As part of “A Green Deal Industrial Plan for the Net Zero Age” to respond to the US Inflation Reduction Act (IRA) (see our alert), the European Commission (the “Commission”) adopted on 9 March 2023 its Temporary Crisis and Transition Framework for State Aid measures to support the economy following the aggression against Ukraine by Russia (the “TCTF”). The text amends the Temporary Crisis Framework last amended on 28 October 2022 (see our blog). 

These are the three most important things you need to know about the TCTF:

  • To avoid that an investment would be located outside the European Economic Area (EEA), EU countries may support investments in the manufacturing of relevant equipment for the transition towards a net-zero economy, such as batteries, solar panels, wind turbines, heat pumps, carbon capture usage and storage (CCUS), as well as their key components and critical raw materials necessary for their production. They may even grant aid matching foreign subsidies to support those investments, provided that they are located in the poorer areas of the EU.
  • EU countries’ possibilities to grant aid for accelerating the rollout of renewable energy are extended to any renewable technologies, including hydropower, and no longer require a bidding process to select the aided projects that are considered as less mature.
  • The TCTF is not a subsidy program, and it is up to EU Member States to provide public funding.

Aid to cover investment costs for the production of relevant equipment for the transition towards a net-zero economy

Continue Reading The Commission adopts its Temporary Crisis and Transition Framework relaxing State aid rules as a response to the US Inflation Reduction Act

On February 22, 2023, the New York Stock Exchange (“NYSE”) and the Nasdaq Stock Market (“Nasdaq”) filed rule proposals[1] to adopt new listing standards implementing Rule 10D-1 under the Securities Exchange Act of 1934. That rule, which the Securities and Exchange Commission (the “SEC”) adopted in October 2022, requires national securities exchanges to implement standards to require listed companies to adopt and publicly file so-called “clawback” policies to recover erroneously awarded incentive-based compensation following accounting restatements. Rule 10D-1, which was first proposed in 2015 and re-opened for comment twice, implements Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The proposed listing standards are subject to a 21-day comment period once published in the Federal Register before the SEC can approve them, and must, in any event, become effective by November 28, 2023. Listed companies will be required to adopt clawback policies that comply with the new standards within 60 days of the effective date of the applicable listing standards (the “Adoption Deadline”).

The listing standards proposed by both NYSE and Nasdaq are materially consistent with Rule 10D-1 and its adopting release. Among other things, both proposed listing standards provide for the commencement of delisting proceedings for listed companies that fail to either adopt a compliant clawback policy or comply with such policy after a clawback obligation arises. These delisting provisions are discussed below, and, for an in-depth discussion of Rule 10D-1’s requirements, please refer to our previous alert.

NYSE – Delisting for Noncompliance

Failure to Adopt a Policy: As proposed, a company listed on NYSE that fails to adopt a compliant clawback policy by the Adoption Deadline will have five days to notify NYSE, after which the exchange will send a written delinquency notification to the company. Upon receipt of this notification, the company would have five days to contact NYSE to discuss the delinquency and to issue a press release disclosing the company’s delinquency, the reason for the delinquency and, if known, the anticipated date on which a clawback policy will be adopted. If the company fails to issue such a press release in time, NYSE will issue a press release stating that the company has received a delinquency notice.

Continue Reading NYSE and Nasdaq Propose Clawback Listing Standards

On March 7, 2023, during the annual National People’s Congress (“NPC”) sessions, China’s State Council revealed its plan to establish a National Data Bureau (NDB) as part of a broader reorganization of government agencies. The plan is being deliberated by the NPC and is expected to be finalized soon. 

According to the draft plan, the new National Data Bureau will be a deputy ministry-level agency under the National Development and Reform Commission (“NDRC”), China’s main economic planning agency that is in charge of industrial policies.  The new bureau will be responsible for, among other areas, “coordinating the integration, sharing, development, and utilization of data resources,” and “pushing forward the planning and building of a Digital China, a digital economy, and a digital society.” 

The plan specifies the new agency will take over certain portfolios currently managed by the Communist Party’s Central Cyberspace Affairs Commission (the party organ that supervises the Cyberspace Administration of China, “CAC”) and the NDRC. Specifically, the NDB will assume responsibility for “coordinating the development, utilization, and sharing of important national data resources, and promoting the exchange of data resources across industries and across departments,” a function currently performed by CAC.  The NDB will also absorb the NDRC teams responsible for promoting the development of the digital economy and implementing the national “big data” strategy.

Continue Reading China Reveals Plan to Establish a National Data Bureau

Practice and Procedure

The ITC’s Recent Sua Sponte Use of 100-Day Expedited Adjudication Procedure

Over the last few years, the International Trade Commission (“ITC” or “Commission”) has developed procedural mechanisms geared toward identifying potentially dispositive issues for early disposition in its investigations. These procedures are meant to give respondents an opportunity to litigate a dispositive issue before committing the resources necessary to litigate an entire Section 337 investigation.

In 2018, the ITC adopted 19 C.F.R. § 210.10(b)(3), which provides that “[t]he Commission may order the administrative law judge to issue an initial determination within 100 days of institution . . . ruling on a potentially dispositive issue as set forth in the notice of investigation.” Although the ITC denies the majority of requests by respondents to use this procedural mechanism, the ITC has ordered its ALJs to use this program in a handful of investigations to decide, among other things, whether the asserted patents claim patent-eligible subject matter, whether a complainant has standing to sue, whether a complainant can prove economic domestic industry, and whether claim or issue preclusion applies.

In a recent complaint filed in Certain Selective Thyroid Hormone Receptor-Beta Agonists, Processes for Manufacturing or Relating to Same, and Products Containing Same, Inv. No. 337-TA-1352, Complainant Viking Therapeutics, Inc. (“Viking”) alleged that respondents had misappropriated trade secrets to create their own drug candidates to compete with Viking’s VK2809 (phase 2) clinical drug candidate. As required by Section 337(a)(1)(A) governing trade secret cases, Viking alleged that the respondents’ unfair acts caused injury and threatened to cause injury going forward to Viking’s domestic industry. Viking’s theory of injury was based on the assumption that Viking’s VK2809 drug candidate and respondents’ ASC41 and ASC43F drug candidates would both receive FDA approval, would both launch into the same market, and would compete with one another. Viking’s complaint stated that its domestic industry product drug candidate, VK2809, will be brought to market in 2028.

Unlike past instances where the ITC employed 100-day proceedings, the Commission took the remarkable step of placing this investigation into a 100-day proceeding sua sponte on the issue of injury, even though no respondent raised the issue of injury as a basis to deny institution or order expedited adjudication. See Notice of Institution (Jan. 20, 2023). Respondents had not even argued that Viking’s injury allegations were deficient in their pre-institution filing. Commissioner Schmidtlein wrote separately to express her disagreement with the majority’s decision to order and expedited proceeding, noting that “these issues [are not] suitable for resolution within 100 days.”

Continue Reading Section 337 Developments at the U.S. International Trade Commission

In August 2022, the Chips and Science Act—a massive, $280 billion bill to boost public and private sector investments in critical and emerging technologies—became law.  We followed the bill from the beginning and anticipated significant opportunities for industry to inform and influence the direction of the new law’s programs. 

One such opportunity is available now.  The U.S. Department of Commerce recently published a request for information (RFI) “to inform the planning and design of the Regional Technology and Innovation Hub (Tech Hubs) program.”  The public comment period ends March 16, 2023.

Background

The Chips and Science Act authorized $10 billion for the U.S. Department of Commerce to establish a Regional Technology and Innovation Hub (Tech Hubs) program.  Specifically, Commerce was charged with designating at least 20 Tech Hubs and awarding grants to consortia composed of one or more institutions of higher education, political subdivisions, state governments, and “industry or firms in relevant technology, innovation, or manufacturing sectors” to develop and deploy critical technologies in those hubs.  $500 million has already been made available for the program, and Commerce will administer the program through the Economic Development Administration (EDA).

Continue Reading Commerce Seeks Comments on Regional Tech Hubs Program

The American Music Fairness Act (“AMFA”) has been re-introduced in the Senate for this Congress.  Sen. Padilla (D-CA) introduced the bill (S.253) earlier this month, along with Sens. Blackburn (R-TN), Tillis (R-NC), and Feinstein (D-CA).  The bill was referred to the Judiciary Committee, on which every cosponsor serves.  Further, Sen. Tillis serves as Ranking Member of the Subcommittee on Intellectual Property, which oversees copyright issues. 

AMFA would amend the Copyright Act to provide public performance rights for terrestrial transmissions of sound recordings.  Specifically, the bill would amend Section 106(6) of the Copyright Act, which provides copyright owners with the exclusive right to publicly perform sound recordings via “digital audio transmission,” by deleting the word “digital.”  AMFA also attempts to address some criticisms that faced similar predecessor bills.  For example, AMFA proposes flat fees for certain nonsubscription broadcast transmissions by public or smaller commercial stations, and provides that other fees would be set in rate-setting proceedings before the Copyright Royalty Board.  Such rate-setting proceedings would take account of economic, competitive, and programming information, as well as whether transmissions substitute for or promote record sales, and whether they interfere with or enhance other revenue streams for sound recording owners. 

While last Congress the House Judiciary Committee approved this legislation by a voice vote, no companion legislation has been introduced in the House yet.  Notably, however, co-sponsors of that prior House bill included Rep. Issa (R-CA), who recently became the Chair of the House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet, as well as Rep. Nadler (D-NY), who is now Ranking Member of the full Committee.  With bipartisan support of members on the relevant Committees of jurisdiction, AMFA is potentially one of the few pieces of legislation that could move in a divided Congress.

On 24 January 2023, the Italian Supervisory Authority (“Garante”) announced it fined three hospitals in the amount of 55,000 EUR each for their unlawful use an artificial intelligence (“AI”) system for risk stratification purposes, i.e., to systematically categorize patients based on their health status. The Garante also ordered the hospitals to erase all the data they obtained as a consequence of that unlawful processing.

The hospitals used the AI technology to “profile” their patients, predict whether they may develop certain pathologies, sort them into the corresponding risk group and, based on that, assign a priority class to them in the hospitals’ waiting lists.  The hospitals indicated that, in essence, they used the AI for predictive medicine purposes, which is part of their standard healthcare activities (Article 9(2)(h) GDPR).  

The Garante, however, disagreed.  In particular, it considered that the processing of health data for the purposes of predicting whether a patient may develop certain pathologies “must be considered additional and autonomous to the processing strictly necessary for the standard activities of care and prevention (Article 9(2)(h) of the GDPR), and therefore can be carried out only on the basis of the specific informed consent of the data subject (Article 9(2)(a) of the GDPR).”  According to the Garante, the standard activities of prevention and care do not include automated patient profiling and risk scoring in order to develop a risk-stratified care management system.  

If confirmed throughout the EU, this restrictive interpretation by the Garante of what qualifies as “preventive medicine” and the “provision of health care” could have important ramifications for the introduction of a wide spectrum of AI and e-health technologies in healthcare.

***

The Covington Team is happy to provide advice or answer any questions you may have on the topic.  

On the heels of Russia’s invasion of Ukraine, pandemic-induced supply chain disruptions, and U.S.-China tensions over Taiwan, 2022 accelerated a sweeping effort within the U.S. government to make national security considerations—especially with respect to China—a key feature of new and existing regulatory processes. This trend toward broader national security regulation, designed to help maintain U.S. strategic advantage, has support from both Republicans and Democrats, including from the Biden Administration. National Security Advisor Jake Sullivan’s remarks in September 2022 capture the tone shift in Washington: “…[W]e have to revisit the longstanding premise of maintaining ‘relative’ advantages over competitors in certain key technologies…That is not the strategic environment we are in today…[w]e must maintain as large of a lead as possible.”

This environment produced important legislative and regulatory developments in 2022, including the CHIPS and Science Act (Covington alert), first-ever Enforcement and Penalty Guidelines promulgated by the Committee on Foreign Investment in the United States (“CFIUS” or the “Committee”) (Covington alert), President Biden’s Executive Order on CFIUS (Covington alert), new restrictions under U.S. export control authorities targeting China (Covington alert), and proposals for a new regime to review outbound investments by U.S. businesses (Covington alert). The common thread among these developments is the U.S. government’s continuing appetite to use both existing and new regulatory authorities to address identified national security risks, especially where perceived risks relate to China.

With a Republican majority in the U.S. House of Representatives riding the tailwinds of this bipartisan consensus, 2023 is looking like a pivotal moment for national security regulation—expanding beyond the use of traditional authorities such as trade controls and CFIUS, into additional regulatory domains touching upon data, communications, antitrust, and possibly more. In parallel, the U.S. focus on national security continues to gain purchase abroad, with foreign direct investment (“FDI”) regimes maturing in tandem with CFIUS, and outbound investment screening gaining traction, for example, in the European Union (“EU”). It is crucial for businesses to be aware of these developments and to approach U.S. regulatory processes with a sensitivity towards the shifting national security undercurrents described in greater detail below.

Continue Reading Will 2023 Be an Inflection Point in National Security Regulation?

On Tuesday, February 14, 2023, the Senate Judiciary Committee held a hearing titled “Protecting Our Children Online.”  The witnesses included only consumer advocates, and no industry representatives.  As Committee Chair, however, Senator Durbin (D-IL) indicated that he plans to hold another hearing featuring representatives from technology companies.

The key takeaway was that there continues to be strong bipartisan support for passing legislation that addresses privacy and online safety for minors.  Both Senator Durbin and Senator Graham (R-SC), the Committee’s Ranking Member, were in agreement that the Committee will mark up relevant legislation, which could happen within the next six months—making the next couple months particularly important for negotiations.  Notably, all of the previously introduced legislation that was discussed had passed at least its respective Senate Committee last Congress.

Senators focused on four bills that could be included as part of a legislative package:

  1. Kids Online Safety Act (KOSA) (to be reintroduced).  KOSA would apply to “covered platforms,” which the previous bill defined as a “commercial software application or electronic service that connects to the internet and that is used, or is reasonably likely to be used, by a minor.”  Among other things, KOSA would impose a duty of care on covered platforms that would require them to “prevent and mitigate the heightened risks of physical, emotional, developmental, or material harms to minors posed by materials” on the platform.
Continue Reading Senate Judiciary Committee Holds Hearing on Children’s Online Safety

Covington annually publishes a detailed survey of state campaign finance, lobbying, and gift rules.  Now, for the first time, Covington is releasing an updated survey that details federal campaign finance, lobbying, and gift rules, in addition to those of the 50 states and the District of Columbia. Corporations, trade associations, non-profits, other organizations, and individuals face significant penalties and reputational harm if they violate federal or state laws governing corporate and personal political activities, the registration of lobbyists, lobbying reporting, or the giving of gifts or items of value to government officials or employees. To help organizations and individuals comply with these rules, this detailed survey—now 327 pages—summarizes the campaign finance, lobbying, and gift rules adopted by the federal government, all 50 states, and the District of Columbia.

Newly added federal sections cover the Lobbying Disclosure Act, the Foreign Agents Registration Act, Congressional gift rules, executive branch gift rules, and the Federal Election Campaign Act. Information is provided in a table question and answer format intended to address common questions with practical guidance. 

Continue Reading Covington Releases Updated Survey of Federal and State Campaign Finance, Lobbying, and Gift Rules (2023 Edition)