Section of the Orange County Bar Association.  He is co-author of the “Real Estate Investment Trusts Handbook” published by West Group. Michael’s practice includes all aspects of federal and state taxation, including mergers and acquisitions, executive compensation, corporate, limited liability company and partnership taxation, tax controversies and real estate investment trusts.

For more information regarding Intellectual Property Taxation, please contact Michael Shaff at or (818)444-4522.

[1]     Internal Revenue Code (“IRC”) §1221(a)(3) (This category of intellectual property is denied capital asset treatment on sale if created by the taxpayer’s personal efforts.).

[2]     See Rev. Proc. 2000-50, 2000-2 C.B. 601.

[3]     See, e.g., Graham v. United States (N.D. Tex. 1979) 43 AFTR 2d 79-1013, 79-1 USTC ¶9274 (dealing with the formula for Liquid Paper).

[4]    IRC §1221(a)(3).

[5]     See, e.g., Kennedy v. Commissioner T.C.M. 1965-228, 24 (CCH) 1155 (1965).

[6]     IRC §1235 (individual inventor or individual purchaser from the inventor will be able to treat the patent as a capital asset if held for more than a year.)

[7]     See, e.g., Weimer v. Commissioner TC Memo 1987-390, 54 (CCH) TCM 83 (1987).

[8]     E.I. DuPont de Nemours & Co. v. United States (3d Cir. 1970) 432 F2d 1052, 26 AFTR 2d 70-5636, 70-2 USTC ¶9645 (sale of right to use patents to manufacture nylon while retaining the right to manufacture Dacron with the same patents held a sale of substantially all of the value of the patent sold).

[9]     IRC §167(g) (allowing the income forecast method of amortization for many types of intellectual property other than computer software).

[10]    IRC §167(f).

[11]    Treas. Reg. §1.174-2(a).

[12]    IRC §197(a).

[13]    IRC §197(d)(1).

[14]    IRC §338(h)(10).

[15]    Cal. Rev. & Tax. Code §6010.9; Nortel Networks, Inc. v. State Board of Equalization (Cal. App. 2011) 119 Cal. Rptr.3d 905.

[16]    Sales and Use Tax Annotation 120.0531 (Apr. 10, 1997).

[17]    Sales and Use Tax Annotation 120.0518 (March 11, 1994).

How to Protect Your Brand — By Konrad Gatien

Brand 101

Partner Konrad Gatien was recently the featured speaker at a San Fernando Valley Bar Association event. Konrad spoke on the topic of “How to Protect Your Brand.”  Key points included the business perspective, legal perspective, a primer on copyrights, trademarks trade dress, and how to make your brand unique.

For more information regarding Brand Development & Content Protection, contact Konrad Gatien at (310) 746-9810 or