Just as your body needs annual wellness checkups, your business does, too. Much of the simple matters can be done by your office, without an lawyer – but if issues turn up, it may be time to check with counsel.

Corporate Status

❏ Corporate Status. Is your business in good standing with the state? In California, corporations, limited liability companies (LLCs) and limited liability partnerships (LLPs) should check here to verify that the business is in good standing. Make sure you choose the proper entity.
Why you should care: a corporation, LLC, or LLP not in good standing in the State of California cannot bring suit or defend itself in court, according to Cal. Corp. Code § 2205 and Cal. Rev. & Tax. Code § 23301. If your business is not in good standing, even if you never get sued or sue anyone, interest and penalties are mounting up. If the business is suspended, the time to fix it is now.
❏ Statements of Information must be filed by most corporations annually, according to California Corporations Code § 1502. Previously, the state sent the form; now, it only sends a postcard.
Why you should care: The lack of a form mailed to the business can lead some businesses to forget to make the annual statement – a costly mistake, as filing it late results in a $250 penalty – ten times the cost of the form. The good news is that the form is now online, and even simpler to fill out than before; the filing fee can be paid by credit card. Put an annual reminder in your calendar system for the beginning of the month before the business incorporated – if the corporation incorporated in June, select May 1st.

Employees

❏ Wage Protection Act. When you hire new employees that are subject to the overtime rules, California now requires that employers give the new employees forms. Read here for more important information.
Why you should care: Eventually, there will be penalties associated with the failure to provide these documents to employees.
❏ Independent Contractors. Are the independent contractors the firm uses actually independent contractors, or are they employees?
Why you should care: there are new penalties for intentionally misclassifying independent contractors. Even without such penalties, paying back taxes for someone you thought was an independent contractor can devastate the business.

Employee Handbook

❏ Check your employee handbook. Does it cover important issues like:

❏ At-will employment?
❏ Getting an acknowledgment from the employee that your business handles confidential information for both itself and its customers, and the employee needs to protect that information both during and after employment with the company?
❏ Specifying that the information created by the employee belongs to the employer as part of a work-for-hire agreement, and the employee is not entitled to use that information after the employment ends?
❏ An ethics policy about dealing with customers and suppliers, that does not create conflicts of interest for your business or the employee?
❏ A policy on inspecting offices, lockers and common areas of the business for contraband?
❏ Payday and timekeeping requirements?
❏ Leave procedures, including sick leave, pregnancy leave, leaving to care for a family member, and military reserve leave?
❏ Allowable time off, such as jury duty, visiting children’s schools, and the like?
❏ Job evaluation procedures?
❏ An illness and injury prevention program?
❏ Appearance policies, including casual Fridays (if offered)?
❏ Harassment investigation procedures?
❏ Internet, email and telephone use procedures – including personal usage and ownership of email accounts, web pages, Twitter, Facebook, and other social media accounts [ http://www.bayoaklaw.com/who-gives-a-tweet-about-who-owns-a-tweet/ ]?
❏ Job termination procedures?

Why you should care: a good employee handbook protects the business by specifying procedures in advance. It reduces uncertainty and the potential for trouble down the line.

Insurance

❏ Make sure your insurance is up-to-date, including:

❏ Worker’s Compensation Insurance (required for all employees);
❏ Disability Insurance for officers not covered by worker’s compensation, and which can be broader in coverage than worker’s compensation;
❏ Health Insurance, with the great changes to the health care system occurring during the next few years, it may be a good time to shop around for a better policy;
❏ Life Insurance for Owners, so that should an owner die, his or her estate can be paid the value of the ownership interest without destroying the company’s future;
❏ General Business Liability Insurance – make sure that all locations are covered, as well as all assets in question. Is there enough coverage? Is there too much coverage? When a firm reduces size, sometimes it forgets to inform the insurer, and they end up paying for what the firm doesn’t need.
Why you should care: While many people pay lip service to insurance issues, there is an aspect of “out of sight, out of mind” to worrying about the issues insurance is designed to cover. Few can afford to over-insure these days, but under-insuring can be disastrous.

Contracts

❏ Sales Contracts. Make sure the following is in your customer contracts:

❏ Attorneys’ Fees: It is far more likely that a customer will breach their contract with you, than you fail to do the work – and if you fail to do jobs for clients, you are not going to be in business for very long, anyway. Thus, every contract or invoice that you provide your customers should have an attorneys’ fees clause, so that if the contract has to be enforced, the prevailing party will receive reasonable attorneys’ fees and costs.
❏ Jurisdiction. The contract is to be interpreted according to the law of your jurisdiction. You know, for better or for worse, your jurisdiction’s laws – you don’t always know the other jurisdiction’s laws.
❏ Integrated. The contract is “integrated” – meaning that the written contract is the complete contract. This prevents alleged oral modifications like “she said that we don’t have to pay until . . . “ from easily being incorporated into the contract (good attorneys might know how to get them in).

Assets

❏ Inventory. Has the business inventoried its physical assets? This is especially important for assets that can easily “walk away” like cell phones and laptops. All such assets should be marked with the name of your business and a landline telephone number. Programs are available to track mobile devices by GPS or other means. An inventory should be kept for insurance and tax purposes. Track, at the least, the model of the inventory, purchase date and purchase value.

Why you should care: Cell phones and laptops have confidential business information, and those who lose them are often afraid to mention it. Marking these devices improves the chance they are returned. Keeping an inventory in a safe place can be good for insurance purposes.

❏ Marking Physical Assets. All substantial physical assets – especially those that can easily walk away –should be marked with a non-removable tag with the business name and phone number. Two places among many to buy such tags is here or here. (Bay Oak Law doesn’t endorse or vouch for these companies; their presence is illustrative).

❏ Marking Intangible Assets. It is easy to understand the importance of marking physical assets like computers, but it is also vital to mark as “Confidential” intangible assets like company information. Every balance sheet, every accounts receivable list, every customer list – every document that, if it falls into the hands of your competitors, could hurt or destroy your business, should be marked as “Confidential.” It is easy to add titles and footers to the firm’s regular forms that are regularly used, so that they get copied into future documents. Send a company-wide email quarterly, reminding everyone of the importance of keeping such information secret.

❏ Software. Does the business have licenses to use all of the software on all the computers in the office? Do you have the registration numbers for all the licenses in a safe place, so that should your office burn down, you do not have to buy more software?

Why you should care: If licenses are missing, it is cheaper to handle this now than after a software developer contacts you and demands thousands of dollars.

❏ Trademarks. On a rainy day when people are sitting around, go through your promotional materials, brochures, website, business cards and the like. Have you registered trademarks for your business name, all your logos, slogans and the like? A typical trademark registration costs less than $2500 – should anything have a trademark registration? Even if you decide not to, run a search on an internet search engine using any word mark that you are using – make sure that your firm is not infringing someone else’s mark – and make sure someone isn’t infringing yours. For each trademark, use the proper marking: “®” for registered marks, and “™” for unregistered marks. Tivo has a good webpage on how to use trademarks properly (hint: you can never “tivo” “Desperate Housewives” – or anything else.)

❏ Copyright. If you produce copyrighted works like books, films, video games or the like, you need to register your copyright. It is easy to do, and takes only a few minutes. Even if you do not, every brochure, white paper, or website you have should have “© 2012, [Name of Company]” on it. While the owner of a copyrighted work has rights as soon as it is published, it doesn’t hurt to remind people of that. Also, make sure that you always have the right to use the works of others on your works, like photographs.

By: Andrew K Jacobson

One of the things that good lawyers do is plan for future possibilities – even when the client, a psychic and astrologer, can (supposedly) see the future. My mentor, Dan Minutillo, repeatedly drilled into me the need to “double-think” – to ask the “what if” questions, even if the client assures us that everything will be hunky-dory forever.

Walter Mercado “was” a psychic and astrologer in Puerto Rico. (Don’t worry; Mercado is still around; see the last paragraph for why the past tense is used.)

On August 4, 1995, Mercado and Bart [Enterprises] signed the Agreement, under which Bart would develop and distribute materials and products related to Mercado’s psychic and astrological services. As part of the Agreement, Mercado granted Bart several rights “during the Term and throughout the Territory” of the Agreement. The Agreement defines “Territory” as the universe. . . . . It defines “Term” to mean “in perpetuity,” subject to a termination provision which, inter alia, allows Mercado to terminate the Agreement after fifteen days’ written notice if Bart fails to pay Mercado any agreed compensation within sixty days of the due date.

Mercado-Salinas v. Bart Enters. Int’l Ltd., (1st Cir. 12/20/2011,  free subscription required).

Mercado gave Bart an irrevocable assignment in copyrights to certain preexisting materials, and to develop new materials using Mercado’s name. Mercado also irrevocably assigned all rights to the common law trademark “Walter Mercado” to Bart – meaning someone else permanently took over – the rights to his name. For all this, Mercado received $25,000 a month in base salary, along with $5,000 a month in clothing allowance, and $2,000 a month for up to 25 three-minute segments per month.

“Finally, the Agreement provides that ‘all grants granted or assigned by this agreement shall be irrevocable under all or any circumstances, and shall not be subject to rescission, termination or injunction. In the case of breach of this agreement by Bart, Mercado’s sole remedy shall be limited to an action at law for damages.’”

Id.

Mercado even helped Bart register the “Walter Mercado” trademark by filing affidavits authorizing Bart to use and register the trademarks, both in the United States and in Mexico.

All went well for the first decade of the agreement, but beginning in 2006, Mercado stopped providing new material or appearing at scheduled appearances. In turn, Bart stopped compensating him. Despite the irrevocability of his agreement with Bart, Mercado tried to terminate the agreement, and the courthouse fight soon commenced, both in Florida, and later in Puerto Rico. Mercado was enjoined from using the “Walter Mercado” trademark, id. at 279, and could not terminate the agreement, because his own breach caused Bart to withhold payment. The 1st Circuit Court of Appeal upheld the injunction, finding that by failing to meet his own contractual obligations, Mercado was barred from asserting that Bart breached the Agreement between them: a “party’s breach effectively suspends the nonbreaching party’s duty to tender performance.”

Where Mercado’s psychic powers and his counsel failed him is in not recognizing that in the future he might not want to be obligated under the Agreement anymore, and he might want to control his own identity. While the $25,000 a month stipend (and $5,000 clothing allowance!) was no doubt tempting, surrendering control over your name as a trademark to someone else is ripe for disaster. Some more doublethinking should have been done.

The amazing Mercado managed to bounce back quickly. A mere six days after the district court enjoined him from using his name, he transformed into Shanti Ananda. Betcha saw that one coming.

When I was a kid, on days when we couldn’t play outside, my friend Mike and I would play Pong on our TV sets. Growing up in the Los Angeles area, many of our friends wanted to be in Hollywood. Now, the video game industry has earned more than Hollywood movies for years.

The San Diego Union Tribune has a great story on the opportunities and risks of the mobile app community. Appy Entertainment (motto: “deadly serious about stupid fun”) is based in Carlsbad, CA, and one of its founders is Chris Ulm, a friend of mine from Sutter Junior High School. One of Chris’ Appy co-founders said that

“One of the reasons we did this start-up is we saw this as the opportunity of the century . . . . The way mobile has grown since the iPhone was launched, it’s historic. But also, we want to create new things. And the video game business became so risk adverse because the budgets were so high.”

Mobile gaming apps, an industry that didn’t really exist four years ago, has now moved on to its second incarnation, in which the products are free, but in-game purchases for the apps cost money. This creates its own set of problems, especially when it is just an Apple App Store account that is charged: never mind kids ordering things without their parents’ approval, certain middle-aged attorneys have had problems mistakenly ordering more puzzles while helping his son on a kids’ app. Not only does the game now have to be entertaining, it has to have in-game items worth buying. But for addictive games, the revenue stream can continue long after the last game is downloaded. Legal headaches await, though, for in-game purchases that are not clearly marked as to price or purchasability. Already one child paid $1400 for “Smurfberries” (a Smurfs app “currency”), and an attorney in Philadelphia has filed a class action suit because his daughter racked up $200 in in-game purchases.

The rapid evolution of the mobile gaming industry echos the Internet boom of the late 1990s, when websites raced to fill the empty niches of the Internet. Good ideas like Google and Amazon flourished, while pets.com and webvan.com couldn’t deliver the goods efficiently to customers. Eventually in mobile gaming a few mega-winners will arise, while smaller successes will fill the niches in between.

Plenty of legal questions will arise. I can’t sell an all-new Gucci handbag from my office – but can I sell its doppelgänger in my lifestyle game, if I don’t use the Gucci name on it? If I (legally) reverse engineer the code to someone else’s game, can I sell in-game items for that game? If I have a valuable in-game item like a special sword, can I sell it? Should the video game company get a share of the proceeds? And what is going to happen when someone counterfeits “smurfberries” or other currency in the game? Intellectual property attorneys look forward to making a living off such momentous questions.

A Federal Express envelope arrives addressed to you as the head of your business. However, it is from a law firm that you have never heard of. You already have counsel – you spoke to them just last month. As tempting as it is to throw the entire envelope, unopened, into the recycling bin, you open it and find a letter addressed to you. You have received a cease-and-desist letter, also known as a “C&D letter.”

You learn that the law firm is telling you to cease and desist from doing something that infringes upon the intellectual property rights of that law firm’s client. It might be a patent issue, or perhaps it has to do with their client’s trade secrets. The C&D letter may claim that your firm is infringing upon their client’s copyright, or their trademark. You are sure your firm hasn’t done anything wrong – you know your business. As tempting as it might be to resume the pitching of the envelope into the recycling bin, this C&D letter means you have to start doing some things right now.

Quickly Acknowledge the Letter. One of the chief causes of increased damages is willfully ignoring claims to stop. A mistake about using someone else’s intellectual property can elevate a minor problem into a serious disaster. Even if you are sure that you are doing nothing wrong, make sure a response is promptly sent, saying that you are beginning an investigation. Give yourself a generous end date for a comprehensive response of two weeks to a month. Don’t wait on sending the initial response letter until the conclusion of the investigation, and do not make any representations that may come back to haunt you later. The response can be from yourself or be from your counsel. Counsel’s response shields you from directly communicating with your adversary, and decreases the possibility of something being used against you. Counsel is usually better placed to investigate the overall reputation of the party and counsel claiming intellectual property infringement, and can smooth the way for you.

Begin a Low-Key, Objective Investigation of the Facts. If someone in your organization messed up, that person will not want to reveal his mistake, but your company’s survival may depend on learning that right away. Be low-key but objective in the investigation. Eeven if those employees used the intellectual property your adversary claims, there may be many reasons why your firm could do so. Again, counsel can be of great assistance, because counsel can frame the issues early on that maximize your advantage.

Consult Your Insurance Policy. Depending on what happened and how your business liability policy is written, your firm may qualify for insurance coverage for the legal costs associated with the dispute. Some business liability policies cover allegations of “advertising injury,” and might thus cover claims like trademark infringement, copyright infringement and trade secret misappropriation. Notify your insurer right away – that is what the insurance is there for. Informing your insurer about an event is not an admission that your firm did anything wrong, and the insurer cannot begin bearing part of the cost until the insurer learns of the claim. Have your counsel review the policy as well – some insurance companies like to avoid the need to pay on claims until they are called on their bluff by counsel.

Can Your Firm Seek Indemnification? Someone else may be liable for your alleged wrongdoing. If a product (including things like software) that your company purchased is alleged to contain infringing elements, your firm may have a claim against the seller. The Uniform Commercial Code (codified in California as 2312(3) of the California Commercial Code) imposes a warranty that products are free of claims by third parties. Like insurance, the sooner the seller learns of the claim, the sooner the seller can begin assuming financial responsibility.

Begin Protecting Documents, Both Paper & Electronic. As your firm now knows of an alleged infringement, you need to take whatever steps are necessary to preserve documents. That includes electronic documents like invoices, emails, and electronic receipts. Besides being the law, it is common sense: those documents may clear you as much as they may hurt you. Electronic deleting of emails or shredding of files could both prevent you from recovering information that could help you, and could create a claim for spoliation of evidence. That leads to an assumption that whatever was destroyed was helpful to the other side your case could be over with before it starts.

Respond Fully. Once your firm has looked at all the facts by the deadline you previously gave, have your counsel fully respond to the original C&D letter in the time frame that you originally mentioned.

Confronting such claims head-on will be cheaper in the long-run than burying your head in the sand. A cease-and-desist letter is a code for starting things right away.

By: Andrew K. Jacobson ©2004

In his autobiography, “My American Journey,” former Joint Chief of Staff Chairman General Colin L. Powell presents several tests to determine when the nation should commit to battle. These tests eventually became known as the “Powell Doctrine.” These tests are as applicable to litigation as they are to war:

1. Commit only if vital interests are at stake.
2. If committing, do so with all the resources necessary to win.
3. Go in only with clear objectives.
4. Be flexible to match the commitment to the objectives, as objectives change.
5. Only take on commitments that have the support of those who must bear the burden.
6. Commit forces only as a last resort.

Vital Interests. An employee has left with vital trade secrets. A former partner has left with the cash of the business. These are emergencies that demand an immediate response.

Usually, though, the threat is less clear. A former employee has left, in a hurry, but the reason for leaving is unknown. A supplier is withholding products, but there are unresolved payment issues. A customer with a clean payment history is now sixty days behind on a large bill, and phone calls are being ignored. The question of a vital interest depends on the situation. An attorney can help assess the situation and suggest solutions short of litigation.

Necessary Resources: Sticker Shock. Even well-off clients are stunned by the resources necessary for litigation. However, unlike most wars, there can be assistance. In California, the costs of some intellectual property disputes are covered under general business liability insurance policies as “advertising injury.” Some business principals may have personal liabilities covered by their home general liability insurance. Some contracts provide that one side will indemnify the other for certain actions. The first question after “what happened?” should usually be, “what insurance policies might be available to cover it?” Even if no one indemnifies you, there are other ways to curb costs.

The first is to take precautions to prevent the dispute from occurring. An attorney is most cost-effective when a relationship is being formed. Ignoring the potential for disputes merely compounds their destructive capability. Cheaper alternatives to full-blown litigation, such as mediation or arbitration, can not only lower the cost of a dispute, but also keep the relationship intact.

Attorneys can also structure contracts to lower the costs to the prevailing party when a dispute occurs. The “American” rule is that litigants pay their own attorneys’ fees. However, if parties contractually agree, the winner may get attorneys’ fees in addition to any other relief.

However, other litigation costs cannot be forgotten. Litigation requires management’s active participation. This can often require tremendous amounts of time from top executives. Employees up and down the chain have to be consulted on the facts, called to deposition, review papers, or otherwise be taken away from more profitable pursuits.

There are also intangible costs. Litigation strains relationships, especially when the combatants are formerly close associates. People caught in the middle have their loyalties sorely tested, and often respond by avoiding both sides. Nights spent worrying about the litigation are also a cost.

Specific Objectives. Deciding the objectives of litigation is often more difficult than it first seems. Crushing the opposition is a wonderful result, but rarely achieved cheaply.

Reaching an objective in litigation means knowing what is possible. Civil courts cannot put people in jail. Forcing a person back to work is very rare. Some outcomes are more likely. Preventing someone from benefitting from your labors can be achieved in the right circumstances. While courts hesitate to be proactive early, they will preserve the status quo through a preliminary injunction. Cases can quickly settle thereafter.

In most cases, only a monetary solution will work. A litigant must balance the size and prospect of the award against the costs of achieving that award. Judges and juries often take a view different from that of either litigant. My own rule is that there is never more than an 80 percent chance of winning, even for the most certain of cases.

Preparing to Change Objectives. Litigation, like war, is never static. A litigant must always be prepared to change the means and the goals. Cases are never as simple as they seem. Documents supporting the case are never found. New case law alters the field of battle. Witnesses cannot be found, or will not get involved. This is often the “fog” of war.

Good litigants are ready for these ups and downs. If the million dollar award no longer looks so certain, be prepared to take a more modest, but certain settlement offer. Alternatively, a defendant may avoid later costs and risks by making a more modest offer early on. These ups and downs are part of the ride.

Support to the End. Litigation’s initial “rush” can be invigorating. It soon wears off, replaced by slogging through document after document, tiresome demands from the opposition, and unwelcome attorney bills. Significant cases now take about eighteen months to reach a courtroom – much faster than before, but still a long time. The initial reasons for the litigation are often forgotten in the meantime. How much of eighteen months ago is still fresh in your mind?

Litigation as a Last Resort. Litigation is too expensive to be the first reaction to any crisis. Often, those interests can be served through litigation’s alternatives. Litigation should be considered only once the alternatives are ruled out.

Copyrights, Trademarks, Trade Secrets, & Patents

Copyright

What’s a Copyright?

A Copyright gives you the right to control what happens to a work that you’ve produced. You have the right to control the copying of it (hence the term “Copyright”), but you have other rights as well. For example, you have the right to control who performs it, in the case of a play. You have the right to control the making of works that are derived from the original work – a sequel, perhaps.

What do I have to do to get a Copyright?

You just have to publish your work – essentially, show it to outsiders, either by fixing it in a written form, presenting it to an audience, etc.

Don’t I have to register the work to get a Copyright?

Not anymore. Now, all you have to do is have evidence that you published it. Registration for widely known works may still be valuable, as promptly registering your Copyright with the Copyright office with give you some more rights should you ever have to protect your Copyright in court.

Can I Copyright a concept, such as, for example, young webheads learning about business?

No, you can Copyright only the expression of an idea. For example, no one has the Copyright for a young wizard learning to cope with new-found powers, but someone – J.K. Rowling – has the Copyright for a young wizard named Harry Potter, and his adventures. It’s her particular expression of the idea of a young wizard that is protected.

I created some web pages, but my boss says that they don’t belong to me. Why not?

Well, answering the question depends on what you created, what you used to create it, and why you created it. Since you created the web pages at work, you presumably used your employer’s computers, and did so at your employer’s direction, so that tends to suggest your employer owns it. However, if you published web pages at home, for purposes unrelated to your job, those would belong to you.

For more information, go to http://www.Copyright.gov/circs/circ1.html#hlc.

Trademarks

What’s a trademark?

A trademark is an image, phrase or otherwise distinctive mark that shows the maker or owner of the product in a way that is distinguishable from all others. Words (Xerox®), shapes (the old glass Coca-Cola bottles), sounds (the National Broadcast Corporation’s three chimes), colors (green-gold professional ironing board covers), and even perfumes have been found to be trademarks, so long as they are not functional, but help identify the product.

What do I have to do to get a trademark?

You pretty much have to use it in commerce before anyone else in your geographic area. There is a constant balancing act ? you want something that is quickly associable with your product, but it has to be distinctive from all others. A trademark does not have to be registered with the U.S. Patent & Trademark Office, but it can help.

What has to be done to register my mark?

You can apply for one before using it, but the most important thing is to actually use the mark. The registration form now is actually online, at www.uspto.gov. Before that, though, we strongly recommend a database search in all the jurisdictions that you want to use the product in, to make sure that you are not violating someone else’s mark. While the US Patent and Trademark Office’s web site has a database of registered marks and those in the application process, that is not enough — someone could be using it without registering it. A full search may cost some money, but it is far cheaper than to waste your investment in marketing on a mark that someone else has priority to.

My friend’s company registered its trademark, but then some other company claimed to use it first, and made my friend stop using it. How can that be right?

The first to use the mark has priority, not the first to register. During the registration process, a search is made to see if the proposed mark is too close to other marks. However, the databases are never foolproof.

What happens if I find someone who is using our mark?

The first step is usually something called a “cease and desist letter,” sent to tell them about your priority to the mark, or the confusing similarity of their mark to yours. If they do not stop using the mark, then you may sue them for trademark infringement. While you do not have to have the trademark registered, it can be a big help, If your mark is registered and valid, then you can recover your attorney’s fees for the case and possibly have a greater recovery, if you win.

Misappropriation of Trade Secrets

Do I have to register a trade secret?

No. In fact, to make it publicly known would destroy the value of a trade secret.

What is a “trade secret,” and how is it different than a trademark?

A trade secret is (1) a secret formula, recipes, method, compilation, program, or technique that is valuable because it is not generally known in the industry, and (2) is subject to reasonable efforts to keep it secret. While a trademark is a way of making your product known, a trade secret is protectable only if it is not generally known.

What are some examples of trade secrets?

Recipes – for example, the formula for Coca-Cola or the “Eleven Secret Herbs and Spices” of KFC. Business methods or manufacturing processes can be considered trade secrets. Customized computer programs, almost always used in-house, can be trade secrets. Customer lists are often subject to trade secret lawsuits.

My business has a secret customer list, and our competitor now is marketing to the same customers. Can we sue to stop them?

It depends on how they came to know about your customers. The identities of customers themselves are rarely secret ? those are usually businesses that want to be known. If your competitor found out the information independently of you, it hasn’t taken your trade secret. However, if you can show that the competitor is using your list that was expensive to put together, you may be able to stop it from using your list, or get damages for their use.

How long does a trade secret last?

Potentially forever – see, for example, the recipes above. A trade secret can last as long as it is valuable because it is secret, and it is subject to reasonable efforts to protect it.

How do I protect a trade secret?

Trade secrets should be clearly marked as “confidential,” or some other marking that clearly shows it should not be shown outside your business. Also, get a written agreement with your employees to protect that information. The best time to do that is at the beginning of the employment relationship, because that is when people are most likely to sign. If you wait until after they start working, you may need some additional compensation to them, although a lawyer may help you structure the process to reduce your cost. Still, protecting your most valuable asset is worth the trouble and expense.

One of my Southern California sales reps left, and is going to work for a competitor. Can I stop him?

Probably not. California has a very strong tradition of protecting employees. Standard employee non-competition agreements are valid in many states, but not California. Even stopping a former employee from announcing his move to a competitor is not likely in California, although you can stop the former employee from using your trade secrets. Many nationwide companies fall victim to this part of California law.

A competitor has just shown up with a device that looks like a copy of ours. Can we stop her from using it?

Yes, if she “stole,” or misappropriated it from you. If she properly reverse engineered it, or developed entirely independently of your trade secrets, she is entitled to compete.

Patents

What is a patent?

A patent is an exclusive right to use or market a unique design, process, formula, or device. It is a monopoly that is authorized by the Constitution’s establishment of a patent office.

What do I have to do to get a patent?

You have to apply for one at the US Patent & Trademark Office (the “USPTO”) within a year of formulating the unique design, process or device. If the USPTO finds that it is sufficiently novel, it will then publish the proposed patent, to see if anyone opposes it. If no opposition succeeds, then the patent can be issued.

How much does a patent cost?

Patents cost from several thousand to twenty thousand dollars or more, depending on the type of patent and the size of the proposed inventor. There are also maintenance fees after a patent is granted. A patent lawyer – who may not be a regular lawyer, but someone specialized in some part of the patent world – is a vital part to putting together a good patent application. We can work with you to find a patent lawyer who meets your needs.

How long does a patent last?

A utility patent, for formulas, devices, and the like, is now 20 years from the date of the application.

What good does a patent do me?

A patent gives you the exclusive right to use or market the invention. For both practical and legal reasons, you may want to licence someone else to use your patent, and you would be entitled to get a reasonable royalty for it. If someone is using the patent without permission, you can stop them from doing so.

Do you have to be employed as an inventor to get a patent?

No. Abraham Lincoln received one relating to steamboats. The actress Hedy Lamarr (of the “Road” pictures, with Bing Crosby and Bob Hope), invented a radio frequency skipping process that is used today in cellular phones.

For more on trademarks and patents, go to http://www.uspto.gov/main/faq/.