What Is An Acceptable Business Risk For Your Business?

Think you got an idea> Give Reading Word's The dark side of IP a read.

Business people often scoff at lawyers that "you have to take risks in business." True, but the risks should be valid risks: venturing the new product, entering the new market, changing up the marketing and ad campaign, leveraging up for growth tomorrow. Unacceptable risks should be those which introduce fines and penalties, complex litigation and jail time. Many businesses rarely think of the dark side, the flip side of their IP: On whom might you be infringing with what consequences? The reality is that if you do infringe, it will be expensive, time consuming and ruinous to your model. They can shut you down and take your profits. Don't consider this an acceptable business risk. Get the evaluations you need.

I know you don't like thinking about IP rights: they're complicated, uncertain and seem to cost you coming and going, for filing and defense. You tend to protect and defend what you can and leave the rest to fate, calling it risk. Don't. You have talked to the lawyers and have got a lesson in costs. A patent can cost $50,000 and up and may yet not issue or may may be invalidated, and the invention may yet infringe. After all the development costs for your goods and services, patents, and trademarks and copyrights are expensive to defend. Many businesses tread skeptically. Many choose to protect their inventions as trade secrets and close their eyes to much of the real world fate of their IP.

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Think about how quickly you can be shut down and your profits stripped should your product be ruled to infringe, even a seemingly old, obscure patent. Unless you examine your work honestly according to the reality of IP law, you too run the risk of high damages and costs and being shut down. You need to pay those few thousand dollars at the front end before you go out on a limb and have experts examine the real world for patents, trademarks and copyrights which your products and creations might infringe.

Do you have any ideas what legal woes your business may be sitting on? By the time you think you need a lawyer, the mess may be big enough to swallow the business whole. An ounce of prevention....

Online Resources: freeERISA.com, Federal Forms Catalog and myCorporateResource.com

Not endorsing any of the following, just providing them for informational purposes.

About freeERISA.com

FreeERISA.com is intended as a useful, website where visitors may view retirement and welfare benefit information on the group or groups of their choice as this data appears on Form 5500 for free.

Federal Forms Catalog for Citizens

Forms.gov provides citizens and businesses with a common access point to federal agency forms.

myCorporateResource.com--Empowering the Corporate Community - Home

myCorporateResource.com is designed to empower corporate professionals with the latest in legal and commercial information from the world’s top law firms and industry insiders. Every year the top 100 American law firms produce more than 10,000 Client Alerts addressing the key commercial and legal issues faced by their clients. We aggregate, review, sort and summarize this content -for free- to give you a really useful corporate resource.

Free Reviewed

Yes, quite behind the times in posting this review from The New Yorker, Malcolm Gladwell reviews Free by Chris Anderson:

There are four strands of argument here: a technological claim (digital infrastructure is effectively Free), a psychological claim (consumers love Free), a procedural claim (Free means never having to make a judgment), and a commercial claim (the market created by the technological Free and the psychological Free can make you a lot of money). The only problem is that in the middle of laying out what he sees as the new business model of the digital age Anderson is forced to admit that one of his main case studies, YouTube, “has so far failed to make any money for Google.”

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So how does YouTube bring in revenue? Well, it tries to sell advertisements alongside its videos. The problem is that the videos attracted by psychological Free—pirated material, cat videos, and other forms of user-generated content—are not the sort of thing that advertisers want to be associated with. In order to sell advertising, YouTube has had to buy the rights to professionally produced content, such as television shows and movies. Credit Suisse put the cost of those licenses in 2009 at roughly two hundred and sixty million dollars. For Anderson, YouTube illustrates the principle that Free removes the necessity of aesthetic judgment. (As he puts it, YouTube proves that “crap is in the eye of the beholder.”) But, in order to make money, YouTube has been obliged to pay for programs that aren’t crap. To recap: YouTube is a great example of Free, except that Free technology ends up not being Free because of the way consumers respond to Free, fatally compromising YouTube’s ability to make money around Free, and forcing it to retreat from the “abundance thinking” that lies at the heart of Free. Credit Suisse estimates that YouTube will lose close to half a billion dollars this year. If it were a bank, it would be eligible for TARP funds.

I am still as doubtful as when I wrote this.

Could Taxes Sink Your business?

Tough Times for Lenders blog posted Ticking Sound: Will the Current Tax Valuation Drag You Down?. Which brought back to mind this headline: State sets sights on back taxes. This comes from that Muncie Star-Pess article:

Sometimes the taxes owed are in dispute. Ed Faulkner Jr. of Faulkner Mortuary, which is included on the list, says he's "been battling with the state for the last 20 years to get our sales tax issues resolved." Faulkner said the amount he owes is less than $10,000 compared to a one-time bill of $160,000.

McFarland noted that some might assume the businesses owing back taxes are all small, "mom and pop" operations, but that isn't the case.

Tough Times has this in its post:

So, my suggestion simply is to add this topic to your workout check list, and include the following as tasks directed at this ticking sound:

* What taxes or assessments cover or encumber the collaterals? Governmental (per a current search of applicable governmental taxing offices)? Private (per a current title report)?
* What valuation has been given to the collateral? (Is it high?)
* How is valuation determined?
* What are the key dates (Due dates? Appeal dates? Etc.)
* Has the owner\borrower contested the valuation? Are written agreements covering valuation in place?
* Is it possible to file a “late” appeal? Are there special conditions for filing a late appeal?
* What input or role does the lender\servicer have in the valuation determination or appeal process? (Under applicable law or regulations? Under the loan documents?)

Todd Franks (with The Cantrell Company) tells me that they have recovered over $100,000 in overpaid property taxes for one loan servicer, after a borrower failed to timely protest their 2008 property tax valuation (in a situation involving Texas real property collateral). His experience is that if the current owner is unsophisticated and\or unfamiliar with the property valuation process, then when the owner is struggling to keep the property and to avoid a loan default or a foreclosure, many owners simply give up on contesting property valuations handed out by taxing authorities. (The result: it is a problem discovered by you AFTER you take title.)

Small Business (SBA) FAQ

Docuticker blog published SBA - Frequently Asked Questions which I think fits well with this blog.

Source: U.S. Small Business Administration, Office of Advocacy
From e-mail:

The Office of Advocacy released its annual update to the Frequently Asked Questions. It estimates that there were 29.6 million small businesses in the United States in 2008. Once again, the document shows the importance of entrepreneurship to our nation’s economy, with small businesses accounting for half of nonfarm, private real GDP and half of all private sector employment. In addition, small businesses generate the majority of net new jobs. Firms with fewer than 500 employees accounted for 64 percent (or 14.5 million) of the 22.5 million net new jobs (gains minus losses) between 1993 and the third quarter of 2008. An estimated 627,200 new employer firms began operation in 2008, and 595,600 firms closed that year. Moreover, according to U.S. Census data, seven out of ten new employer firms last at least two years, and about half survive five years.

A Better Business-Lawyer Relationship

Never having had any success with this concept in Indiana, I still like its potential. Articles like Law.com's Small Law Firm Woos Clients With Monthly Subscription Fees keep me believing that this is the best practice for providing legal services to businesses:

Given the steps they go through to set each client's pricing at the outset, and the flexibility that both sides maintain in the month-to-month arrangement, they don't worry about clients taking advantage. "What if they stay with us one more month or one more year?" Smithline asks. "What if they refer another client?"

Earlier this year, executives at San Mateo, Calif., cloud computing startup Appirio Inc. were looking for a way to cut legal costs. The big firm the company was using wasn't too interested in entertaining flat-fee billing at the time, said Jim Emerich, Appirio's chief financial officer (he declined to name the firm). So the company's work went to Smithline Jha, Emerich said, after a beauty contest that attracted four competitors.

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So in early 2008, the firm started experimenting by putting a few longtime clients on a flat-fee subscription. They'd estimate what the client would spend with the firm in a year, and divide that by 12 to arrive at a monthly price. (Depending on the client, they say, a month can cost from $6,000 to about $30,000.)

They've since come up with a way to set a monthly price for new clients, too, by negotiating based on what Smithline calls the exploratory month. At first, "You don't know enough about the client and they don't know enough about you." They charge $5,000 for that initial month, during which the firm does as much work as the client will give and learns how frequent and complex its deals are. Then, they negotiate a monthly figure.

"People think it's really complicated, but it can be a really quick and friendly discussion," Jha said.

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To keep it simple, there are no caps or floors, and neither side is bound legally for more than a month at a time. That way, either party can address major fluctuations in work by requesting an adjustment for the following month, Smithline said. He noted that most client rates are not adjusted more than once a year.

Invoices list the assignments and tasks, but not the time spent, and Smithline says the firm doesn't track time spent internally, either.

So why would a business not prefer this type of relationship to one of hourly fees?

Why Should Businesses Have a Long Term Relationship With Their Lawyers?

I should point out that for the business, a long term relationship leads to lower costs and better service. Lawyers get to provide a better service (and if you do not think that matters to your lawyer, give them a call and talk with them).

No, I suggest reading Schedule Your Legal Checkup over at JD Supra. Not much longer than this post but you will need Adobe Reader.

If you are an Indiana business wanting to know how a lawyer can help your business, I suggest giving me a call.

For Those Wanting to Check Up on Their Business's Reputation

I have not tried this out but Iam intrigued enough to pass it along.. Channel Signal seems to collect online chatter about a company and presents the information to the business. This knowledge can be very useful.

For Business: Hiring Decisions

From Manta.com comes Why Small Business Owners Make Bad Hiring Decisions

Here are 5 reasons why small business owners fail to make good hiring decisions:

1. Lack of time: The business owner is swamped as discussed above and is unable to take the time to make sure that he is making the best hiring decision.

2. Needs a body right now: Typically a small business owner does not have enough back-up staff to handles tasks within the organization if an employee leaves. This creates a crisis and the employer is forced to make decisions too quickly. As you know - haste makes waste.

3. Too emotionally close to the decision: Due to lack of enough people to help make a hiring decision, the employer is the key decision maker and maybe, the only decision maker. Unfortunately this puts the employer too close to the candidate and the process of hiring. Hence the employer may make decisions which are more based on emotion than information.

4. No formal training in hiring: Hiring seems to be almost like an additional, unwanted and unimportant task which befalls a manager. So very few employers go through enough training to understand the intricacies of hiring.

5. Lack of funds: The employer is usually working with a limited budget and sacrifices getting hiring support from a consultant, background checks, use of assessments and proper legal counsel and ends up hiring a candidate that may have shown up as a problem employee if a more detailed investigation had taken place.

How Contracts Help Fight Fraud

From the Supply Excellence blog comes Fraud Risks (and how Contracts can help):

In other words, a head-in-the-sand approach or playing nice will not protect against fraud … it’ll just prevent you from knowing about it until it’s too late. And while communication early and often is key, the contract tweaks Neil highlighted also point to an important step technology can play in reducing risks of fraud.

Having pre-approved clause language and proper process and approvals in an automated contract management system may root out instances where fraud can take place in the first place. And, worse case, it provides improved after-the-fact visibility in the event that it is not caught proactively.

Notice it is just any contract but a well-written contract that helps fight fraud. Here is another point where a good relationship with the business' lawyer can help prevent problems - such as lost proftis.

Trademarks - Franklin College Suit From Start to Quick Finish

I learned of the Franklin College trademark case from The Indianapolis Business' College sues like-named competitor and, frankly, did not hold out much hope for the interloper.

The confusion has finally gotten to Franklin College.

The liberal arts college south of Indianapolis filed a lawsuit today alleging trademark infringement against Ohio-based Franklin University, which will open a campus in Castleton this fall.

Franklin University has run a heavy advertising campaign to mark its entrance into Indianapolis. But Franklin College said the marketing blitz has been too close to Franklin College's own branding.

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Moseley said that since Franklin University's advertising began in May, Franklin College has received many calls, comments and e-mail messages asking why the school has changed its name or whether it has opened a satellite office for online courses. He also complained that the colors and clock tower in some Franklin University ads are strikingly similar to Franklin College's logo.

"We have great concerns about the impact of the obvious confusion, especially with prospective students and employers of our alumni," Moseley stated.

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In an interview in June, Linda Steele, vice president of marketing for Franklin University, said the school never considered operating under a different name than Franklin in Indianapolis.

"The Franklin College issue came up and we really did have to take a step back and ask the question whether that is a showstopper," Steele said. "Obviously, we think not, because we chose to go forward."

Well, here is the report from The Indiana Lawyer Blog noting that the suit has been settled and has a link to the settlement agreement. Reading the settelment agreement, I think everyone will see a sensible solution that works for the benefit of both parties and also resolves the problem. It may be a bit snarky but perhaps a bit of training on trademarks for the marketing division?

Avoiding Common Legal Business Mistakes

I find I do can find no way to easily summarize Common Legal Mistakes Businesses Make and How to Avoid Them, Part II from John L. Watkins. The best I can do is list the topics covered:

• Mistake Number 6: Ignoring Key Contractual Provisions
• Mistake No. 7: Assuming it's Non-Negotiable
• Mistake No. 8: Using Internet Forms
• Mistake No. 9: Letting Your Employees Vary Your Terms and Conditions

Business owners - read this article. Anyone reading me for any length of time knows that I emphasize preventive law. Here is an article showing business owners what can be prevented.

What Happens to the Business if There is a Divorce?

Consider this scenario from The Golden Scribe's Prenuptial Agreements to Protect the Family :

In a similar fashion, business partners can be protected with a prenuptial agreement. If Tom and Scott have worked over the past five years to create a successful business, and Tom is about to get married, the business and its assets can be protected by the prenuptial agreement. This not only protects Tom, but it protects Scott, as well. Without a prenuptial agreement, Tom and Scott’s business could potentially be torn apart by a divorce.

What happens to your business if this was you or a partner or other co-owner? Don't know for sure? Get yourself to a lawyer ASAP. If you are in Indiana and do not already have legal counsel, give me a call.

Oh, what if everyone is married before starting the business? Think about a post-nuptial agreement.

The Costs of Restructuring A Business

Canada's Slaw raises a point with its Focus on Employees: The Hidden Costs of Restructuring a Business that I think often gets overlooked when restructuring a business (whether in or out of bankruptcy) - the employees. Yes, we know they are there but do we really pay attention?

Planning for a business restructuring often takes months; yet in my experience, insufficient resources are typically devoted to managing the human resources consequences, leading to significant additional or ‘hidden’ costs. The following are some examples of strategies that can mitigate costs and losses associated with terminated or disaffected employees:

* Rumours of a pending sale of a business or layoffs are worrisome and distracting to employees, resulting in lost productivity, higher benefit costs, poorer client relations and service, and attrition of key employees. Emphasize the importance of taking steps to maintain confidentiality throughout the planning or negotiating stages.
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How fairly employees believe they and laid off co-workers were treated during the restructuring will affect retained employees’ commitment and productivity. Consider what if any steps you can take to minimize the chances that employees will become disaffected and/or leave as a result of the restructuring.
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If you are considering providing ‘working notice’ of termination for employees, consider the hidden costs of such a plan including increased benefit claims and costs, the potential negative impact on service to clients and customers during the working notice period, and the risk that those employees will not complete critical tasks or facilitate a transition prior to their termination. Offering a closing bonus or increased severance offer payable at the end of the working notice period dependent upon maintaining service levels or completion of the key tasks, is one way to manage those risks.
*

If the sale or closure of a business or business unit is delayed, do not expect that an extension of employees’ working notice will be welcomed by those employees. One consequence of that event is that any negotiations for the final severance packages, if not yet settled, will be negatively affected. If it is reasonably foreseeable that the sale or closure date may be delayed, consider the benefits of agreeing to more generous severance package terms in exchange for an early settlement coupled with a right for the employer to later apportion what part of the severance will consist of working notice and pay in lieu of notice.
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Business owners who have agreed to sell their business but stay on as an employee after the closing are usually not prepared for and/or underestimate the difficulties associated with the change in control and culture that inevitably occurs. Ensure that any new employment agreements have good severance provisions that can be triggered by the former owner/now employee, and minimize any linkages to payment of the sale proceeds with the length of employment, post-closing.
*

If retention of key employees is a condition of sale, determine what is necessary to secure their employment, or continued employment. Key employees’ leverage increases as costs to negotiate and implement the sale have been incurred, and as closing nears. Consider the relative risks of early communication of a sale that may not close in order to secure key employees, versus the costs of not securing key employees early.
*

Consider the culture of an acquired business when imposing new employment contracts. Even when a purchaser agrees to offer employment to current employees on substantially the same terms, if the form of employment contract (i.e. formality, tone, or one-sided language) is at odds with what the employees are used to, the employee-purchaser relationship will get off to a bad start. That in turn may affect the employees’ willingness to buy into or adapt to operational changes implemented by the purchaser, or result in loss of productivity or other costs associated with attrition.

Where Divorce and Business Law Intersect

How can a divorce injure a business? I can think of several ways but Ex-Wife Can’t Talk About Divorce to Media—Ever, Conn. Court Rules from ABA Journal - Law News Now shows another way and the means of protection:

The ex-wife of a wealthy skin doctor can't talk about her divorce with the media—ever, Connecticut's Supreme Court has ruled.

The ruling establishes that private waivers of First Amendment free speech rights are "presumptively enforceable," the Connecticut Law Tribune reports.

Still, the state's high court said such decisions should be made on a case-by-case basis and should consider the abilities of the individual waiving rights.

The ruling enforces a confidentiality agreement signed by Madeleine Perricone, the wife of multimillionaire skin doctor Nicholas V. Perricone, who agreed not to talk about her divorce in the early stages of its bitter and contentious filing, the Associated Press reports.

Tweeting Employees?

Let us count the ways Internet access has impacts employment law: E-mail. web surfing, downloading files, and blogging. All have had their crisis moments and now Tweets Create Legal Issues for Lawyers and Employers:

By answering, in 140 characters or less, the question "What are you doing now?" corporate and professional employees "may convey proprietary information, may reveal other privileged or private information and may expose the company to claims of defamation or harassment," writes Jones Day partner Steven Bennett in a cover story for the May issue of the New York State Bar Association Journal.

The original article is here in PDF format.

Not to denigrate the problems of tweeting, but my online experience makes me think that the real problem with any such employee is a lack of common sense. That lack may create more problems for the employer than merely tweeting.

What to do if your company gets a deposition notice?

Read Be Prepared to Deal With Deposition Notices and get ready to call your lawyer:

Your company has just been served with a 30(b)(6) deposition notice under the Federal Rules of Civil Procedure, and it is your job to respond to the notice and determine who will testify on behalf of the corporation. Is there anything you can do to ensure that your company puts its best foot forward at the deposition? The answer is yes: There are numerous strategies for selecting and preparing witnesses to participate in these depositions.

A 30(b)(6) deposition is a widely used litigation tool that requires a corporation to appear at a deposition and respond to questions regarding a specific list of topics contained in the notice. Since these depositions make it easier to depose the right corporate officers and managers on the right topics, as in-house counsel you need to be aware of how to avoid the many potential pitfalls of 30(b)(6).

Take a good look at the list of topics in the notice. Once you fully comprehend the crucial points involved, you need to identify the right witness or witnesses to speak on behalf of your company. Balance the number of witnesses against cost and time constraints.

The scope of a 30(b)(6) deposition is broad: A company can proffer as many witnesses as it needs to cover all areas of inquiry. A corporation may prefer to respond to a particular topic of inquiry covered in a plaintiff's notice by designating several corporate representatives. But doing so may unnecessarily subject the corporation to many hours of deposition testimony that an opposing party otherwise might not have the ability to take. And that isn't necessarily an outcome that you want to encourage.

Oh, if you think just because it says "federal" that this may not apply to you, then think again. Indiana's trial rules have a similar rule for our state courts:

(6) A party may in his notice name as the deponent an organization, including without limitation a governmental organization, or a partnership and designate with reasonable particularity the matters on which examination is requested. The organization so named shall designate one or more officers, directors, or managing agents, executive officers, or other persons duly authorized and consenting to testify on its behalf. The persons so designated shall testify as to matters known or available to the organization. This subdivision (B)(6) does not preclude taking a deposition by any other procedure authorized in these rules.

What does it take to start an Indiana partnership?

The following pretty much condenses Indiana's law on forming a partnership:

... Copenhaver v. Lister, 852 N.E.2d 50, 58 (Ind. Ct. App. 2006). To form a partnership, parties must join together to carry on a trade or adventure for their common benefit, each contributing property or services, and having a community of interest in the profits. See id. In addition, to establish a partnership relation between parties, there must be: (1) a voluntary contract of association for the purpose of sharing profits and losses, which may arise from the use of capital, labor, or skill in a common enterprise; and (2) an intention on the part of the parties to form a partnership. Id. The intention that controls in determining the existence of a relationship is the legal intention deducible from the acts of the parties. Id. The intention to form a partnership must be determined by examining all the facts of the case, and the conduct of the parties reveals their true intentions and the construction they placed upon any agreement. See id.

What may not be so clear is that the "partners" may not know that they are partners. No formal partnership agreement is required - only actions as listed above.

Which makes partnerships a bit dangerous for the unwary. See partners can be held liable for the actions of other partners even without the first partner's knowledge and all the partners' personal assets are on the line.

New Indiana Workmen'c Comp Cases

Employers read this.

Judges rule on workers comp billing issues

Employers or their insurers - not health care providers - must prove when medical expenses for injured employees might be considered higher than what's allowed under the state's workers' compensation statute, according to the Indiana Court of Appeals.

In a series of rulings today that deal with injured firefighters and city workers in multiple Hoosier communities, a three-judge appellate panel interpreted the Indiana Workers' Compensation Act and how it applies to state statutes about medical billing disputes.

"This case requires us to review several statutes under the Act that balance the right of medical service providers to seek payment for medical care to injured workers, against the right of employers to demand that such payments not be excessive," the unanimous panel wrote, turning to its own Indiana precedent as well as rulings from other state and federal courts.

The cases are Washington Township Fire Department v. Beltway Surgery Center, No. 93A02-0811-EX-01006; City of Michigan City v. Memorial Hospital, No. 93A02-0811-EX-01010; and Onward Fire Department v. Clarian Health Partners, No. 93A02-0811-EX-01007. Three other suits on identical issues, filed the same day in November and assigned to the same writing panel of judges, have not been ruled on.

What is a Cooperative Business?

Understanding Cooperative Forms of Business [Book Excerpt] - ABA Book Briefs Blog

A cooperative business generally has the following characteristics:

1. It is owned and controlled by the people who use its services or buy its products (its "owner/customers").
2. Its primary focus is to provide its services or goods to its owner/customers and not to the general public.
3. It is democratically controlled by its owner/customers, and each owner/customer has one vote regardless of the amount of services or products it purchases from the cooperative.
4. The primary objective of the cooperative is to maximize benefits, rather than profits, for its owner/customers.

Federal and state governments treat cooperatives differently from other business entities. One reason is that the rewards from their operations go almost entirely to their owner/customers rather than to outside investors, and they often provide services or products that would otherwise be unavailable from investor-owned enterprises. The success of agricultural cooperatives in helping farmers emerge from economic depression paved the way for the formation of other cooperatives, such as those providing electric and telephone service in rural areas, attracted by tax advantages and low-cost, government-backed financing. While preferences continue to be extended to some cooperatives today, governments have also imposed restrictions on cooperatives based on their unique characteristics.