Each client in private banking has a relationship with his or her own private banker. Beyond credit needs, private-banking clients have available and may draw upon other specialists like securities/investments, trust services, insurance and financial planning.
Smart Business spoke with Mark Nakamaru, a senior vice president and group manager of Private Banking at Comerica Bank, about what types of services private bankers provide, how individuals and businesses alike can benefit and what factors to consider when looking for a private banking partner.
What are some of the services that private bankers provide?
Their primary focus is to address the financing needs of their clients, although in some cases, this extends to the businesses that they are associated with. Service-related companies such as law firms, CPA firms and medical practices are some examples of private banking businesses. Private bankers provide one-stop banking including customized credit facilities, a full array of deposit products, securities investments, asset management, insurance and financial planning. One private banking relationship manager can help deliver all the financial needs for both an individual and his or her business.
How can a company benefit from private banking lending options?
With any business, there is a need for a multitude of services and products. We provide a wide array of services such as traditional depository products, treasury management, merchant services and foreign exchange, to name a few.
Also, a company benefits from a private banker’s ability to customize service needs, as well as banking the principals of the company. Private bankers have the ability to underwrite, structure and approve loan requests in-house, providing quick decisions and customized loans for clients.
How do stock option loans work?
Let’s say a senior executive of a company has stock options that are coming due in six months. He has a tremendous opportunity today on an investment he wants to take advantage of. We can structure a loan for him today with repayment to come from the stock options he will eventually exercise. There is some risk to this. He may not want to exercise his stock options if the stock price drops below the strike price. But we will look for ways to mitigate this risk and structure this loan for him.
How can a company use a mortgage as collateral for a loan?
We can establish a line of credit for a business using the equity in the owner’s personal residence or commercial building as collateral. This may provide a lower interest rate and extended terms on the line of credit. A start-up company, for example, could benefit from this type of loan as it provides additional collateral.
The process to establish this type of loan mirrors the steps one would take to borrow individually for an equity line of credit.
What types of questions should one ask when looking for a private banking partner?
I would inquire about the approval process for loan requests. Does the prospective partner use loan centers for approval or does it have the ability to underwrite and approve loans in-house? There could be advantages or disadvantages with either, depending on your needs. Another key issue is the lending limit of the bank. If it is a small community bank, there are restrictions as to how much money it can lend. A client who is looking for a large credit facility would not be well served by a bank with a house limit that cannot match his credit needs.
The lending experience of your private banker should also match your credit needs. A real estate investor, for example, should ask if the bank actively participates in this market. If so, your private banker should have the real estate experience to help facilitate the real estate loans you require.
Remember, all banks will tell you that they provide great service. Before choosing a bank and/or private banker, have a face-to-face meeting. The candidate should be quite convincing in its commitment to back up its claims.
MARK NAKAMARU is senior vice president and group manager for Private Banking at Comerica Bank. Reach him at (213) 486-6263 or firstname.lastname@example.org.
Recent legislative changes in California have altered the landscape of workers’ compensation. It is crucial for companies to be aware of these reforms when evaluating current insurance plans.
One way to revisit workers’ compensation plans is by conducting a collateral review, which typically centers around collateral on loss-sensitive workers’ compensation programs such as large deductible or retrospectively rated plans. “Some of the initial collateral calculations from several years ago do not now reflect current regulatory or credit risk requirements,” says Dennis Olsen, area senior vice president for Arthur J. Gallagher & Co.
Smart Business spoke with Olsen about the types of collateral that are available, how often collateral should be reviewed and what should be done to prepare for a collateral review.
What is the basis for carrier collateral requirements?
Typically, these types of programs require collateral for two reasons. One is that the insurance carriers themselves have statutory regulations that require them to collateralize self-funded losses. The other reason that they require collateral, aside from the regulatory requirements, is that they want to avoid a credit risk. Insurance companies don’t want to be on the hook for claim payments below the deductible layer.
What types of collateral are available in the market?
The most common form of collateral that is requested by insurance carriers is a letter of credit. But there are many other types of collateral that are used on occasion, such as surety bonds, trust programs and cash.
A trust program provides an alternative to a letter of credit and allows the insured to place negotiable securities into a trust account where the carrier can access the trust assets. The advantage of this option is that the insured is able to earn an investment income on those securities and they don’t impact their balance sheet as a letter of credit would. Trust programs also tend to be less expensive, with savings of up to 50 basis points over letters of credit.
Surety bonds, over the last several years, have not been widely used, as the surety bond market has been restricted.
When should collateral be reviewed?
We normally recommend that collateral be reviewed twice a year. When an insured has been on a loss-sensitive program for a period of time, there tends to be a pyramiding of letters of credit. Currently, we’re in a market where it’s especially important to do the review twice a year because there have been quite a few changes over the last few years. In states like California, where there has been recent workers’ compensation reform, the loss development on claims has been dropping rapidly.
How should a business prepare for a collateral review?
The first step is to do a comprehensive claim review and to evaluate individual case reserves, plans of actions and the potential for closing old claims. The second thing we recommend is to do an actuarial analysis and project ultimate losses using current loss development. This should be done in conjunction with the collateral reviews that are done twice a year.
Insured companies that have former carriers holding collateral often will discover that these carriers will only allow an annual claim review. Typically, the second evaluation is going to be done without a claim review, but it is still important to do a real study to evaluate what the estimated loss reserve is for those open cases. That is then used to negotiate with the insurance carrier as to how much collateral you really need to be holding.
What other factors should be considered when negotiating collateral?
In the past, few collateral agreements specified adjustment time frames or even the loss basis for reducing collateral. Some insurance companies are now more willing to define specific security terms, which will greatly ease future collateral reduction negotiations. If you’re negotiating collateral with the current insurer, you want to bring the leverage of the pending renewal to the negotiations. In a lot of cases, a reduction in old collateral or waiving collateral requirements on the renewal policy can be negotiated. There is also the potential for replacing older forms of collateral by consolidating letters of credit or by substituting letters of credit with cash or trust programs.
DENNIS OLSEN is area senior vice president for Arthur J. Gallagher & Co. Reach him at (818) 539-1323 or Dennis_Olsen@ajg.com.
Detecting problem areas at an early stage is essential for a business to succeed. It’s also important that, once identified, these problems be fixed judiciously.
In this sense, Positron Emission Topography (PET), a medical technique used for early detection and evaluation of diseases, parallels the business world. As Dr. Mike Phelps, the inventor of PET and the chair of Molecular and Medical Pharmacology at UCLA says, “It’s not just detecting disease earlier, but it’s improving the accuracy with which you understand what you’re dealing with, and from that, getting more quickly to the right treatment.”
Smart Business spoke with Phelps about the technique he pioneered, the spiraling cost of health care and the challenges involved with raising private funding.
How important are innovations such as PET in helping identify medical problems early?
One, treatments have better responses at early stages, and two, the complexity of the treatment both in the treatment itself and the costs expands as the disease progresses.
So it’s important to detect a disease earlier from that regard, and of course, the prognosis gets worse for the patient as the disease progresses. It’s probably reasonable to say that we can cure greater than 90 percent of all cancers right now if we could detect them when they’re truly just a primary cancer they’re only in the organ where they originate and they’re still encapsulated at that point.
But once they spread beyond that, they start to infiltrate the organ they’re in, they start to spread to other organs. The prognosis gets bad, the treatments get complicated and very costly.
In pioneering this technique, what challenges in the research and development phase did you face?
There were a lot of technical barriers to overcome. We were developing a camera to be able to watch and measure the biology and biochemistry of disease in patients that had never been done before. Of course, we also faced a lot of problems in terms of FDA approval and the reimbursement.
At the time that PET came to the clinical world, all the previous approaches to reimbursement and FDA approval had been changed and much more evidence was required. So we had to develop all of the basic science and clinical evidence to show that it would change and improve the care of patients.
How does PET improve medical delivery for patients?
It’s well-proven that PET has about a 93 percent accuracy in diagnosing Alzheimer’s three-and-a-half years before the conventional approach can make a diagnosis of probable Alzheimer’s. So it makes that diagnosis early, and with a single test, as opposed to years of repetitious tests trying to make and improve the diagnosis.
Could health insurance premiums decline as diseases are detected earlier?
It’s not so much about detecting disease earlier. The question is, can you develop a better way to manage the resources that you have for health care in such a way that you lower costs and improve quality?
Health care is 15 percent of the GNP. It’s growing at five times the GNP, and if we’re not careful, it’s going to become the GNP. The largest expenditures are in the treatment and care of patients, not the diagnosis.
The largest number of mistakes that alter the care of patients and the costs is in the diagnosis.
If you can make the diagnosis quicker and more accurately, then you reduce the number of tests that are being used to make that diagnosis. The quicker you can get to the right answer, the better you can get to the right treatment and the care of patients. In addition to just being earlier, it is important that resources are better utilized.
You are the principal or co-principal investigator of more than $150 million. How do you manage this type of budget?
Very carefully. It illustrates our ability to compete nationally to get funds like that, but managing funds after you get them is quite a different issue. When we get them, we propose something that the review process said was important and worth money.
What follows, though, is how you use the funds to execute not only what you agreed to do, but to motivate people to come up with new ideas constantly.
What challenges have you faced in getting prospective donors on board with your mission?
It is very much like in business when you’re starting a new entrepreneurial company and trying to convince investors of the level of your convictions and your beliefs, and that you can execute what you say.
Most of our donors are people who have been through that. They’re smart people who have had good ideas and they’ve been successful.
You try to get them to come to a common place with you to share a belief with you. Even on gifts in a university setting, most often the most important thing that the donor will actually provide is not his money, but his commitment to you, and his ideas.
Dr. Mike Phelps is the chair of Molecular and Medical Pharmacology at UCLA. Reach him at (310) 825-6539 or email@example.com.
The impact of Hurricane Katrina has had a lingering effect on many facets of the American economy.
Certainly, insurance carriers have felt the pinch. As demand for reconstruction projects rose following last year’s devastating hurricane, so did payouts often in multiples of what the carriers had expected to pay.
Now, says Deborah Freeland, area senior vice president for Arthur J. Gallagher & Co., underwriting requirements are much more stringent. “The days of just picking up the phone and getting true blanket coverage, where a group of buildings is covered with a single limit, regardless of the value stated for the individual buildings, are long gone,” she says.
Smart Business spoke with Freeland about demand surge, how a company should go about getting an appraisal and the importance of obtaining valuations from certified appraisal professionals.
Why has there recently been an increased demand for appraisals from insurance carriers?
The tremendous property losses resulting from Hurricane Katrina highlighted the fact that many of the insured properties were scheduled as having values well below what would normally be considered a true replacement cost under normal circumstances. Add the increase in costs associated with the demand surge following the hurricane and resultant flooding, and the carriers were paying out multiples of what they expected to pay to replace these undervalued buildings. Many carriers now require independent verification of building values as a condition to binding coverage.
What is demand surge, and how does this impact values?
Demand surge is essentially post-event inflation. After a disaster affecting a large number of buildings, as insurance dollars roll in for reconstruction, there is much demand for limited construction materials and labor. This drives up building reconstruction costs. The greater the number of buildings affected, the larger the total economic impact and the greater the demand for goods and services that increased the demand surge. Generally, over time, as more of the buildings in an area are rebuilt or repaired, the demand for contractors, laborers and materials begins to drop off, and costs stabilize.
How should a company go about getting an appraisal?
Contract with one of the many appraisal firms or an independent, certified appraiser. A referral from someone you trust, who has used a firm’s services in the past, is the best way to find a resource.
If you don’t have a referral, the Web site of the American Society of Appraisers (www.appraisers.org) is an excellent reference. It lists certified appraisers by discipline, location and specialties. Costs may be much less than you would think. Right now, however, there is so much demand for appraisal services, it does pay to call several to compare prices.
Also, it is important to note that there are many types of appraisals. Insurance contracts generally cover replacement of the building with one of ‘like kind and quality,’ so we would usually ask for a replacement cost appraisal and specify that it is for insurance purposes, or request a reconstruction cost appraisal, which includes additional loading costs that might be incurred following a loss.
How do valuations from a certified appraiser differ from those of insurance carriers?
Most insurance carriers do not provide full, certified appraisals. Instead, they use computerized programs that take general building data and develop an estimate of the cost to construct a building. These are a good tool for checking to see whether the values they are given for a building appear to be in the ballpark and flagging out buildings that appear to be undervalued. However, these programs require the user to make certain subjective assessments, and the programs also incorporate generic assumptions that may not apply to a particular building. Often, a more detailed analysis done by a certified appraiser may show that the estimates obtained using these programs are not even close to being correct.
Do appraisals provide an absolute valuation, or are they subject to change?
An appraisal is a snapshot at a particular time, giving the cost to rebuild a particular building and factoring in costs of materials and labor. So, if the cost of materials goes up days or weeks after the appraisal was completed, the appraisal needs to be updated to reflect these changing costs.
Trending figures for updating appraisals are published by different valuation firms. In general, applying these to an appraisal that was conducted within the last five years will give a pretty accurate figure. Most appraisal firms will not trend up an appraisal that is over 5 years old.
DEBORAH FREELAND is area senior vice president for Arthur J. Gallagher & Co. Reach her at (818) 539-1290 or Deborah_Freeland@ajg.com.
The SEC continues to display strong interest in timely and complete document production. Increasingly, important documents reside on computers, e-mail servers and portable drives.
As a result, it is crucial for businesses to be aware of what constitutes electronic document production in this era of rapidly changing innovations to traditional modes of communication.
“Companies need to have an understanding of what type of electronic information exists, which will include essentially anything with an on/off switch such as computers, laptops, backup servers and PDAs,” says Kevin Martin, a partner in Alschuler Grossman Stein & Kahan LLP’s Business Litigation Department. “Anything that would be backed up on a server is a potential source for information.”
Smart Business spoke with Martin about how the SEC is now responding to companies that fail to provide complete document production, how CEOs can be pro-active in identifying and managing electronically stored information and how a company should proceed if it receives a subpoena.
How is the SEC now reacting to incomplete production?
The SEC has become very heavy-handed in response to incomplete document production by corporate citizens. It has levied stiff financial penalties against companies for failing to fully and adequately respond to government subpoenas. For example, the SEC commenced actions against Morgan Stanley, Bank of America and Deutsche Bank Securities for failing to produce all of its electronic documents in a timely manner in response to SEC subpoenas. As part of Deutsche Bank’s settlement with the SEC, it agreed to pay $7.5 million to the government.
What are the possible ramifications for a company that fails to adequately provide complete documentation?
With respect to the SEC, enforcement proceedings may be brought and stiff penalties levied. In the context of civil actions, one of the major ramifications is that a court could impose spoliation sanctions against the party that has failed to produce all of its documents. With this type of sanction, a court instructs the jury that destroyed documents are presumed to be damaging to the party responsible for the destruction. This severe sanction was recently imposed on Morgan Stanley in 2005.
How can CEOs be pro-active in regard to document production?
The company and CEO should be prepared to demonstrate that they acted with good faith diligence. To this end, CEOs should confirm with company employees that the universe of electronically stored information has been identified.
In addition, CEOs should determine what to retain in accordance with their statutory obligations and company retention policies.
Finally, CEOs should create an infrastructure to manage electronically stored information and train employees on the proper use and storage of electronically stored information.
If companies take a pro-active approach to their discovery obligations, they will be in a position to certify with confidence that they have completed their document production and feel confident that they will not face problems down the road that could have and should have been avoided. For example, one of the major problems that Deutsche Bank faced with the SEC is that it had representated to the government that it had completed its e-mail document production, when in fact it had failed to produce 277,000 e-mails. Obviously, when Deutsche Bank disclosed this fact to the SEC, the SEC was not pleased, and Deutsche Bank lost credibility with the government investigators. The loss of credibility with government regulators can have far-reaching ramifications to companies that are the subject of investigations.
How should a company proceed if it receives a subpoena from government regulators?
Following receipt of a subpoena, written instructions must be sent to employees directing them to preserve documents and not to destroy or delete any data on computers.
Before responding in any manner to the subpoena, it is critical that the company first make an internal assessment of: (1) the potential universe of responsive documents; (2) the difficulty of culling the responsive documents together; and (3) the length of time needed to review the documents prior to production. The company should also assume that it may be called upon to demonstrate good-faith due diligence in responding to document production demands.
Only after these determinations are made will a company be in a position to make representations to the government as to what types of documents will be produced and when. Obviously, companies must not make promises to the government that they cannot keep and must avoid inexcusable document production pitfalls.
KEVIN MARTIN is a partner in Alschuler Grossman Stein & Kahan LLP’s Business Litigation Department. Reach him at (310) 255-9055 or firstname.lastname@example.org.
Competition runs rampant in the retirement services sector. Banks, mutual fund companies and insurance companies are all vying for a slice of 401(k) business.
However, not all retirement plan providers offer the same level of commitment when it comes to making sure employees are well-versed in eligible plans.
After all, getting employees to participate involves more than merely letting them know a plan is available. Education is an important component that providers should bring to the table.
“Commitment to the education process is key,” says Frank Ricchiuti, vice president and retirement plan consultant at Comerica Bank. “A successful 401(k) plan usually has good participation levels. Education is the driver to good participation.”
Smart Business spoke with Ricchiuti about what functions a retirement plan provider should be responsible for, how often a retirement plan should be reviewed and how service providers can assist in employee education.
What are some key factors to consider when looking for a retirement plan provider?
The wish list is obvious: competitive pricing, quality investments, efficient service and great technology. Unfortunately, this reads like every providers’ marketing brochure. Some plan sponsors know what they want; many know they have a problem but don’t know how to fix it; and some don’t know what they don’t know. So the combination of product marketing and not knowing enough to cut through the spam makes it very difficult for a plan sponsor to identify and evaluate those key factors.
What functions should a retirement plan provider be responsible for?
The three main components are record-keeping, administration and investments.
The less obvious but equally important issues are compliance oversight, ongoing due diligence of the investments and the level of commitment toward participant education (preferably live meetings). These services do not totally relieve the plan sponsor of fiduciary obligations, but they can certainly assist the employer to make prudent decisions in selecting a provider.
Once in place, how often should a retirement plan be reviewed?
This is a huge fiduciary liability issue, and many plans have now established investment policy statements for guidance in this regard. Investments move in and out of favor, so they should be reviewed at least annually.
Larger plans review their investments quarterly, which may be the result of a very specific investment policy. We also believe that plans should have an administrative review to measure the overall efficiency and competitiveness of the program in a fast moving industry. We find that many of our clients are not being offered these reviews by current service providers.
How can a company encourage its employees to participate in retirement plans?
This varies by employer. A high-tech company or a law firm does not have the same issues educating participants as a manufacturing company has.
Employers concerned by productivity and thin profitability margins are often reluctant to make 401(k) plan enrollment meetings mandatory. We also see successful 401(k) plans where enrollment meetings are presented in other languages (e.g. Spanish) with enrollment materials to match.
The new Pensions Protection Act brings a potential solution to the problem automatic enrollment and auto deferral increase options we expect plan sponsors to consider in the future.
How should employees be educated about retirement plans?
Ultimately, it is the fiduciary responsibility of the employer to provide that information. The employer achieves this by partnering with effective resources.
Those resources can be the actual service provider and/or a good broker or consultant who will focus on developing and driving an effective ongoing action plan. Multiple tools are available now with more being developed all the time. We’re seeing live workshops with worksheets and pencils in hand (even PDAs); seminars to existing participants on different investment-related topics; Webinars; Internet-based education and financial planning models; and user-friendly investment options that promote asset allocation through target retirement date funds. The key is choosing the right team, because a dedicated retirement plan consultant can make all the difference.
FRANK RICCHIUTI is vice president and retirement plan consultant at Comerica Bank. For a no-obligation assessment of your current retirement plan, reach him at (714) 433-3235 or email@example.com.
Being well versed in relevant procedural rules relating to e-discovery is important to ensure that necessary information is preserved, located, and possibly produced in the event of litigation. The new amendments, scheduled to become effective in December, provide a reminder about the importance of having document-retention policies that take into consideration electronically stored records and data.
“The amendments are going to force companies to look at their policies ahead of time, before litigation starts, or in the early stages, to make sure that they don’t run afoul of their responsibility to preserve electronic as well as paper records,” says Pauline Massih, a partner in Alschuler Grossman Stein & Kahan LLP’s Business Litigation Department.
Smart Business spoke with Massih about the proposed amendments and what steps in-house counsel should take in response to the changes.
How has electronic discovery impacted the legal system?
E-discovery is dynamic in nature, voluminous in scope, and multiplying at a far greater rate than paper records. By one account, we’re receiving 20 percent more e-mails per day than a year ago. The sheer volume of information that is now available has had an impact on discovery and the ability of parties to seek and exchange information. It has put greater responsibility on each and every company to assess what kind of records they have, understand how that information is stored, and for how long.
As we move from file cabinets to file servers, the universe of information a company must review in order to make sure it has complied with its discovery and regulatory obligations has definitely expanded.
What are the proposed amendments to the Federal Rules of Civil Procedure regarding electronic discovery?
The federal rules are playing a little bit of catch up in regard to e-discovery. After approximately five years, the U.S. Judicial Conference Advisory Committee on the Federal Rules proposed a series of rule amendments relating to e-discovery. The proposed amendments are intended to lead to greater certainty, less burden and lower costs. They fall into five main categories.
The first category relates to the separate treatment and definition of electronically stored information under Rule 34. The second category requires counsel to include e-discovery in their initial disclosures and planning conferences under Rules 16 and 26. The third category provides procedures under Rule 26(b)(5) for a party to assert privilege or work product after inadvertent production of e-discovery.
The fourth category allows relief from production under Rule 26(b)(2) if the information is not ‘reasonably accessible because of undue burden or costs.’ The last category is designed to provide a safe harbor from sanctions under Rule 37(f) for companies that, because of automatic retention policies, may have inadvertently deleted otherwise responsive electronically stored information.
What impact will the proposed amendments have on the manner in which parties handle written discovery?
The proposed rules will clearly require considerably more attention by in-house counsel to early preparation for e-discovery. The impact of the amendments will be more on the front end in forcing litigants to assess the universe of electronically stored information on their systems, including off-site back-up tapes, voicemails and e-mails. The proposed amendments underscore the need for effective corporate policies governing the use and retention of electronic information, especially e-mail correspondence.
What steps should in-house counsel take to respond to the changing rules regarding electronic discovery?
All in-house counsel should review their company’s document-retention policies with a new eye to the issue of e-discovery. They need to determine which business records are truly important and which are superfluous. Generally, ‘important’ documents include those necessary to meet governmental requirements, contracts, insurance policies, personnel files, tax-related documents, certain corporate policies and official correspondence. Superfluous material such as personal e-mails, personal correspondence, preliminary drafts of letters, brochures and newsletters do not typically need to be preserved in the same manner, but still need to be explored and dealt with.
Creating schedules for document management and guidelines for litigation holds are also critical. If a lawsuit or a government investigation is pending, threatened or even reasonably foreseeable, then automatic retention policies must be suspended and effective preservation policies put into effect.
Lastly, whatever policy is in place must actually be complied with through proper training of key personnel and system-wide application.
PAULINE MASSIH is a partner in Alschuler Grossman Stein & Kahan LLP’s Business Litigation Department. Reach her at (310) 255-9120 or firstname.lastname@example.org.
Establishing trademarks is beneficial to companies and consumers alike in the realm of international business. “It helps to show that all goods sharing the same trademark have the same level of quality,” explains Jonathan Stern, an associate in Alschuler Grossman Stein & Kahan LLP’s Entertainment & Media Department. “For example, if I go to a McDonald’s in Cairo I know that the French fries that I get will be the same quality that I get in Los Angeles.”
Smart Business spoke with Stern about the most common international trademark disputes involving the Internet, how to resolve domain name disputes and the importance of registering trademarks overseas promptly.
There is no such thing as a universal trademark that is enforceable in every country. What type of problems does this cause?
It is quite problematic because trademark rights are entirely territorial in scope. Worldwide, hundreds of countries and jurisdictions have their own laws, their own regulations and their own registration systems. There are a number of existing comprehensive treaties that establish requirements for obtaining trademark registrations in many countries with just one filing. Usually, however, if you want global protection, the rights have to be acquired and protected on a piecemeal basis.
What is the most common type of international trademark dispute involving the Internet?
One of the most common disputes involves counterfeiting. Without any sort of uniform standard in place for the buying and selling of counterfeit goods, companies that have valuable trademarks continue to have significant and potentially expensive hurdles to surmount in globally enforcing their trademarks. Companies that manufacture goods such as clothing need to be vigilant about tracking down and stopping counterfeiters. If possible, they should work to foster relationships with auction Web sites such as eBay. This way, they can work together to implement procedures that will discourage trademark infringers from using such sites.
How common are domain name disputes?
Disputes involving domain names continue to be a problem, but less so for established companies whose trademark names have been in existence for quite some time. The main reason for this is that they’ve likely resolved their disputes by now. Companies that are in the infancy stages of creating their brand need to conduct preliminary research to make sure that their desired domain name hasn’t already been acquired. It’s also important to conduct research in countries that companies might seek to expand into to make sure they’re not unintentionally infringing on trademarks in foreign countries.
How can domain name disputes be resolved?
There is a mechanism to adjudicate disputes involving generic top-level domains such as .com, .net, .org, .biz, .info and .name. This dispute-resolution process also applies to some country code top-level domains. For example, .fr is the domain code used in France.
The generic top-level domains and country code top-level names have adopted the Uniform Domain Name Dispute Resolution Policy (UDRP), which provides a streamlined administrative procedure to help curb abusive registration and use of a domain name.
The UDRP administrative procedure covers three different situations. The first situation is when the domain name registered by the domain name registrant is either identical or confusingly similar to a trademark belonging to the complainant. The second situation is when the domain name registrant has no rights or legitimate interests with respect to the domain name in question. The third situation is when the domain name has been registered and is being used in bad faith.
Is there a system in place to help curb counterfeiters?
There is no uniform system for dealing with the buying and selling of counterfeit goods. Different countries have different statutes on their books. Some provide criminal sanctions. Almost all provide monetary damages, but in different amounts, and usually not as generous as in the United States.
What steps can a company take to safeguard against international trademark disputes?
It’s important for a company that is just developing its brand and trademarks to select a mark that is acceptable in prospective international target markets. Assuming a company can trademark its goods, it’s important to register the marks promptly. This is particularly important for companies that don’t have very large budgets because most countries follow the first-to-file rule. Also, a company should consult with legal counsel that has international trademark experience.
JONATHAN STERN is an associate in Alschuler Grossman Stein & Kahan LLP’s Entertainment & Media Department. Reach him at (310) 255-9138 or email@example.com.
While there are many styles of leadership, ranging from team-oriented to dictatorial, sometimes the best approach is to be flexible.
“I don’t think there is any one best leadership style,” explains Don St. Clair, vice president for enrollment management and marketing and adjunct faculty member of organizational leadership at Woodbury University. “The smart leader surveys the situation, surveys the organization and then chooses the style that is most effective for that moment.”
Smart Business spoke with St. Clair about what makes a good leader, how a person can improve his or her leadership skills and how an organization should groom leaders for the future.
What are some of the characteristics of an effective leader?
Effective leaders need to be able to communicate well and need to have a clear vision of what they want their organization to do. Also, they need to have good organizational skills, they must be very courageous, and they have to be highly ethical.
What type of leadership style tends to be the most effective?
One camp says that there is a best style, which is a team or coaching leadership type of approach. This involves a high regard for the person being led and there’s a focus on task orientation. The other camp favors situational leadership. I favor the approach which says there is not one best style that is effective. The style of leadership that’s most effective is dependent upon the person you’re leading, the organization you’re leading or the circumstances in which you’re leading.
How can a person enhance their leadership skills?
This is another area where there has been a great deal of study over the past 50 years. One camp thinks leaders are born. We’ve all heard of born leaders and may think of people like John F. Kennedy, Mother Teresa, or Michael Jordan. There’s another group, however, that thinks leadership can be learned. I think there is a middle-ground that you can take here. There are certain characteristics that we’re drawn to such as people who have a vision, have the ability to communicate their vision clearly, are honest, and have a good ethical compass. Some people are born to some extent with those characteristics. However, these characteristics are also ones that can be learned to a great extent.
How important is it for a leader to lead by example?
There’s simply no substitute for alignment of words and actions. We’re in a day and age, where more than any other time in human history, what we do is on public display. I remember as a child sometimes people would say to me, ‘Do as I say, not as I do.’ I knew even as a child that was a losing proposition. You have to demonstrate leadership. No matter what you say, what you do speaks much louder.
What advice would you give about tailoring one’s leadership style to accommodate individual differences within an organization?
This is really hard to do and it requires a great deal of commitment and work. One of the reasons it’s so hard to do is all of us have a preferred style of leadership that is second nature to us. We may be very directive or even dictatorial. We may be very easygoing or team oriented. It’s important to recognize when a style works and when it doesn’t. Go back and do an inventory on when your preferred style hasn’t served you very well. You have to be perceptive enough to recognize what your preferred style is, when it hasn’t worked well, and then be flexible enough to adapt that style when necessary.
How can an organization most effectively groom future leaders?
It’s important to look at people who are good at what they do; they could be proficient in sales, marketing, customer service, strategic planning or any function of your business. Then it’s important to develop their leadership skills which can be accomplished two ways. I’m a big fan of mentoring. The best way to teach future leaders is one-on-one. Also, you can have people engage in formal education through degree programs in leadership and seminars on leadership. A combination of structured education in leadership and management skills, along with mentoring, is the best formula.
DON ST. CLAIR is vice president for enrollment management and marketing and adjunct faculty member of organizational leadership at Woodbury University. Reach him at firstname.lastname@example.org.
For instance, intellectual property is particularly prized by computer software developers who have copyrighted their software and by life science firms that design proprietary products.
The value that intellectual property provides shouldn’t be viewed strictly in revenue terms. It can also serve as collateral to secure various types of financing. Of course, lenders require legal documentation to prove that these assets are, indeed, proprietary.
“If a business is interested in leveraging its intellectual property by offering it up as collateral for a loan, that business owner should ensure that it is properly patented, trademarked, copyrighted, et cetera,” says Bonnie Kehe, senior vice president and regional managing director for Comerica Bank’s Technology & Life Sciences Division.
Smart Business spoke with Kehe about how value is assigned to a company’s intellectual property, the steps a business should take to secure a loan with these assets and why an increase in this financing option is a good sign for the tech sector.
What types of businesses use intellectual property as a financing option?
Businesses that have a valuable portfolio of intellectual property, such as a software company. A medical device company, where the technology is its own and employees have actually designed and developed the product.
Most companies have some sort of intellectual property, such as trademarks. Also, there can be value in a branded name, which is intellectual property.
How do you assign value to a company’s intellectual property?
It’s typically a subjective valuation, and it’s based on a variety of factors. For example, if you can project future cash flow based on the sale of a product that is your own, like software, then you can come up with a value of that intellectual property.
In the situation where a company has institutional investors, like venture capitalists, then the investors have likely assigned a value to the company in connection with a recent financing.
The third way would be independent intellectual property appraisers that institutions hire to value a company’s intellectual property portfolio. Again, the valuations are based on a lot of different matrixes, including discounted cash flow.
How important is it for CEOs to look after intellectual property, not only as a legal asset but also as a financial asset?
If the company is planning on leveraging its intellectual property portfolio or if intellectual property is integral to its business, then it’s very important.
The CEO or business owner should ensure that it’s legally registered and properly protected.
What are the first steps to securing a loan with intellectual property assets?
There has to be some matrix for assigning some sort of valuation, even though it may be a very subjective valuation. If it’s just a brand name that the company is looking to leverage, there are some lenders that will lend against brands.
What’s key for other lenders is that the intellectual property is adequately protected it’s registered, it’s patented.
Software needs to be not only copyrighted but also registered with the Library of Congress. So there is a two-step process with the registration and copyright of software.
Also, the business should work with intellectual property attorneys because there are a lot of law firms that have special practices specifically related to intellectual property.
How common is it to lien intellectual property when making a loan?
In middle-market lending, it is not terribly common. It is very common if a financial institution is banking a technologically driven company, meaning a company that is deriving a part of its revenue from its intellectual property.
Do you expect to see an increase in using intellectual property for financing options?
We hope so, because it’s indicative of a strong technology market. With the dot-com bust, the entire tech sector was in a trough from 2000 to 2004, and we’re now just beginning to see some activity. The sector is here to stay.
It’s the future, both on the life sciences side as well as the information technology side. We would hope to see continued growth in the financing of tech companies. A lot of it is going to be an economy- and industry-driven phenomenon.
BONNIE KEHE is senior vice president and regional managing director of Comerica Bank’s Technology & Life Sciences Division. Reach her at (714) 433-3266 or email@example.com.