In this week’s Alabama Law Weekly Update, we present for your consideration, first, a brief outline of new reporting requirements for larger businesses under the Affordable Care Act (the “ACA”); and second, a federal court decision highlighting important considerations for businesses to protect intellectual property.
The ACA reporting requirements took effect on January 1, 2015. Forms will be due early in 2016 with respect to the 2015 calendar year. There are two basic reporting obligations for Applicable Large Employers (“ALEs”): 1) Filing with the IRS, and 2) Furnishing to employees, separate forms summarizing health insurance offered during the year to employees, its cost, and other items. Providers of insurance have separate filing and furnishing obligations, even when they do not qualify as an ALE. Employers that self-insure can be both an ALE and a provider of insurance – and must fulfill both reporting obligations. The reporting process will assist the IRS in administering the individual mandate and employer mandate penalties, as well as the premium tax credits through ACA health insurance Exchanges. Importantly, ALEs must file and furnish even if they do not offer health insurance.
Application. ALEs are employers which, with respect to a calendar year, employed an average of at least 50 full time employees (including full time equivalent employees, or “FTEs”) on business days during the preceding calendar year. Employers which themselves qualify as an ALE must fulfill the filing and furnishing obligations, and all employers that together comprise an Aggregated ALE Group (generally, controlled groups or affiliated service groups) are each considered “ALE Members” and must each fulfill the ACA reporting obligations – even if one of the ALE Members is not large enough, by itself, to be an ALE.
Penalties. Each form required to be filed with the IRS and each form required to be furnished to each employee, which is incomplete, incorrect, or untimely, triggers a $100 penalty. Note that reporting penalties are in addition to any other penalties under the ACA, such as the employer mandate or market reform penalties. The IRS has indicated that it intends to assess penalties under the employer mandate after the annual reporting process is complete. ALEs should become familiar with the reporting process now, to avoid only discovering a penalty while preparing the forms early in 2016, after the 2015 year is closed.
Forms. Draft forms and instructions have been proposed by the IRS: Forms 1094-C and 1095-C for ALEs and forms 1094-B and 1095-B for providers of insurance.
Click here to view the table.
Employee Statements. ALEs will prepare form 1095-C for each full time employee, even those that do not participate in the employer’s health insurance plan. ALEs will furnish one form 1095-C to the employee with that individual employee’s individual information; and also file with the IRS all forms 1095-C, together with the transmittal, form 1094-C. Start tracking information now, in order to be able to report in 2016 with respect to the 2015 calendar year:
- The name, address, and EIN of the ALE, and the calendar year for which the information is reported;
- The name and telephone number of the ALE’s contact person;
- A certification as to whether the ALE Member offered to its full time employees (and their dependents) the opportunity to enroll in minimum essential coverage (“MEC”) under an eligible employer-sponsored plan, by calendar month;
- The number of full time employees and FTEs for each calendar month during the calendar year, by calendar month;
- For each full time employee, the months during the calendar year for which MEC under the plan was available;
- For each full time employee, the employee’s share of the lowest cost monthly premium for self-only coverage providing minimum value (“MV”) offered to that full time employee under an eligible employer-sponsored plan, by calendar month; and
- The name, address, and taxpayer identification number (“TIN”) of each full time employee during the calendar year and the months, if any, during which the employee was covered under an eligible employer-sponsored plan.
- Name and EIN of other ALE Members in the Aggregated ALE Group, if applicable.
- Whether any safe harbors or transition relief applies, and documentation confirming such, if applicable.
Additional information to be tracked by providers of insurance, such as employers who offer self-insured health insurance coverage:
- The name, address, and TIN, or date of birth if a TIN is not available, of the primary insured person (called the “responsible individual”).
- The name and TIN, or date of birth if a TIN is not available, of each individual who is covered under the policy or program of insurance (called a “covered individual”).
- For each covered individual, the calendar months for which the individual was enrolled in coverage and entitled to receive benefits for at least one day during the month.
- Type of health insurance coverage provided to the primary policy holder and covered individuals, by month. Particularly important is the source of insurance provided for a particular employee – whether coverage was provided through employer-sponsored coverage, a multi-employer plan, or some other source.
Tropic Ocean Airways, Inc. v. Floyd and Key West Seaplane Service, Inc., 2014 WL 7373625 (C.A.11 (Fla.) December 30, 2014) (affirming district court’s dismissal with prejudice of cybersquatting lawsuit, for failure to state a claim for relief).
Tropic Ocean Airways (“Tropic”) sued Key West Seaplane Service, Inc. (“Key West”) over the registration and ownership of an internet domain name, tropicoceanairways.com. Tropic and Key West are competitors, providing chartered flights to and around the Caribbean. Key West registered the domain name a year after Tropic began providing flights in the Caribbean.
Tropic sued, claiming violations of the Anticybersquatting Consumer Protection Act (the “ACPA”). The district court dismissed Tropic’s complaint because Tropic failed to plead sufficient facts showing that its mark, “Tropic Ocean Airways”, was protected under the ACPA. The Eleventh Circuit affirmed the dismissal. The court’s reasoning is instructive for businesses seeking to protect marks under the ACPA.
Among other things, the ACPA provides a civil cause of action against the creation of internet domain names that harm a business’s marks. To prevail in its ACPA claim, Tropic had to prove three things. First, that its mark was distinctive at the time the Key West registered the domain name. Second, that Key West registered or used a domain name that is identical or confusingly similar to Tropic’s mark. Third, Key West registered or used the domain name with a bad faith intent to profit. The district court dismissed Tropic’s complaint with prejudice.
The issue on appeal related to Tropic’s claim that “Tropic Ocean Airways” was a distinctive mark in March 2012, when Key West registered the domain name. “Distinctive” marks are those that serve the purpose of identifying the source of goods or services. Importantly, Tropic did not claim its mark was “famous.” Marks can be protected, even if not famous. There are four gradations of distinctiveness, (1) generic marks suggest the basic nature of the product or service; (2) descriptive marks identify the characteristic or quality of a product or service; (3) suggestive marks suggest characteristics of the product or service and require an effort of the imagination by the consumer in order to be understood as descriptive; and (4) arbitrary or fanciful marks bear no relationship to the product or service. Suggestive and arbitrary/fanciful marks (categories 3 and 4), “are deemed inherently distinctive and are entitled to protection.” Protection is more difficult for the first two categories. Descriptive marks (category 2), are considered “distinctive” only if the mark has acquired “secondary meaning,” which occurs “when the primary significance of the term in the minds of the consuming public is not the product but the producer.” Tropic argued that its mark had acquired secondary meaning and that it was “distinctive” under either category 2 or 3; and therefore, entitled to protection.
Motion to dismiss. The appellate court agreed with Tropic that determining whether a mark is “distinctive” is a question of fact, not law. Generally, questions of fact are not resolved by a motion to dismiss. However, a court will consider, as a matter of law, whether a plaintiff’s complaint contains factual matter, which, if accepted as true, is sufficient to state a plausible claim to relief.
Tropic’s “suggestive” claim. A “suggestive” mark requires a leap of the imagination to get from the mark to the product,” such as, for example, using a penguin for a refrigerator product. The district court concluded that Tropic’s mark was not suggestive – it merely informed consumers about the service Tropic provides and the relevant geographic location. The appellate court agreed. There was no “leap of the imagination” to connect Tropic’s mark to its service – a necessary component for protection.
Tropic further argued that its mark was suggestive because the US Patent and Trademark Office (the “PTO”) accepted the mark as suggestive upon Tropic’s application for registration. A certificate of registration from the PTO generally creates a “rebuttable presumption” that marks are distinctive. The appellate court agreed with the district court, that in this case, no presumption arose to protect Tropic. Tropic’s application for registration had not been finalized and no certificate of registration was issued from the PTO. Further, the court noted, Tropic had not even filed its application for registration until a year after its claim arose. Timely registration with the PTO probably would have helped Tropic’s claim – at least it could have survived the motion to dismiss and proceed into further fact-finding; allowing Tropic to prove its case or, or more likely, come to a settlement with Key West.
Tropic’s “descriptive” claim. To determine whether a mark has “secondary meaning” the court applied a four-factor test. Tropic alleged that each of the four factors was met, but the court found that most of Tropic’s allegations were conclusory statements containing no factual content, and disregarded such allegations. Unable to conclude that the mark had acquired secondary meaning, the court of appeals found that the district court’s grant of the defendant’s motion to dismiss was appropriate. Tropic’s complaint was insufficient as a matter of law – that even if the court believed everything that Tropic said in its complaint, Tropic still would lose.