In the Information Age, every business has a website that is available to any person in the world who points a Web browser to its address. As a result, businesses must understand how to create an online presence that enables customers to find them and distinguish them from their competitors.
“Basic knowledge concerning trademark rights, website addresses and how they work together is key for any business in establishing and defending its online identity,” says John Haarlow, Jr., an attorney at Novack and Macey LLP.
Smart Business spoke with Haarlow about how to establish a strong Web presence.
What is a trademark?
The term trademark generally refers to a name or symbol used to identify a business or the goods and services it provides. For example, the name Nike and its swoosh symbol are both identified with Nike Inc. The concept of trademarks recognizes that consumers associate symbols and words with particular businesses, goods and services. One reason trademark law exists is to prevent consumer confusion caused by the use of similar words or symbols in association with competing or related goods.
What is a registered trademark?
A registered trademark is a mark that has completed the federal registration process before the U.S. Patent and Trademark Office. During registration, the proposed registered trademark must pass various substantive standards, such as not creating a likelihood of confusion with other registered trademarks for related goods or services. Registration does not require the assistance of an attorney, but one can be helpful during the process.
Why should a trademark be registered?
Every trademark used grants some rights automatically, including the exclusive right to use the mark within the user’s geographic market area. However, federal registration provides a more powerful group of rights, such as exclusive use of the mark in commerce nationwide in connection with the registered goods and services, so other businesses cannot use a similar mark in connection with similar goods or services. A registered trademark also provides notice to others that it is in use, making it is less likely that they will adopt or register similar marks. Should a controversy arise, a registered trademark enjoys a presumption of validity in litigation.
What is the connection between a trademark and a website?
When looking for a particular company or product website, many consumers expect that typing the company or product name, followed by .com in a browser’s address bar will take them to the right place. Thus, owning a domain name that corresponds with a trademark designating the name of a business or product is likely to make it easier for consumers to find them on the Web.
If possible, every business should own domain names corresponding with both its name and its products’ names. Consider registering multiple domain names to increase the chances consumers find your business or product on the Web and reduce the chances that others might obtain similar domain names.
How do companies obtain domain names?
It is easy to find one of the many companies that provide domain name registration. What can be difficult is finding an available domain name, as registration is on a first-come, first-served basis. Thus, while Delta Air Lines and Delta Faucet Co. can coexist in the marketplace because they sell different goods and services, only one of them can own delta.com. Moreover, owning trademark or other rights to a name is not a prerequisite for registration.
Anyone can register any domain name, regardless of whether he or she has recognized rights to the words registered. While there are legal remedies for cybersquatting — the improper registration of a domain name that is the same as or similar to a trademark with the bad faith intent to profit — they require resources that are not available to all businesses. As a result, the availability of domain names should be a consideration when choosing the name for a new product or business.
How does trademark registration help a business defend its rights on the Internet?
A federally registered trademark provides the exclusive right to use the mark nationwide. Thus, a domain name cannot use a registered trademark in a way that is likely to cause confusion between the domain name and the mark. In such circumstances, the holder of the federal registration will most likely be able to force the owner of the website to relinquish all rights to the offending domain name. This is true even when the two businesses use the marks at bricks-and-mortar locations in two different geographical areas.
For example, assume that the fictitious Beta Widget Co., marketing its products at beta.com, sells widgets in stores in Illinois and Wisconsin and obtains a registered trademark for the use of Beta in connection with widgets. Subsequently, Gamma Widget Co. begins selling a new line of widgets in North and South Dakota that it calls Beta Widgets and launches the website betawidgets.com. Consumers looking for Beta’s widgets might type betawidgets.com into their browsers, only to find themselves at Gamma’s website and be confused as to the source of the goods.
Should this chain of events come to pass, Beta would likely be successful in forcing Gamma to cease using the name Beta Widgets to refer to its new widget line and would likely be able to force Gamma to stop using the betawidgets.com website. However, if Beta did not have registered rights, these remedies would be in far greater doubt because only registered rights provide a national right to exclude, precluding Gamma from mounting a defense on the basis of the two companies’ distinct markets.
John Haarlow, Jr. is a commercial litigation and intellectual property attorney with Novack and Macey LLP. Reach him at (312) 419-6900 or firstname.lastname@example.org.
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Although depositions may seem like they are less formal than a trial, they are a critical part of a lawsuit. The answers given at a deposition are legal testimony and, in essence, it is no different from testifying in court.
“A lawyer is entitled to depose an opposing party and all witnesses with knowledge relevant to the lawsuit,” says Andrew Fleming, a partner at Novack and Macey LLP. “Typically, depositions are conducted at the office of the attorney taking the deposition, and the witness is placed under oath to answer questions.”
Smart Business spoke with Fleming about how to properly prepare for a deposition for the best possible outcome.
What is the purpose of a deposition?
Depositions have two primary purposes. First, the examining lawyer often will use the deposition to learn the facts relevant to the case. For example, in a typical breach-of-contract case, the plaintiff’s lawyer asks a series of questions designed to determine if, in fact, the contract was breached. In that regard, the examining lawyer will depose the parties and other witnesses involved in the transaction to discover what each person involved in performing the contract did or did not do. The process provides a very important and useful procedure for obtaining evidence.
Second, a deposition gives the examining lawyer an opportunity to obtain admissions that support his or her case. To obtain this information, examining lawyers frequently use cross-examination techniques when questioning a witness. In many instances, cases can be won or lost at the deposition stage, and as a result, thorough preparation is key.
How can a witness prepare for a deposition?
One of the most important things that a witness must do is to understand the deposition process and make sure that he or she is comfortable with testifying. A witness must first become familiar with the pertinent facts of the case. Oftentimes, this requires a review of the documents relevant to the dispute, such as emails, correspondence, contracts and the like.
Next, the witness needs to review with his or her attorney the ground rules for the deposition — rules that are very important no matter what the case involves. Often, it helps to go through a mock deposition with the attorney to not only become more comfortable with the deposition process but also to give the witness and the attorney a chance to identify and correct bad habits before the deposition takes place.
What are some key deposition ground rules?
The first rule to make sure the witness understands that every question must be answered truthfully. If it is not, the witness may be subject to sanctions and criminal penalties. The witness must also listen carefully to the question and answer only the question that is being asked. Also, as a general rule, witnesses should not guess at an answer.
While these may sound like straightforward rules, they are easier said than done. It takes tremendous concentration and focus to sit for hours and answer only the questions that are being asked. And while it is natural during a normal day-to-day conversation for people to assume that certain events have occurred and to speak about them as if they have, in the deposition setting, it is important that a witness focus only on what he or she actually knows has occurred.
What are some common mistakes made during depositions and how can they be avoided?
In addition to losing concentration and guessing, mistakes frequently occur when a witness is shown a document and asked questions about it. All too often, witnesses will not read the document at the deposition even though they are asked to do so by the examining lawyer. Instead, they will skim through the document thinking they know what it says.
But, often in this situation, a witness will give inaccurate testimony when questioned about the meaning of a particular document. And worse, the examining attorney might exploit this mistake by getting the witness to agree to a particular spin that he or she places on the meaning of the document — a spin that is always in favor of the examining lawyer’s client.
It is easy to avoid this mistake. When asked to read a document at a deposition, a witness should slow down and do just that: Read the document.
In addition, a witness should never let the examining lawyer put words in his mouth. Be especially alert when asked typical cross-examination questions because those are invariably designed to get the witness to agree with the examining lawyer’s view of the case. These questions are not hard to spot, as they usually begin with phrases such as, ‘Isn’t it fair to say?’ Or, ‘Wouldn’t you agree that?’ When you hear such questions, think long and hard before answering, and resist the urge to casually agree with the examining lawyer.
What other traps should a witness look out for?
An examining lawyer will be so cordial that the witness may think the deposition is just a friendly conversation. This is not so. Even though such depositions are more pleasant, a witness must still not let his or her guard down and must always follow the rules discussed.
On the flip side, examining lawyers take a more aggressive approach at depositions, to the point of making the deposition an unpleasant experience. It is important in these situations that the witness maintain a calm demeanor. Becoming upset or even angry at an examining lawyer because of the manner in which he or she is asking questions can never benefit the witness. In fact, if you allow yourself to get upset, you often can lose your concentration and break some of the rules discussed. That is why it is always important that the witness maintain a calm and professional demeanor at the deposition, no matter how the examining lawyer behaves.
Andrew Fleming is a partner at Novack and Macey LLP. Reach him at (312) 419-6900 or email@example.com.
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When a contract involves a large sum of money or is otherwise important, it is imperative that you get a lawyer involved to solidify the contract’s enforceability and to ensure that the contract accurately reflects the parties’ agreement.
Of course, it’s not always realistic or cost effective for businesses to hire a lawyer to review every contract involving low stakes. For example, if a business is changing suppliers in order to save a modest amount of money, hiring a lawyer to review the contract could eliminate some (or all) of the cost savings.
“And, if it turns out that the contract the parties signed is unenforceable or somehow defective, it’s usually not a huge problem because the deal itself was not that important to the company in the first place,” says Adam Waskowski, attorney with Novack and Macey LLP. “That’s why the company didn’t hire a lawyer to begin with.”
When businesses go it alone in preparing their contracts, there are some steps they can take to avoid turning a small deal into a big headache.
Smart Business spoke with Waskowski about the measures that can help businesses avoid signing contracts with unintended consequences.
Can companies just use language from old contracts?
No. Don’t do this. Sometimes businesses try to create new contracts using templates from previous deals or, worse yet, from Internet forms. For example, they might pull up Word versions of old draft contracts, change the parties’ names, make what they think are minor revisions (usually at the other parties’ request) and then sign the documents.
However, when people attempt to do this, they rarely get it right, and sometimes inadvertently include terms that they didn’t agree to — or delete terms they meant to keep in. Changing just one word of a contract — or even using a word differently in part of the contract than it is used in another part — can drastically change the contract’s legal effect. Accordingly, to draft a legal contract, you really need to know what you are doing.
So if businesses shouldn’t use forms, and the deal doesn’t justify hiring an attorney, what should it do?
You can do the deal if it makes business sense. Just don’t sign anything you don’t understand. In most situations, you don’t need a formal document containing specific fine print and legalese in order to form a contract. The best thing to do — if you must enter into a contract without getting a lawyer involved — is to simply memorialize in writing what you think are the really important terms and have both parties sign the document.
In most cases, these terms include, without limitation, price, quantity and timing. For example, if you are looking to purchase 1,000 widgets for $1,000 each, to be of some quality recognized in your industry, and you need the widgets delivered to your place of business by April 1, 2013, it is probably sufficient to prepare something that says: ‘This confirms that [Name of seller] will sell [name of buyer] 1,000 widgets for $1,000 each. The widgets shall be delivered to [place of business] by April 1, 2013, and shall be of [insert industry standard] quality.’ If both parties sign a document agreeing to these terms, that’s likely sufficient.
Likewise, in a contract to provide services, the important terms might include the services to be provided, the time that the services will be provided, the person who will provide the services (if this is important), and the cost of the services. This process is not, however, foolproof. It may not result in an enforceable contract. But piecing together old forms of contracts won’t necessarily create an enforceable contract either. And by keeping things simple — and using language you understand — you will avoid agreeing to terms by which you did not intend to be bound. In most cases where the stakes are low, it’s better to enter into an unenforceable contract than to inadvertently enter into, for example, a 10-year exclusive contract when you thought the contract would be terminable at any time.
Can a person who has negotiated numerous similar contracts before just use forms?
You should be careful, especially if you are modifying the form or entering into a deal that differs from the previous deals. Lawyers aren’t geniuses, but reading legal documents is a very specific skill set that takes experience and training to do competently. In some respects, legal contracts are a bit like computer programming. One small change to the code can drastically change — or wreck — the program.
What if the other side proposes a contract containing lots of fine print?
In most cases, you shouldn’t approve the fine print — especially clauses that you don’t think you completely understand — without having an attorney review it, at least briefly. As a business litigator, I’ve frequently represented clients who signed contracts that they believed were ‘small’ deals where the underlying contract — unbeknownst to the client — provided for automatic renewals, longer or different contractual terms than the parties discussed, severe penalties for early termination, one-sided attorneys’ fees provisions (where you pay the other side’s attorneys’ fees if they win a lawsuit over the contract, but the other side does not pay your fees if you win), and so on.
If you want to do the deal without having an attorney review the written contract, I’d suggest crossing out the fine print if you have bargaining power. There are very few times when all that fine print is really necessary, especially if someone is trying to win your business. The fine print is invariably just a bunch of very one-sided provisions favoring the party that drafted it.
What if the signed contract contradicts earlier agreements?
You are probably stuck with the terms of the written contract. The written contract is the deal, notwithstanding what you think you’ve agreed to.
Adam Waskowski is an attorney with Novack and Macey LLP. Reach him at (312) 419-6900 or firstname.lastname@example.org.
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As technology becomes an ever-increasing part of most businesses, so does the need to become more sophisticated on issues regarding intellectual property ? patents, trademarks and copyrights.
“An electronic process now can be easily patented,” says Eric Macey, partner in Novack and Macey LLP. “Because technology is claiming more of business, you have to become more familiar with it, because you are consistently signing license agreements to do business, and you are consistently getting rights to use technology in a certain way from people who hold patents.”
You have to make sure you know that what you’re doing is consistent with the law, particularly when you are outsourcing, a practice which is growing because of the cost benefits and flexibility that it can offer.
“When you outsource, you enter into contractual relationships that involve technology, which may involve patent rights, trademark rights and other rights,” Macey says. “You have to understand that you can’t just look at a form agreement and sign it. It’s not a simple purchase order. It’s not like that anymore.”
For instance, a company may outsource its website to a Web developer, and the site will offer items for sale from your inventory and provide for e-commerce sales. You may want your employees to have access to the site which may add to potential problems.
“You sign some agreement that has all kinds of information on it, on copyrights and patents that this company has that you can’t use and you can’t disclose and things like that,” Macey says. “I think in the old days you just signed them and didn’t read the fine print, but I think it has greater implications now because there is greater liability than you had before.”
Eric Macey, partner in Novack and Macey LLP, is a co-founder of the firm. He focuses on areas such as arbitration, business torts, class-action defense, commercial litigation, employment law, financial services and others. He has a clientele consisting of a wide range of business corporations and institutions, investment ventures, partnerships, and individuals. Macey has extensive trial experience in state and federal courts throughout the country and has acted as both an arbitrator and mediator in alternative dispute resolution settings.
When a dispute occurs between businesses, it is not uncommon for one of the parties to turn to the court system for resolution in the form of a lawsuit. However, there is an alternative method to resolving legal issues that can save you both time and money.
Alternative dispute resolution, or ADR, is a process in which legal disputes are resolved by trained mediators or arbitrators rather than a judge. Under certain circumstances, ADR can be used to settle disputes more quickly and less expensively than if they were decided in litigation. ADR also provides the parties with greater privacy because proceedings are not taking place in a public forum.
“Privacy is one of the principal advantages of arbitration or mediation over litigation,” says Stephen J. Siegel, a partner with Novack and Macey LLP.
Smart Business spoke with Siegel about how ADR can benefit your business and when it is an appropriate choice for dispute resolution.
What are the most commonly used forms of ADR?
The two principal forms of ADR in the United States are arbitration and mediation. Arbitration is similar in some respects to litigation. Both are adversarial processes in which the parties offer evidence and arguments to try to obtain a favorable binding ruling from a neutral decision-maker.
But, arbitration is different from litigation in several key respects. Unlike in the court system, the parties typically participate in selecting one or more of the arbitrators. Also, there are only a handful of grounds on which you can try to overturn an arbitration award and these are very hard to establish. In addition, U.S. arbitrations are generally resolved in less than a year, whereas it often takes several years to get a decision ‘on the merits’ in business litigation. Finally, on average, there is less discovery and less motion practice in arbitration than in litigation.
Mediation is quite different from arbitration and from litigation. First, though mediations are sometimes contentious and have adversarial elements, a successful mediation requires the parties to collaborate with a neutral mediator and one another to negotiate an agreed resolution to the dispute. Second, there are fewer rules in mediation and generally, the mediator and parties are free to design the process to suit their needs. Third, if settlement efforts fail, a mediation does not commonly lead to any sort of binding ruling.
Under what instances is it most appropriate to use ADR?
Arbitration and mediation are tools. They are helpful if used wisely, and can be frustrating and costly if not. Arbitration is a good tool for resolving repeat disputes of a known size and complexity. For example, if your company periodically has pricing or performance disputes with its customers that are significant but not ‘bet the company’ events, arbitration might be a good way to resolve those disputes. It can provide you with a confidential process, a say in who the arbitrator is and the opportunity to limit discovery and motion practice to help contain costs.
On the other hand, in large, complex or unique disputes, arbitration may not be the best choice because it offers little or no right to appeal. If you don’t agree with the award, you’ll generally have to live with it, whereas in litigation, an appellate court can take a fresh look at the legal issues. Also, with bigger disputes involving multiple claims and issues, the parties often want more discovery and the opportunity to file motions to resolve issues before trial. Litigation is well suited for such cases, though arbitrators often permit discovery, and sometimes allow motion practice.
Mediation is worthwhile for nearly any dispute that both parties want to resolve but which they are having trouble settling on their own. Setting aside a time and place to meet about settlement, and working with a neutral party frequently helps parties to bridge differences that seemed insurmountable.
Even when a settlement is not reached during mediation, the process can still be beneficial. For example, it might bring the parties closer to a settlement and facilitate reaching a settlement in the future. Even if no settlement is ever reached, mediations often provide the parties with insights into their adversary’s positions, goals and strategies, and that can be invaluable as the dispute proceeds. Most mediations are valuable whether or not the mediation leads directly to a negotiated resolution.
On the flip side, a common frustration occurs when two parties want to settle but the mediator is not skilled at working the parties toward common ground. So take the time to investigate and select your mediator carefully.
How do ADR costs compare to cases processed in the court system?
Generally, arbitration should reduce your direct costs in attorney’s fees and other dispute-related expenses as compared to a litigated outcome. This is because there is less motion practice and discovery and the process typically leads more quickly than litigation to a hearing on the merits of the dispute. But, these savings are not always realized. Sometimes arbitrations get very involved and complicated. The choice of how to manage arbitration is as important as the choice of whether to arbitrate. Once you’ve agreed to arbitrate, you have an important task in laying out the ground rules to keep it less costly, burdensome and time-consuming than litigation. You have to manage the process to achieve those goals.
In general, mediation is less expensive than litigation or arbitration, but it’s hard to compare the costs. Mediation is often a supplemental way to resolve a dispute that’s in litigation or arbitration, so unless the mediation leads directly to a settlement, it may increase your direct costs. If the parties go to mediation simply because they were asked or required to do so, not out of a genuine desire to resolve the matter, then it can be an added cost with little or no benefit. But, as with arbitration, if you select your neutral party carefully and manage the mediation process, you’ll increase the chances of saving costs and obtaining an acceptable outcome.
Stephen J. Siegel is a partner with Novack and Macey LLP. Reach him at (312) 419-6900 or email@example.com.
If your organization still doesn’t have a social media policy, it is time to create one.
“Every organization should have a social media policy that enables it to optimize the opportunities that interactive social media sites present while minimizing the attendant risks,” says Kristen Werries Collier, a partner with Novack and Macey LLP.
Smart Business spoke with Collier about those risks and how to develop a workable policy to minimize your exposure.
What are some of the risks associated with social media?
While social media’s open format and accessibility to the public makes it a vital platform for organizations to disseminate information, that attribute engenders certain risks, including: the disclosure of confidential or proprietary information; the broadcast of negative comments about your organization, co-workers, customers or clients; and the risk of employees’ personal views being improperly imputed to the organization’s detriment. Your social media policy should essentially be a primer of how to avoid these and other risks.
How can an organization begin to draft a social media policy?
You don’t need to start from scratch. Visit socialmediagovernance.com/policies.php or www.kokasexton.com/word/100-examples-of-corporate-social-media-policies — free databases of social media policies. Assimilate what you like from these policies and then continue to modify the directives to address your specific concerns. If your organization already has a code of conduct related to media, you can modify those directives to cover the use of social media.
One size doesn’t fit all. You need to tailor your policy to reflect your organization’s culture. Determine how strict your policy needs to be based on your needs and tolerance for risk. I don’t think it makes sense to bar your employees from accessing social media sites at work. Your organization depends on your employees’ professional judgment, and their use of social media sites should be governed by that judgment, guided by your social media policy.
Even if you block access to social media altogether, that does not obviate the need for a policy that informs employees of the repercussions of posting negative comments during nonwork hours that could damage the organization’s reputation or reveal confidential or propriety information.
Who should be involved in creating the policy?
Keep in mind that you are asking your employees to self-monitor their behavior in accordance with prescribed guidelines, which means that any policy’s effectiveness turns on whether your employees understand it and buy into it. Given that, you want to create an understandable policy that protects your organization from the pitfalls of social media sites without overreaching.
To get employee buy-in, recruit a cross-section of employees to help you create the policy. They can then be integral to communicating it, facilitating implementation, monitoring its effectiveness and tweaking it.
What are some general guidelines for creating an effective social media policy?
1. Keep it short.
2. Define social media so it is clear what the policy is addressing.
3. Start on a positive note and highlight how your organization uses social media sites to its advantage so it is clear the policy is intended to empower and educate.
4. Declare that the purpose of the policy is to protect the organization.
5. State that the policy is not intended to infringe on employees’ personal interaction online but to ensure their posts do not reflect poorly on the organization, its employees or clients, and do not reveal confidential or proprietary information.
6. Encourage employees to use common sense.
7. Be specific. Provide an organization-specific list of the types of information that cannot be disclosed and note that if it seems confidential, it probably is.
8. Remind employees that if they identify the organization as their employer in online profiles, comments posted there could be imputed to the organization.
9. Direct employees to refrain from posting comments that could be interpreted as harassing, slurs, disparaging, demeaning or inflammatory.
10. Explain why certain conduct is prohibited.
11. Remind employees that their online presence is subject to applicable laws and terms of service.
12. Inform employees that you will monitor their social media presence, and then do it.
13. Tell employees the use of social media at work is a privilege, one that can be rescinded if abused.
14. Spell out the repercussions for violating the policy.
15. Have employees sign the policy.
16. Have a plan to minimize damage if the policy is violated.
How should an organization implement the plan?
Communicating the policy is as important as writing it. With that in mind, designate someone to convey a clear message about why the policy is necessary and that employees are expected to follow it. It would be a shame to invest significant time and effort into drafting the policy and then have it sit unread in your employees’ inboxes.
Also have a point person to answer questions because employees can’t abide by the policy if they don’t fully understand it.
How often should the policy be reviewed?
It should be reviewed at least annually, allowing you to work out the kinks by refining what works and eliminating what doesn’t. After you have a policy that has proven to be workable and effective over time, you can revisit it when the need arises, or at least every couple of years.
Kristen Werries Collier is a partner with Novack and Macey LLP. Reach her at firstname.lastname@example.org.
Businesses use a number of legal documents, such as purchase orders, confirmations, invoices, leases and employment contracts, but despite the importance of such documents, the process of generating and updating them is frequently haphazard.
“Disputes often arise out of ambiguous, confusing, conflicting or outdated provisions in forms and standardized contracts,” says Michael A. Weinberg, a partner with the business litigation specialty firm Novack and Macey LLP. “Companies spend millions to litigate disputes that could have been avoided had they invested mere thousands in periodic reviews and updates of their core contractual documents. Quality forms and standardized agreements can be as important to success as physical, human and financial assets, yet they often go unreviewed and unrevised for decades. Such complacency and inattention can lead to disaster when the neglected documents become Exhibit A in a lawsuit.”
Smart Business spoke with Weinberg about how companies can make sure their forms and contracts are up to date and maximally enforceable, and what contract provisions might deserve special attention during the review and revision process.
How can a company start reviewing and upgrading its forms and standardized contracts?
The review and drafting process should be a collaboration between management, which knows the business, and corporate counsel, who knows the law. Companies too often think that, without lawyer involvement, they can simply copy forms and contracts that are being used by competitors or cherry-pick provisions from a variety of such documents.
That’s a mistake. Borrowed terms may be poorly drafted, out of date, specific to the requirements of a different state, or otherwise unsuitable as templates. Moreover, copying from multiple documents can lead to internal inconsistencies, variations in definitions and other anomalies that may result in confusion.
The goal of the drafting process is more than the generation of up-to-date documents that fulfill your business objectives; it’s also to ensure that such documents are clear and comprehensible. When a document is finalized, the non-attorney who participated in its creation should understand every word of it. While technical phrasing may be required in certain circumstances, forms and contracts with confusing ‘legalese’ are more likely to land a company in court than those expressed in straightforward standard English.
Given the rapid pace at which the law changes, biannual review of forms and contracts is warranted. All such documents should be reviewed concurrently, even though they likely were created at different times by different people using different terms. By putting documents on the same review timetable, their terms can be harmonized and the potential for future problems reduced.
What role should business litigators play in the review process?
Once documents have been drafted or updated, they should be looked at by a commercial litigator who will approach them from a perspective different than that of corporate counsel. The litigator can perform a ‘stress test’ on the documents, vetting their provisions to see if their language could be exploited by an adversary in a hypothetical dispute situation.
By playing devil’s advocate, the litigator can help pinpoint document provisions that need more work, or identify language or clauses that should be added to the documents to strengthen or clarify them.
What kinds of provisions give rise to problems?
There are myriad standardized documents, and within those a plethora of provisions, any of which may present problematic language. Certain provisions, however, may merit extra scrutiny. For example, a contract might provide for consent to jurisdiction in a certain state or court but then fail to include a stipulation that such state or court is the only place where suit can be brought.
Integration clauses can also lead to problems. Such clauses provide that the contract represents the entire agreement of the parties and supersedes all other agreements or negotiations. But, in Illinois, such language is likely insufficient to prevent a party from asserting that it entered into the agreement in reliance on an untrue ‘outside-the-document’ representation. To maximize the prospect that such an assertion will be rejected by a court, a separate ‘nonreliance’ clause should be included in the contract.
Warranty provisions are likewise tricky. If you want a warranty, use warranty language. Drafters sometimes employ words like ‘promise’ or ‘guarantee’ to describe something they really intend to be a warranty, but failure to use the correct technical term can be fatal. Moreover, when drafting warranties that run in favor of the drafting party, attempts to overreach can backfire. Overly broad warranties that go beyond those set forth in the Uniform Commercial Code are sometimes deemed commercially unreasonable and unenforceable, leaving the party seeking warranty protection with fewer rights than narrower language would have afforded it.
Restrictive employment covenants and confidential information protection provisions also give rise to disputes, but good drafting can improve your odds of success. A drafter should avoid attempting to define every type of information as proprietary or confidential, as such breadth of definition, if rejected by a court, can void the provision. Likewise, drafting covenants not to compete that are overly harsh or excessive in duration or geographic scope can leave you without any valid competition restrictions. A reasonable restriction that is enforceable is better than an overbroad restriction that is struck down.
Where terms of form documents are ambiguous, outdated, confusing, incomplete or poorly worded, misunderstandings can arise, relationships can be undermined and litigation can ensue. For this reason, when it comes to scrutinizing documents, every sentence should be viewed as a potential source of trouble.
Michael A. Weinberg is a partner with the business litigation specialty firm Novack and Macey LLP. Reach him at (312) 419-6900 or email@example.com.
Ideas and closely held information, designs and processes are often a business’s most valuable assets, and the law provides companies with tools to protect those assets.
Patent, trademark and copyright laws are the most widely known ways to protect new ideas, but, while lesser known, the laws protecting trade secrets provide the better tool for companies to protect their confidential intellectual property.
“Protecting one’s valuable trade secrets is not only a good business practice, it is also often necessary to maintain the protections afforded by trade secret law,” says Donald Tarkington, the managing partner of Novack and Macey.
Smart Business spoke with Tarkington about how to protect trade secrets and how to make sure departing employees don’t walk out with valuable information.
What information is covered by trade secret protection?
Trade secrets can include technical or nontechnical data, compilations of information, marketing or financial data, manufacturing processes and lists of actual or potential customers. It covers virtually any information that is sufficiently secret that it derives economic value from the fact that it is not generally known and that the business makes a reasonable effort to keep confidential. Even information derived from public sources may be a trade secret if accumulating that information requires significant effort.
Courts look to six factors in evaluating whether information is a trade secret: the extent to which the information is known outside the employer’s business; the extent to which it is known by employees and others involved in the business; the extent of measures taken by the employer to guard the secrecy of the information; the value of the information to the employer and to its competitors; the amount of effort or money expended in developing the information; and the ease or difficulty with which the information could be properly acquired or duplicated.
Do trade secrets need to be registered?
Trade secrets are not registered like a trademark or copyright. Nor are they applied for as with a patent. Unlike ideas that are patented, trademarked or copyrighted — which are protected even though they are publicly known — trade secrets are protected because they are secret and because their secrecy makes the information valuable. As long as the information is secret, used in the business and valuable, it will be protected if the business takes reasonable steps to keep it confidential.
Why is it important for companies to protect their business practices, products, services or intellectual property?
Trade secrets are, by definition, confidential and valuable. They are assets and should be protected. Businesses should be no more tolerant of someone taking their trade secrets than they would be of someone walking out the door with a valuable piece of equipment.
Protecting trade secrets is also important to preserving a business’s legal rights. Under the Uniform Trade Secret Act, information is not a trade secret, regardless of how valuable it might be, if the business does not make reasonable efforts to protect its confidentiality. Businesses’s efforts to protect confidentiality don’t have to be perfect. What is reasonable will depend on the size and sophistication of the parties, as well as the relevant industry. But a business must take affirmative measures to protect the secrecy of its information.
How can businesses protect their trade secrets?
There are several measures a business can take, including marking information as confidential, keeping information in a secure place, restricting access to those who need to use it, password-protecting electronically stored information, developing policies that require employees to keep the information secret and requiring anyone with access to sign a confidentiality agreement. For particularly sensitive information, businesses should work with their data processing professionals to restrict offsite access to electronically stored information and limit the ability to download or copy information.
How can businesses ensure departing employees won’t take trade secrets with them?
As long as information qualifies as a trade secret, the law precludes employees from using that information after they leave. The best protection, however, is to require employees to sign confidentiality agreements in which they acknowledge that the information they were given is confidential and that they will not disclose it if they leave.
Confidentiality agreements can even protect information that does not meet the strict definition of a trade secret. When one employee with access to secret information leaves, disable his or her password and e-mail access and take back company issued laptops. It is also a good idea to review the usage logs on the employee’s laptop and the company’s computer network to see if there is any unusual copying or downloading activity.
If a nondisclosure agreement is violated, what steps should a company take?
If a business learns that someone is disclosing trade secrets to third parties, it should consider taking action against that individual and against the former employee’s new employer. Possible actions include a suit for damages resulting from improper use of information and/or an injunction action against the former employee and new employer prohibiting the use or disclosure of the information.
Knowingly allowing trade secrets to be disclosed to third parties risks damaging a business’s claim that the information is a trade secret. Deciding whether to take action against a former employee or a new employer should be considered on a case-by-case basis, but one thing that should be taken into account is that allowing the trade secret to be disclosed could destroy the value of the information and destroy the business’s ability to seek protection of the information in the future.
Donald Tarkington is the managing partner of Novack and Macey. Reach him at (312) 419-6900 or firstname.lastname@example.org.
Businesses spend years establishing sterling reputations. Customer lists can take vast amounts of time to build, and confidential information such as costs, vendor lists and trade secrets are often the result of thousands of hours of work. Yet all of these things can be quickly lost if a departing employee engages in illegal conduct.
Similarly, competitors can spread false information in a desperate effort to steal clients, or poach one of your employees. When these things happen, enterprises need immediate help. Yet they are often unsure whether the courts can move fast enough to assist them, as years can pass between the time a lawsuit is filed and a judgment is entered.
“Businesses can obtain valuable relief from the courts in emergency situations,” says Richard L. Miller II, a partner with the business litigation firm Novack and Macey LLP. “In such situations, it is important to promptly seek assistance from a lawyer who has prosecuted these types of claims. If you wait too long, or do not properly establish your case, you can lose protections that can be literally priceless.”
Smart Business spoke with Miller about how a business can obtain assistance from the courts in emergency circumstances.
Why is it important to act quickly in these situations?
To convince a judge that you have an emergency, you must demonstrate that you behaved in a manner consistent with that. Thus, as soon as you learn of a crisis, find a skilled litigator who has experience in seeking emergency relief. Then make sure that he or she has an adequate amount of time to devote to your case, which will require a great deal of immediate attention.
If you delay taking action, the harm that you fear may be completed before counsel can present your case to a judge. And if your reputation has already been destroyed, or your customer list has been published, there may be nothing a judge can do to help you in the short term.
What is the process to obtain a temporary restraining order (TRO)?
You must first initiate a lawsuit. Your lawyer will draft and file a complaint, which will contain the facts relevant to your case. You will sign a statement swearing that its allegations are accurate.
Your lawyer will also prepare a short emergency motion that asks the court to issue the TRO that will prevent the defendant from engaging in the conduct that will harm your business. Further, your counsel will draft a memorandum that explains, in detail, why the motion should be granted.
These materials usually can be prepared in a few days. Once they are filed, your lawyer should be able to present your motion to a judge within a day or two thereafter.
How does a business show that it is entitled to emergency relief?
Under Illinois law, in order to obtain your TRO, you do not need to meet the same standard as you do to win your case in its entirety. Rather, you must satisfy four elements.
First, you must show that you have a protectable interest. Generally speaking, a legitimate, threatened business interest entitles you to protection.
Second, you must demonstrate that you will suffer irreparable injury if the TRO is not granted. This is easily met under Illinois law because once a protectable interest is established, it is presumed that an irreparable injury will follow if it is not protected.
Third, you must convince your judge that you have ‘no adequate remedy at law,’ meaning that a monetary award after the fact will not make you whole.
Fourth, you must establish that you are likely to succeed on the merits of your case. Still, you merely must present a ‘fair question,’ which, once established, entitles you to have your rights preserved. These are the four keys to obtaining a TRO.
How will a case unfold in court?
Once your initial documents are filed, your case will be immediately assigned to a judge who is responsible for deciding emergency motions. Your motion will be argued at a nonevidentiary hearing, at which no witnesses are called and no evidence is considered, other than your sworn complaint.
Barring exceptional circumstances, your lawyer will be required to give the defendant notice of the hearing. If counsel for the defendant appears, he or she will be allowed to argue that you have not satisfied one or more of the elements necessary to obtain a TRO.
If you prevail, a TRO will be issued that prohibits the defendant from engaging in the offending conduct. However, this does not mean the case is over. If an agreement to keep that restraining order in place is not formed, a preliminary injunction hearing must be scheduled.
Discovery will then be taken, perhaps including interrogatories, document requests and depositions. Thereafter, at the preliminary injunction hearing, the parties will present evidence. The judge will then decide whether to enter an injunction that will protect you until a final trial can be held.
The key to obtaining emergency relief is to have a qualified attorney act quickly. When a party prevails at the TRO stage, the opponent often settles the dispute rather than attempting to convince the judge, who has already ruled in the plaintiff’s favor, to change his position at the subsequent preliminary injunction hearing.
Richard L. Miller II is a partner with the business litigation firm Novack and Macey LLP. Reach him at (312) 419-6900.
Most lawsuits never actually go trial, nor are they resolved by motion. Instead, they are resolved by settlements negotiated by the parties’ attorneys. Unfortunately, many attorneys are not as familiar with the rules of settlement as they are with the rules of evidence.
“Written settlement agreements should reflect the parties’ agreement and intent,” says Timothy J. Miller, a partner at Novack and Macey LLP. “But written settlement agreements also should protect against unintended consequences.”
There are significant pitfalls associated with settlement agreements, so business owners would be well served to understand what they potentially face when settling a lawsuit.
Smart Business spoke with Miller about settlement agreements and what owners should know when entering into them.
What is one of the biggest concerns that a business owner should have when entering into a settlement agreement?
In most cases, a business owner enters into a settlement agreement thinking that a dispute is being fully and finally resolved and that he or she is ‘buying peace.’ Thus, any business owner contemplating a settlement should be certain that the settlement will actually end the dispute.
What is one way in which a ‘settled’ case can come back to life?
In settlement negotiations, parties may say or write things that they hope will lead to an agreement. A business owner who wants to make certain that a case is really over should take steps to make sure that statements made during negotiations cannot resurrect the dispute. Some negotiators lie. Sometimes they exaggerate to induce the other party to settle. Other times, a negotiator may mistakenly say something that is not true. Even when no lies are told, parties can have different memories of statements made during negotiations. Those statements can provide fertile grounds for resurrecting disputes that a business owner thinks have been resolved.
How can you avoid having statements made during settlement discussions hurt you?
Your lawyer should make certain that everybody agrees going into the negotiations that the case has not been settled until a written settlement agreement is signed by all parties. Then, the written settlement agreement drafted to reflect the agreement should contain strong nonreliance and integration clauses.
A nonreliance clause is a provision that says that the parties are not relying on any statements made, or writings exchanged, during negotiations unless they are specifically included in the written agreement. Such a clause should also provide that the parties are relying on their own judgment and investigation and have had the advice of independent counsel. It helps to stop later claims that a business owner lied during negotiations and that the opponent relied on such alleged lies.
An integration clause says that the written agreement is the entire agreement of the parties. This clause will stop somebody from claiming that some part of the agreement is not contained in the written agreement. For example, in an employment dispute, a business owner may pay a former employee to dismiss a claim. An integration clause may protect the owner from claims that the owner also agreed to give the employee the job back.
What if a business owner is relying on statements made in the settlement negotiations?
Nonreliance and integration clauses mean that statements and promises not contained in the written agreement probably will not be considered by a court. But this applies to the business owner, too. If an owner is relying on a statement made in negotiations, that should be included in the agreement.
Are there potential problems with releases in settlement agreements?
Usually, the purpose of a settlement is for both sides to give up, or ‘release’ their claims against each other. Sometimes, however, releasing claims against one party may have the unintended effect of releasing claims against other unnamed parties. There is an old rule that the release of one wrongdoer releases everybody liable for the same harm. Many lawyers believe this rule has been abrogated by statute, but this is only partially correct.
Illinois has abrogated the rule that a release of one joint tortfeasor releases all tortfeasors. What many lawyers do not recognize is that this applies only to tortfeasors. As a result, the common-law rule that an unqualified release of one who caused a monetary loss precludes a claim against other parties who caused the loss continues to apply to, for example, co-obligors on a contract and claims for joint breaches of fiduciary duty. If there are other parties that a business owner does not want to release, an attorney can address this issue.
Will a release bring total peace?
Not always. A general release might not be deemed to release claims that one party claims it did not know about when it signed the release. A business may be able to protect itself by providing in the written document that the parties are aware they may have claims against each other they do not know about, and the release is intended to bring total peace and release even unknown claims.
Are there other issues to be aware of?
Certainly. If a party with whom a business owner has settled sues again on that settled claim, in blatant violation of a settlement agreement, the owner could still have to pay lawyers to defend the suit. A provision in a settlement agreement providing for attorneys’ fees to be awarded to the prevailing party in a dispute wherein the settlement agreement is raised as a defense may help protect against such problems.
Timothy J. Miller is a partner at Novack and Macey LLP. Reach him at (312) 419-6900 or email@example.com.