Regardless of where you are at in your company’s life cycle, it is prudent to protect your brand by obtaining state or federal registration for your mark or company name. State or federal registration helps ensure that your business and reputation are not tarnished, or that you do not lose clients as a result of others encroaching upon your area by using a name or mark that is confusingly similar to yours.

“There exists common-law rights that take effect from the moment you start your business, but to enhance your protection it is best to obtain federal or state registration for your brand to better enforce your right of ownership,” says Timothy Jordan, a shareholder at Garan Lucow Miller PC. “Registration establishes that you own the mark and anything confusingly similar can be barred from entering the market.”

Smart Business spoke with Jordan about registering a trademark and the consequences of not doing so.

What are common-law rights and what protections do they offer?

As soon as a company uses a name or mark, it’s developing common-law rights of use. However, the protection of that mark under such rights is limited.

Say you have been using your name in the Detroit area for six years without obtaining federal or state registration. Suddenly a businessman from California, independent of you, comes up with the same or similar name and applies for and obtains federal registration. That registration can provide for the blanket use of that name throughout the United States. Your competitor may now be able to stop you from expanding the use of your mark outside of the geographic area in which you are currently operating, if the business appears related. You can still use your name and continue to do business in your geographic area, but you cannot expand your business beyond that point.

In a similar scenario, another company in the same field and state obtains a state registration after you have been using your mark. That company can prevent you from expanding into the other company’s territory within the state.

When should you apply for state and/or federal registration? 

A state registration is relatively inexpensive and fairly easy to obtain. If you are a startup that has any realistic hopes of getting your business out of your garage, spend the money to obtain a state registration. If things are taking off within the first year apply for federal registration, a process which can take between eight months to a year and a half.

But first, find out if the name you would like to use is already registered or in use. You do not want to spend the money on a website, materials and advertising only to find out there is another business with the same or similar name doing similar work or selling a similar product.

How do you search for a name?

There is a federal database maintained by the U.S. Patent and Trademark Office that you can access and search to determine if the word or phrase you would like is ‘live,’ in other words is in use as a trademark. You can navigate the site as you would most any Internet search engine.

Trademarks are valid for 10 years but require a notice of renewal be filed in the fifth year to maintain it, and again between the ninth and 10th years for each additional 10 years of protection. If you do not file for renewal after five years, the mark can become part of the public domain and will eventually expire, which means someone else can use that name.

How do you protect a slogan or phrase associated with your business prior to registration?

Companies that have tag lines or a slogan that accompanies their mark often put the initials ‘TM’ or ‘SM’ at the end of it. By doing so the company is using the phrase as if it were a trademark or service mark. While there is no registration in place, the company is putting the world on notice that the phrase is viewed as a trademark or service mark.

The phrase attached to your company name has to develop secondary meaning before registration is possible. Once the word or slogan conjures up a meaning different than the literal words or slogan, such as Levi’s® representing jeans, then your mark has developed secondary meaning and you can seek registration.

Make a note of when your phrase or tag line was posted to your website or used on some other material viewed by the public because it will help establish the date of your initial use, which will be noted by the trademark office.

When is it appropriate to seek registration for a new product or line?

If you are a large, existing business and you are going to expand into a new product line, from the get-go it is worth the time and money to obtain registration on the new product name. It may cost you a few thousand dollars, but it will save you more down the road. However, if you’re only making $10,000 annually, it might be more prudent to use the TM designation because that is free.

You have to look at your market, your perception of your future success and your resources. If you work only in Michigan, and not all over the country, a state registration may be sufficient. If your product takes off, then you have to decide when it is right for you to invest the money to obtain a federal registration. It’s a personal decision to determine when you are successful enough to need to protect your name.

Timothy Jordan is a shareholder at Garan Lucow Miller PC. Reach him at (313) 446-5531 or tjordan@garanlucow.com.

Insights Legal Affairs is brought to you by Garan Lucow Miller PC

Published in Detroit

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 sfanning@garanlucow.com.

Insights Legal Affairs is brought to you by Garan Lucow Miller PC

Published in Detroit

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 isimpson@garanlucow.com or (248) 952-6456.

Insights Legal Affairs is brought to you by Garan Lucow Miller PC

Published in Detroit

Letting employees go is never easy. But it can become even more difficult if you fail to do it right.

When an employee feels that he or she was unfairly terminated, choices for the employee are often few and emotions can fuel the fire, resulting in a lawsuit against the employer. To protect yourself, you must ensure that your records and the way they are kept are extremely tight. Any holes in the process could present an opportunity for an employee to sue, says Thomas Paxton, shareholder at Garan Lucow Miller PC.

“State and federal legislation over the years has actually increased the ways that employees can sue their employers,” says Paxton.

Whistleblower acts, Family and Medical Leave Act, the Americans with Disabilities Act and Title VII all present opportunities for disgruntled employees to sue. The result can be costly lawsuits that can severely impact a business’s bottom line and reputation.

“An employee could get a verdict that includes years of lost wages that can reach into the millions,” says Paxton. “And even if you win, it is very costly to defend these suits.”

Smart Business spoke with Paxton about how maintaining solid records can protect you in the case of an employee lawsuit.

What key documents should a company maintain to protect itself against employee lawsuits?

The two most important documents a company can have are a solid job application and updated, accurate job descriptions. The job application should not ask for irrelevant information, which requests a candidate to reveal discriminatory data. Never ask for an applicant’s photo. Do not request a birth date. Do not request information for factors that identify someone’s membership in a protected class, including age, gender or race.

The application should also include a statement that the applicant signs to agree to comply with the company’s rules and regulations. This component can go a long way at trial if you can take out an employee-plaintiff’s job application and show a signed statement that he or she agreed to follow the rules.

Second, maintaining updated, accurate job descriptions is critical for defining employees’ roles when a worker claims he or she cannot perform a certain duty. A good job description gives employers and employees a foundation to objectively determine the employee’s actual performance. Further documentation of incidents in which job duties were not performed can help support the employer’s case that any decision was made because of legitimate, nondiscriminatory reasons.

These two documents, along with wage and hour information, rate or basis of pay and terms of compensation should be kept in a personnel file separate from any employee medical records.

How should employees’ health records be maintained?

The U.S. Equal Employment Opportunity Commission mandates that employers file employees’ medical records separately from personnel records to protect against making employment decisions based on protected criteria, as medical conditions are irrelevant to job requirements.

Some occupations require keeping certain medical records on file. Medical records may also be on file if an employee applies for a disability benefit, such as FMLA. Separating personnel and medical files will help protect an employer in case an employee claims that he or she was wrongfully terminated or was demoted because of the employer’s perception of a disability or an actual disability that is unrelated to someone’s employment or that person’s ability to do the job.  If you keep medical and personnel records in the same file, it would be difficult to make a defense in a lawsuit that you did not know about the employee’s medical condition when you made the business decision.

What processes can an employer implement to minimize its liability in the event of a lawsuit?

Consistently review and document the performance you expect from your employees. Hold employees accountable for performing duties outlined in their job descriptions. File this information. Most important, train supervisors and other managers in the company to immediately and objectively document any and all performance issues.

It goes back to the old saying, ‘Get it on paper.’ Adding to that, get it on paper, on time. Always document performance issues as soon as they occur. This can be as simple as placing a note in the employee’s file. Document what happened and when, and the results of the situation. If you wait to document a reason for terminating an employee based on performance until after a lawsuit is filed and after you talk to your attorney, the documentation won’t hold any clout in court.

Further, when job descriptions or duties change, always update those documents so that they remain current to the requirements of the position.

Where can a company get started to ensure proper documentation?

The first step is to conduct a review of your records and record-keeping processes. It’s a good idea to enlist a professional with experience in employment law who can identify any gaps in your record-keeping process. It’s a far better investment to protect your business by instituting a record-keeping process than it is to defend your company in a costly employee lawsuit.

Your lawyer should be readily willing and capable of reviewing your processes and records so as to minimize the possibility of litigation and to maximize the successful defense of a filed lawsuit. Also know that maintaining well-documented processes is a cultural commitment. It requires the cooperation of all leaders in your organization, from the CEO to the managers. Once you institute a solid system, you need to train everyone on your policies and procedures so that there are no surprises down the road.

Thomas Paxton is a shareholder at Garan Lucow Miller PC in Detroit, Mich. Reach him at (313) 446-5518 or tpaxton@garanlucow.com.

Insights Legal Affairs is brought to you by Garan Lucow Miller PC

Published in Detroit