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contents 4 EDITOR’S DESK INTELLECTUAL PROPERTY
10 THREE KEY IP CASES TO WATCH THIS YEAR Fair use, “a law of nature,” and the very existence of the PTAB, all on the table. By Michael Cicero
FEBRUARY/MARCH 2021 Volume 18 / Number 1
COLUMN: THE ANTITRUST LITIGATOR
20 REFUSAL TO DEAL Supreme Court poised to revisit a controversial 1985 decision. By Jeffery M. Cross
12 COVID-19 AND INTELLECTUAL PROPERTY PROTECTION Zoom eavesdroppers and work from home NDAs. By Tim Hudson and Emily W. Miller DATA PRIVACY/CYBERSECURITY
14 BRAZIL’S NEW DATA PROTECTION LAW Stricter in some respects than the GDPR, it affects companies worldwide. By Vishal Sunak COMPLIANCE
16 BREXIT CHECKLIST FOR U.S. TECHNOLOGY COMPANIES Parallel investigations — no more “one-stop shopping.” By Bird & Bird legal team 18 MANDATING EMPLOYEE COVID-19 VACCINATIONS Reasonable accommodation for the recalcitrant, if possible. By Emily H. Mack
22 FEATURES
7 TRANSFORM YOUR LEGAL DEPARTMENT Productivity and ROI will soar. By David Edelheit 22 PANDEMIC-RELATED EMPLOYMENT LITIGATION Today’s crisis meets yesterday’s legislation. By Dan M. Forman 24 STEPS TO IMPROVE BOARD DIVERSITY IN 2021 A mandate, no longer just a best practice. By Geoffrey R. Morgan FEB/MAR 202 1 TODAYSGENERALCOUNSEL.COM
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EDITOR’S DESK
W
e are a litigious nation, so when something as disruptive as the pandemic comes along, lawsuits are sure to follow. In this issue of Today’s General Counsel, Dan Forman
summarizes the kinds of class actions employees are filing based on Covid-related lay-offs, business closures and the circumstances that arise when work is done remotely. Emily Mack’s article covers the problems employers will soon face with regard to mandatory vaccination policies. Because of the havoc Covid has caused, another massive disruption, Brexit, receded into the background. Nevertheless, the UK exited the EU on the last day of 2020, and that will have a big impact on global commerce. A team of lawyers from Bird & Bird outlines the new realities that U.S. companies, especially tech companies, face post-Brexit. In other articles, Michael Cicero discusses three IP cases to watch in 2021, and columnist Jeffery Cross analyzes a major antitrust case that the Supreme Court is likely to accept this year.
Bob Nienhouse, Editor-In-Chief bnienhouse@TodaysGC.com
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SPONSORED SEC TION
Transform Your Legal Department By DAVID EDELHEIT
G
eneral Counsel are used to hearing the familiar mandates from the C-Suite — be more of a business advisor, generate revenue, do more with less, deliver faster. In a recent survey, 70 percent of chief executives said GCs should be a strategic business partner and key member of the leadership team. Only 55 percent of CEOs, however, said their GCs fill those roles. Clearly, CEOs and GCs have the same goal, so why aren’t GCs able to be consistently viewed as a strategic partner? GCs juggle many responsibilities. Straddling the roles of cost BACK TO CONTENTS
center manager, risk manager and revenue generator is a tall order. Mired in manual processes and budget limitations, GCs have been handcuffed, unable to think strategically about the business as often as they would like. Nor have they wielded the innovative technology necessary to use datadriven insights and streamlined workflows to deliver demonstrable, dramatic business results that wow the C-Suite.
END-TO-END TRANSFORMATION Until now, GCs have not been pressured to engage in a fullblown legal transformation.
According to a Gartner study, eight out of 10 law departments are unprepared to support their organization’s digital initiatives. But as business complexity mounts and cost pressure intensifies amid a pandemic, GCs are feeling more heat to do what was unimaginable — create enhanced value and increase productivity while reducing costs and risk. Not only is transforming the legal department essential, it is feasible. Thanks to increased cloud capacity and advances in artificial intelligence, GCs are freed up for more strategic business pursuits. To deliver strategic value, GCs must be all in on transformation efforts and have buy-in from CEOs. That means understanding that this transition will cause short-term disruption but longterm gains. It is not just about implementing technology here and there. Digital transformation is workflows and processes. It’s a mindset and commitment to a new way of doing business. To put it bluntly, when it comes to legal transformation, you have to go big or go home. But what you put in will pay dividends. Companies that invest in transformation are discovering that an optimized law department increases productivity 20 percent, reduces operating costs by up to 45 percent, accelerates delivery 63 percent and speeds revenue generation by 35 percent. This ROI occurs because of
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direct law department measured gains and business unit value capture — thanks to downstream and cross-stream synergy. The results of end-to-end transformation radiate across the legal department and beyond to build the business.
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Reduce costs: Use AI to hunt contracts for value. Commercial contracting is the lifeblood of many legal departments. Some Fortune 500 companies spend upwards of 75 percent of legal department resources on contracting, and it can be wasteful. According to research by McKinsey and World Commerce & Contracting (formerly IACCM), companies lose anywhere from 8 percent to 20 percent of their contract portfolio’s value due to revenue leakage. For the Fortune 1000, this equates to $2.5 trillion of value leakage per year (according to World Commerce & Contracting research) due to poor contracting processes. Forward-thinking law departments are tapping into the power of AI to surface hidden revenue potential in contracts down to the line-item level. Their efforts are yielding 10 percent improvements in contract performance. Not only are they increasing their profitability, they are improving their workflow processes. They are improving contract turnaround times and collecting revenue sooner, which decreases contract management costs.
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Improve performance: Streamlined intellectual property practices. COVID-19 has accelerated digital deployment across the enterprise, and that includes the law department. When a law department becomes digital — embraces
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automated workflows, uses data and insights to drive more informed decision-making, and adopts agile delivery models — productivity soars. For example, the law department of a Fortune 50 manufacturer recently undertook a process to transform how it handled efficiencies around its intellectual property. By transforming the IP team into a dedicated entity, expanding their resources with new skills and technical expertise, redesigning processes built together with outside counsel, and training the team on innovation, they saw a $50 million recurring annual revenue gain.
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Reduce risk: AI pattern recognition reveals risks hiding in plain sight. To manage risk, you need clear lines of sight. End-to-end legal transformation empowers teams with a bird’s-eye view of every inbound and outbound risk-related activity across the enterprise. With an expanded vantage point, legal can identify risks they didn’t even know existed, pinpoint areas to prioritize and anticipate trends. Take, for example, a $25 billion company that was still relying on Excel to manage ethics and compliance data. With myriad manual processes at play, responding to the business was taking twice as long as necessary. Legal knew they required a bigger budget; but without having a handle on their data, they couldn’t make a compelling case to the C-Suite for more resources. Integration and automation were the heart of that transformation strategy for the department. They modified roles and responsibilities, instituted advanced technology, and supercharged the legal team’s response time to uncover unseen risks.
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What is the moral of the story? Legal got a bigger budget.
SHOOT FOR FAST RESULTS Legal departments are experiencing real and robust results by embracing digital, but the enormous potential of transformation has yet to be fully realized. A successful digital transformation should start delivering tangible results in a matter of weeks, not months or years, and set companies on an upward trajectory of value realization for years to come. Law departments face important questions: Can you get buy-in across the organization? Can you quickly get people using the new technology? Can you get talent to profoundly change the way they work, i.e., to become digital citizens? Getting started on digital transformation begins with a vision. All the key stakeholders and leaders need to agree on the art of the possible. Have a meeting and outline your optimized law department. When you have consensus, get out of the gate with strong change management and customer experience strategies. Once you have buy-in, go all in.
Dave Edelheit serves as Chief Digital and Transformation Officer for UnitedLex. He has digital transformation experience in multi-country, multi-cultural ecosystems within complex geopolitical landscapes. He is currently enrolled in a global executive leadership program at Yale University.
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INTELLECTUAL PROPERT Y
Three Key IP Cases to Watch This Year By MICHAEL CICERO
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copyright case before the Supreme Court, Google v. Oracle, looms large on the list of cases likely to alter the intellectual property landscape. A decision is expected in June. The Arthrex patent case, with a high court decision expected in June as well, threatens the very existence of the Patent Trial and Appeal Board (PTAB). In a third patent case, a patentee seeks Supreme Court review of controversial appellate court decisions. These are the key cases to watch in 2021. Google v. Oracle should produce a landmark decision on the doctrine of fair use, and possibly on both fair use and the copyright eligibility of computer programs. Sun Microsystems developed
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the Java platform for computer programming in the 1990s. Google v. Oracle centers on Application Program Interface (API) packages written for Sun’s Java 2 Standard Edition, which enable programmers to use pre-written code to incorporate functions into their programs without writing new code. In 2005, Google acquired Android to develop a software program for mobile devices. Google and Sun discussed the possibility of Google taking a license for such development, but those negotiations fell through. Following the failed negotiations, Google copied 37 Java API packages, amounting to 11,500 lines of copyrighted code. Google also copied the structure,
TODAYSGENERALCOUNSEL.COM FEB/MAR 202 1
sequence and organization of those packages, but wrote its own implementing code for the functions the packages performed. In 2007, Google announced the availability of the Android software platform for mobile devices, the first of which were sold in 2008. Since then, Android reportedly generated over $42 billion in advertising revenue. In 2009, Sun sued Google in a California federal district court for both patent and copyright infringement, seeking a staggering $8.8 billion in damages. Google raised defenses of fair use under the Copyright Act, and argued that the API packages weren’t eligible for copyright protection, among other contentions. Google’s fair BACK TO CONTENTS
use arguments asserted that its use of the API packages was “transformative” because Google wrote its own implementing code and incorporated the copied API packages into a smartphone platform. In 2010, Oracle acquired Sun and became the new plaintiff in the case. By May 2016, the parties had tried the case once (with no damages awarded) and had undergone one appeal to the U.S. Court of Appeals for the Federal Circuit, where Google’s copyright eligibility defense was rejected. In a trial on remand from the Federal Circuit, the jury returned a verdict finding that Google’s copying of the API packages was fair use. Following entry of a final judgment on that verdict, Oracle filed another appeal. Google cross-appealed to preserve its copyright defense.
ADVISORY ONLY In a 2018 decision, the Federal Circuit largely regarded the jury’s fair use finding as “advisory only,” reversed the finding and remanded the case to the district court for a trial on damages. The Federal Circuit also remarked that it was “unnecessary” to rule on Google’s cross-appeal. Google then successfully petitioned for Supreme Court review of both the copyright and fair use issues. Its brief called the Federal Circuit’s ruling “the first decision ever to reverse a jury’s fair use verdict.” In May 2020, the Supreme Court ordered supplemental briefing on the appropriate standard of review of the fair use issue. This signals that the Court could reach a conclusion that the jury’s fair use verdict was entitled to deference, warranting reversal of the Federal Circuit’s decision, possibly BACK TO CONTENTS
without remanding for any further adjudication of that issue. Should that happen, the Court could duck the thorny copyright eligibility issue altogether, reasoning that even assuming the validity of Oracle’s copyright, no liability exists due to the finding of fair use. The Justices’ questioning at oral argument vigorously challenged both litigants, sending no clear signals as to who will prevail in the Court’s much-anticipated decision. In any event, the Court will now likely provide needed clarification about the jury’s role in fair use determinations. This enhances the perception that Google v. Oracle will prove highly consequential.
TWO IMPORTANT PATENT CASES U.S. v. Arthrex, Inc. threatens the very existence of the PTAB of the U.S. Patent and Trademark Office (USPTO). The PTAB is a “quasi-judicial body [that] operates at the direction of the USPTO director,” who is also a member of the PTAB. It decides invalidity challenges to patent claims, as well as appeals of USPTO examiners’ claim rejections in pending patent applications. Arthrex argued that the USPTO’s hiring of the PTAB’s administrative patent judges violated the Appointments Clause of the U.S. Constitution. The Federal Circuit agreed, reasoning that the administrative patent judges should have been appointed by the President instead of the Secretary of Commerce. Many unsatisfied PTAB proceeding participants then appealed adverse judgments under Arthrex. In response, the Federal Circuit frequently reversed those judgments and remanded the cases to be heard before new PTAB judges.
As of May 1, 2020, there were 103 such remands, all of which the PTAB stayed, pending possible resolution by the Supreme Court. The United States successfully petitioned for Supreme Court review. The Court heard arguments on March 1, 2021. American Axle & Mfg., Inc. v. Neapco Holdings LLC expanded the defense of patent ineligibility to mechanical inventions. On December 28, 2020, American Axle petitioned for Supreme Court review of split Federal Circuit decisions holding that its patent for a drive shaft assembly manufacturing method was ineligible for being directed to a “law of nature.” In this case, the law of nature is Hooke’s law of elasticity, which was discovered by the English scientist Robert Hooke in 1660. Hooke’s law states that, for relatively small deformations of an object, the displacement or size of the deformation is directly proportional to the deforming force or load. On January 11, 2021, Neapco indicated that it did not intend to respond to American Axle’s petition unless the Court requested otherwise. Interestingly, the Court did just that on January 29. Failing Supreme Court review, expect louder calls for a legislative solution to the investmentimpairing uncertainty spawned by current patent ineligibility case law.
Michael Cicero practices in Taylor English Duma LLP’s Intellectual Property Department. He focuses his practice on patent prosecution, preparation of opinions, trademark prosecution and copyright matters. mcicero@taylorenglish.com
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INTELLECTUAL PROPERT Y
Covid-19 and Intellectual Property Protection By TIM HUDSON AND EMILY W. MILLER
T
rade secret litigation is rising. Following the enactment of the Defend Trade Secrets Act in 2016, protection for trade secrets was placed on par with federal protections for other intellectual property — but without the risks and hurdles associated with registration and disclosure. According to a report on trade secrets litigation by Lex Machina, trade secret case filings in federal court increased 30 percent between 2015 and 2017 following the passing of the Defend Trade Secrets Act. Employee turnover and mobility, the digital world, and the framework of statutory protections will inevitably result in trade secret litigation for years to come. Adding to those factors, the onset of the Covid-19 public health crisis rushed companies into unprecedented
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circumstances, with increased risk of loss of confidential information. Historically, employers were mostly concerned with employees leaving with hard copies of documents containing trade secrets and handing them over to a competitor. In the digital age, however, employers became increasingly concerned about the theft of electronic versions of trade secrets. Due to the remote workforce made necessary by the pandemic, employers are balancing the need to protect trade secret information with their employees’ need for access to those trade secrets to perform their duties. Additionally, there can be eavesdroppers on video conferences where confidential information is discussed. This results in greater risk and more opportunities for trade secrets escaping protections
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implemented by companies. Knowing what trade secrets are is a critical first step in formulating a plan of protection. Trade secrets can include many different types of information, for example, formulas, product specifications, manufacturing methods, source codes, marketing strategies, customer or supplier lists, and pricing information or cost structure. To qualify as a trade secret, information must give its owner a competitive advantage over competitors, not be generally known or readily ascertainable to the public, and derive economic value from its confidential nature. Companies should inventory their trade secrets — identifying what the company considers a trade secret and assessing whether any new or additional information should also be designated BACK TO CONTENTS
a trade secret. Steps should also be taken to assess the measures implemented to safeguard this information both internally and externally.
PROTECTING TRADE SECRETS WITH A REMOTE WORK FORCE In court proceedings, trade secret holders must show efforts to safeguard information and prevent unauthorized disclosures. Companies must be able to demonstrate that those measures were reasonable under the circumstances, including the remote working environment during the Covid-19 pandemic. Examples of proactive measures to reduce risk of unauthorized disclosure of trade secrets in the work-from-home environment include the following: • Implement written policies regarding the confidentiality of trade secrets. Consider having employees sign an acknowledgement documenting their receipt and understanding of the policy. Remind employees of the policies and their duty to maintain confidentiality of certain company information. • Consider having employees with access to trade secrets sign non-disclosure agreements (NDAs) or confidentiality agreements. Remind employees subject to such agreements of those obligations and that remote working does not change or excuse those obligations. • Evaluate the virtual “fence” or “security guards” protecting trade secrets and identify whether the company should assess vulnerabilities. Consider requirements for password complexity, utilizing virtual private networks with multi-factor authentication and prohibiting BACK TO CONTENTS
use of unsecure home or public networks. • Consider restricting access to trade secrets on a need-to-know basis. • Consider monitoring access to trade secret information by utilizing software to track access habits and alert to suspicious activity, such as unusual accessing, downloading or printing.
PLANNING FOR EMPLOYEE DEPARTURES Examples of measures to safeguard trade secrets and minimize the risk of disclosures with departing employees: • Perform exit interviews to remind departing employees of confidentiality obligations. • Consider requiring certifications from departing employees that they are aware of their obligation to maintain trade secret confidentiality after termination of employment, do not have any trade secrets in their possession, have returned or destroyed any trade secrets, and have not disseminated such information to any third parties. • Consider performing forensic investigations of key departing employees to determine access to confidential files immediately prior to departure and whether such files were emailed or saved to an external drive. Employers can be brought into a lawsuit after a new employee improperly takes trade secret information from her or his former employer. Although it is not possible to completely prevent lawsuits, companies can take steps to hedge against liability for a new employee’s misappropriation. Here are some examples:
• Implement a policy stating that prospective and new employees shall be notified, even at the recruiting stage, not to bring or discuss any trade secrets or proprietary information from any former employer. • Consider asking during the interview process whether candidates are bound by NDAs or confidentiality agreements with any past employer. • Consider asking new employees to certify that they are not bringing any confidential information from a former employer to their new place of employment. Trade secret litigation will increase in the coming years, and companies must be vigilant to ensure they are protected. This is particularly true given the current work-from-home environment and the unique challenges that companies face in the Covid-19 era.
Tim Hudson is a Partner in Thompson & Knight’s Trial Practice Group in Dallas. He specializes in defending, preparing and trying cases involving product liability, commercial litigation, trade secrets, intellectual property and securities in state and federal trial courts and before governmental agencies. Tim.Hudson@tklaw.com Emily W. Miller is a Shareholder at Andrews Myers. She has experience handling a wide variety of commercial litigation matters, and represents clients in complex business disputes, including contracts, fraud, negligence, trade secret protection, fiduciary duty and corporate governance. emiller@andrewsmyers.com
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DATA PRIVACY/CYBERSECURIT Y
Brazil’s New Data Protection Law By VISHAL SUNAK
B
razil makes up more than 40 percent of Latin America’s economy and accounts for over half of its IT spending. It is expected to become the fifth largest consumer market in the world by 2023, so it’s understandable that Brazil would want to adopt legislation to safeguard consumer data. The General Data Protection Regulation (GDPR) has aimed to do the same for the European Union. The California Consumer Privacy Act brought this focus down to a state level in the United States. It took more than two years after passage for Brazil’s General Data Protection Law (LGPD) to reach
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its current form, yet some were still caught by surprise when it officially went into effect in September 2020. It sets regulations and creates a legal framework that addresses areas from data processing and transfers to individual rights, governance and accountability. Like the GDPR, the LGPD extends beyond borders. It applies to any organization processing the data of individuals in Brazil, regardless of where the entity is located or where the data is stored. Whether you have a physical office in Brazil or just sell services or products in the market doesn’t matter; companies that handle
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personal data of anyone living in the country must comply. Banking, finance, healthcare, software as a service, data security and social media are obviously subject to the LGPD because of the personal data they routinely handle. However, unlike similar regulations, the LGPD impacts businesses of all sizes. The following first steps should be taken by all: • Determine liability by mapping personal data processing and that of any third parties to determine what is subject to the LGPD. • Conduct an analysis to see where BACK TO CONTENTS
processes fall short of LGPD regulations. • Overhaul and implement new data processing policies to meet compliance. • Review and update third-party contracts to ensure they are compliant. Although there are comparisons to the GDPR, you’ll need to keep several differences in mind when approaching the LGPD.
DATA PROTECTION OFFICER MUST BE APPOINTED Both the LGDP and the GDPR require that a Data Protection Officer (DPO) be appointed and that contract information be publicly available. The DPO must act as the go-between for the companies they represent, the Data Protection Authority and the data subjects. The DPO must make sure that the company is following the law. While the GDPR states that the controller and the processors
entities. It makes specific reference to Brazilian Arbitration Law. It makes exceptions for research bodies and their studies, provided anonymization techniques are put in place whenever possible. Protection of credit under the LGPD should be considered in light of other federal laws. For instance, the Positive Credit History Law requires express and prior consent for the collection of consumer payment data.
DATA BREACHES The LGPD has distinct requirements regarding security breaches. For example, the report to users must include the technical and security measures taken to protect the data. The GDPR requires 72-hour notification while the LGPD requires a report within “a reasonable time period” (Brazil’s Data Protection National Authority is working on a definition of what is reasonable). With respect to international data transfers, companies must
Unlike other similar regulations, Brazil’s data protection law impacts businesses of all sizes. must each appoint a DPO, the LGPD only requires the controller to make the appointment. There are no exceptions. All controllers are subject to the regulations. The legal bases for data processing in both the GDPR and the LGPD are similar. They include explicit consent, contractual performance, public task, vital interest, legal obligation and legitimate interest. The LGPD differs from other data protection initiatives in some important ways. It adds health protections in procedures conducted by health professionals and BACK TO CONTENTS
have the express consent of the user and a guarantee by the controller that there are legal instruments in place to ensure an adequate level of protection. Both the controller and processor can be held jointly and separately liable for a security breach or improper use of personal data. Data Protection Officers must become an integral part of processing. They should act as the go-between for the controller, users and data protection authority. The LGPD broadly defines its personal data category as “related
to an identified or identifiable natural person.” A deeper set of criteria is used for sensitive personal data. Anonymized data is exempt from the law unless it can be reversed. Public data is treated differently, and limited by the purpose that led to its disclosure. How disruptive is the LGPD for a typical legal team? Very disruptive, and more so for smaller teams. Few legal groups can spare the personnel to go through contracts, and they certainly don’t want to miss any crucial details. They also must make sure that the language is compliant; and since the LGPD just came into effect, there are no standard examples to follow. There will certainly be litigation in the future. But the more issues are brought to the surface, the better we’ll get at handling it. And with similar initiatives being considered across the globe, it’s clear that data protection regulation is only going to grow. If your company or your clients operate in various nations, or there is a desire to expand further, you don’t want to be starting from scratch. Your strategies for managing compliance and streamlining reviews will need to handle the digital and international growth ahead.
Vishal Sunak is CEO and founder of LinkSquares. He develops strategies aimed at assisting corporate legal and finance teams with review of their contracts. Prior to founding LinkSquares, he held positions in operations and product management at Backupify and InsightSquared. Vishal@linksquares.com
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COMPLIANCE
Brexit Checklist for U.S. Technology Companies By ROGER BICKERSTAFF, YUICHI SEKINE, ELIZABETH UPTON, SALLY SHORTHOSE, NICK ARIES AND BRYONY HURST
new immigration rules that will apply. Applications can now be made for the new Skilled Worker and Intra-company Transfer visa. For technology companies in the UK, the message is clear. Whilst freedom of movement for EU nationals to the UK has ceased, most work visa restrictions have been removed. It will be much easier to sponsor non-UK nationals as new hires.
DATA PROTECTION
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he United Kingdom exited the European Union on January 31, 2020, and the Brexit transition period ended on December 31, 2020. The EU-UK Trade and Cooperation Agreement has been in effect since January 1, 2021. U.S. technology companies need to be aware of the key implications for their businesses arising from the UK’s new status as a “third country” outside the EU.
PEOPLE There is no longer free movement of people between the EU and the UK. The Trade and Cooperation
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Agreement includes a framework for new mobility routes for business travelers but does not confer any new residence rights. EU nationals who were lawfully resident in the UK at the end of the transition period and wish to stay must register to preserve their rights under UK law. British citizen employees residing and working in an EU member state must comply with national requirements to protect their continued right to reside and work in that state after the end of the transition period. For people moving to the UK after the end of the transition period, there are
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EU to UK data transfers: Transfers of personal data from the EU to the UK now constitute a transfer of personal data to a third country. As the UK does not yet have an adequacy decision, the EU-UK Trade and Cooperation Agreement includes a temporary arrangement allowing personal data transfers for four months, extendable up to six months. During this period, alternative safeguards such as standard contractual clauses are not required. Data transfers from the UK: The UK will continue to treat EU countries’ laws as adequate. On this basis, transfer adequacy mechanisms are not needed for UK to EU data transfers. Personal data transfers to other jurisdictions will be as per the pre-Brexit position. EU adequacy decisions and alternative safeguards are recognized for these transfers. Lead supervisory authority and representative issues: The General Data Protection Regulation “one-stop shop” no longer applies in the UK for investigations that have a multicountry dimension. Organizations could face distinct investigations and BACK TO CONTENTS
sanctions in the UK and the EU. In a large-scale data breach, for instance, both the Information Commissioner’s Office and at least one EU regulator may need to be notified, and each could follow up with distinct investigations and sanctions.
TRADE, TAX AND TARIFFS Trade both ways between the EU and UK is tariff and quota free, but customs declarations and procedures are necessary for the import and export of goods into and out of the EU and Great Britain. UK businesses must have an Economic Operator Registration and Identification number. For value-added tax purposes, businesses that have relied on a UK-based Mini One Stop Shop need to re-register in an EU jurisdiction. Until June 30, 2021, there will be a simplified import customs clearance system for imports into the UK from the EU. From then on, full formalities will apply. Full export declarations for exports from the UK to the EU have been required since January 1, 2021.
CONTRACTS The EU-UK Trade and Cooperation Agreement does not include any provisions relating to the enforceability of business contracts or the mutual recognition and enforcement of judgments. As to the choice of governing law, the Rome I and Rome II EU regulations governing the choice of law have been incorporated into UK law and continue to apply. With regard to enforceability for cases commenced after January 2, 2021, the Hague Convention will be applicable, and the UK may accede to the Lugano Convention in due course. Hague only applies to exclusive jurisdiction clauses BACK TO CONTENTS
and the enforcement of judgments based on these clauses in civil and commercial matters. In other cases, English common law rules, which are generally less predictable, will apply. Practically speaking, permission to serve a claim outside of the jurisdiction will almost always be required unless the Hague Convention applies.
ONLINE TECH SERVICES AND REGULATORY COMPLIANCE The EU’s E-Commerce Directive no longer applies to the UK. Article 3 of the directive provides “passporting” protection for online service providers established in the EU, which allowed them to operate in any European Economic Area country while only following relevant rules in the country in which they are established. UK companies providing online services across the EU now need to comply with the national rules applicable to their services in each EU country where their services are available.
TRADEMARKS EU trademarks and registered and unregistered community designs no longer have effect in the UK. Comparable UK trademarks and registered community designs have been automatically created, at no charge, and have been in effect since the end of the transition period. This does not apply to pending applications. Companies with pending applications should apply to register a comparable UK trademark as soon as possible. For new filings, companies should dual-file in the EU and UK.
for the export of all dual-use items, including encryption software, now covers exports from the EU to the UK. For transfers from Great Britain to the EU, an open general export licence covers the export of dual-use items, and includes encryption software.
CONFORMITY ASSESSMENTS Conformity assessments carried out by UK bodies prior to the end of the transition period are no longer valid for EU purposes. In the UK, it will be possible in most instances to use the EU CE mark until January 1, 2022. The new UK Conformity Assessed mark is also available and must be used after that date.
GEO-BLOCKING The EU Geo-Blocking Regulation has been revoked in the UK. As a result, companies are not prohibited from discriminating in the UK between EU customers and UK customers in their on-line businesses. Within the EU27, the EU regulation will continue to apply to UK businesses.
COMPETITION Companies operating in the UK and the EU should consider potential exposure to parallel investigations by the European Commission and UK Competition and Markets Authority.
Roger Bickerstaff, Sally Shorthose, Nick Aries and Bryony Hurst are partners at Bird & Bird LLP. Elizabeth Upton is Legal Director, Privacy & Data Protection, and Yuichi Sekine is Head of Business Immigration.
SOFTWARE EXPORT CONTROLS The UK is now a third country for EU export control purposes. The EU General Export Authorization FEB/MAR 202 1 TODAYSGENERALCOUNSEL.COM
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COMPLIANCE
Mandating Employee Covid-19 Vaccinations By EMILY H. MACK
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everal businesses — including Aldi, Dollar General and Instacart — have recently announced plans to offer employee vaccination incentives. As the vaccine becomes readily available, other employers will likely express interest in encouraging their employees to get vaccinated. Some may make it a requirement, but could find that enforcing a mandatory vaccination policy requires specific adjustments to reap the benefits of a vaccinated workforce, while remaining legally compliant. If regional health authorities endorse vaccination as their
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official recommendation for protecting citizens from Covid19, it could create a standard (or at least a general expectation) that employers will encourage or require vaccination to ensure workplace safety. Additionally, some businesses may be concerned that they could face negative outcomes if they don’t require employees to be vaccinated. These concerns range from loss of productivity due to employee sick days to facing lawsuits resulting from coworkers or customers testing positive for Covid-19 after contact with an unvaccinated employee.
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Generally, employers have the right to establish mandatory vaccination policies so long as they make reasonable accommodations for employees who refuse. If an employee refuses to get vaccinated, and the employer determines that the unvaccinated employee poses a “direct threat” (i.e., that the unvaccinated employee would cause significant risk of substantial harm to the health or safety of the employee or others), that individual could potentially be terminated. Certain exceptions, though, could apply. The Americans with Disabilities Act (ADA), which prohibits disBACK TO CONTENTS
crimination based on disability, could apply if an employee cannot receive the vaccine for healthrelated reasons. If an employee claims to be unable to be vaccinated for medical reasons, the employer should first request supporting medical documentation and then determine if there is a direct threat to the workplace as a result of the employee not receiving the vaccine. Recently released guidance from the U.S. Equal Employment Opportunity Commission suggests that employers should evaluate the following factors to determine whether an employee who is unable to be vaccinated poses a direct threat in the workplace: the duration of risk, nature and severity of potential harm, and the imminence and likelihood potential harm will occur. Even if an employee poses a direct threat, employers must engage in an interactive process with the employee to determine if there is a reasonable accommodation that eliminates the threat prior to excluding them from the workplace. The interactive process is highly fact-specific and will depend on the individual’s job responsibilities, the work environment, and other factors such as the prevalence in the workplace of employees who have already received the vaccination. Although pregnancy alone is not a disability under the ADA, employers should also be prepared to make similar accommodations for pregnant employees, especially considering uncertainty or personal concerns related to the vaccine’s effect on pregnant women. Employees may also refuse to be vaccinated on the grounds that receiving a vaccine conflicts with sincerely held religious beliefs. BACK TO CONTENTS
Protections granted by Title VII of the Civil Rights Act of 1964 require covered employers to reasonably accommodate an employee’s religious beliefs and practices, unless doing so would cause an undue hardship. Much like the ADA analysis, under Title VII, once an employer is on notice that an employee’s sincerely held religious practice or belief prevents them from receiving the Covid-19 vaccine, the employer may be required to make reasonable accommodations to allow the individual to continue performing their duties — unless those modifications would cause an undue hardship. An accommodation that compromises workplace safety may present an undue hardship. Because the vaccine is new and its application within work settings is uncharted legal territory, exactly how the undue hardship exception will be applied in such instances remains to be seen. For this reason, companies should find ways to mitigate the risks that unvaccinated employees could pose. If the last year has taught us anything, it is that employers are more adaptable and resilient than ever. The increasing availability of the vaccine does not mean employers should stop using unconventional solutions to retain talent despite the ongoing threat of the virus. Establishing a clear, well-communicated vaccination policy will help ensure that an employer’s inoculation approach corresponds with federal workplace laws. Employees who hope to opt out of the requirement should be permitted to apply for an exemption. The process should be structured to be compliant with any applicable health information and other privacy protection standards
under the ADA. Exemption paperwork should, for instance, be routed through the appropriate channels, such as the HR department, instead of the employee’s immediate manager. Vaccination records should be kept in a medical file, not a personnel file. When accommodations for an unvaccinated employee are necessary, companies will need to carefully examine the overall work environment to determine the best course of action. If an unvaccinated individual will be in close contact with people, and closing an office door or wearing a mask wouldn’t significantly reduce the threat of infection, the simplest solution may be to allow the employee to work from home. For a while, the risk analysis process will involve a constantly moving target, depending on how many employees have received both required vaccine injections and how the general public’s vaccination rates unfold. The situation doesn’t have to be permanent, however. Ten percent of an organization’s staff opting out of vaccination for workplace law-protected reasons may initially seem daunting, but those employees won’t pose the same risk when 90 percent of the staff has been vaccinated.
Emily H. Mack is a partner in Burr & Forman. She concentrates her practice on labor and employment, education law and complex litigation matters. She assists businesses and individuals in matters involving retaliation, discrimination and hostile work environment claims. emack@burr.com
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THE ANTITRUST LITIGATOR
Refusal to Deal By JEFFERY M. CROSS
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enerally, the antitrust laws do not require a company to work with or do business with a rival. As early as 1919, the Supreme Court announced the “Colgate Doctrine,” which held that a company is free to exercise its own independent discretion as to the parties with whom it will deal. In most instances, even monopolists are not required to help their competitors. It is fundamental antitrust law that not only is it not (by itself) unlawful to obtain a monopoly, but it is not unlawful for a monopolist to compete. Competition includes deciding how and with whom a company will do business.
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In 1985, however, the Supreme Court in a controversial decision, Aspen Skiing Co. v. Aspen Highlands Skiing Corp., held that a monopolist could violate Section 2 of the Sherman Act by refusing to deal with a competitor. Subsequent decisions by the Supreme Court have led some to argue that the Aspen decision has “bit the dust.” But a decision by the Seventh Circuit Court of Appeals in early 2020 applied Aspen to a refusal by Comcast to continue doing business with a competitor. In Viamedia, Inc. v. Comcast Corp., the Seventh Circuit reversed a dismissal of the plaintiff’s refusal to deal claim. Comcast has petitioned the Supreme Court for certiorari.
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In December, the Court asked the Office of Solicitor General to file a brief expressing the views of the United States. Many believe that such a request to the government means that the Court is likely to accept certiorari. Given the potential impact of the Aspen refusal to deal doctrine, it would be worthwhile to review Aspen and the Seventh Circuit’s decision in Viamedia. Aspen involved four ski resorts in Aspen, Colorado. Aspen is a destination skiing town. Skiers travel there to spend several days, and they generally want to ski all of the nearby mountains. When the four ski resorts were owned by separate companies, BACK TO CONTENTS
they cooperated to offer skiers a four-mountain ski pass that allowed skiers the flexibility to ski any mountain during their stay. Revenues were divided among the owners of each by usage. Over time, however, the defendant acquired ownership of three of the four resorts. The defendant had monopoly power. It had a dominant market share and there were barriers to entry. Because any new ski runs would have to be
years. In addition, in those markets where the defendant was not dominant, it also participated in similar all-mountain pass arrangements. The Court viewed these facts as establishing that the cooperative arrangement between the monopolist and its competitors was efficient and pro-competitive. Second, the Court found that the defendant gave up shortterm profits in order to eliminate the plaintiff. Significantly, the
In 1985 the Supreme Court held that a monopolist could violate the Sherman Act by refusing to deal with a competitor. built on U.S. Forest Service land, there were unlikely to be any new entrants. The defendant continued the all-mountain pass for several years. It was very popular, outselling the defendant’s three-mountain pass by a substantial amount. The defendant subsequently decided, however, to eliminate the all-mountain pass in order to capture revenue being paid by skiers to the plaintiff. The defendant initially made a revenue-sharing offer to the plaintiff that was so onerous that the defendant knew the plaintiff could not accept it. Ultimately, the defendant completely refused to deal with the plaintiff. The plaintiff sued for a violation of Section 2 of the Sherman Act. After a month-long trial, the defendant was found to have monopolized the Aspen ski market. The Supreme Court affirmed. The Court focused on several critical factors that led to a Section 2 violation for defendant’s refusal to deal. First was the fact that the defendant participated in the all-mountain pass for several BACK TO CONTENTS
defendant refused to accept cash payments at full market rates. And third, the jury found that there were no pro-competitive justifications for defendant’s conduct. As noted above, subsequent Supreme Court decisions had suggested that Aspen was unique. Indeed, the Court in the 2004 case Verizon Communications Inc. v. The Law Offices of Curtis V. Trinko LLP held that Aspen was at the outer boundaries of Section 2 liability. The Seventh Circuit in February 2020 held that Aspen was still good law and applied it in the case of Viamedia v. Comcast. Comcast had a monopoly in the operation of Interconnect services — cooperative arrangements among cable television operators to efficiently sell advertising for available time slots across a viewer market — in three geographic markets. Comcast wanted to monopolize a second market, the advertising representation market, in which Viamedia also competed. Comcast did so by refusing to deal with cable television operators with respect to Interconnect services
if they also dealt with Viamedia for advertising representation services. The Seventh Circuit found the same three Aspen factors in the case before it. The Seventh Circuit noted that a company establishing a new, more efficient distribution scheme might also forgo shortterm profits to implement that scheme. However, Viamedia’s complaint plausibly alleged that Comcast’s conduct was irrational in that it not only led to financial losses for Comcast but it also degraded the value of the Interconnects. By blocking access to the Interconnects for the cable operators that were Viamedia’s advertising representation customers, Comcast reduced the value of advertising offered by the Interconnects. Companies seeking to advertise in a viewer market couldn’t reach all of the cable subscribers in that market because those cable operators had been excluded. Aspen and Viamedia have important implications for a monopolist that wants to exit a previous relationship with a rival. Whether the Supreme Court accepts certiorari and addresses refusal to deal conduct by a monopolist will clarify the risk involved when a monopolist wants to end an arrangement with a rival.
Jeffery Cross is a columnist for Today’s General Counsel and a member of the Editorial Advisory Board. He is a partner in the Litigation Practice Group of Freeborn and Peters LLP and a member of the firm’s Antitrust and Trade Regulation Group. jcross@freeborn.com
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FEATURE
Pandemic-Related Employment Litigation By DAN M. FORMAN
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mployers are confronting a tidal wave of pandemic employment litigation as plaintiffs’ counsel seek to hold employers responsible for decisions made during a time of rapidly evolving government guidelines, new laws, new regulations, and big changes in the way business is conducted during the pandemic.
WARN ACT For many years, employers dealing with solvency or M&A issues con-
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fronted the Worker Adjustment and Retraining Notification (WARN) Act in conjunction with long-term planning. Now, the rapid onset of Covid-19 and related regulations have caused many unforeseen layoffs, furloughs and business closures. Although some employers with business disruptions early in the crisis may benefit from the “unforeseeable business circumstances” defense that allows for less than 60 days’ notice of a mass layoff or plant closing, the continuing crisis will make such
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a defense difficult or impossible to assert. Many states, like California, have their own versions of the WARN Act. At the outset of the pandemic, California’s Governor Newsom issued an order providing some relief from notice requirements. However, under the “unforeseeable business circumstances” and California’s emergency order, notice provisions are not entirely removed, but require employers to give as much notice as practical and BACK TO CONTENTS
provide information as to why notice could not be timely given. One reported decision from the Middle District of Florida concluded that the parent of Alamo and Enterprise car rental companies could invoke neither the “natural disaster” defense nor the “unforeseeable business circumstances” to dismiss a WARN class action at the pleading stage, and that the “unforeseeable business circumstances” defense was fact-intensive.
WAGE AND HOUR Nationally, wage and hour errors will be increasingly costly to employers, especially when they are confronted with class action litigation — or, in California, Private Attorney General Act claims. Automation of operations, time-keeping methods and systematization of work processes leads to increasing certification of classes of employees across the country. Minimum wage increases can create unintended calculation errors with significant consequences. Moreover, employees working in a remote location may not comply with an employer’s attempt to insulate against overtime work. Calculations of “regular rate of pay” become more complicated when employers are providing paid sick leave, paid Families First Coronavirus
Response Act (FFCRA) leave, and other types of leave and pay that were not contemplated before Covid-19. Finally, California requires employers to reimburse employees for expenses incurred
employees who complained about not getting enough leave, safety issues, and compliance with OSHA and other health or safety standards. In California, where failure to engage in the interactive process is an affirmative
Wage and hour errors will be increasingly costly to employers, especially when they are confronted with class action litigation. while carrying out their work. Therefore, California employers who did not provide any kind of reimbursement to employees required to work remotely will likely face class action claims for reimbursement of expenses such as electricity, Wi-Fi and a portion of water bills.
DISCRIMINATION, WORKPLACE SAFETY AND RETALIATION Federal discrimination claims, especially age and disability discrimination, are intertwined with leave laws such as the Family and Medical Leave Act (FMLA), the Families First Coronavirus Response Act (FFCRA), and state law equivalents. The rapidly changing regulations, Covid-19 infections, and the quarantining of employees who were in close contact necessarily implicate the potential for discrimination claims. There are increasing numbers of retaliation claims by fired
cause of action, this area is rife for increased litigation — especially where employers had little time to make layoff, furlough or termination decisions. Moreover, CAL/OSHA-promulgated emergency regulations have a host of requirements, including the return-to-work criteria for “exclusion pay to many employees.” Litigation rooted in the pandemic will recede with Covid-19, but it is likely to be a long time before that happens.
Dan M. Forman is Chair of CDF Labor Law’s Unfair Competition & Trade Secret Practice Group. He has extensive experience counseling and litigating over trade secrets, covenants not to compete, executive compensation and severance, and other aspects of employment and labor law. dforman@cdflaborlaw.com
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FEATURE
Steps to Improve Board Diversity in 2021 By GEOFFREY R. MORGAN
self-identify as meeting certain diversity requirements (female, under-represented minority or LGBTQ+) and to provide ongoing disclosure about diversity statistics pertaining to their boards of directors. Nasdaq cited a desire to “enhance investor confidence.” Given the broad support, there is every reason to believe that the rule will be adopted as proposed. Boardroom diversity is no longer a best practice. It is a mandate. Below is a practical roadmap for board leaders committed to making diversity and inclusion a part of the fabric of their boardrooms.
UNDERSTAND DIVERSITY WITHIN YOUR BUSINESS
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hough most of us are content to leave 2020 in the rearview mirror, it is nonetheless a year that has reshaped our economy and our social priorities. This rings especially true in matters of diversity, inclusion, racial equality and social justice. This year has taught businesses from Wall Street to Main Street that mere efforts in these areas are no longer sufficient. Shareholders and consumers expect results. Corporate boardrooms represent one of the greatest areas of opportunity to enhance diversity in corporate leadership. Requirements by states like Illinois
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and California to report on and meet certain boardroom diversity standards are helping to move the needle. Consider this: Today there are no S&P 500 firms reporting all-male boards, and a majority of S&P 1500 boards have at least three female directors. Still, there remains much to be done. Nasdaq has made a significant statement about the importance of boardroom diversity. In December 2020, it filed a proposal with the Securities and Exchange Commission that, if adopted, would require companies listed on the Nasdaq’s U.S. exchange to have, or explain why they do not have, at least two directors who
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First, the board must understand diversity through the lens of its own business. There is overwhelming evidence that leadership diversity is good for business. Too often, however, diversity is narrowly defined, which can lead to resistance and stalled efforts. Looking at board diversity through the lens of existing business opportunities may help board members understand the value that diverse representation can bring to the bottom line. Identify key business goals, objectives and challenges at hand and outline the knowledge, skills and abilities (KSAs) a director should have to help address them. Is the company targeting younger customers? Is it trying to become more digitally focused? How would a candidate with less traditional credentials view a problem the company is facing differently? What qualities does the consumer BACK TO CONTENTS
or end-user possess that could be mirrored internally?
DEFINE YOUR GOAL AND STEPS FOR ACCOUNTABILITY Second, the board must define its goal and take steps to hold itself accountable. Perhaps the board commits to allocating a set number of hours per month to minority recruitment. Or it endeavors to create term limits, or promises that 75 percent of future interviews will go to women or members of under-represented
similar resume. Although those types of appointments carry minimal risk, they don’t always benefit the company. Consider placing a pause on internal recruitment. Instead, try partnering with an independent recruiting firm that has demonstrated success in helping diversify companies’ C-suites and boardrooms. Armed with the KSAs previously identified by the board as being instrumental, they can deliver a diverse talent pool — including first-time directors,
Nasdaq would require companies listed on the exchange to have, or explain why they do not have, at least two directors who meet certain diversity requirements. groups. Even bolder, maybe the board pledges to onboard a set number of women within the calendar year. Whatever the goal, it must be clearly defined and widely communicated. Reporting diversity goals proactively to shareholders and in proxy statements will create a new level of transparency and accountability necessary for achieving meaningful progress. In this regard, use the proxy statement as a tool to communicate your goals and your commitment to achieving them.
RECONSIDER YOUR RECRUITMENT VENUES Third, the venues and processes through which directors are recruited must be entirely reconsidered. The manner in which boards typically recruit potential directors is homogenous, hindering efforts to achieve diversity and inclusion. Board members often come from committee members’ professional or social circles and frequently have a BACK TO CONTENTS
women, minority candidates and younger professionals — and set the board up for a successful evaluation process.
RETHINK EVALUATION TO AVOID UNCONSCIOUS BIAS Fourth, a diverse candidate pool is a critical starting point, but it’s meaningless if the evaluation process doesn’t promote diversity. Board leadership must rethink the evaluation process, including the criteria against which potential directors are measured. Avoid unconscious bias at the outset by setting some parameters for the evaluation period. The first step is to specify evaluation criteria that is in line with the KSAs identified to be critical to the business — not positions that traditionally are attractive or comfortable for shareholders — and stay true to them throughout the process. Then, consider a blind review of all resumes and CVs, redacting information such as names and dates of graduation
from the document to encourage an open mind. Finally, consider conducting less traditional in-person interviews, perhaps by letting the candidate choose an interview venue that demonstrates the value she or he will bring to the board. Don’t let incremental progress cause a false sense of accomplishment. Boardroom diversity is not achieved by checking the box. Appointing a woman or a member of an under-represented community does not constitute success. Boards that are serious about building more inclusive, representative boardrooms must recognize the long-term and ongoing commitment required. Start by making diversity and inclusion part of every discussion. Is the board making progress toward its goal? Where are additional opportunities for increased representation, such as on the nominating committee? How can incremental successes be celebrated internally and with shareholders and customers? Baking commitment to boardroom diversity into the culture is the only way to turn progress into results. Corporate governance leaders must insist on specific measures that lead to a defined goal. Only then will shareholders, companies and consumers realize the value of truly diverse, inclusive boardrooms.
Geoffrey R. Morgan is a founding partner of Croke Fairchild Morgan & Beres in Chicago. He provides strategic guidance to growthstage startups and Fortune 500 companies in areas of corporate governance, corporate finance, M&A and securities regulation. gmorgan@crokefairchild.com
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