An IP health check

Anyone that owns a business today
should take a moment to check the
hidden assets of that business; namely, their intellectual property (IP). In
today’s economy, this property can often
be a company’s most valuable asset.

One way to keep track of your IP is to
have it audited every six months.

“If you have never audited your business’s IP, or more than six months has
passed since your last audit, then it is
imperative that you do so now,” says Frank
Herrera, Esq., chairman of the Intellectual
Property and Internet Law Group at Fort
Lauderdale-based law firm Rothstein
Rosenfeldt Adler. “Nearly all businesses
have IP, whether it is in the form of trademarks, copyrighted works, patents or even
trade secrets.”

Smart Business talked to Herrera about
the best way to protect IP assets.

What are some of the dangers of not protecting a business’s IP?

Surprisingly, many businesses consider
much of the competitive information they
maintain as a trade secret but fail to take
the appropriate measures to protect this
information from competitors, employees
or even ex-employees. Even more astounding is the fact that many businesses fail to
adequately protect and police their trademarks or copyrighted materials, letting
infringement run rampant. Some businesses fail to sufficiently exploit their patent
portfolio for potential licensing, which
could mean additional royalties added to
the bottom line.

Even seemingly successful businesses
simply do not systematically audit or otherwise maintain an inventory of their intellectual property. Rather, the concept of IP
usually comes to the forefront when the
business is most vulnerable — namely, at
the pre-litigation or litigation stage. Unlike
large businesses that continually monitor and exploit their IP portfolios, small businesses that don’t are missing out on leveraging their IP.

How and when should a business audit or
take inventory of its IP?

As a business owner, every six months,
with or without the help of an IP attorney,
you should:


  • Check to see if your trademarks have
    been registered with your state’s
    Department of Corporations, the U.S.
    Patent and Trademark Office or Foreign
    Trademark Offices, if appropriate;



  • If your company owns trademark registrations, double-check that the renewal
    dates and other appropriate deadlines are
    calendared to avoid abandonment or cancellation;



  • Confirm that all essential trademarks
    are the subject of a trademark watch service so that you will be immediately alerted
    to unauthorized usage of a confusingly similar trademark;



  • Make a list of information you consider to be ‘trade secrets,’ such as customer lists, product formulas and the like.
    Evaluate whether your business treats
    such information as a ‘trade secret’ and
    make sure only key employees have access
    to this information;



  • Insist that key employees sign a
    nondisclosure agreement to prevent them
    from disseminating your trade secrets and
    insist that they sign a noncompete agreement upon leaving. This prevents them
    from working for a competitor for a reasonable amount of time, usually two years;



  • Make sure all employees understand
    that all content created for your business
    — photos, brochures, software, etc. — are
    works-made-for-hire under copyright laws
    and the property of your business. If an
    independent contractor creates works for
    your business, insist on a signed agreement
    that clearly sets forth that your business
    owns all copyrights;



  • When launching a new product or service use an attorney specializing in IP law;



  • Review your patent portfolio, and
    make sure all maintenance fee deadlines
    are appropriately calendared, and decide
    whether patents could be a source of
    income by way of royalties;



  • If you have any questions concerning
    the status or health of your IP, make an
    appointment to discuss them with an IP


While this checklist in not exhaustive it
should get you thinking about proper auditing and maintenance of your IP assets.

FRANK HERRERA, ESQ. is chairman of the Intellectual
Property and Internet Law Group at Fort Lauderdale-based law
firm Rothstein Rosenfeldt Adler, Attorneys at Law. Reach him at
(954) 315-7246 or [email protected].

Risk management partners

Business owners often have the mis-perception that their insurance broker exists solely to access markets on their behalf and not much else.

The truth is that brokers provide a variety of transactional services and, more
importantly, consultative services that
can shape the future of a client’s risk
management program. As such, the broker should be thought of as the buyer’s
risk management partner, says Don
Miller, regional director of global and
national accounts for Arthur J. Gallagher
& Co., the world’s fourth-largest insurance broker, with Risk Services Division
offices in Miami.

“If your broker just sells you insurance,
you are missing many services that can
save you money,” says Miller.

Smart Business spoke with Miller about
the importance of risk management and
how insurance brokers can help business
owners save money.

How do buyers typically select their broker?

There are two ways that buyers select an
insurance broker: through competitive bidding or through a broker selection process.

Competitive bidding can identify the
‘market of the moment’ in terms of new
entries into a particular line of coverage
attempting to garner market share
through competitive premiums and terms.
The governing criterion here is price. It is
a matter of responding to a set of specifications that may be good, bad or incomplete with little involvement with the
client’s company or management. The
overlooked costs are continuity of coverage, claims settlement, and — often more
importantly — slotting a company as
buyer of price. There is no incentive by
the broker to be creative, analytical or
present a new alternative, and broker
services are not typically offered.

Broker selection is a well-structured
systematic approach to selecting a broker
that offers the best resources and experience in the buyer’s industry with extensive
industry clients to validate their experience and broker success. This is the better
of the two options.

What are some key considerations in using
the ‘broker selection’ process to select a broker?

Niche-specialist value — The broker
should be able to clearly state how it will
bring value-added solutions to the process
for this business niche. In today’s world,
knowledge of the client’s industry is as
important as insurance knowledge; therefore, the broker should be able to demonstrate that it specializes in a client business
or specific lines of specialized coverage.

Team participation and credentials — The servicing team should feature a strong
team leader with a hands-on commitment
to the account. Be sure to verify team
member presentation involvement versus
actual involvement. A client process management system that involves the buyer
and broker setting responsibilities and
establishing timelines is also important.

Client lists — A broker’s credentials are
best served by a review of its client list,
especially clients of your size and industry.

Reputation — Review the broker’s
local, regional and national key market premium volume. Check the broker’s carrier
solvency standards.

Personal interviews — Make sure you
actually interview the broker with your key decision-makers. The broker’s presentation during this interview should be well
thought-out and customized to your particular situation and include risk management function of the insurance program.

How does the risk management function
relate to insurance?

The risk management decision-making
process is really the same decision-making
process that businesses use to ensure continuity of their operations.

Identify risk of loss. Quantify risk of loss
in terms of frequency and/or severity.
Develop alternatives for the treatment of
risk (i.e. eliminate, retain, contractual
transfer, insurance transfer). Select the
optimal alternative risk management plan
at an economical cost. Close the loop by
periodically revisiting the loss exposure
and adjusting the treatment method used.
Manage claims and prevent and reduce
future losses.

Your broker should be involved in all
phases of the risk-management process
and must have a thorough knowledge of
the buyer’s business/industry.

What does the buyer have to do to put some
skin in the game?

Don’t start the process if you have no real
thought of changing brokers and are not
encouraging creative ideas to enhance
your program.

Share useful information up-front with all
brokers, recognizing that the incumbent
has an edge in this department if adequate
information is not provided to all competing brokers.

Focus the brokers on the evaluation criteria; keep it from being ‘fuzzy.’ Allot adequate time for the entire process, especially the broker team presentations. Establish
value rather than cost of the broker’s services as the selection governing criteria.

DON MILLER, CPCU, ARM, is the regional director of
global/national accounts for Arthur J. Gallagher & Co.’s Miami
Risk Services Division, based in Miami. Reach
Miller at (305) 592-6080 or [email protected].

Katrina Emergency Tax Relief Act

Our world has seen more than its share of natural catastrophes this year. Those companies and individuals who want to step up to help now have a tax incentive to do it.

The Katrina Emergency Tax Relief Act of 2005 was signed into law on Sept. 23 by President Bush to help families recovering from Katrina and to encourage charitable giving. The new law — which covers giving from Aug. 28, 2005 and is set to expire at midnight on Dec. 31, 2005 — allows corporations to take charitable deductions without regard to the 10 percent cap of its taxable income normally allowed by law, as long as the giving is in cash and to an IRS-approved Katrina charity.

The new law is even more generous with individuals, as it suspends all deduction limitations for cash contributions to any qualified organization, not just those helping Hurricane Katrina victims.

This legislation is critical for charities competing for an ever-shrinking pool of funds, says John G. Ebenger, CPA, director of real estate tax services with accounting firm Berkowitz Dick Pollack & Brant.

Smart Business spoke with Ebenger about the importance of the Katrina Emergency Tax Relief law and what business owners and individuals need to consider before taking advantage of the tax incentives.


What are some key issues a business owner should consider when planning to give while the Katrina Emergency Tax Relief Act is in place?
A business owner should take a hard look at cash flow to see if extra giving to Katrina charities right now makes economic sense. It is a simple matter of making the gift and taking the deduction because you have the money right now.

If cash is tight, another consideration for giving right now is future projections for cash, such as a large contract coming in six months from now. If you see that your business is going to make more money down the road and you can afford to give more right now, then by all means, it is the right thing to do.


Would you recommend businesses change their giving to take advantage of this bill?
If a business has the intention of giving (to Katrina charities), this is the year you want to stack your contributions (increase your 2005 contributions instead of contributing some in 2005 and some in 2006).

But one very important consideration is your business’s corporate culture. A company may have set charities that depend on donations. If you suddenly switch what you have always done in the past — and put blinders on and only see the tax benefits — you are jeopardizing the morale of your company and your reputation.

Donating to Katrina charities should be extra giving, not replacement for local or other charities that rely on you for giving. If a company drops these programs just for the Katrina tax benefit, you can bet on a backlash.


Will this help stem the charitable giving fatigue that may be settling in with companies and business owners?
Year-end is always the time when most charitable giving happens. But with all the competing catastrophes, people may be willing to give, but not as much. To make matters worse, the amount of grants and federal aid is drying up dramatically because of the budget deficit and costs of other federal expenses.

Charities are depending more on the generosity of individuals and corporate givers for their survival. So, temporarily, yes, it will help the incentive to give — at least until midnight on Dec. 31st.

Under the new law, S corporations, partnerships and sole proprietors can claim not only cash donations, but food and educational books.


What is the advantage of donating these items over giving cash?
Some companies, like individuals, prefer to give something tangible rather than cash, which gives them the confidence that the donation will go directly to the individual in need rather than administrative costs.

It is common for large wealthy family groups, which still use the S corporation or partnership structure, to avail themselves of these provisions and, for example, donate textbooks to a public school.


What advice do you have for business owners or executives who wish to give as an individual?
Before Aug. 28, giving could not exceed 50 percent of an individual’s adjusted gross income. Now there’s no limit to cash donations.

Wealthy individuals who were subject to the taxable income limitation were also further limited by an itemized deduction limitation. This has also been lifted until Dec. 31st.

This is important because by the time you go through the two limitations, taxpayers have been known to lose greater than 50 percent of the charitable deduction. Wealthy individuals who have been reluctant to give no longer have these restrictions. This is a significant way charitable organizations can bring in more contributions.

Tax laws are complex and the impact on each individual is different. Individuals and companies should consult their tax advisers before embarking on a giving campaign to ensure they understand the real tax impact.


John G. Ebenger is a director of real estate tax services at Berkowitz Dick Pollack & Brant Certified Public Accountants & Consultants LLP. Reach him at (305) 379-7000 or [email protected].