A new nationwide standard for upholstered furniture flammability was signed into law on December 27, 2020 as part of the Consolidated Appropriations Act, 2021, which includes the COVID–19 Regulatory Relief And Work From Home Safety Act.  This legislation embraces the California Technical Bulletin (TB 117-2013) for testing the smolder resistance of materials used in upholstered furniture.  The California standard has been mandatory in that state since 2015, so the standard should already be on the compliance radar for most national retailers.

TB 117-2013 is intended to assess the flammability of upholstered furniture when exposed to a smoldering cigarette, a common cause of residential fires.  TB 117-2013 requires different tests for outer fabric, inner linings, and filling material that simulate a discarded, lit cigarette.  Each material is required to survive for an extended period without creating flames or overly smoldering or charring.  The previous version of the TB 117 standard also required an open flame test, which had been criticized for forcing manufacturers to use flame retardant chemicals.

Continue Reading New National Standard for Flammability of Upholstered Furniture

On December 15, 2020, the European Commission (EC) presented its long-awaited proposal for a Digital Services Act (DSA), together with a proposal for a Digital Markets Act (DMA), which we discussed in a previous alert. Whereas the DMA aims to promote competition by ensuring fair and contestable markets in the digital sector, the DSA proposal intends to harmonize the liability and accountability rules for digital service providers in order to make the online world a safer and more reliable place for all users in the EU.

Most notably, the DSA would impose far-reaching due diligence obligations on online platforms, with the heaviest burdens falling on “very large” online platforms (i.e., those with more than 45 million average monthly active users in the EU), due to the “systemic” risks such platforms are deemed to pose in terms of their potential to spread illegal content or to harm society. In this day and age when the perceived power of online platforms to independently control content publication and moderation is headline news daily, with governments throughout the globe grappling with different legislative and regulatory proposals, the DSA stands out as an ambitious effort by the EC to create a consistent accountability framework for these platforms, while striking a balance between safeguarding “free speech” and preserving other values and interests in a democratic society. Like the parallel DMA proposal, the DSA proposal has been criticized for targeting mainly U.S.-based companies, which would make up most of the “very large” platforms. Given the huge commercial interests at stake, the passage of both laws will no doubt be the subject of intense debate and lobbying, including with respect to the asymmetric nature of the proposed regulation and the powerful role that the EC reserves to itself in both proposals. Continue Reading Digital Services Act: The European Commission Proposes An Updated Accountability Framework For Online Services

The Biden Administration has promised an across-the-government effort to combat climate change, consistent with policy priorities during the Obama Administration. While much speculation has focused on a climate infrastructure package or a possible revamp of the Clean Power Plan, appliance manufacturers should be prepared for a less publicized but similarly significant change in direction from the current administration: increased enforcement under the U.S. Department of Energy’s (DOE) appliance standards program.

Background

The DOE administers the appliance standards program under the Energy Policy and Conservation Act (EPCA), which includes setting mandatory appliance energy and water efficiency standards for over 60 covered products, such as refrigerators, dishwashers, vacuums, and battery chargers. Each appliance standard has two components: a conservation standard and an associated testing procedure through which the manufacturer demonstrates compliance with the applicable standard.

Although this program has existed since the 1980s, the Obama Administration was the first to explicitly include goals for greenhouse gas emission reductions as a component of the standards-setting process. Over the course of 8 years, DOE issued new and updated conservation standards for numerous products, and DOE’s Office of Enforcement investigated and issued monetary penalties to companies failing to comply with updated standards incorporating these emission reduction goals. The Trump Administration, by comparison, has not directly incorporated these greenhouse gas-related factors into the rulemaking process, and has been comparatively less active in updating standards in general. The Trump Administration also has pursued fewer enforcement actions on the whole – and appears to have sought smaller penalties – relative to the Obama Administration. Continue Reading Appliance Manufacturers Should Prepare for Increased DOE Enforcement Activity

On December 15, 2020, the European Commission (EC) published its proposal for a Digital Markets Act (DMA). The proposal aims to promote fair and contestable markets in the digital sector. If adopted, it could require substantial changes to the business models of large digital platform service providers by imposing new obligations and prohibiting existing market practices. These changes not only would create significant new obligations on “gatekeeper” platforms, but also opportunities for competitor digital service providers and adjacent firms. Further, the proposed requirements of the DMA have the potential to transform the way that businesses engage with “gatekeeper” providers – including, for example, companies that sell goods and services, distribute apps, and/or purchase advertising on large platforms.

Digital Markets Act Proposal: Main Takeaways

  • Proposes new rules intended to promote fair and contestable markets in the digital sector, which would apply only to providers of “core platform services” designated as “gatekeepers”.
  • Defines “core platform services” to include online search engines, online marketplaces, social networks, messaging and chat apps, video-sharing platforms, operating systems, cloud computing services, and advertising networks and exchanges.
  • Defines “Gatekeepers” as providers of core platform services which have a significant impact on the EU internal market, serve as an important gateway for business users to reach customers, and have an entrenched and durable position.
  • Provides quantitative thresholds based on turnover or market value, and user reach, as a basis to identify presumed gatekeepers. Also empowers the Commission to designate companies as gatekeepers following a market investigation.
  • Prohibits gatekeepers from engaging in a number of practices deemed unfair, such as combining personal data across platforms, ‘wide’ MFN clauses, misusing non-public data about the activities of business users and their customers to gain a competitive advantage, blocking users from uninstalling pre-installed applications, self-preferencing in ranking, etc.
  • Imposes certain affirmative obligations on gatekeepers, including measures to promote interoperability, data access, data portability, and transparency regarding advertising services.
  • Requires gatekeepers to notify below-threshold mergers and to accept independent audits of profiling practices.
  • Puts the Commission in charge of enforcement with extensive investigative powers, including the power to require access to databases and algorithms, and the ability to impose fines of up to 10% of the gatekeeper’s worldwide annual turnover.
  • Empowers the Commission to impose structural remedies, potentially including the divestiture of businesses, for recurring non-compliance.
  • Authorizes the Commission to carry out market investigations to assess whether new gatekeeper practices and services need to be regulated.

Continue Reading Digital Markets Act: The European Commission Unveils Plans to Regulate Digital ‘Gatekeepers’

Recalls in Review: A monthly spotlight on trending regulatory enforcement issues at the CPSC.

“Smart” homes and personal electronic devices are no longer a futuristic ideal.  Millions of internet-connected phones, TVs, wearable fitness trackers, home security devices, home appliances, and digital assistants are in use in the United States today.  The internet of things (“IoT”) is the use of network sensors in physical devices to allow for remote monitoring and control.  These devices have made great strides in making our lives more convenient.  But interconnectivity and data collection can also have serious security and privacy implications.

Despite the dramatic increase in the number of IoT products purchased by American consumers over the past few years, the law is slower in addressing any potential hazards posed by IoT technologies.  However, we expect to see more IoT product-related regulations enacted at the federal level over the next few years. We recently wrote about the new Internet of Things Cybersecurity Improvement Act, which was signed into law on December 4, 2020. The legislation charges the National Institute of Standards & Technology (NIST) with drafting and finalizing security requirements for IoT devices.

Continue Reading Recalls in Review: IoT Products

On December 18, 2020, the Ninth Circuit Court of Appeals held that “Oh, the Places You’ll Boldly Go!,” a Dr. Seuss and Star Trek mashup illustrated book, is not a fair use exempted from copyright liability. Under the Copyright Act of 1976, the factors courts assess in determining if there is fair use include:

  1. The purpose and character of the use, including whether this use is commercial or for a nonprofit educational purpose;
  2. The nature of the copied work;
  3. The amount and substantiality of the portion used in relation to the copied work as a whole; and
  4. The effect of the use on the potential market for or value of the copied work.

17 U.S.C. § 107(1)-(4).

In 2019, the District Court for the Southern District of California had found that the mashup book was sufficiently transformative, under prong one of the fair use analysis, to constitute fair use. Amici were animated on both sides in front of the Court of Appeals, with copyright owners concerned that a finding of fair use would result in any mashup combining creative elements from disparate sources absolving the creator of copyright liability. On the other hand, some amici, such as Electronic Frontier Foundation and Public Knowledge, were worried about the suppression of creative expression.

The Ninth Court ultimately found that all of the fair use factors favored Dr. Seuss. In particular and in its analysis of the purpose and character of the book, the court reasoned that the mashup was not a parody of Dr. Seuss because it did not critique or comment on the copied material. This decision is a win for copyright owners seeking to protect their works. But it provides a cautionary tale to those who wish to create works based on a mashup of protected material without truly seeking to parody that content.

On November 30, 2020, New York Governor Cuomo signed into law a bill that will allow estates and representatives of deceased individuals to defend their names and likenesses from commercial exploitation, allowing their estates to continue to control and protect their likeness after their death. The new law, which establishes a “Right to Publicity” for deceased individuals who were domiciled in New York at their time of death, allows these individuals to that have commercial value, including their name, picture, voice, or signature, against unauthorized use.

In connection with the new post-mortem right to publicity, Governor Cuomo stated, “In the digital age, deceased individuals can often fall victim to bad actors that seek to capitalize on their death and profit off of their likeness after they pass away – that ends today. This legislation is an important step in protecting the rights of deceased individuals while creating a safer, fairer New York for decades to come.” The new post-mortem right of publicity applies up to 40 years after the death of the deceased personality, and it provides certain exceptions, such as for works of art or political interest, parodies and satires, and the use of names and likenesses in the news.

In enacting this law, New York joins the minority of U.S. states which recognize a post-mortem right of publicity, an area of law that has long been controversial and which has resulted in extensive discussion of choice-of-law rules. Continue Reading ‘Imagine’ This: John Lennon Would Have Received Post-Mortem Right to Publicity in New York

The United States-Mexico-Canada Agreement (USMCA) came into force on July 1, 2020. Included in the USMCA are stronger labor provisions Congressional Democrats demanded, with the support of the Trump Administration, that were approved on a bipartisan basis during consideration of the USMCA implementing legislation in late 2019. The stronger labor provisions helped secure the support of key labor groups for the USMCA. Together with overall support from business groups, the USMCA set a framework for more extensive labor commitments in U.S. trade agreements. This is expected to lead to more aggressive enforcement.

While no case has been brought on the labor provisions of the USMCA so far,1 the groundwork has been in place for anticipated enforcement actions on labor violations to begin at any time. Notably, the Department of Labor’s Bureau of International Labor Affairs (ILAB), with the Office of the U.S. Trade Representative as co-chairs, has established the Interagency Labor Committee for Monitoring and Enforcement (Committee). One of the responsibilities of the Committee is to review public submissions on potential violations of the USMCA labor provisions and to initiate the domestic process for the Rapid Response Labor Mechanism.

The Rapid Response Labor Mechanism is an innovative enforcement tool under the USMCA that can be triggered when workers at a “Covered Facility” in a “Priority Sector” in Mexico are being denied the right of free association and collective bargaining. A “Denial of Right,” if found, can lead to the suspension of preferential tariff treatment of goods manufactured at the Covered Facility or the imposition of unspecified penalties. Two prior Denial of Right determinations can lead to the denial of entry of goods manufactured at the Covered Facility after the third determination. The USTR has named the U.S. nationals to the list of Rapid Response Labor Panelists who can serve as panelists to verify a Covered Facility’s compliance.

Additionally, the ILAB has set up a hotline where interested public in USMCA countries can provide confidential information about alleged labor violations under the USMCA. The ILAB also worked with the U.S. Department of State to establish three labor attaché positions at the U.S. Embassy in Mexico City to oversee and monitor Mexico’s compliance with the labor provisions of the USMCA.

The Trump Administration signaled throughout 2019 that enforcement of the USMCA can be done through the dispute settlement mechanism under the USMCA, including the Rapid Response Labor Mechanism, or, if the USMCA’s state-to-state dispute settlement process is delayed, through the use of Section 301 of the Trade Act of 1974. Under Section 301, the U.S. Government would theoretically be able to take action on its own initiative against Mexico for any violation of the USMCA, including the labor provisions. Section 301 has most notably been applied against China for unreasonable and discriminatory practices related to intellectual property rights that burden or restrict U.S. commerce. The actual use of Section 301 as an enforcement tool by the U.S. will likely depend on the effectiveness of the USMCA dispute settlement mechanism and the Rapid Response Labor Mechanism.

The Federal Bar Association’s Fashion Law Conference will be held online from February 8-12, 2021. Crowell & Moring is pleased to be a sponsor of the event, which promotes the advancement of fashion law. This year’s conference will explore relevant industry topics, including changes anticipated with the Biden Presidency; the increase in counterfeits in ecommerce; contract termination issues; retail bankruptcies; and labor and employment considerations related to returning to the office and stores.

CLE credit will be available.

Register for the Fashion Law Conference before January 18, 2021 to receive the early bird rate. Please contact Frances Hadfield for more information.

Last week, the President signed the Internet of Things (IoT) Cybersecurity Improvement Act into law, kicking off a multi-year process that will culminate in the first-ever federal requirements for IoT devices. Under the law, the National Institute of Standards & Technology (NIST) is now charged with drafting and finalizing security requirements for IoT devices, as well as guidelines for managing disclosures about those devices’ security vulnerabilities. In two short years, the federal government will then be prohibited from procuring IoT devices unless (1) the devices meet the pending NIST requirements; or (2) the devices are granted a formal waiver by an agency Chief Information Officer. In addition to creating yet another cybersecurity regime for the government contracting community, the law will create a new benchmark for consumer-facing companies to consider when assessing and complying with the growing number of states imposing their own “reasonable security” requirements for IoT devices.