Social media tools provide an accessible and inexpensive way for businesses to expand their market footprint. But failure to protect and enforce intellectual property rights may quickly turn a great resource into a major headache, whether or not social media is part of a corporate marketing program, says Alexis Dillett Isztwan of Semanoff Ormsby Greenberg & Torchia LLC.
Together, social media and intellectual property pose internal and external issues. Internally, a business must monitor and control employee use of intellectual property. Given social media’s accessibility, problems can arise and grow rapidly. Imagine an employee prematurely tweeting about a new product launch or information never intended for the public. To reduce risk, businesses should establish a written social media policy that:
? Sets clear guidelines for appropriate topics to be posted on any media, including company and employee personal accounts.
? Identifies personnel permitted to post and the posting approval process.
? Addresses use of third-party trademarks or copyrights or names of individuals or competitors.
? Is clearly and regularly communicated and taught through annual training.
Externally, businesses should police unauthorized use of their intellectual property on social media sites. Defamatory comments can take on a life of their own. Businesses must also contend with trademark misuse or infringement, from someone using your trademark as its domain name to assuming your brand identity online, an aggressive practice called “brand-jacking.” To combat these challenges, businesses should:
? Monitor social media for use of company trademarks.
? Obtain formal protection for intellectual property, e.g., trademark registrations.
? Avoid overreaction; weigh impact of potential negative backlash online against severity of misuse.
? Consider availing itself of the social media site’s enforcement policies.
Alexis Dillett Isztwan, a member at Semanoff Ormsby Greenberg & Torchia LLC, concentrates on intellectual property and technology law.
The term “intellectual property” applies to more than just a copyright. Here are some questions for companies to consider about their IP when security is a concern.
Q. What is considered intellectual property but is often overlooked when deciding what to protect?
A. When people think of intellectual property, they most often think ’patent’ or ‘copyright.’ There are other forms. One that’s often overlooked is trade secrets.
As noted in an influential restatement of the law, a ‘trade secret is any information that can be used in the operation of a business … that is sufficiently valuable and secret to afford an actual or potential economic advantage over others.’ They take a wide variety of forms, including product formulas, data compilations, customer lists, manufacturing techniques and other types of business know-how.
Q. How might a company’s trade secrets be vulnerable?
A. A business has to identify its trade secrets before it can protect them. Common sense goes a long way here. Business owners should start by asking, ‘What does my business do better than the competition, which the competition doesn’t know about?’ The answer might qualify as a trade secret.
Q. What policies or procedures should a company put in place to protect its trade secrets?
A. There are no hard and fast rules, but a business must take ‘reasonable steps’ to protect its secrets. This could include password-protecting computers, limiting access on a need-to-know basis, keeping documents under lock and key, and/or requiring employees to maintain secrecy during and after employment.
Q. How has social media affected a company’s ability to protect its trade secrets?
A. It has made it more difficult for businesses to argue that it has trade secrets — a point underscored in Sasqua Group Inc. v. Courtney, No. 10-528, 2010 WL 3613855 (E.D.N.Y. Aug. 2, 2010), where the court held that compiled customer data was not a trade secret because the information was also available on the Internet and social media sites.
There are no easy answers, but one thing seems clear: Businesses must take care when posting to social media sites and educate employees about using social media sites.
P. Andrew Fleming is a partner with Novack and Macey LLP. He represents individuals and small, midsize and large companies in complex commercial litigation.
Contracts and legal agreements can play a key role in determining whether a company flourishes or flounders, but it’s easy to skip over the details when more urgent matters come into play. Those who don’t come back to those details when the fire has been put out, however, run the risk of bigger problems down the road.
But sometimes the perceived urgency to get the deal done becomes the driving force, undermining the effort, quality, judgment and scrutiny needed to pen a solid contract that’s in the company’s best interest. If the analysis and due diligence takes more time than anticipated, impatience grows and the decision may be made to just get it finished so you can move on.
With so much on the line, you can’t afford to do that. You need to do what it takes to ensure that every agreement is in the best interest of your company and that your rights are safeguarded for the agreement’s term.
Do you sign, or are you responsible for, the contracts your business concludes? Savvy leaders keep their focus on getting the right deal and then they watch for potential pitfalls and red flags in the fine print. They conduct reviews, ask probing questions, understand the terms and financial impact of the deal and are alert for liability issues and balanced termination provisions in the contract.
Here’s some advice that will help safeguard your company’s future:
Put all business dealings
Do this even with your partners, family and employees. When there are modifications or changes to your agreement, put them in writing so both parties are aligned. Not only will having a written agreement prevent issues and misunderstandings in the future, in certain situations, verbal contracts can be legally binding.
Clarify the scope of
What rights do you have? What can you do? And often more important, what can’t you do? Be sure the boundaries are very clear. Describe geography, markets, improvements and noncompete terms.
Define all of the important contractual terms
Be sure that performance criteria, metrics, timelines and detailed services required by both parties are set out clearly, as well as the consequences of nonperformance along with remedies. Define price, cost, volume by product, forecasting, payment terms, licenses or permits required, registration cost, etc.
Understand the legal terms and their implications
Don’t be embarrassed to ask your colleagues who negotiated the agreement or to ask your legal team the same question multiple times. As a check, ask an individual who hasn’t been associated with the contract to review it and point out potential areas of concern.
Don’t assume anything is obvious or clear
As the saying goes, the devil is in the details. Include formulas, definitions and examples of calculations. Set out potential problems and disputes and how they will be resolved. Define it in a manner where someone not familiar with the business could fulfill and understand the terms of the agreement.
Define the duration of the agreement and the terms for early termination
All business relationships have an end point, so it’s critical that contracts between business entities or individuals make provisions for unwinding the relationship when all obligations are fulfilled. Carefully define each party’s rights and obligations after termination.
Monitor performance and fulfillment of the terms of the agreement
Make sure the company lives up to its responsibilities under the contract to protect its reputation and business relationships.
A solid contract answers all of the “what ifs.” What if the other company goes out of business or is acquired? What if your contractual partner doesn’t fulfill its obligations under the contract? What if there’s a truckers’ strike that prevents ground shipment of the raw goods you need?
Become practiced in setting out and answering all the “what ifs,” and you’ll find yourself among the gold medalists in the contract game.
Tony Arnold is founder and principal of Upfront Management, a St. Louis-based management and executive consulting firm. He can be reached at (314) 825-9525 or firstname.lastname@example.org.
As the country’s population ages, a growing number of people will, unfortunately, suffer from diminished capacity, which can arise from conditions such as Alzheimer’s disease and dementia. “This is occurring more as businessmen and women work into their later years, and they become more susceptible to these conditions that affect their ability to make business decisions,” says Suzanne Fanning, an attorney with Garan Lucow Miller PC and co-chair of the Washtenaw County Bar Association Probate Section.
If someone with diminished capacity to make decisions enters into a transaction, that decision may be later subject to challenge in court.
“If it is established that the person did not have the requisite legal capacity to enter into the contract, the court may set the contract aside, to the detriment of the other party that entered into the contract,” she says.
Smart Business spoke with Fanning about how to take the legal precautions necessary to protect your business when concerns arise about another party’s possible diminished capacity.
What is diminished capacity, and who does it affect?
Diminished capacity is essentially an impairment of daily cognitive functioning, which can impact memory, reasoning, language and insights, all of which are skills critical to good business decision making. While the majority of businesspeople will not suffer from diminished capacity, as the population ages, there is a greater likelihood that it will become an issue.
Diminished capacity can also impact younger businesspeople who have been injured or who suffer from serious illness. This could be temporary, such as when medical treatments impair mental capacity, or permanent, such as when a person is in a serious accident.
What are the signs of diminished capacity?
There are no standard set of criteria, but there are red flags to consider if you are engaged in business transactions with someone who appears to have diminished capacity. These can include memory loss or forgetfulness, problems with the ability to communicate, loss of mental acuity, calculation problems, diminished comprehension, disorientation, inflexibility during negotiations, susceptibility to manipulation or even fraud by third parties.
Are there different standards of capacity for different business transactions?
Yes. Legal capacity has different legal definitions depending on the transaction and the applicable case law and statutes in the state in which you are operating. In Michigan, for example, the legal standard for the capacity to contract is whether the person in question possesses sufficient mental capacity to reasonably understand the nature and effect of the contract.
The more complicated the contract, the higher the level of understanding that is necessary to have the legal capacity to make that contract. In a real estate transaction, such as signing a deed, the standard is whether a person has sufficient mental capacity to understand the business in which he or she is engaged, to know and understand the extent of the value of the property and how to dispose of it.
It is important that businesspeople be aware that a transaction can be set aside by a court if the other party is later found to have lacked the requisite legal capacity at the time the transaction was undertaken. Therefore, it is important to take appropriate steps to protect yourself and your business when concerns arise that the other party may lack the legal capacity to enter into a transaction.
How can you protect your business in the event that your business partner is showing signs of diminished capacity?
One way to address this concern is to create a durable power of attorney, in which you and your partner name each other as the agent to transact business in the event the other suffers from a diminished capacity. You can also name a trusted employee or adviser to this position.
Having a durable power of attorney will also prevent a spouse or family member of the incapacitated person from gaining the authority to transact business matters on that person’s behalf. This is especially important when those family members have little or no experience in business.
What can be done if a client or third party to a transaction appears to have diminished capacity?
One option is to ask for a capacity evaluation by a doctor to ensure that the person has the capacity to enter into that particular transaction. Of course, this topic must be approached with great care. Another option is to make the transaction contingent on a court guardianship or conservatorship in which the court will grant authority to a third party to act on the person’s behalf.
For example, while a person with diminished capacity might not be capable of signing a deed necessary to a business deal, his or her court-appointed guardian or conservator could be granted authority to sign the deed on behalf of that person and proceed with the transaction.
Clearly, such a scenario can be extremely difficult. It may be a client with whom you have worked over many years. It can be difficult to extricate yourself from the relationship, but it may be necessary to protect yourself legally because these transactions can be set aside. It may be a matter of approaching the client’s partner or spouse, explaining that you are having concerns and bringing in a third party to make sure the transaction is protected.
Suzanne Fanning is an attorney with Garan Lucow Miller PC and concentrates her practice in probate and trust litigation and planning. She is co-chair of the Washtenaw County Bar Association Probate Section. Reach her at (734) 930-5600 or email@example.com.
Insights Legal Affairs is brought to you by Garan Lucow Miller PC
A dissatisfied client takes his complaints to the public forum by publishing statements calling your product junk and your operation a joke. A competitor slams your business on an online forum, accusing your firm of producing dangerous products.
How do you defend yourself, and do you have a case for a lawsuit?
“The Internet opens up a worldwide web of opportunity for people to publish their opinions about anything and everything, says Ian Simpson, a shareholder specializing in liability and defamation at Garan Lucow. And once alleged defamatory statements are published, the damage is already done.
“Deciding whether to move ahead with a lawsuit requires analyzing whether you have a legal basis for an action because you have to prove all of the elements of a claim and understand that it often takes a lot of resources to pursue the case.”
Smart Business spoke with Simpson about defamation, how free speech is protected and when to take action against a party that is making defamatory statements about your business or product.
What is defamation?
Generally, defamation is a false accusation of wrongful conduct, or a malicious misrepresentation of someone or some entity’s words or actions that is published to third parties, causing damage. Libel is the written form of defamation, and slander is the verbal form. Classic examples of defamation where damages are presumed include lack of chastity or criminal conduct. Defamation includes untrue statements with defamatory meaning that could harm a reputation, generally without charging criminality or lack of chastity. In most cases, damages have to be proven rather than presumed. The statements must be published and available to the public — not merely be stated in a confidential document — resulting in damage.
What defenses are used to protect those charged with defamation?
Truth is generally a defense under the First Amendment of the United States Constitution. Most matters of opinion are protected against claims of defamation, as such statements cannot be proven as true or false. For example, ‘In my opinion, Company X’s products are not high quality’ is a protected statement. Further, in the United States, public figures, celebrities, politicians and others who put themselves in the public spotlight are generally unable to sue for defamation unless they can prove the statements were made with actual malice.
Is a business owner considered a public figure?
Another area where statements are generally protected, unless actual malice is found, are matters of public interest. A private company may be involved in a public dispute of interest to consumers. This essentially places it in an arena similar to that of a ‘public figure’ because policy favors granting increased protections to statements made in controversies of interest to the public. Say a company is involved in coal mining and environmental safety. Because this issue is of public interest, alleged defamatory statements become a matter of public concern and are protected under the law unless malice is proven.
How has the Internet impacted companies’ vulnerability to defamatory statements?
The Internet essentially gives the public a speakerphone to air opinions online, and those statements are protected as long as they are expressly stated as opinion and not made with malicious intent. Further, federal law generally protects businesses that merely serve as online conduits for the statements of others (online review sites, for example) are generally protected against claims of defamation, although the maker of the comment may still be liable. Similarly, most blog sites, if not the posts themselves, are protected by law.
Although companies that operate as mere forums are generally protected, there is no similar protection for a company that is not considered a forum of opinion that adopts, republishes or retains defamatory statements.
The crux of many defamation cases is how opinions are stated. They must be couched as opinions to be protected. Where a person or company has stated opinions as ‘fact,’ the risk of liability is greatly increased.
What are the first steps to stop a party from making defamatory statements?
First, consult with an attorney. Typically, an attorney will create a cease-and-desist letter expressly demanding the person or company making the alleged defamatory statements stop immediately. If the person or company does not stop voluntarily, a written demand for a retraction of the statements will be made.
A written demand for a retraction will set the stage for future litigation. If no retraction, published in a similar manner to the original statement, is made, additional damages may be obtained if a lawsuit is pursued. Note that the statute of limitations for a claim of defamation is one year from the date of the publication of the alleged defamatory statements, so aggrieved parties must act promptly to protect their rights to bring an action under the law.
How can a business protect itself from being the victim of a defamation suit?
Always discuss with an attorney strong matters of opinion or statements about competitors or matters of public interest before those statements are published. Also, consider bringing in a legal adviser to train employees on Internet commentary and what is permissible and acceptable. It is generally ill-advised to be interviewed for any publication without consideration of the potential for defamation that may exist in the making of casual comments in such interviews, and the right to review the interview to reconsider any such comments before publication is essential.
Defending a defamation suit can be expensive and can effectively destroy a business. We highly recommend companies in the publishing and Internet business carry insurance covering claims of alleged defamation.
Ian Simpson is an attorney at Garan Lucow specializing in liability and defamation law. Reach him at firstname.lastname@example.org or (248) 952-6456.
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Trademarks (™ or ®), trade names (Band-Aid or Kleenex), service marks (SM) and the like can be valuable brand assets of an organization or its CEO for that matter. They are not unlike patents that protect an inventor from someone duplicating an innovative process or product. The difference is that although you have to file post registration documentation at specified periods of time, trademarks do not have a limited right of use.
And like patents, the ownership of a trademark, trade name or service mark, as long as it is registered, can be assigned to anyone or anything: the person who created it, the shareholders or the company who markets the products and/or services.
So what defines a trademark?
By definition, trademarks, trade names or service marks are interchangeable terms and provide market differentiation, define proprietary processes, brand products and define ownership. The definition found at the U.S. Patent and Trademark Office, www.uspto.gov/faq/trademarks.jsp, states: “A trademark is a work, phrase, symbol or design, or a combination thereof that identifies and distinguishes the source of the goods of one party from those of another.”
An attorney who specializes in trademark law can best guide you on securing a trademark or you can go to the aforementioned website and manage the registration process yourself. The good news is it as long as there are not any complications, the process generally takes two years or less.
My focus on the importance of writing on this subject really promotes the marketing side of why using trademarks can provide a strong competitive advantage, lead to market differentiation and become an extremely valuable asset. The power of a name, phrase or company mark can be a game changer for some companies.
Using trademarks as a smart marketing strategy
Not unlike the days of sticking a flag in the ground to lay claim to a tract of land, using trademarks, trade names and/or service marks lays claim to company names, product and service names, positioning taglines, characters and artwork and more.
A good example of this would be McDonald’s. Try using a “Mc” in front of anything and see what happens. As consumers, when we hear something with the prefix “Mc,” we automatically connect with McDonald’s because of the way the company has branded its products.
What would happen if McDonald’s had not claimed that as is distinguishable mark? An example of a phrase, “It’s The Real Thing” was claimed by Coke, whose product, wave symbol and company name, Coca-Cola, are all registered trademarks. Laying claim protects the advertising investment these companies are putting into building name recognition and product differentiation.
What’s involved in making a claim?
So how does this apply to your company? You can benefit in very much in the same way. Take an inventory of your marketing assets. What is trademarked? What should be trademarked? Do you have product and service names for what you offer the marketplace? If you do, how could that change your market position and brand preference? Do you have a logo mark? What about brand-defining graphics? All you need to do to make a claim is add a “™” or “SM.”
If you decide to complete the paperwork, pay the fee and register the trademark with the USPTO. Once approved, you can (and should) use the ® or registered symbol. Not using the symbols associated with evidence of claim of your trademarks can put them at risk.
Trademarks have hard asset value
I find that this point is best expressed by John Stuart, former CEO of Quaker Oats: “If this business were split up, I would give you the land and the bricks and mortar, and I would take the brands and trademarks, and I would fare better than you.”
Trademarks are marketing assets, and those assets can be owned by either you or by your company.
A smart transition strategy for business owners shared in a Vistage meeting by presenter Patrick Ungashick, author of “Dance in the End Zone,” suggested taking your company name and intellectual property and assigning them to a separate LLC. And since ownership of registered marks is transferable, that’s one smart business idea.
Kelly Borth is CEO and chief strategy officer for Greencrest, a 21-year-old brand development, strategic marketing and digital media firm that turns market players into market leaders. Borth has received numerous honors for her business and community leadership. She serves on several local advisory boards and is one of 25 certified brand strategists in the United States. Reach her at (614) 885-7921 or email@example.com, or for more information, visit www.greencrest.com.