PTO Accelerates Patent Issuance Timeline
The US Patent & Trademark Office (PTO) announced that it has shortened the time between the issue notification and the issue date for patents. Historically, the time between these two events averaged about three weeks. Seeking to provide earlier protection for inventions, the PTO intends to reduce that time to about two weeks. The PTO is making the move because publishing electronic grants via the PTO online platform has allowed the PTO to eliminate redundancies and reduce the time between grant notification and the issuance date. The shortened wait time has the added benefit of potentially allowing patent applicants to avoid the Quick Path Information Disclosure Statement (IDS), which attempts to streamline filing an IDS after payment of the issue fee.
Practice Note: Given the accelerated timeline, the PTO recommends that applicants file continuation applications before payment of the issue fee to ensure codependency.
The Employee Retention Credit: IRS’s “Risking” Model Faces Legal Challenge
Case: ERC Today LLC et al. v. John McInelly et al., No. 2:24-cv-03178 (D. Ariz.)
In an April 2025 order, the US District Court for the District of Arizona denied a motion for a preliminary injunction filed by two tax preparation firms. The firms sought to halt the Internal Revenue Service’s (IRS) use of an automated “risk assessment model” that the IRS used to evaluate and disallow claims for the Employee Retention Credit (ERC), seeking to restore individualized review of ERC claims.
BACKGROUND ON THE ERC
The ERC was enacted in 2020 as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act to provide financial relief to businesses affected by COVID-19 by incentivizing employers to retain employees and rehire displaced workers. The ERC allowed employers that experienced significant disruptions due to government orders or a substantial decline in gross receipts to claim a tax credit equal to a percentage of qualified wages paid to employees. Millions of employers have filed amended employment tax returns (Form 941-X) claiming the credit for periods in 2020 and 2021. Since the enactment of the CARES Act, the IRS has issued roughly $250 billion in ERC.
THE IRS’S MORATORIUM AND AUTOMATED RISK ASSESSMENT MODEL
In September 2023, the IRS instituted a moratorium on processing ERC claims to review its procedures, reduce the backlog of claims, and identify potential fraud. Before the moratorium, all ERC claims received individualized review. During the moratorium, the IRS developed an automated “risk assessment model” to facilitate the processing of claims. This model, which is alternatively known as “risking,” utilizes taxpayer-submitted data and publicly available information to predict the likelihood that a taxpayer’s claim is valid or invalid. Claims deemed to be “high risk” by the system are excluded from review by an IRS employee and instead are designated for immediate disallowance. In August 2024, the IRS lifted its ERC processing moratorium and began issuing thousands of disallowance notices to taxpayers. Notwithstanding these actions, the number of pending ERC claims remained above one million as of November 2024.
THE COURT CHALLENGE TO THE IRS’S “RISKING” MODEL
In their motion for a preliminary injunction, filed January 7, 2025, the plaintiffs (the tax preparation firms) sought a court order compelling the IRS to, among other things, stop the use of “risking” and restore individualized employee review of ERC claims. The plaintiffs claimed to be injured by the “risking” model because they were unable to collect contingency fees from clients when claims were disallowed.
In support of their motion, the plaintiffs pointed to having received on behalf of their clients many boilerplate rejections immediately following the end of the moratorium. The plaintiffs alleged that these summary disallowances were arbitrary and capricious, thus violating the Administrative Procedure Act (APA), because the “risking” model precluded the IRS from acquiring information necessary to properly evaluate the claims.[1] The plaintiffs also contended that the disallowances reflected a shift in IRS policy to disfavor ERC, with the result being that several legitimate claims were being unfairly disallowed. The plaintiffs argued that this apparent shift violated Congress’s intent in enacting legislation providing for ERC.
On April 7, 2025, the court denied the motion, finding that the plaintiffs failed to meet the high bar for injunctive relief at this stage of the litigation.[2] The court said that the record of the case at this juncture did not support the plaintiffs’ contention that the increase in claim disallowances after August 2024 was because of the IRS denying valid claims. However, the court pointed to a concession by the IRS that its use of the “risking” model may be resulting in the disallowance of legitimate claims. The court suggested at several points in its order that the plaintiffs (or the employers they support) could bring forth evidence demonstrating that the “risking” model was unduly denying benefits to deserving taxpayers.
Practice Point: This case highlights that the IRS has been adopting novel mechanisms to address its backlog of pending ERC claims, which given current resource constraints, it may seek to employ them in other contexts, including those involving income tax refunds. The “risking” model in particular, while purporting to expedite the review of certain supposedly “high-risk” claims, may be having the collateral consequence of denying benefits to eligible employers. Taxpayers with potentially meritorious claims can (and should) be prepared to administratively appeal or even litigate disallowed claims, which they can do by filing a complaint in the US district court with jurisdiction or in the US Court of Federal Claims.
[1] The plaintiffs also alleged that the IRS exceeded its statutory authority by disallowing their clients’ ERC claims without providing them a right to be heard or a direct right to appeal in an independent forum. The plaintiffs argued that the IRS violated the Due Process Clause of the US Constitution’s Fifth Amendment by depriving their clients of ERC without adequate review of these clients’ claims.
[2] More specifically, the court found that the plaintiffs did not establish that they had standing to seek the requested relief, or that the United States (through the actions of the IRS) had waived sovereign immunity as to the plaintiffs’ APA claims. The court also concluded that the plaintiffs did not show that their due process claim was likely to succeed on the merits such that a preliminary injunction was an appropriate remedy.
Litigate or Arbitrate? Sixth Circuit Decision Looks at Timing of Sexual Harassment Claim
Can you compel arbitration with an employee who is alleging sexual harassment? You may recall that in 2022, Congress enacted the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFAA), which precludes employers from requiring employees to arbitrate sexual harassment claims. But what if the alleged harassment occurred before the EFAA effective date? A recent Sixth Circuit opinion, Memmer v. United Wholesale Mortgage, LLC, answered this question.
EFAA Background
Congress passed the EFAA on the heels of the #MeToo movement, which highlighted that arbitration could be used to hinder public awareness of sexual harassment claims and potentially deter employees from pursuing claims, including class actions. Under the EFAA, an employee may voluntarily agree to proceed with arbitration of a sexual harassment claim, but an employer cannot compel as much.
The EFAA applies “with respect to any dispute or claim that arises or accrues on or after the date of enactment of this Act [March 3, 2022].”
But what does this language actually mean? Is it possible for the EFAA to apply to an instance of sexual harassment that occurred prior to March 3, 2022? If the employee left employment before the effective date, can you compel arbitration?
The Memmer Decision Sheds Some Light
Kassandra Memmer quit her job several months before the enactment date of the EFAA and filed a lawsuit alleging a variety of discrimination claims, including sexual harassment. Given her termination date, the alleged harassment occurred prior to March 3, 2022. Not surprisingly, the defendant moved to compel arbitration based on a valid agreement, arguing that the EFAA did not apply to the plaintiff’s claims. The district court agreed, and Memmer appealed.
The majority opinion, authored by Judge Karen Moore and joined by Judge Eric Clay, focused on the EFAA’s language in a statutory note, specifically Congress’s disjunctive language choice, “dispute or claim.” Given Congress’s use of both words, the Court held it had to ascribe a separate meaning to each word. On the one hand, a “claim” accrues when the cause of action accrues, meaning certain elements are in place to form an injury or legal claim ripe for vindication. As for the word “dispute,” the Court held that there is no “set legal framework” to determine when a dispute arises. Instead, the question involves determining exactly when the parties became adverse to one another.
By giving distinct meanings to the words “dispute” and “claim,” the Court held that even though the plaintiff’s claims accrued prior to the enactment date of the act, the dispute between the parties may have transpired after the enactment date of the EFAA. Accordingly, the Court remanded to the district court for consideration of exactly when the dispute arose between the parties.
Based on the Memmer case, employers who seek to compel arbitration of sexual harassment claims cannot rely only on the employee’s separation date. Instead, an employer must also consider when the dispute arose, or when some type of opposition between the parties transpired. The operative dates could be when the employee complains of harassment, when the employer investigates (or does not investigate) the sexual harassment complaint, when the plaintiff files an EEOC charge, or even when the plaintiff files a lawsuit. In the words of the Sixth Circuit, “[u]ltimately, when a dispute arises is a fact-dependent inquiry” that depends on the specific context of each case.
Listen to this post
Recalibrating Regulation: EPA, Energy, and the Unfolding Consequences of Deregulatory Momentum
The U.S. Environmental Protection Agency (EPA) has long navigated the complex intersection of science, law, policy, and public trust. Under the Trump Administration, EPA faces renewed scrutiny. The Administration seeks regulatory rollbacks and is pursuing a broader deregulatory strategy that many believe risks sacrificing hard won environmental protections in the name of economic growth.
While early promises to reduce bureaucratic red tape struck a chord with a number in industry, implementation has appeared blunt thus far, rather than measured. Deregulatory actions have sometimes resembled sweeping cuts “with a machete instead of a scalpel,” affecting the intended target of outdated or burdensome rules, but taking with it collateral damage including critical administrative safeguards and scientific functions. Although EPA has avoided some of the steepest cuts levied on other federal agencies, many worry that this trajectory will fundamentally impair the Agency’s mission.
EPA Administrator Lee Zeldin has attempted to ease concerns, stating that he can “absolutely” assure the public that deregulation will not harm the environment. “We have to both protect the environment and grow the economy,” he stated when questioned by CBS News’s “Face the Nation” about whether he could ensure that deregulation would not have an adverse impact. Still, the juxtaposition of that reassurance against ongoing efforts to slash regulations leaves many stakeholders uneasy.
At the heart of the Administration’s argument is a broader political philosophy — an intent to upend what it views as “entrenched bureaucracy.” White House spokesman Harrison Fields emphasized in a Statement that the Administration is “prioritizing efficiency; eliminating waste, fraud, and abuse; and fulfilling every campaign promise.” Critics, however, view these efforts as retributive, undermining institutional expertise, and marginalizing science-driven decision-making. Some demand a clearer upside — what fraud, waste, and abuse has been uncovered and eliminated?
One of the most visible fronts in this deregulatory push is energy policy. A recent Executive Order directs the federal government to expedite coal leasing on public lands, and aims to designate coal as a “critical mineral.” This pivot is being positioned as part of a strategy to meet the rising energy demands of generative artificial intelligence (AI) and data centers that are expected to increase significantly electricity consumption in the coming decade.
Despite this coal-forward rhetoric, more coal-fired power capacity was retired during Trump’s first term than under either of President Obama’s terms. Analysts note that even with reduced climate regulations, coal’s economic competitiveness remains constrained by market forces and state-level clean energy mandates. “You can run all these coal plants without environmental regulations…I’m sure that will save industry money,” energy data analyst Seth Feaster of the Institute for Energy Economics and Financial Analysis recently told Wired. “Whether or not the communities around those places really want that is another issue.”
Meanwhile, the federal freeze on electric vehicle (EV) charging infrastructure funding has disrupted planned rollouts in several states. “It puts some players in a bad spot where they’ve already invested,” states Jeremy Michalek, an engineering and public policy professor at Carnegie Mellon University, in a recent article on the topic. Similar concerns are emerging in the aviation and alternative fuels sectors, where projects relying on incentives from the Inflation Reduction Act (IRA) and Infrastructure Investment and Jobs Act (IIJA) now face sudden funding uncertainty.
Last week, Judge Mary McElroy of the U.S. District Court for Rhode Island, ordered the Trump Administration to reinstate previously awarded funds under both the IRA and the IIJA, underscoring the legal and financial turbulence surrounding the current regulatory landscape. This new normal is unwelcome to most shareholders. In a March 2025 press release about another lawsuit specifically challenging the Administration’s freeze on funding from the IRA and IIJA, Skye Perryman, President and CEO of Democracy Forward, states that “The decision to freeze funds that Congress appropriated is yet another attempt to roll back progress and undermine communities. These actions are not only unlawful, but are already having an impact on local economies.”
Meanwhile, in a recent post on TruthSocial, President Trump invited companies to relocate operations to the United States, promising “ZERO TARIFFS, and almost immediate Electrical/Energy hook ups and approvals. No Environmental Delays.” But for regulated entities, states, and federal partners navigating a rapidly shifting policy environment overseen by a new Administration that has diminished and fractured its workforce and shown a propensity to backpedal from bold claims, the promise of speed may not be worth the cost of lost clarity, stability, and long-term sustainability.
OCR Reaches Settlements with Northeast Radiology and Guam Memorial Hospital Over HIPAA Security Rule Violations
The Department of Health and Human Services’ Office for Civil Rights (“OCR”) recently announced two HIPAA enforcement actions involving failures to safeguard electronic protected health information (“ePHI”) in violation of the HIPAA Security Rule. Both cases stem from investigations into incidents that exposed sensitive health data, underscoring ongoing federal scrutiny of entities that fail to implement core compliance measures such as HIPAA risk analyses, system activity reviews and workforce access controls, into their security programs.
Northeast Radiology, P.C. (“NERAD”) agreed to a $350,000 settlement after OCR launched an investigation into the company’s use of a medical imaging storage system (“PACS”) that lacked proper access controls. The investigation stemmed from a March 2020 breach report in which NERAD disclosed that, between April 2019 and January 2020, unauthorized individuals had accessed radiology images stored on its PACS server containing unsecured ePHI, gaining access to the ePHI of nearly 300,000 individuals. OCR found that NERAD had not conducted a comprehensive HIPAA risk analysis, failed to implement procedures to monitor access to ePHI, and lacked adequate policies to safeguard sensitive data.
In addition to the monetary settlement, NERAD agreed to a two-year corrective action plan that requires it to conduct a thorough HIPAA risk analysis to assess potential threats to the confidentiality, integrity, and availability of ePHI; implement a risk management plan to address identified security vulnerabilities; establish a process for regularly reviewing system activity, including audit logs and access reports; maintain and update written HIPAA policies and procedures; and enhance its HIPAA and security training program for all workforce members with access to PHI.
Guam Memorial Hospital Authority (“GMHA”) reached a $25,000 settlement following OCR’s investigation into two separate security incidents: a ransomware attack in December 2019 and a 2023 breach involving hackers who retained access to ePHI. Through its investigation, OCR determined that GMHA had failed to conduct an accurate and thorough HIPAA risk analysis to determine the potential risks and vulnerabilities to ePHI held in its systems.
As part of a three-year corrective action plan, GMHA is required to conduct a comprehensive HIPAA risk analysis to identify risks to the confidentiality, integrity and availability of its ePHI; implement a risk management plan to mitigate those risks; develop a process for regularly reviewing system activity, such as audit logs and access reports; and adopt written policies and procedures to comply with the HIPAA Privacy, Security and Breach Notification Rules. GMHA also must strengthen its HIPAA training program, review and manage access credentials to ePHI, and conduct breach risk assessments, and provide supporting documentation to OCR.
Together, these enforcement actions reinforce OCR’s expectation that covered entities and business associates adopt and maintain robust, enterprise-wide security programs capable of preventing, detecting and responding to threats that compromise ePHI.
Unleashing American Energy: Trump Administration’s Latest Executive Orders
New Executive Orders and Proclamation
On April 8, 2025, President Donald J. Trump issued three significant executive orders (“EOs”) and a fourth proclamation consistent with his pledge to “Unleash American Energy.” These Presidential actions, titled (1) Strengthening the Reliability and Security of the U.S. Electric Grid, (2) Protecting American Energy from State Overreach, (3) Reinvigorating America’s Beautiful Clean Coal Industry, and (4) Regulatory Relief for Certain Stationary Sources to Promote American Energy, seek to promote domestic oil, gas, and coal energy production. Each of these actions is discussed below.
Strengthening the Reliability and Security of the U.S. Electric Grid, EO 14262
This EO directs the Secretary of Energy to streamline emergency processes and to develop a uniform methodology for analyzing reserve margins across all regions of the bulk power system. The stated needs for the EO include aging infrastructure, increased need for electricity, and demand for energy use by datacenters.
Using Section 202(c) of the Federal Power Act, the EO seeks to curtail the decommissioning of generation resources or to prevent fuel-switching of generation resources in excess of 50 megawatts if the fuel-switching will reduce the nameplate capacity. While not expressly stated, this EO likely seeks to prevent oil, gas, and coal generation resources from going offline.
The EO requires the Secretary of Energy to develop the uniform methodology by May 8, 2025, at which time we will have a better sense of how the Administration intends to implement this order.
Protecting American Energy from State Overreach, EO 14260
EO 14260 aims to counter the more recent state efforts to target oil and gas companies for greenhouse gas emissions and climate change issues. For example, several municipalities, counties, and state governments have initiated litigation against oil and gas companies for alleged climate change damages, using various state tort law theories. We have previously written about these cases and, with this EO, these cases will likely take a new twist. We can expect to see the federal government intervene in these cases if they have not done so already.
The EO also seeks to challenge state laws and regulations that curtail greenhouse gas emissions or seek payments from oil and gas companies for climate change damages. The EO cites New York’s and Vermont’s climate superfund legislation, where the states seek collective payments from oil and gas companies for remediation involving climate change related damages. In addition, the EO cites to California’s carbon cap-and-trade program.
The EO directs the attorney general to identify all state and local laws and regulations burdening domestic energy production, including “any such State laws purporting to address ‘climate change’ or involving ‘environmental, social, and governance’ initiatives, ‘environmental justice’, carbon or ‘greenhouse gas’ emissions, and funds to collect carbon penalties or carbon taxes.” The EO also directs that the attorney general take all appropriate action to stop the enforcement of these state laws and to provide a report to the president within 60 days (by June 7) of the attorney general’s efforts. We will likely see the federal government initiating lawsuits against these states under various theories of the Dormant Commerce Clause and federal law supremacy related to the Clean Air Act.
Reinvigorating America’s Beautiful Clean Coal Industry and Amending Executive Order 14241, EO 14261
The third EO is an effort to support the domestic coal industry. Originally issued by President Trump on March 20, 2025, EO 14241 aims to enhance coal production and use as a means of securing economic prosperity and national security, lowering electricity costs, and supporting job creation. The revised April 8 EO further outlines a series of policies and actions to remove regulatory barriers, promote coal exports, and assess coal resources on federal lands, while also encouraging the development of coal technologies. Working together, these orders seek to promote coal as a key fuel source for steel production and artificial intelligence data centers in the United States.
By previously designating coal as a “mineral” under the March 20 EO, coal will be granted various benefits specific to mineral production, including expedited environmental review and a streamlined permitting process.
The April 8 EO also grants specific powers to various federal agencies to identify and assess coal resources and reserves on federal lands, as well as to prioritize coal leasing and related activities. The Secretary of the Interior, the Secretary of Agriculture, and the Secretary of Energy are instructed to identify, revise, or rescind any guidance, regulations, programs, or policies that seek to transition the United States away from coal production and electricity generation, or that discourage investment in coal projects, both domestically and internationally. These agencies are further instructed to promote and identify export opportunities for coal and coal technologies, and to facilitate international offtake agreements for U.S. coal. The order also specifically directs the Secretary of the Interior to publish a notice in the Federal Register terminating the Obama Administration’s 2016 “Jewell Moratorium,” which halted federal coal leasing on public lands with the intent to change the way the United States managed its coal and oil resources.
Finally, this EO expands the use of categorical exclusions for coal under the National Environmental Policy Act (“NEPA”), which would allow coal-related projects to avoid NEPA’s requirements to prepare an environmental impact statement or an environmental assessment.
Due to the broad powers being granted to these few federal agencies, along with the rescinding of previous administrations’ programs designed to limit coal production and reliance nationally, we anticipate litigation from various energy and environmental groups challenging this order.
Regulatory Relief for Certain Stationary Sources to Promote American Energy
The fourth action, a Presidential proclamation, also addresses coal usage in the United States but specifically in the context of coal-fired electricity production.
Invoking the authority of Section 112(i)(4) of the Clean Air Act, which allows the President to exempt stationary sources from compliance with federal emissions standards, this proclamation exempts certain coal-fired power plants from compliance with the U.S. Environmental Protection Agency’s May 7, 2024, final rule amending the preexisting Mercury and Air Toxics Standards (“MATS”) Rule that was issued to make air emissions more stringent. Citing national security concerns pertaining to the shutdown of coal-fired power plants that would cause the elimination of jobs and place the United States’ electrical grid at risk, as well as the unavailability of necessary technology to implement the MATS Rule, this proclamation issues an exemption to certain stationary sources subject to the Rule. Therefore, the Rule, which is scheduled to go into effect on July 8, 2027, will allow the stationary sources to be further exempt from the Rule’s stricter emissions requirements until July 8, 2029. All stationary sources that are specifically subject to this exemption are identified in Annex I of the proclamation.
Because there are certain stationary sources that may be excluded from Annex I and, thus, this exemption, we anticipate litigation from various companies and industries challenging their lack of inclusion in this exemption. Furthermore, it is expected that various energy and environmental organizations will file challenges to this EO in court.
Conclusion
All of these new executive actions are likely to face legal challenges from different states and energy and environmental groups. Blank Rome will continue to monitor any developments and provide updates on the legal and policy implications of these EOs.
Financial Industry Concerns Cause FCC to Delay Implementation of Broad Consent Revocation Requirement under TCPA
On April 11, 2025, a controversial new rule by the Federal Communications Commission (FCC) was set to take effect to modify consent revocation requirements under the Telephone Consumer Protection Act (TCPA). But each of the rule’s mandates, as codified at 47 CFR § 64.1200(a)(10), did not go into effect on that date. Just four days before, the FCC issued an Order delaying the rule’s requirement that callers must “treat a request to revoke consent made by a called party in response to one type of message as applicable to all future robocalls and robotexts . . . on unrelated matters.” See FCCOrder, Apr. 7, 2025 (emphasis added).
The plain language of the rule is generally broad. It states that consumers may use “any reasonable method” to revoke consent to autodialed or prerecorded calls and texts, and that such requests must be honored “within a reasonable time not to exceed ten business days.” The rule then goes on to delineate certain “per se” reasonable methods by which consumers may revoke consent. For example, if a consumer responds to a text message with the words “stop,” “quit,” “end,” “revoke,” “opt out,” “cancel,” or “unsubscribe,” then the consumer’s consent is “definitively revoked” and the sender is thereafter barred from sending any “additional robocalls and robotexts.”
Many industry participants—especially the banking industry—have been critical of the rule. One major concern is its sprawling effect. For example, under the rule, if a consumer were to respond to a marketing communication with the word “unsubscribe” or the like, then the sender and all of its business units may be forced to cease unrelated forms of communication on issues such as the provision of account notices or other informational matters.
The banking industry has taken issue with the burdens imposed by the rule as well. That include concerns about “numerous challenges” financial institutions face in attempting to modify existing call platforms to comply with the rule, with “substantial work” being required by “larger institutions with many business units with separate caller systems.” See FCC Order ¶ 6. The bank industry has also raised challenges faced by financial institutions in “designing a system that allows the institution . . . [to] not apply a customer’s revocation to a broader category of messages than the customer intended.” See FCC Order ¶ 9.
The banking industry’s concerns ultimately appear to be what persuaded the FCC to stay the implementation of Section 64.1200(a)(10) in part earlier this month. The new rule is now set to not go fully into effect until April 11, 2026. For the time being, that means banks and other companies receiving a consent revocation request from a consumer in response to one type of message may not necessarily be prohibited from communicating with the consumer using “robocalls and robotexts from that caller on unrelated matters.” The FCC nonetheless suggests—albeit vaguely—that it will enforce any additional obligations required under the new Section 64.1200(a)(10), so companies engaging in TCPA-regulated communication practices should take heed accordingly.
The UK’s Failure to Prevent Fraud Offense
Effective September 1, 2025, the UK’s Failure to Prevent Fraud offense will go into effect as part of the UK’s Economic Crime and Corporate Transparency Act 2023 (the ECCTA). The law significantly expands corporate liability for fraud committed by employees and other associated persons of relevant corporates and will require compliance refinement for any business within scope of the offense operating in connection with the UK. The UK government (its Home Office) published guidance in 2024 (the “Guidance”) to help companies navigate this corporate criminal fraud offense as well as take appropriate action to help prevent fraud.
As companies continue to grapple with recent developments regarding enforcement of the FCPA, international efforts to curb bribery and corruption have not waned. Foreign governments continue to prioritize anti-corruption enforcement such as the European Commission’s proposed directive from May 2023 to combat corruption, the ECCTA and Failure to Prevent Fraud Offense, as well as the recently announced International Anti-Corruption Prosecutorial Task Force with the UK, France, and Switzerland. These cross-border initiatives demonstrate how a temporary pause in U.S. enforcement of the FCPA should not result in companies moving away from maintaining robust and effective compliance programs.
The Failure to Prevent Fraud Offense
You can see more detail on the new offense in this article from our UK colleagues. In summary, a “large organization” can be held criminally liable where an employee, agent, subsidiary, or other “associated person” commits a fraud offense intending to benefit the organization or its clients, and the organization failed to have reasonable fraud prevention procedures in place. An employee, an agent or a subsidiary is considered an “associated person” as are business partners and small organizations that provide services for or on behalf of large organizations. Regarding the underlying fraud offense itself, this includes a range of existing offenses under fraud, theft and corporate laws, which the UK’s Home Office notes as including “dishonest sales practices, the hiding of important information from consumers or investors, or dishonest practices in financial markets.”
A “large organization” for purposes of the fraud offense is defined as meeting two of the following three thresholds: (1) more than 250 employees; (2) more than £36 million (approx. USD $47.6 million) turnover; (3) more than £18 million (approx. USD $23.8 million) in total assets – and includes groups where the resources across the group meet the threshold. Further, the fraud offense has extraterritorial reach, meaning that non-UK companies may be liable for the fraud if there is a UK nexus. This could play out in several scenarios. For example, the fraud took place in the UK, the gain or loss occurred in the UK, or, alternatively, if a UK-based employee commits fraud, the employing organization could be prosecuted, regardless of where the organization is based.
What Companies Can Do Now
The Failure to Prevent Fraud offense is an important consideration in corporate compliance, extending beyond UK-based companies to non-UK companies with operations or connections in the UK. The only available defense to the failure to prevent fraud offense is for the company to demonstrate that it “had reasonable fraud prevention measures in place at the time that the fraud was committed.” Or, more riskily that it was not reasonable under the circumstances to expect the organization to have any prevention procedures in place. To that end, the Guidance outlines six core principles that should underpin any effective fraud prevention framework: (1) top-level commitment; (2) risk assessment; (3) proportionate and risk-based procedures; (4) due diligence; (5) communication and training; and (6) ongoing monitoring and review. Specifically, the Guidance makes clear that even “strict compliance” with its terms will not be a “safe harbor” and that failure to conduct a risk assessment will “rarely be considered reasonable.” These principles mirror the now well-established principles in the UK that apply to the UK offences of failure to prevent bribery under the UK Bribery Act 2010, and failure to prevent the facilitation of tax evasion under the UK Criminal Finances Act 2017.
Companies should consider the following proactive steps:
Determining whether they fall within the scope of the ECCTA’s fraud offense.
Identifying individuals who qualify as “associated persons.”
Conducting and documenting a comprehensive fraud risk assessment to determine whether the company’s internal controls adequately address potential fraudulent activity involving the company.
Ensuring due diligence procedures, as related to, for instance, external commercial partner engagements and other transactions, address the risk of fraud in those higher risk activities.
Reviewing and updating existing policies and procedures to address the risks of fraud.
Communicating the company’s requirements around preventing fraud and providing targeted training to employees and other associated persons, including subsidiaries and business partners, to make clear the company’s expectations around managing the risk of fraud.
Establishing fraud related monitoring and audit protocols, including in relation to third party engagements, for ongoing oversight and periodic review.
Ensuring these policies and procedures are aligned with other financial crime prevention policies and procedures and relevant regulatory expectations.
The months ahead are a critical window to align internal policies and procedures not only with the UK’s elevated enforcement expectations as evidenced by the ECCTA and the Failure to Prevent Fraud offense, but also as bribery and corruption remain a mainstay priority for other foreign regulators. Companies should continue to prioritize the design, implementation, and assessment of their compliance internal controls. Companies with a well-designed and effective compliance program will be better equipped to adapt as regulatory landscapes shift and emerging risks develop, enabling companies to more efficiently respond to new enforcement trends.
Federal Proposal to Rescind ESA’s ‘Harm’ Definition Raises the Stakes for California’s AB 1319
The United States Fish and Wildlife Service and the National Marine Fisheries Service (collectively, Services) proposed last week to rescind the regulatory definition of “harm” under the federal Endangered Species Act (ESA), sparking intense criticism from environmental advocacy groups. If finalized, the rescission would remove a longstanding protection for the habitat of wildlife species listed as threatened or endangered under the ESA, making regulatory compliance easier for many types of projects across the country. But it would also set up a potential collision between the current president’s deregulation efforts and one of several bills that California’s Legislature is considering as a way to compensate for potential “backsliding” of federal environmental protections, with the regulated community in California likely to be among the losers.
Federal Action Would Remove Prohibition on Habitat Modification
Section 9 of the ESA prohibits the “take” of any endangered species, a prohibition extended to many threatened species by regulation. (16 U.S.C. § 1538(a)(1)(B)-(C).) Under the ESA, “take” means to “harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, collect, or attempt to engage in any such conduct.” (16 U.S.C. § 1532(19) [italics added].) Existing regulations further define “harm” as “an act that actually kills or injures fish or wildlife … [including] significant habitat modification or degradation where it actually kills or injures wildlife by significantly impairing essential behavioral patterns, including breeding, feeding or sheltering.” (50 C.F.R. § 17.3 [italics added]; see also § 22.102.)
The Services have proposed to eliminate the regulatory definition of “harm,” leaving only the statutory definition of “take,” which the Services said they interpret as prohibiting only affirmative acts that are intentionally directed toward particular members of a listed wildlife species. Actions that could indirectly harm listed wildlife by modifying their habitat would no longer be prohibited by the ESA, removing a significant source of potential liability for projects that involve clearing, grading, vegetation removal and similar activities. While effects on listed species’ habitat still could trigger a federal agency’s obligation to consult with the Services under Section 7 of the ESA, many projects lacking a federal “handle” such as a federal approval or funding, likely would be able to forgo seeking ESA authorization.
AB 1319 Aims to Combat Federal ‘Backsliding’ Through Emergency State Listings
AB 1319, a bill introduced in the California Assembly in February 2025, would require the California Fish and Game Commission to consider listing under the California Endangered Species Act (CESA) any California-native species that would receive reduced protection as a result of a “federal action” taken under the ESA after January 19, 2025. Such federal actions specifically include, but are not limited to, those relying in whole or in part on amendments to the ESA regulations. The Commission initially would list new species through adoption of an emergency regulation, a process already authorized by the CESA although seldom used, but then would need to promptly evaluate each species for permanent listing under the CESA procedures that apply to “candidate” species.
The California Department of Fish and Wildlife (CDFW) currently identifies 80 wildlife species in California that are ESA-listed but not CESA-listed, nearly all of which could be eligible for emergency listing if AB 1319 becomes law. Adopting emergency regulations to list those species under the CESA may be fairly straightforward, but evaluating the newly listed species as candidates for permanent protection would place an unprecedented workload on the Commission and the Department. The evaluations almost certainly would drag on for years (as many already do), during which time the candidate species would remain subject to the CESA’s take prohibition and permitting requirements, even though an emergency regulation, by law, may remain in effect for no more than 360 days (including conditional extensions).
Far from experiencing regulatory relief, projects in California, even those already fully approved and permitted, would face the prospect of obtaining incidental take permits to cover a slew of species newly listed (or treated as candidates for listing) under the CESA. CDFW, which issues those permits, is already struggling under a workload that reflects the recent addition of two new candidate species that are relatively widespread, the western burrowing owl and the Crotch’s bumble bee. Additional delay for many types of projects is a sure outcome if AB 1319 becomes law.[1] Thus, Governor Newsom will face a difficult choice if AB 1319 clears the Legislature. In 2019, he vetoed a bill containing nearly identical language over concerns about its effects on the state’s water conveyance projects. This year, he will have to choose between his desire to oppose the current federal administration and his need to show that his own administration can deliver the housing, energy, infrastructure and fire preparedness projects that California urgently needs.
FOOTNOTES
[1] AB 1319 is a non-urgency bill; if enacted, it would take effect on January 1, 2026.
Bella Spies also contributed to this post.
EU Loses WTO Challenge Against China’s Anti-Suit Injunctions; Files Appeal
As predicted by ip fray on April 10, 2025, the European Union (EU) has confirmed on April 22, 2025 it lost the World Trade Organization (WTO) proceedings against China over anti-suit injunctions (ASIs) for standard essential patents (SEPs). The EU is appealing. In August 2020, China’s Supreme People’s Court decided that Chinese courts can prohibit patent holders from going to a non-Chinese court to enforce their patents by putting in place an “anti-suit injunction”. The Supreme People’s Court also decided that violation of the order can be sanctioned with a 1 million RMB daily fine. Since then, Chinese courts have adopted several additional anti-suit injunctions against foreign patent holders leading to the current dispute.
Per the EU,
[T]he WTO panel upheld the EU’s case by acknowledging that China has developed a policy of limiting intellectual property rights, starting with the guidelines of the Supreme People’s Court, supported by the political level and implemented by the judiciary through several court judgments. It also found that China must be more transparent by transmitting to the EU and other WTO members information on intellectual property matters, including court judgements.
However, the panel did not follow the EU’s interpretation of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement as requiring China to refrain from adopting or maintaining measures that undermine other WTO members’ implementation of the agreement in their jurisdictions. According to the panel, the TRIPS Agreement does not contain an obligation for WTO members to abstain from adopting measures that prevent other WTO members from implementing it in their own territories.
China’s Ministry of Commerce responded on April 23, 2025:
China has always attached great importance to intellectual property protection and its achievements are obvious to all. China is pleased to see that the WTO expert group supports China’s claims. China has received the EU’s appeal request and will handle it in accordance with the relevant rules of the MPIA to safeguard its legitimate rights and interests.
An additional WTO complaint filed by the EU against China continues to proceed regarding setting global royalty rates for SEPs in DS632.
The EU appeal can be found here (English) and China’s response as reported by Xinhua here (Chinese).
OIG Issues Another Favorable Advisory Opinion on Patient Recruitment Efforts by Community Health Centers
The Office of Inspector General for the Department of Health and Human Services (OIG) recently issued a favorable Advisory Opinion on a proposed arrangement by a community health center (Health Center) designated under Section 330 of the Public Health Service Act (PHSA). The Health Center provides certain social services to individuals (e.g., providing diapers and baby gear to indigent families; assisting crime victims with replacing locks) and proposes to identify individuals in need of primary care services while providing them social services, inform them of available primary care services, and schedule appointments for them to receive such primary care services from the Health Center or a local provider. Noting that the social services would qualify as remuneration that could induce individuals to self-refer to the Health Center, the OIG addressed whether this plan would trigger sanctions under the federal Anti-Kickback Statute (AKS) and the Beneficiary Inducements CMP. Ultimately, the OIG approved the proposal based on the Health Center’s inclusion of several safeguards, including the use of an objective criterion for identifying individuals and the inclusion of multiple providers in the referral list.
The Proposed Arrangement
The Health Center provides both medical and non-medical social services to underserved populations, including childcare, food banks, employment counseling, and legal services, all designed to improve health outcomes and access to healthcare. The Health Center’s scope of project, approved by the Health Resources and Services Administration (HRSA), includes these additional non-medical social services. Under the proposed arrangement, the Health Center would aim to identify individuals in need of primary care during the provision of these social services, inform them about available primary care services, and schedule appointments at the Health Center or refer the individuals to local providers.
OIG’s Conclusion
Despite the arrangement potentially generating prohibited remuneration, the OIG concluded that it would not impose administrative sanctions under the AKS or the Beneficiary Inducements CMP based on the following safeguards that reduce the risk of steering patients to the Health Center:
Objective Criterion for Identifying Individuals. The Health Center uses an objective criterion – whether the individual has seen a primary care provider within the last year –to identify individuals in need of primary care services. This approach does not promote the Health Center and reduces the risk of steering patients.
Non-Promotional Referral List. The list of primary care providers given to individuals is organized in alphabetical order and drafted without promoting the Health Center (e.g., no bold font, underlining, or other emphasis). Additionally, the Health Center implements an “any willing provider” standard, ensuring that any community provider can be included on the list.
Alignment with Health Center’s Mission. The Health Center provides primary care services to underserved populations, regardless of their ability to pay. The proposed arrangement aligns with its designation as a Health Center under Section 330 of the PHSA, which requires activities focused on recruiting and retaining patients from the service area and promoting optimal use of primary care services.
Conclusion
The OIG has issued multiple favorable OIG advisory opinions involving designated community health centers offering some form of remuneration to individuals to improve patient engagement and access to healthcare. In 2020, the OIG approved a health center’s proposal to offer $20 gift cards from “big-box” retailers to incentivize pediatric patients who had previously missed two or more preventive and early intervention care appointments to attend such appointments. In 2012, the OIG issued a favorable advisory opinion on a health center’s proposal to offer $20 grocery store gift cards as an incentive to visit the health center for a screening or clinical service.
Other types of health care organizations, like health systems and hospitals, providers vertically integrated with plans, and providers at financial risk, may find value in offering similar incentives and social services to enhance patient engagement and improve health outcomes. They should consider the factors highlighted in this advisory opinion as ways to reduce risk, but they should exercise caution before proceeding. Advisory opinions are binding only with respect to the requesting party, and designated health centers under Section 330 of the PHSA are unique in that they are statutorily required to conduct a broad range of activities focused on recruiting and retaining patients from the service area and promoting and facilitating use of primary care services.
Attention SNFs: Enhanced 855A Disclosure Requirement Deadline Extended to August 1, 2025
On April 17, 2025, the Centers for Medicare and Medicaid Services (“CMS”) extended the revalidation deadline for its 855A skilled nursing facility (“SNF”) attachment to August 1, 2025 (previously May 1, 2025), giving SNFs more runway to comply with the new ownership, managerial, and related party information disclosure requirements.
Additionally, on April 9, 2025, CMS updated its published guidance, Guidance for SNF Attachment on Form CMS-855A (April 9, 2025), clarifying which entities CMS classifies as an additional disclosable party (“ADP”). An updated question in the “FAQ” section addresses a scenario where “Company X [is] an indirect owner of the SNF and Company Y [is] an owner of ADP Z.” The updated guidance states that Companies X and Y, in that scenario, are not ADPs purely by virtue of their organizational relationships. Accordingly, indirect owners of SNFs and owners of ADPs, without more, do not need to be disclosed on the SNF Attachment as ADPs. Instead, CMS clarifies that Companies “X and Y would have to fall within one of the ADP categories … e.g., administrative services, financial control, etc. – to qualify as an ADP.”
The updated guidance also states that companies that furnish physical therapy, occupational therapy, speech-language therapy, or other rehabilitation services to the SNF’s patients are considered ADPs within the “administrative services” category. Finally, companies that contract with SNFs to provide services such as dietary services, housekeeping, or laundry services to the SNFs are not classified as ADPs under the new guidance.
Although the additional guidance is helpful, CMS has previously indicated that it will be unable to address all conceivable factual scenarios to identify every potential disclosable party. The guidance reiterates that the Final Rule should be “construed towards disclosure and, if in doubt about whether additional information should be released, SNFs should disclose it.”
This article is an update to a December 2024 client alert.