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What A Business Owner Should Expect From A Business Attorney

“Don’t just advise me.  Fix what needs fixing!” “Don’t just treat me as another client.  Invest yourself in my business as if it were your own!” These statements are likely to be heard from a business owner who recognizes the need of sound legal assistance, whether it be an owner of a fairly new business […]

“Don’t just advise me.  Fix what needs fixing!” “Don’t just treat me as another client.  Invest yourself in my business as if it were your own!”

These statements are likely to be heard from a business owner who recognizes the need of sound legal assistance, whether it be an owner of a fairly new business or a well-established company looking to grow.

A seasoned business law firm with attorneys and a business specialist on staff who possess first-hand knowledge of what it takes to start, build and run businesses, having experienced and learned from the failures that come from building successful enterprises, can bring that “something extra” to the table for business clients.

A business owner may simply need restructuring of the operations to maximize profits, or he/she may have inherited a company that has an antiquated culture resistant to change.  Even if the owner is aware of the issues, it is a challenge to make the changes needed to further the company while dealing with putting out the proverbial fires that occur daily.

What would a law firm with the credentials described above (“the Law Firm”) do to solve a business owner’s problem?

  • First, the Law Firm’s business specialist would thoroughly evaluate the structure of the organization, its cash flow status, personnel, operations, financial controls and tools, marketing, customer relations, vendor (IT) services, its advisors, and in-place employer-employee policies/agreements.

 

  • The business specialist would share such findings with the business attorneys on staff to develop a plan designed to address the specific needs of the business.  Depending on the size and age of the business, the plan could include a lifespan of anywhere from three to twelve months.

 

  • The proposed plan would then be presented to the business owner for a thorough review, as well as follow-up sessions to allow time for the owner to fully digest the recommendations and allow for modifications of the plan.  Upon approval of the plan, a Letter of Engagement would be formed to stipulate the services to be provided over the course of the plan.  The parties would agree to an initial retainer gauged for the work to be done in phases, with the understanding that the retainer would be replenished on an as needed and mutually agreed upon basis.

 

  • The business specialist of the Law Firm would then become a prominent advisor taking the lead on restructuring the business as well as ensuring the business owner has a strong grasp on the business by teaching him/her how to “know their numbers.”  This will allow the owner the ability to deploy new capital/structured debt to grow their business.

 

  • In a phased manner, the business attorneys of the Law Firm would address the relevant legal matters, serving as the quarterback to the client’s other advisors to integrate the services of all the company advisors into the plan’s implementation in a collaborative and cost-efficient manner.

 

  • Like any plan, changes will be required in both timing and substance due to the “reality on the ground.” Particular focus will be on the client’s cash flow and the reactions of the client and personnel to the significant changes in the company’s business culture that will be required to successfully implement the business plan.

 

The process described can be tailored to a myriad of business situations and challenges. It takes foresight and courage for any owner of a privately held business that needs the kind of help described in this article to agree to the expenditure required to underwrite this approach.  However, with the assistance of the Law Firm with the credentials described, such as Rust Law LLC, the business owner will realize that the cost of this service pales in comparison to the costs incurred prior to the plan’s implementation.  Moreover, he/she will know that the reorganized enterprise has staying power, capable of besting its competition for the foreseeable future.

Alicia E. Emili, Esq. – Mark Reese, Business Specialist – Robert N. Rust III, Esq.
RUST LAW LLC

If you are interested in discussing the contents of this article further, you are welcome to contact any of the co-authors at the offices of Rust Law, LLC at (610 821 0484).

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It’s a Trademark Because I Say It’s a Trademark

How do clients – current or prospective – separate messaging about your business’s products or services from those of your competitors?  Every marketing department, company executive, and entrepreneur knows that the answer is branding.  And so, the value of investment in brand marketing is abundantly clear.  But, what if you’re not Coca-Cola® or Nerf®?  What […]

How do clients – current or prospective – separate messaging about your business’s products or services from those of your competitors?  Every marketing department, company executive, and entrepreneur knows that the answer is branding.  And so, the value of investment in brand marketing is abundantly clear.  But, what if you’re not Coca-Cola® or Nerf®?  What if you’re Lehigh Valley Oats or Penn Machine Parts?

A trademark is any word, name, symbol, or device, or any combination thereof that a business uses to uniquely identify or distinguish its products or services from those of its competitors and to indicate the source of the goods or services.  Federal trademark laws permit the owner of a trademark to stop competitors from labeling or advertising their products in any way that is likely to cause a reasonable consumer to be confused as to the source of those products, as it may lead the consumer to incorrectly associate the products with the rightful trademark owner. But, generally speaking, federal registration of a trademark is not available if the elements of the mark merely describe the goods or services, or their characteristics, including their geographic origin.

Consider the advantage conferred upon a lightbulb business permitted to register the trademark in the word BRIGHT.  As a shopper perused the teeming lightbulb aisle of a big box home improvement warehouse, what if one lightbulb could claim the exclusive right to display that descriptive word – BRIGHT – upon its packaging?  BRIGHT – the word that tells the consumer all she needs to know.  This is the bulb she wants to provide the bright light she seeks.  She knows it is because it says so.  She also knows that none of the other bulbs says it is bright.

The Lanham Act – the United States’ federal trademark law – permits registration of an otherwise descriptive mark if the owner of the mark can prove that it has “acquired distinctiveness.”  The legal history around the Lanham Act also refers to this as “secondary meaning.”  If an applicant for federal trademark registration can offer proof that it has used the trademark for more than five years and that the primary significance of the mark in the minds of the consuming public is not the product but the producer, the US Patent and Trademark Office must permit registration of the mark.

The power of acquired distinctiveness has benefited local companies with names like the fictitious examples above.  Consider Bethlehem Steel and Lehigh Valley Dairy Farms® (a registered trademark of Dean Foods Company).  But, while the rights of distinctiveness accrue over time, they need not accrue by chance.

In addition to permitting registration of trademarks, the Lanham Act affords protection of common law trademarks.  That is trademarks that are not registered but indicate source because the business uses them in a manner that causes them to indicate the source.  The Lanham Act also permits registration of descriptive marks that have not yet acquired secondary meaning on the Supplemental Register of the USPTO.  By leveraging the legal rights afforded under these sections of the law, in combination with legally strategic usage of otherwise descriptive marks, businesses may pave their own way to acquired distinctiveness in as little as five years.  That is, businesses may use their five-year plan to capture broad, valuable identity in trademarks that immediately convey to consumers the quality, characteristics, advantages, and value of their products.  Moreover, a business that is successful in this regard may also preclude competitors from using those terms or terms likely to cause confusion with respect to the source of the products or services.

Organizations working together through: their executives – with strategic planning; their Marcom department – executing brand marketing; and their legal advisers – guiding best practices for forming legal foundations for distinctiveness claims – can potentially grow the company’s ownership of highly advantageous, meaningful terms that become suggestive of the company’s goods and the goodwill they carry.

Douglas Panzer, Esq.
Of Counsel For Intellectual Property

Fitzpatrick Lentz & Bubba

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The Role of Intellectual Property and Human Capital in Succession Planning

Succession planning refers to the sale or other transfer of a privately-owned business to the next generation of a family business, an employee manager or management team, or an outside purchaser. A good succession plan facilitates the successful transition of the business and ensures its continued viability, in addition to providing a return on the […]

Succession planning refers to the sale or other transfer of a privately-owned business to the next generation of a family business, an employee manager or management team, or an outside purchaser. A good succession plan facilitates the successful transition of the business and ensures its continued viability, in addition to providing a return on the investment of the current owner. However, studies by the Small Business Administration show that less than 30% of the small businesses who are likely to experience a change in ownership over the next ten years have written succession plans and contingencies. One key element to any good succession plan is determining and monitoring the value of the business. Accounting professionals and valuation experts can help you establish this value, based on cash flow and liquid assets, profits, taxes, liabilities, fixed assets, such as real estate and equipment, and intangible assets. While EBITDA gets a lot of play in the business world, human capital, or the value of knowledge and experience in your employees, and intellectual property (“IP”) are just as important. If not expertly cultivated, both classes of assets can depreciate, and your business succession plan can fail before it gets off the ground.

Almost every business, no matter how small, has valuable IP upon which it relies, and most businesses will have IP in each category, determinable through an IP audit. Copyright law protects Web sites, catalogs, software, textual and digital content. Typically, copyrightable materials are protected from use by third-parties for the life of the creator plus another 70 years. For content created by the employees of a business, AKA “works-for-hire,” the owner of the content (hopefully, the owner of the business and her/his successor-owners) can exclude others from using the content for 120 years from the date it was created or 95 years from the date it is published, posted, or distributed (whichever comes first).  Trademark law covers business names, logos, and product packaging. Service and trademarks registered with the U.S. Patent & Trademark Office (the “USPTO”) will live forever, as long as they are continuously used in commerce, maintained with the USPTO via periodic confirmations of use and payment of fees, and protected against infringement. Inventions, processes, improvements, and formulations fall under the patent law which protects the innovation developed by you or your employees. Patents in the U.S. are granted by the USPTO and last 20 years if maintained through periodic payments to the USPTO. Design patents, which protect ornamental elements of functional items, are also issued by the USPTO and last 15 years from the date they are granted. Federal and state trade secret laws have evolved to give business owners a perpetual and powerful option to protect proprietary information and trade secrets, such as detailed processes that cannot be reverse engineered, valuable research results and data, business plans, and databases of information regarding products, services, customers, and/or prospects. Trade secrets can be maintained and enforced forever as long as the information has demonstrable commercial value, derives value from being maintained as a secret, and maintains its secret status by virtue of reasonable measures taken by the owner of the information.

Similarly, key executives and employees can represent immense value to an on-going business, through their exceptional performance, leadership or importance to the culture of the company. Business owners looking to identify the future leaders of their company and the foundation for its future success should identify these key individuals, as well as the most critical roles and positions. Determine ways to keep talented individuals on board, as well as potential successors for the various positions and systems in place to ensure success for those roles and departments. As noted above, despite the fact that many business owners lack the time and/or courage to face the prospect of retirement or an unexpected need to hand over the reins to their business, a succession plan can be the best chance of success and survival for small businesses. Family businesses (and the families themselves) run the risk of disruption and self-destruction without a clear-cut succession plan, in addition to potentially deleterious effects of poor estate and income tax planning. Finally, succession plans guarantee a secure retirement for the current owner(s)/leader(s) of the company while providing a level of control over the process. The thrill of creation, creativity, and control is likely what led you to take the risk of starting your own business; don’t cede this power now for fear of facing the future.

By: Nicole J. O’Hara, Esq
Saul Ewing Arnstein & Lehr, LLP

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Morality Clauses & Employment Agreements: What Employers Need to Know

 Employers take risks every day with the people that the company hires – including top level managers and CEOs.  So, do brands and sports teams when they hire spokespeople or athletes on multi-year, multi-million-dollar contracts.  Anytime there are significant dollars committed to a single person over a long period of time, real risk exists. One […]

 Employers take risks every day with the people that the company hires – including top level managers and CEOs.  So, do brands and sports teams when they hire spokespeople or athletes on multi-year, multi-million-dollar contracts.  Anytime there are significant dollars committed to a single person over a long period of time, real risk exists.

One of the most impactful traits of the people you hire is their moral character.  This is especially true when the person you hire is your spokesperson, or your chief executive, or otherwise is the face of your organization.  One of the most impactful tools you have to control your contractual relationships is called morality clauses.

Long-term, multi-million-dollar employment contracts are a double-edged sword.  They can be a sign of your company’s financial health and purchasing power for star talent.  If, however, the company finds itself embroiled in a star employee’s misconduct, that same contract can become a massive liability if it is not structured properly.

Before we delve into the details of the application of a morality clause, consider this hypothetical example:

The Star Employee in a Regional and Growing Business:  Imagine that you are on the board of directors of a high-profile company.  You have hired a star performer to be your Chief Executive Officer.  He is personally responsible for generating 30-40% of the company’s annual revenue.  This continues for years. Suddenly, one day the city newspaper published a thorough, well sourced and researched story alleging the CEO was involved in multiple incidents of sexually inappropriate conduct both inside and outside the workplace with other employees.  The Board of Directors now needs an exit from the CEO’s multi-year employment contract.

Here is the question: When entering into a large or high-profile contract with an employee that has high visibility on your company or brand, how do you leave room to exit the deal if your star employee engages in conduct that the company finds socially or morally unacceptable?

This is where a well-drafted morality clause comes in useful.  A morality clause will enable an employer to unilaterally terminate an employment agreement if the employee engages in certain defined types of behavior.  The actual language of morality clauses can vary greatly from industry to industry.

Here is a sample morality clause:

If Employee commits any act, which is an offense involving moral turpitude under federal, state or local laws, or which might tend to bring Employee to public disrepute, contempt, scandal or ridicule, or which may embarrass, offend, insult or denigrate individuals or groups, or that may shock, insult or offend the community or the Company’s workforce or public morals or decency or prejudice Company, or which results in actual or threatened claims against Company, Company shall have the right to unilaterally terminate this Agreement without liability for the unpaid portion of any compensation due hereunder upon written notice to Employee.

 As you can see, there is quite a bit of subjectivity involved in the above language.  This is necessary because it gives the Employer more latitude to act when necessary because, at the time the contract is signed, future events and future employee behavior are completely unpredictable.

The balancing act involved is that Employers must be cautious to not throw due process out the window.  However, in today’s social media, a full-fledged existential scandal can erupt and spread within hours.  An employer that is slow to react (or is perceived to be slow to react) can find itself in the crosshairs of an angry online mob because of the misdeeds of one of its employees.  Engagement, timing, and speed are crucial.

If your employment contracts have due process provisions which require a degree of investigation before taking disciplinary action, you must ensure that the due process clauses work coherently with the morality clauses.  An independent investigation by an outside firm can take weeks or months to complete.

It is extremely important to note that morality clauses are also routinely used in family law matters.  Typically, morality clauses are part of custody agreements or a divorce settlement agreement also.  We’ll dive into that in the next article.

By: Bryan Tuk, Esq., Tuk Law Offices

Bryan Tuk is an attorney, author, and musician. His recent book: risk, create, change: a survival guide for startups and creators, is available on Amazon. You can find out more about Bryans writings at http://riskcreatechange.com

 Tuk Law Offices represents clients throughout Pennsylvania and New Jersey, focused on startups, entrepreneurs, arts & entertainment law matters, copyrights, trademarks and nonprofit organizations. You can learn about Bryans law practice at http://tuklaw.com.

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