Intellectual Property (IP) Basics

Intellectual property (IP) is a general term for categories of rights in intangible creations of the mind. How can one own something intangible, much less protect it? Well, setting aside the fact that property rights generally are mental constructs based on relationships, a conceptual framework may be of aid. There are four main types of IP rights: patents, trademarks, copyrights, and trade secrets. (This overview will focus on IP under US law, primarily from a commercial perspective.)

IP is one of a company’s most valuable assets. Among other things, it builds brand awareness and loyalty among consumers, establishes protectable legal interests in goods and services as well as the technology and know-how used to produce them, and has intrinsic value that may be sold, licensed, or leveraged for profit. It is thus important for companies to understand, and also properly manage and protect. 

Patents 

Patents protect rights in useful inventions and discoveries, like machines and processes. A patent is a right granted by the US government to an inventor for a limited time to exclude others from making, using, offering for sale, or selling the invention in the US, or importing the invention into the US. Utility patents (including business method patents) are the most common types. A company obtains patent protection by filing an application with the US Patent and Trademark Office (USPTO). 

Trademarks 

Trademarks protect product, service, and company identifiers, like brands, logos, and package designs, in order to show which person or company is the source or origin of goods and services and distinguish the trademarked goods and services from those made or sold by others. Trademarks may take the form of names (as in Calvin Klein® apparel), brands (like Coke® soft drinks and Apple® computers or Intel Core™ processors), designs and symbols (think Nikeʹs “Swoosh” design on footwear), and slogans (such as De Beersʹ slogan A Diamond Is Forever®).

Trademarks may also take the form of color (the color of Owens-Corningʹs pink fiberglass insulation), sound (NBC Universal Mediaʹs chimes), scents, and package, product, or store design (e.g., the shape of a fragrance bottle or the interior design of a restaurant). Trademarks consisting of colors or package, product, or store designs, or combinations of these features, are commonly referred to as “trade dress.”

In the US, trademark rights arise from use, not registration. However, companies frequently protect their more valuable trademarks by filing for federal trademark registration with the USPTO since doing so provides many benefits, including the exclusive right to use the mark nationwide in connection with the goods or services covered by the registration, and the right to use the registered trademark symbol ® to discourage infringement. Unregistered trademark rights are limited to the territory in which the mark is actually used; companies may choose to signal unregistered trademarks with “TM”.

Copyrights 

This is the realm of expressive works, like art, music, dance, and literature, and also software. Copyright protects works of authorship that are fixed in any tangible form or medium of expression, and original in the sense that they are independently created by the author (or authors), and at least minimally creative. The “author” may be one person, or two or more persons (in which case the work is jointly owned by its authors). For a “work made for hire,” the employer or party that commissions the work is the initial owner of the copyright in that work, unless either of these parties and the creator of the work agree differently in a signed writing.

Copyright protects both published and unpublished original works of authorship, and covers a wide variety of literary, artistic, and cultural output. However it does not protect ideas, systems, methods, or processes, or US government works, or typefaces (although copyright protection is available for computer programs that generate fonts and typefaces).

Registration is not required to establish federal copyright ownership. However, companies frequently protect their copyrights by filing for registration in the US Copyright Office as registration provides substantial benefits, including the ability to bring an action for copyright infringement, and recovery of attorneysʹ fees and special categories of damages not otherwise available in an infringement action.

Trade Secrets 

A trade secret is business, financial, and technical information which is kept confidential by its owner through reasonable efforts, and has economic value because the information is not generally known. For example, Coca-Cola’s soda formula, KFC’s fried chicken recipe, and the source code of Adobe’s Photoshop® software are trade secrets.

Trade secrets are not registered like patents, trademarks, and copyrights. Instead, companies expect their employees to protect trade secrets by making reasonable efforts to keep this information confidential: for example, by never giving passwords to anyone, keeping hard copies of trade secret information in locked files or cabinets, and never giving confidential information to customers or other individuals outside of the company unless authorized by management and covered by a signed Non-Disclosure Agreement (NDA).

Fonville Legal Can Assist You

Effectively managing your company’s ownership and use of IP, whether in the context of enforcement, licensing, IP transfers, or dealing with employees and contractors, is a topic for another article – or a phone call with your lawyers. If you are interested in learning more about Fonville Legal or you’re ready to get an attorney’s perspective on your business’s intellectual property situation, we encourage you to contact us today! We look forward to hearing from you.

Why You Might Consider Alternative Fee Arrangements

Traditionally, attorneys are paid an hourly rate for the work they do. How high the rates are will depend on a variety of factors, such as how experienced the attorney is, what type of practice areas they focus on (for example, a finance attorney may charge more than an estate planning attorney), and how expensive overhead costs are (which will depend on factors such as office rent in the city or area where they are based). At Fonville Legal, we typically bill by the hour, but we are open to discussing alternatives, if and as appropriate. When we begin working with a new client, we are happy to talk with them about what they envision and what makes sense given their unique circumstances. It is important to us that all of our clients feel they are receiving quality services for their money. We believe that our virtual model pulls the pendulum strongly in the direction of value.

Alternative fee structures can take a wide variety of forms. The following are some examples: 

Hard Cap

A hard cap fee structure might be appropriate for some (although certainly not all) matters. Under this arrangement you will be billed at an agreed-upon hourly rate, but only up to a certain agreed-upon amount. Attorneys most often agree to a hard cap structure when their clients have strict budgetary restrictions. If the attorney can complete the work that needs to be done without hitting the cap, that’s great! If it takes some additional hours past the limit, though, it won’t impact the client’s bottom line.

If you choose a hard cap fee structure, it’s important to discuss the specifics with your attorney. Will work stop after the cap is hit? Will a certain limited number of additional hours be provided? Will you expect your attorney to get the job done regardless of complications that could arise? It is imperative for the attorney and client to carefully define the scope of the work together to ensure that they are on the same page. Hard caps thus make more sense for uncomplicated projects, possibly involving a degree of repetition, that are easy to scope.

Soft Cap

A soft cap fee arrangement is similar to a hard cap, but with a notable difference. With a soft cap, the law firm receives a reduced percentage of its hourly fee for any work performed after the cap threshold is reached. 

Collared fee

A “collared fee” arrangement is where the client pays the firm hourly fees based on a budget and a collar where the price ranges above or below the budget – for example, 10%. If fees are below the collar, the firm may receive a bonus or, if the charges are above the collar, the client may receive a discount off the firm’s hourly rates. A collared fee can also simply refer to a minimum and maximum fee.

Fixed or Flat Fee

The number of hours counsel historically spend on similar cases can often determine a flat fee. Clients favor a fixed fee because it is predictable and a flat rate is easier to compare with flat rates from other legal service providers. However, flat rates (like caps) can work as a disincentive. When the cost of counsel’s work product exceeds the flat fee, counsel may spend a diminishing amount of time on the matter. The billable hour provides for individualized attention to a matter, whereas a fixed fee may not. A fixed fee turns a representation into a commodity.

A variation for matters in certain practice areas is a discounted flat fee with an escalation clause. If the number of hours counsel needs to spend on the matter, multiplied by an hourly rate, exceeds a certain percentage of the discounted flat fee – say 120% – then an escalation or fee adjustment applies. The fee adjustment compensates counsel for the additional time expended.

Blended Rates

It is common for different attorneys at the same firm to have different hourly rates based on their experience, their education, and demand. If you don’t feel strongly about which attorney at a firm handles your case, a blended rate will allow them to work on it as a team. You would then be charged a rate that is a blend of the different attorneys’ hourly fees. This could be an exact average, or even lower if a less senior attorney will be handling most of the work with occasional check-ins from a partner, for example. 

Monthly Rates

Fonville Legal colleagues Josh Wallenstein and Andrew Lopez offer external general counsel services utilizing retainer-based billing, whereby a client gains budgetary predictability by engaging counsel part-time at a fixed monthly cost.

Let’s talk!

If you are interested in learning more about alternative fee structures, or want to hire the Fonville Legal team as external general counsel, we would be pleased to hear from you. Contact us today!

What is CFIUS (and why should I care)?

The Committee on Foreign Investment in the United States (CFIUS), chaired by the Secretary of the Treasury, is a multi-agency group responsible for the regulation of foreign transactions and investments involving U.S. businesses, and the intersection of those investments with national security concerns. Earlier this year, the U.S. Treasury Department expanded CFIUS’s reach through regulations implementing the Foreign Investment Risk Review Modernization Act (FIRRMA). 

Before FIRRMA, businesses and investors could voluntarily submit their transactions to CFIUS for review, with an eye to obtaining CFIUS clearance and eliminating that risk permanently. Now, in many cases, filing for review has become mandatory. If those participating in such transactions do not flag their deal for review, they could face significant consequences, up to and including forced divestiture.

Your transaction might be subject to CFIUS review if it entails foreign investment in U.S. businesses that:

• produce, design, test, manufacture, fabricate, or develop critical technologies;

• own, operate, manufacture, supply, or service critical infrastructure; or

• maintain or collect sensitive personal data of U.S. citizens that could be exploited in a way that threatens national security;

or if it entails foreign investment in real estate located near U.S. military bases or sensitive government facilities, or areas important to national security such as air or maritime ports.

Paraphrasing the pertinent regulations, “critical technologies” is meant to encompass, generally, technologies that are potentially military or defense-related, as well as “emerging and foundational technologies” (which it appears will include artificial intelligence, biotechnology, and robotics). “Critical infrastructure” refers to systems and assets vital to U.S. national security. “Sensitive personal data” includes health, financial, and similar information. Collectively, these are referred to as TID (technology, infrastructure, and data) industries. 

Many factors need to be weighed in evaluating whether a transaction falls within CFIUS purview. Key issues to review include whether the transaction would provide a foreign government a substantial interest in a TID business, result in control by a foreign person over the U.S. business, or provide certain rights to the foreign investor (including substantive decision-making influence, access to material non-public technical information, and board observer status). Certain carve-outs to the filing requirement do exist – for example, for “excepted investors” from qualifying countries, for passive participants in a U.S.-based private equity fund, and for some types of real estate transactions, but these exceptions are somewhat limited, and it may still be prudent in some cases to file a voluntary notice. For transactions involving critical technologies, pursuant to final regulations recently issued by the Treasury Department, the determination of whether a mandatory declaration is needed will be based on whether the technology would fall under certain U.S. export control authorization regimes.

Filing a notice with CFIUS is a substantial, rather technical undertaking, and the parties preparing the notice must produce a significant amount of information. Although information filed with CFIUS is required to be treated confidentially, this can still be a burdensome process. There are also considerable filing fees, especially for higher value transactions.

At Fonville Legal, we understand the complexities of the review process under CFIUS and FIRRMA, and can help your business navigate through it, including in the initial determination of whether a filing is necessary or advisable. To learn more about CFIUS and how we can assist, we invite you to contact our firm today.

Alternative Investment Fund Subscription Documents and Investor Questionnaires – Completing Them Correctly

A major step for investors who want to get involved with a private equity or hedge fund – including funds dealing with renewable energy and other impact investment funds – is completing the necessary subscription documentation. This can involve some fairly voluminous and complicated paperwork, the purpose of which is essentially to document that you understand what you are doing by investing.

Through your subscription documents, you state that you are a sophisticated financial investor with an understanding of the action you are taking and the risks involved. You acknowledge that you realize you are taking part in an alternative type of investment, one that may not be as straightforward as a more-typical investment in securities such as buying shares on a stock exchange. You confirm that you are willingly taking this risk and that you have read the documents describing the fund in detail. The main way you convey all of this is by making certain representations, and completing page after page of boxes to check and blanks to fill in.

In our experience at Fonville Legal, investors often make an error when completing these documents. Those who do the documents themselves, and even those who hire an attorney who isn’t used to this type of work, can frequently make mistakes that subsequently need to be fixed. These are the three biggest types of mistakes in subscription documents:

1. Leaving something blank.

2. Forgetting to verify something.

3. Contradicting yourself.

The consequences of uncorrected mistakes can be significant. In completing the investor questionnaire and the subscription agreement, thereby joining the fund and signing on to its operative documentation, the investor is making serious representations. Even if not deliberately fraudulent, misrepresentations, inaccuracies, and inconsistencies could affect an investor’s rights in relation to the fund down the road.

For the fund, the consequences are potentially drastic: if the fund allows investment by a someone who doesn’t fit one of the categories of a legally acceptable investor, it could lose its status as exempt from having to make much more extensive and burdensome regulatory disclosures – at a minimum, negatively impacting the offering’s business and economic terms, and generally defeating its purpose as an alternative investment fund. It could even be directed to cease operations. As a result of these potential consequences, funds will look over incoming subscriptions and to the extent any mistakes are found, the investor (in order to be able to invest at all) will have to redo the documents, and possibly supply additional information to the fund to verify their status, resulting in an increased administrative burden on both sides to ensure fund regulation compliance. 

At Fonville Legal, we utilize our keen attention to detail to thoroughly examine complicated subscription documents and make sure everything is in order the first time. After a close review, we identify any mistakes and let our clients know what they need to revisit or clarify.

Get Legal Counsel

If you are an investor, you know that investing in a new endeavor is not something to be taken lightly. You should always partner with an experienced attorney who understands the weight that subscription agreements carry, and can help ensure your documents are error-free. The Fonville Legal team is here to help. If you have questions or if you’re ready to partner with us, we encourage you to contact us today. We look forward to hearing from you!

Non-Disclosure Agreement FAQ

If you’ve ever negotiated with or been employed by a company in a position where you learn about its inner workings, trade secrets, or employee or client data, you’ve likely encountered a non-disclosure agreement (also variously called an NDA, confidentiality agreement, confidential disclosure agreement, or CDA). 

The confidential information of an organization is usually a vital business asset – most companies derive substantial value from their confidential information and data, both by having exclusive use of it in their own business, and by sharing it selectively with customers, suppliers, and others. Non-disclosure agreements are an important tool that can be used to protect a wide range of intellectual property and other sensitive information in a variety of situations. 

Over the years, we have frequently encountered questions regarding non-disclosure agreements. In today’s blog post, we’re answering a few of the questions we’ve heard most often.

I trust the person I am working with ... Is a written agreement really necessary?

It’s possible that you might disclose private information to someone with an unwritten agreement not to disclose, and everything could turn out fine. However, in keeping with business law’s focus on risk mitigation, non-disclosure agreements are an easy and relatively inexpensive way to protect yourself against unexpected circumstances. A well-written NDA will give you documentation to rely on in the event of a dispute, and if clearly worded, can prevent many disputes from arising in the first place. 

There are numerous reasons to enter into written confidentiality agreements, such as the following:

• Avoiding confusion over what the parties consider to be confidential.

• Setting expectations regarding treatment of confidential information between the parties, whether disclosing or receiving confidential information.

• Maximizing protection of trade secrets, because under state law this protection can be weakened or lost (deemed waived) if disclosed without a written agreement.

• Covering issues that are indirectly related to confidentiality, such as non-solicitation.

• Maintaining standards that are expected of most commercial relationships and transactions.

• Memorializing confidentiality agreements is often required under upstream agreements with third parties (for example, a service provider’s customer agreement may require written confidentiality agreements with subcontractors).

• Enforcing written contracts is easier than enforcing oral agreements.

What is the difference between a mutual NDA and a non-mutual NDA?

With a mutual NDA, both sides of the agreement are bound to keep one another’s information confidential. With a non-mutual (unilateral) NDA, only one party is accepting limitations as to what they can share with others. There can be variations of degree, depending on the primary direction of information flow. If you’re not sure which type of NDA is appropriate for your situation, an attorney can help you decide. 

What is covered by a non-disclosure agreement?

The scope of what is protected will depend on the precise language of the agreement. The parties should carefully define what information is considered confidential, and the purpose of the agreement. Typical obligations regarding confidential information include restrictions on disclosure, access, and use, as well as safekeeping and security requirements. These will vary depending on industry sector and the parties’ wishes, and are some of the reasons it is important to draft NDAs with care.

Are they really worth the paper they are printed on?

Yes (in fact a great deal more). An NDA is a contract which is enforceable just like any other, and allegations regarding confidentiality breaches can and do occur, up to and including litigation. 

Can I use an online form non-disclosure agreement?

It’s best to create your own custom non-disclosure agreement, rather than use a boilerplate online form. For matters of this importance, you want tailored terms that are as clear as possible, to prevent conflicts later on. Sitting down with an attorney to create your own non-disclosure agreement – or indeed any other contract – can save you a lot of hassle, heartache, and expense in the future. (It’s also advisable to do it as early as possible in a commercial relationship, preferably before any confidential information is disclosed.)

The Fonville Legal team is committed to providing our clients with the information and guidance they need to succeed in the business world. We take pride in helping make sure your non-disclosure agreements and other important contracts are clearly worded to protect your interests. If you have further questions about non-disclosure agreements, or if you’re ready to sit down with us to create one, we invite you to contact us today. We look forward to hearing from you.

Business Contracts in the Time of Coronavirus

As the coronavirus pandemic continues to sweep every corner of the world, doing business has become more complicated. There are several legal instruments businesses can consider to potentially excuse themselves from performance under a contract, such as the ones listed below. Since their application often turns on questions of foreseeability, how is their use impacted by COVID-19 now that its capacity for disruption is clearly on our radar? 

Force Majeure

Force majeure clauses are commonly included in commercial contracts, and allow a party to suspend performance, and/or avoid liability for non-performance, if certain listed circumstances beyond a party’s control prevent or severely hinder the performance of the contract. These supervening events generally include drastic interruptions to business operations, such as natural disasters, armed conflict, or governmental orders, that make performance infeasible. 

Whether the COVID-19 pandemic or related disruption constitutes a force majeure event will depend on the drafting and interpretation of each contract – some force majeure clauses are worded broadly, others more specifically. This means that they must be analyzed case-by-case, with courts looking at the intent of the parties, the context, and the particular language used. In New York, for example, courts tend to interpret these clauses narrowly, requiring that the type of event invoked under the clause be specifically referenced. For this reason, precise language is important, and a skilled attorney will take some trouble to identify the events that should trigger the effects of force majeure. 

If a force majeure clause uses broader wording and refers to, for example, “other events beyond the control of the parties”, then the supervening event must have been an extraordinary event which was unforeseeable at the time the contract was made. 

Today, we are all aware of the risks of coronavirus, yet may still be unsure exactly how they will affect our contracts. In these conditions, anyone concerned that these foreseeable risks may hinder their performance should deal expressly with the impact of coronavirus in carefully-drafted contracts.

Other Doctrines

If your contract does not contain a force majeure clause, you may look to common law concepts such as the following:

• Frustration: Frustration is a common law doctrine that may be invoked where contractual performance has been obstructed (or rendered radically different, under English law) by an uncontrollable outside situation, such that the parties can no longer achieve the originally intended purpose of the contract. However, a contract is not frustrated where a valid contract term deals with the situation, or where the parties should have foreseen the frustrating event at the time they made the contract.  

• Impossibility: Impossibility excuses a party from performance under a contract only if that performance has become objectively impossible (not merely more onerous), as a result of a supervening event beyond the control of the parties. In particular, the impossibility must result from an unanticipated event that a party could not have foreseen at the time the contract was made. 

In some jurisdictions it may be possible to make use of the legal concept of impracticability: for example, Section 2-615 of the New York’s Uniform Commercial Code (applicable to transactions in goods) recognizes impracticability due to unforeseen circumstances. Courts will, again, look to whether the supervening event was within the contemplation of the parties at the time of contracting. 

As with force majeure clauses, a detailed assessment of the circumstances is necessary under each of these doctrines to see whether a party can be excused from performance.

How You Can Manage Your Contracts in the Wake of COVID-19

One piece of advice that has always been applicable to business agreements, but is abundantly relevant now, is to write thorough contracts – an ounce of prevention is worth a pound of cure. 

We recommend that you review all aspects of your existing contracts, especially if performance has become difficult or impossible due to COVID-19. Look for provisions that may be affected by the ongoing pandemic – in particular any provisions which require notification to the other party of complications, delays or non-performance – and take documented steps to ensure you are complying with all provisions as best as you are able. You might also consider purchasing insurance that provides compensation if one party or another doesn’t perform under a contract, reviewing the particular policy wording carefully. 

Even if the COVID-19 pandemic is not expressly covered by a force majeure clause in a given contract, it may be possible for a party to utilize one of the legal instruments outlined above, if this was arguably an unforeseeable event at the time the contract was made; going forward, however, we advise addressing COVID-related risks with specificity in your agreements. 

In Conclusion

Many entrepreneurs and managers will find it difficult, if not impossible, to satisfy all terms of their business contracts going forward. It remains possible and in many cases may be advisable for parties to vary their contracts or renegotiate terms (as we all know, in litigation, the only party certain to win is your attorney!). We would be happy to discuss these matters with you, negotiate a non-litigious outcome, and chart out a path forward. 

What is Green Finance?

At Fonville Legal, we feel strongly about using our legal knowledge and experience to improve the world around us. One way we do this is by providing legal guidance within the world of green finance. In today’s blog post, we’re discussing the meaning of green finance, and how a lawyer can help in this area of growing importance.

Green finance refers generally to any financial investment in projects intended to benefit the environment, and can be considered a form of “impact investment.” It could involve sustainable development, renewable energy, energy efficiency, carbon capture and storage, clean transport, biodiversity and wilderness protection, and otherwise addressing the challenges of climate change. Green finance can also refer to the funding of such projects and policies via green bonds.

Environmental initiatives often rely on private investors who want to use their money to fund projects that make the world “greener.” These initiatives have seen major growth in recent years. Investors with $45 trillion of assets under management, including major names such as Barclays and Blackrock, have made public commitments to climate and responsible investment (source: climatebonds.net), and investors of all kinds are increasingly focused on integrating environment, social and governance factors into their investment processes.

How can a lawyer help someone who is involved or wants to be involved in green finance?

Many parties can be involved in a green finance project, and an attorney can be of assistance to any of them. The Fonville Legal team can offer guidance to:

• Small and large investors, including project sponsors

• Lenders and borrowers

• Developers

• Other companies seeking to reduce their carbon footprint and demonstrate their environmental bona fides 

If the above applies to you, if you are involved in green finance in another way, or if you want to become involved in green finance, here’s how Fonville Legal can help you: 

• Creating clear, concise, yet thorough contracts

• Reviewing terms to help choose the right green investment

• Structuring contracts to allocate and mitigate risk

• Assessing compliance with contract requirements and the law

At Fonville Legal, we have extensive experience in transactional law, which we apply in the area of green finance, where our passion for the environment meets our skill in helping others navigate the law. Whether you’re already involved in the world of impact investment or you’re looking to start growing your assets in a way that benefits the environment, reach out to us. Our small international firm gives each and every client the personalized attention they deserve. Contact us today to learn more about how we can assist you.