The Legal Beat

No Estate Plan? No Swank.

By Nubiyn M. Mzekewe, Esq.

It seems with age, we hear more and more stories about the fights and frustrations of families with no explicit direction on how to divvy up the property of a deceased relative. We think to ourselves, “My family would never act like that.” Then, most of us proceed by never getting around to planning for that inevitable and uncertain day.

Well, it’s time. 

Even if 40 is the new 50, and 30 is the new 40, and 20 is the new 30, and so forth; you would be ahead of schedule by committing to an estate plan right now. And, believe it or not, an estate plan has never aged or killed anyone. It simply smoothes the transfer of property at your death, because you are prudent enough to plan while you still look (and sometimes frolic as someone) 10 years younger.

Take a serious look at the time-honored principles of basic estate planning, which is comprised of wills, administration of estates, petitions for widow years support, living wills and cost (in the state of Georgia). Not only is adopting these principles wise, but you can encourage family and friends to adopt these principles, especially those doing so to protect a dependent spouse and children (as you plan to do).

LAST WILL AND TESTAMENT

The first thing needed is a Last Will and Testament. It shows organization and tells the whole world how you intend to dispose of your valuable property at death, and who you would like to receive that property as beneficiaries. You may change the will at any time prior to death which includes changes to beneficiaries, with one exception. The state of Georgia will not allow a testator (the one who makes the will) to cut a dependant spouse and minor children out of the estate. It protects a dependant spouse and minor children with a right to support despite any contrary provisions in the will. 

Just as vital as deciding how to dispose of you property is choosing the right person to carry out your wishes. That person is called an Executor (or Executrix) who should be reliable, prudent and honest. In many cases, a testator chooses a spouse, sibling, parent or adult child to serve in this capacity. However, it is not uncommon for a testator to name an attorney to act as an executor.  Regardless of your choice, keep in mind that this in not a glam job. Though the title may sound posh and grandiose, it carries fiduciary obligations that call for good-old-fashioned diligence and caution.

More specifically, an executor is directed to pay off, settle and compromise all debt claims against the decedent’s estate; distribute the decedent’s property according the will; settle any disputes among beneficiaries; among other things. It is also important to realize that anything of worth in the estate, whether high-priced or an invaluable family keepsake, deserves proper consideration under the will and by a prudent executor. To encourage caution, a testator may require an executor to post a bond to minimize any risk of mismanagement. Because of these responsibilities and risk, an executor is usually paid a reasonable fee. Compliments and "thank yous" may not be adequate payment.

Though you are not required to hire an attorney, there are rules governing how a will is prepared and witnessed to be legally enforceable. If you have little or no property, few obligations and few bequests, you can draft a simple will with no help from others. Otherwise, contacting an attorney is always helpful.

ADMINISTRATION OF ESTATE

In case you die without a will while domiciled in Georgia, the laws of intestacy will determine who shall receive the personal and real property, and who shall act as Administrator. The powers of an administrator are similar to an executor but granted by a letter of administration issued by county Probate Courts of the decedent’s residence. This process is like the latte you didn’t order — not as sweet or creamy and you already left the building.

However, your closest family member typically has priority in applying to serve as Administrator.  This may change in the event of an agreement among heirs. In some cases, even creditors may apply for this job where debts are owed and no family relative has come forward to take on the process. Unfortunately, it is also typical for family members to fight over the appointment of an Administrator.

If you are married with children at the time of death, the law authorizes the spouse and children to receive the estate, with the spouse receiving not less than one-third of the estate. For example, if there is a surviving wife and two children, each person receives an undivided one-third interest in the estate. As another example, if there were a wife and four children, the wife receives one-third of the estate while the four children will divide the remaining two-thirds equally among the four of them. If this is not how you planned it, tough luck.

By comparing testate and intestate situations against each other, you will find that testate situations (where a will was created) offer much more protection and less room for misunderstanding intentions to dispose of your estate. Nonetheless, in both situations, there is a six-month grace period allowed before initiating the process to pay debts, distribute property and wind up the estate. What’s the bottom line? If you asked for a double shot of espresso, soy milk, honey and whip, test it before you leave.

WIDOW/WIDOWER YEAR'S SUPPORT

One of estate planning’s most unusual options is the right to file for a widow/widower year's support. This device makes it very difficult for someone to disinherit a dependant spouse and minor children under Georgia law. In fact, a year's support may be awarded to a spouse and minor children for 12 months support after a testator’s death. With a slight similarity in Pennsylvania, it is virtually unknown in other states.

A petition for year's support can be defined as real or personal property being set aside from the estate by a Probate Court for the support of a dependant spouse and minor children for one year after death. However, this is not a distribution of inheritance, and there is no one-third interest limitation as done for intestate administrations of an estate. Persons who are entitled to an award of year's support are the surviving spouse and minor children. Minor children of the deceased, legitimate or not, may also be provided for.

After receipt of a year's support award, the estate may be administered by will or administration if any property remains in the estate. In small estates, the widow's year's support may exhaust the entire decedent’s estate. Under special circumstances, a year's support may be extended for additional years.

Conversely, a right to year's support may be lost in several ways, including a lapse of three years from the date of death and the year’s application; remarriage; an election to take under a will; or a prior assent to devise of property, among others. 

This bottom line is obvious: Georgia fervently protects spouses and children.

LIVING WILL

Estate planning also deals with your financial and medical affairs in the event of incapacity. Technically, a living will is not a will at all, since you are giving someone other than yourself powers over financial and medical affairs while you are still alive. Though it does not dispose of property in your estate, it gives important direction on how you want medical care and sustenance to be given in the event you are incapacitated and unable to communicate. 

The person given this authority by the living will is often called the Personal Representative.  Historically, living wills gave authority to hospitals and medical facilities to make decisions about continuing medical care, food and water. However, living wills have now evolved to the point where that authority is given to the Personal Representative, who decides on and gives directives to medical providers. This minimizes liability risk for hospitals and medical providers since they are acting on the instruction of the Personal Representative.

A living will is usually prepared in conjunction with a special kind of power of attorney giving the attorney-in-fact the authority to handle affairs for another because of mental inability or medical and life-threatening condition. You may disagree, but I suggest a personal representative and an attorney-in-fact who can handle the pressure loving and caring for you.

Why? Because the execution of a Living Will must be handled as carefully as a Last Will and Testament because of the importance of the subject and the long term consequences of the decision. And you should consult competent legal counsel.

COST

Factoring in quelled fears and reduced confusion, the cost of estate planning is very affordable. A simple will may cost as low as $300, whereas a will containing trust and offshore corporations may push the price above $1,000. Administration of estates, petitions for widow years support and living wills are priced very similar to wills. If circumstances are simple, their costs are between $300 and $500. If circumstances are not as simple, these costs increase accordingly. However, you should be aware that it is much more expensive, monetarily and emotionally, if you provide no direction to dispose of property prior to dying. 

In other words, without an estate plan, your swank will stank.

Contact Info:
Mzekewe & Associates, LLC
Attorneys and Counselors at Law
1963 Highway 138, SW
Riverdale, GA 30296
Bus: 770-997-0334
www.mzekewe.com

Franchise Negotiation Considerations

The wild world of entrepreneurship is a high risk, high reward realm in which to play. Those who step into the rocky waters of self-employment and business building turn in the security of steady and predictable compensation for the unpredictable ebb and flow of eating what they kill. A total lack of control over policy and business approach is exchanged for complete control over management, administrative duties, marketing and every other aspect of business operations. Indeed it takes a special kind of person to go out on a limb and attempt to start a business from scratch. For those quasi-special people who are brave enough to undertake running a business, but do not quite want to start one from scratch, franchising is a great option.

Operating a franchise is a good idea for the more risk-averse entrepreneur because franchises have proven systems that are articulated clearly and definitively in a franchise manual, and typically entail support from the franchisor to help make the business successful. I know, I know ... that sounds like the franchisor sales pitch doesn’t it? Well, I will temper my exuberance with a sampling of the legal issues a franchisee should consider when embarking upon a franchise venture – or otherwise find oppression from a new boss in the form of a franchisor.

Franchises typically entail licensing intellectual property from the franchisor, with that intellectual property being the basis upon which the franchisee will conduct its business. Therefore it is important to ensure you are licensing everything you will need to start up, operate and grow your franchise. Some unsuspecting franchisees find that after entering into a franchise agreement, they do not have the right to use certain valuable intellectual property owned by the franchisor that is useful, and in some cases necessary, to achieve the full profit potential of the franchise. When negotiating a franchise agreement, make sure you receive the right to use all names, trademarks, systems, processes, and other intellectual property you anticipate using to implement the franchise. If you don’t, you may be required to pay additional fees just conduct basic actions required to succeed in your franchise enterprise.

Franchisors often times upgrade their brand images, logos, facility standards, etc. When they do, they require their franchisees to incur costs to implement changes at their franchise location consistent with these changes. The costs associated with these changes can be very extensive, and unexpected. The best way to limit these costs is to establish a cap for the expenditures required to be undertaken in connection with such upgrades in the franchise agreement during initial negotiations. Moreover, include a reasonable notice provision requiring the franchisor to give you a sufficient amount of time to implement the changes. This will afford you the opportunity to budget and plan for the expense as the requirement comes down from the franchisor.

Another big matter to address in managing a franchise is the opportunity to be rewarded for the business you build. Franchisors love to horn in on a franchisee’s sale of the franchise. They will require a payment in connection with any sale of the franchise, usually some percentage of the sale price. This is sometimes in addition to a franchise fee that must be paid by the new franchisee; basically allowing the franchisor to double dip. While negotiating this provision away is usually contentious, it will make your franchise more marketable as you seek to exit and cash out down the road, and is worth the effort.

Franchising is a nice middle-of-the-road approach to entrepreneurship, but to get that real feeling of controlling your own destiny, fight hard to keep the strong arm of the franchisor from around your neck.

 

Contributed by Travis Townsend Jr. 

Licensing the Right to Sue for Third-Party Patent Infringement

IP Licensing is everywhere. Many of us were introduced to licensing practices during the 1990's when shrink wrap licensing was popularized by Microsoft and other software manufacturers. More recently, click-through (or click wrap) licenses have emerged. With the rise of shrink wrap and click-through licensing, most of us, whether wittingly or unwittingly, are or have been a patent or technology licensee. Whether you read the license or simply check the “I have read and agree to be bound by the foregoing terms” box before you hit the download button, you understand the basic concepts: you get some right to a licensed technology or product, usually the right to use that technology or product, subject to certain restrictions and conditions. This type of licensing is typically referred to as end-user licensing.

End-user licensing is conceptually similar to license arrangements between companies, which can be referred to as business-to-business, or B-to-B licensing. Basically, one company acquires some right to a licensed technology or product from another company. Patent rights licensed in B-to-B licensing arrangements, however, tend to be very different in many respects. One arrangement that is sometimes used by patent owners involves granting a licensee the right to sue third-parties for infringements of licensed patent claims.

Several years ago, I had a client that was in an industry where this practice was heavily used. It provides a good example of one of the reasons why companies might license enforcement rights to another company. The industry was large, lucrative and was dominated by a handful of huge companies. Each of the top feeders owned a portfolio of patents that, if asserted against the others, would be crippling to the market. Specifically, each seemed to appreciate that launching a direct patent infringement assault against one of the other major actors would cause the target of the assault to counter with its own patent claims, which would most likely cause a chain reaction of escalating assaults which would ensure mutual self-destruction for all. To avoid that outcome, the patent holder would typically assign a patent, or more commonly license a right to sue on the patent, to a third party, who could then sue the target or otherwise enforce patent rights against the target. Although it was clear what was going on to anyone paying attention, this veil of plausible deniability was enough for patent holders to strategically slow down their competitors and prevent total industry meltdown.

The scenario above is just one example of how licensing the right to sue can be strategically used in patent cases. Be mindful, however, that patent licensing in this area is extremely nuanced and any strategy involving granting the right to sue to another party should be carefully thought out and well planned. As outlined in my April 26, 2010, Legal Beat blog post,  too often patent holders intend to grant a licensee the right to sue under a patent. But they only discover at the time of suit that the licensee can only bring suit if the patent holder is joined as a co-plaintiff or may discover that the licensee has no right to bring suit under any condition. This result can undermine the entire license strategy and might only be discovered after significant time has passed and after the licensee has paid substantial license fees to the licensor. Moreover, as outlined in my May 10, 2010, blog post, it is possible to arrive at a much more damaging result through poor licensing, where no one has the right to bring suit on the patent(s).

 
  Contributed by Tennell Lockett, partner at Townsend Lockett & Milfort, LLC

The Trademark Application Process

During my practice as an IP lawyer, I have noticed that my trademark clients routinely have a misapprehension about how long the trademark process will take. In fact, once, after what I thought was a thorough consultation with a client about their soon-to-be-filed trademark application, the client leaned back and said, “Okay. Good. I think I understand everything. So what am I looking at? A couple weeks? A month? How long before this thing is finalized?” I realized then that: 1) the IP bar, myself included, needed to do a better job informing clients and the public about this topic; and 2) my consultation session was not over. In that vein, I thought a brief overview of the application process might be helpful.    

As an initial matter, the United States Patent and Trademark Office will very seldom, if ever, immediately grant a federal trademark application after it is filed. In fact, it generally takes up to 5-8 months (or more) before a trademark office official, referred to as an Examining Attorney, will pick up your application to formally review it and start the substantive examination process. Once he has reviewed your application, the EA determines whether there are grounds to reject your application or whether other modifications or clarifications are necessary. If the EA finds grounds for rejection, modification or clarification, the EA will send you a response, called an Office Action, soliciting your response to his findings. These Office Actions are routine and you can expect at least one Office Action as a matter of course during the application process. You or your attorney will respond to the EA’s Office Action, either providing the EA with arguments to overcome his rejection, or providing clarification or amendments to your application to overcome his cited objections. There may be multiple rounds of this back-and-forth between you and the EA during this period.

Importantly, you have 6 months from the time any Office Action is mailed to respond to it. If you fail to timely respond, your application will go abandoned. There is a procedural mechanism that allows you to attempt to revive the application after it has gone abandoned, but you will incur additional filing fees and will need to submit compelling explanation and argument for your delinquency.    

If the examiner is satisfied with your amendments, explanations and comments, the examiner will approve your mark to be published for opposition. 

Your mark is typically published for opposition within 30 days of the examiner's approval of the mark for publication. Your mark will publish in the USPTO's Official Gazette for a 30-day opposition period. Any party who believes it would be harmed by the registration of your mark may file an objection (opposition) within that 30-day period with the Trademark Trial and Appeal Board. If the mark is opposed, the timeframe for that process varies, but it is usually a considerably lengthy period as TTAB oppositions are separate administrative proceedings and can easily take up to 6 months and substantially longer.

Within approximately 3 months after the mark published in the Official Gazette, if no opposition is filed, the USPTO issues a registration for your mark.

Contributed by Tennell Lockett, partner at Townsend Lockett & Milfort, LLC

If You Can Keep a Secret, Let’s Do Business

One of the biggest fears of many business owners and managers is exposure of their company’s business plans and key secrets. Lots of businesses derive their value from the special things they know and do, the special ways in which they do them, and the special people for which they do them. But all business operations require interaction with outside parties whether it is with customers, vendors or contractors. These interactions can sometimes present situations where sharing confidential information is unavoidable. Then what? How do you get the appropriate people involved with your business without risking the loss of your valuable confidential information?

The first step in protecting your company from mass dissemination and misappropriation of confidential information is to limit disclosure to those instances when doing so is absolutely necessary and to those individuals to whom disclosure is absolutely necessary to further your objectives. Just because you’re considering hiring a vendor to help develop your marketing strategy it doesn’t mean that every single employee of the vendor needs to know your secret processes for doing business or who your target clients are. Make sure disclosure is made on a “need to know” basis. The smaller the number of individuals receiving the confidential information the more control you have in protecting it.

The next step is to require all parties who will be receiving the information enter into a tight non-disclosure agreement. Ensure that the NDA expressly defines “confidential information” and that the definition is comprehensive. Key items that must be covered in the definition of “confidential information” include: all company proprietary information, intellectual property, customer lists, business processes, trade secrets, and anything else the company wants to expressly prohibit from being disclosed. After thoroughly defining the information to be kept confidential, the NDA should expressly state the duty to keep the information confidential. The duty to keep confidential should state directly that the receiving party must not disclose confidential information to third-parties. It should also disallow the use of the information for the receiving party’s own benefit.

A good NDA should also contain clear policies and procedures that must be implemented to protect the information. Some examples of useful procedures include the prohibition of making duplicates, return delivery of materials once reviewed or upon completion of the relationship, or even destruction of the materials upon completion of the relationship. Consistent with my previous statement that the number of people receiving the information should be limited, it is good to provide language in the NDA that only permits the receiving party to disclose information to employees, partners, agents or officers on a “need-to-know” basis.

Don’t let fear of disclosing confidential business information prevent you from doing business. At the same time, take steps to protect your valuables. 

  Contributed by Travis Townsend Jr. 

Combating The Generic Conundrum in Trademark Law

Coping with the generic component of trademark law is nothing new.** Trademark law history is littered with examples of names and phrases that have lost their trademark status as generic terms. Numerous names that we use to generically identify a product today were, at one time, protectable trademarks. For example, while we think of ASPIRIN, ESCALATOR, BABY OIL, CALL FORWARDING and TRAMPOLINE as common products and services, they were, in fact, once valuable marks. These are far from isolated examples, at one time or another, each of the names below was held to be generic and not protectable as a valid mark:

• ALE HOUSE (both food and beer service facility)
• ALL NEWS CHANNEL (television broadcasts)
• AUDIO BOOK CLUB (audio book retail mail order services)
• CELLOPHANE (transparent cellulose sheets and films)
• COLA (type of soft drink)
• COMPUTER LEARNING CENTER (courses in computers)
• THE COMPUTER STORE (computer sales)
• DERBY PIE (chocolate nut pie)
• DOS (type of computer operating system)
• DRY ICE (solid carbon dioxide)
• E-TICKET (electronic airline ticketing services)
• FIRST AID (bandages and items which make up a first aid kit)
• GOLD CARD (premium level credit card services)
• HOAGIE (class of sandwich)
• HOG (large motorcycle)
• ICE PAK (ice substitute)
• JUJUBES (gum candy)
• LOG CABIN HOMES (log cabin home design)
• PILATES (method of exercise and associated equipment)
• SHREDDED WHEAT (baked wheat biscuit)
• SUPER GLUE (rapid setting cyanoacrylate adhesives)
• THERMOS (vacuum-insulated bottles)
• YELLOW PAGES (business telephone directory)
• ZIPPER (fastening product)

So, what can be done? Keep in mind that this occurrence is triggered by something that occurs in the minds of consumers, so there are no measures that guarantee this will not happen to you. There are, however, steps you can take to greatly reduce this from happening to you. 

Be mindful of strange, unique names with pioneering technologies and products. When introducing a new technology or product to the market, keep in mind that consumers are experiencing it for the first time. Strange or unique names are more likely to cause brand/product confusion. For example, when transparent cellulose sheets were introduced to the market, consumers are less likely to experience brand/product confusion if the mark TANGERINE is used as opposed to the mark CELLOPHANE. There is little danger that a consumer will think the transparent sheet is a “tangerine.” To be clear, however, I am not suggesting that you refrain from using arbitrary or fanciful names for new products because there are advantages to doing so. The key is to be aware of the risks.

Be mindful of repeatedly using the same brand in latter models. If, for example, you create several models of a new transportation device, and brand each one under the brand name T-PORT, there is some chance that consumers will think that the transportation device itself is a T-PORT vehicle, as opposed to a T-PORT branded vehicle. Consumers are less likely to reach this conclusion if each model receives its own brand, e.g., the T-PORT transportation device, the A-PORT transportation device, and the V-PORT transportation device. 

Be mindful of consumer use of your mark as a verb.  A red flag should be raised when you hear consumers using your brand name as a verb, such as “xeroxing a copy” or “googling an address.” If consumers conceptually distill your brand to an act or action, they are likely to also link all products that perform this act with your brand name.

Create a generic name and a brand. If you introduce a new technology or product to the market, do not hesitate to also create a generic description or name for the product. For example, if you create a mechanical device for relieving skin agitation, create both a brand name (PFUTZ) and a product name (personal back scratcher). Many companies have coined or popularized product names for this very purpose. A few examples are ROLLER BLADES’ (brand name) use with “inline skates” (product name), BAND-AID’s use with “self-adhesive bandages,” JEEP’s use with “sports utility vehicle,” WITE OUT’s use with “correction fluid,” and TIVO’s use with “digital video recorder.”

Implement brand protective marketing. Be proactive about making the product/brand distinction clear in your marketing. The perfect marketing piece has three distinct elements in this respect: 1) brand name or mark; 2) product name; and 3) an identification of source. For example, “Buy the new PFUTZ brand personal back scratcher by Tennellco.”  

Employ proactive prevention. There is absolutely nothing wrong with a proactive campaign designed at educating the public. This campaign can be as simple and direct as television advertisements or direct mail pieces informing the public that your brand is not a product name. A number of companies have, to varying degrees of success, expended significant resources on such campaigns. Notably, companies operating under the KLEENEX, PAMPERS, BAND-AID and XEROX marks have each undertaken such campaigns. One memorable Xerox “anti-generic” add stated, "When you use ‘Xerox’ the way you use ‘aspirin,' we get a headache."      

A qualified trademark attorney can assist you in developing strategies to prevent your mark from becoming a generic term.

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** For a more detailed discussion of the Generic Conundrum, see "Too Much of A Good Thing?: The Generic Conundrum in Trademark Law,” http://atlantatribune.typepad.com/the_legal_beat/2010/09/index.html

Contributed by Tennell Lockett, Partner at Townsend Lockett & Milfort, LLC

Are You Sure You Want to Start a Nonprofit?

Is there anything more fulfilling than volunteering or engaging in community service? That warm and fuzzy feeling you get from helping change the world for the better is like no other. Some people participate in church-organized community service activities, while others support organizations like the United Way, Project Open Hand or Habitat for Humanity. With all the needs of people of the world, there is still a great need for more non-profit institutions geared toward solving humanity’s problems. So when I get a phone call from an aspiring non-profit organization entrepreneur telling me they want to get started I get excited! And when the client goes on and on in a fiery passion about his or her particular cause and all the things planned to provide assistance to the world I get wound up and ready to go. But I always have that little bird on my shoulder telling me to temper my enthusiasm with some counsel to the client on whether they really want to take on the task of organizing and running a nonprofit.

While nonprofits are usually based in high-minded ideals, they should be approached like serious business and require hard work. The organizational requirements are very similar to those of a for-profit business. The typical form for a non-profit organization is a corporation and it must be formed by filing articles of incorporation with the local organization authority just like with a for-profit corporation. Bylaws must be adopted, and a board of directors must be elected as well. However, in addition to following basic corporate organization steps, non-profit organizations desiring tax-exempt status must complete and file a Form 1023 application for tax-exempt status with the Internal Revenue Service (IRS). Many states also require a tax-exempt application be filed with the state’s taxing authority.

As a practical matter, raising money is the bane of a nonprofit’s existence. Unlike a for-profit corporation, nonprofits cannot simply sell ownership interests or issue debt to obtain operating capital. Instead, non-profit corporations must basically beg big-hearted people and institutions for money to operate. As a consequence, there are strict rules regarding the financial management of the organization that must be followed. Nonprofits must ensure that no funds raised by the organization inure to the benefit of the corporation’s directors, officers, agents or any individuals. Nonprofits must also ensure that funds donated for specific purposes are used just for those purposes. A best practice for non-profit corporations is to establish a restricted account for sponsorship dollars and other specially allocated donations. Another best practice is to implement a clear and strict conflicts of interest policy that outlines when the corporation can engage affiliated individuals for paid products and services.

Garnering support and awareness for your organization’s cause is difficult enough, but when you add on the financial management and governance requirements, operating a non-profit organization can be herculean endeavor. Do not embark upon the undertaking lightly as it will unquestionably require a lot of attention to detail, hard work and effort.

 Contributed by Travis Townsend Jr. 

Too Much of A Good Thing?: The Generic Conundrum in Trademark Law

In nearly every facet of business in the United States, more is better. Companies are usually gunning for more revenue, more profits, more customers, and more market share. In short, the general goal of most companies is total market domination. There is, however, a seemingly quirky aspect of trademark law where that general goal can have devastating consequences. Basically, trademark protection can, for lack of a better term, “flip.” Let me explain more.

When I was growing up, kids spent countless hours at video arcades playing video games. Nearly every game consisted of some form of game-play incorporating a series of levels, which started at level 0 and increased in difficulty and complexity at each subsequent level until the player reached an ultimate level. When the player “beat” the ultimate level, the game was said to “flip” because the game reset to level 0. Anecdotally, video game connoisseurs could flip a game with one quarter.

Trademark protection can also be said to “flip,” under certain circumstances. A hypothetical newly-branded product has very little trademark protection upon introduction to the market. As consumers begin to recognize the product’s mark as a source-identifier, trademark strength increases. As the hypothetical company aggressively markets its branded product and, hypothetically, every consumer in the market associates the company’s branded product with its mark, the strength of the mark reaches its zenith. When the mark and product become so popular in the market, however, that everyone begins to associate the mark with the product (and not the company’s version of the product), then the mark can be said to have “flipped” and all trademark protection for our hypothetical mark is lost.

As our hypothetical emphasizes, traditional notions of total market domination do not mesh nicely with trademark law, at least not as we commonly conceive of market domination. The reason for this dynamic is because trademark law is focused on the consumer, not the proprietor. The federal trademark act, called the Lanham Act, is a consumer protection statute. The statute focuses on preventing consumer confusion, not on rewarding the hard work or protecting the success of businesses.

Keeping in mind the policy objectives of trademark law, trademark law’s “flipping” makes sense. Since trademark law wants to ensure that consumers have clear in their mind that a particular product or service comes from a particular provider (i.e., that the goods or services come from a particular source), then it is perfectly understandable that a source identifier, e.g., a trademark, obtains greater protection as its ability to identify a source of origin increases. The minute, however, a mark serves as an identifier of a product, and not a source identifier, it does not further the policy objectives of trademark law. More specifically, if a mark does not identify to a consumer that a product or service comes from a particular source of origin, the mark cannot convey any number of assurances about a product that a market consumer would want in order to make purchasing decisions. For example, a generic term, such as “computer,” cannot convey any information about the quality, safety, monetary value, resell value, etc. of a particular desktop computing device. Such generic terms cannot provide the consumer protection contemplated by the trademark law and therefore are afforded no trademark protection. This is true even where your mark becomes generic through your own aggressive marketing or because of the popularity of your product in the marketplace.

 Contributed by Tennell Lockett, Partner at Townsend Lockett & Milfort, LLC

Preparing an Adequate Private Placement Memorandum

In my previous entry, I discussed the risks of running afoul of the securities laws while issuing securities to raise capital for a business. The entry also outlined several exemptions to the registration requirements prescribed by the Securities and Exchange Commission (SEC) in the securities offering process. After publication of the entry I received several inquiries about how to go about providing information to prospective investors in a private offering and manner sufficient to meet the SEC standards. So I thought I’d write a follow-up regarding the primary disclosure document used in many private offerings, the private placement memorandum (PPM). Here’s the quick and dirty on PPMs.

The PPM is a memorandum that is intended to tell prospective investors, both sophisticated and unsophisticated alike, all information that is relevant to making an investment decision in the company that is offering securities for purchase. Thus, the PPM is the key vehicle for informing investors about the company, the people running the company, the securities they are purchasing and, most importantly, the risks associated with giving the company their money.

A thoroughly prepared PPM should include the names and expertise of all of the company’s directors, executives, managers, and other key agents including their work experience and age. The PPM should also include the company’s business plan, and explain the company’s key products and service lines. There should be some discussion about the market in which the company will be implementing its business strategy, the nature of the company’s competition, and the advantages and disadvantages experienced by the company in the implementation of its business. Additionally, every sound PPM details any material contracts held by the company, and also discloses any financial relationship between individuals who are helping the company raise capital through the sale of its securities.

If there is any significant litigation threatened or pending against the company, or any prospective bad company happenings, the company should not be shy about including this information in the PPM. While it is never fun to bare bad news (or potential bad news) to anyone, especially those to whom you are trying to sell, it is important to give the full unadulterated snap shot of the company, bad with the good. Otherwise you may find yourself being chased down by the SEC for making material misrepresentations due to the omission of key information. As mentioned in my previous entry, those material misrepresentations may have you reminiscing on your childhood days playing the Monopoly board game. Do not pass go, do not collect $200; go straight to jail. Except this time it will take more than rolling a double to get out of jail.

Remember, the purpose of the PPM is disclosure, disclosure, disclosure. Therefore, in addition to the items outlined above, the PPM should include anything about the company within the knowledge of company management relevant to making an investment decision. Company insiders stand in a unique position in that they know more about the company than anyone not affiliated. Thus there is an expectation that management should know what is important about the company, and there is an obligation upon management to ensure that information is passed along to investor prospects. This is true even if such information does not fit neatly into the typical category of things disclosed in a PPM.

A properly prepared PPM, when complete, should be in a form such that anyone with basic reading comprehension skills can pick it up, read it, and know everything about the company that may impact their investment. If that’s not the case, the PPM is deficient and tweaking needs to be done until the PPM is an accurate written approximation of the company.

 Contributed by Travis Townsend Jr. 

How Do I Protect My Screenplay or Script?

Some time ago, a potential client approached me with a common problem. Someone had stolen, well, allegedly stolen, his screenplay and had translated it into a popular, critically-acclaimed feature film. As with many similar cases, the screenplay was not stolen like jewels might be stolen by a jewel thief. That is to say, such thefts are rarely as dramatic as might be envisioned. No sneaky midnight burglar. No oil painting hiding a wall-mounted family safe. No safe-cracking techniques using stethoscope and white glove. No thief making off in the night with a million dollar screenplay. What actually happened was far more pedestrian. This individual had casually shared his screenplay with a number of industry actors during a few discussions and some years later an A-rated major motion picture debuted with strikingly similar themes, characters and storylines.

As the individual continued the story, a single thought ran through my mind: man, I wish he had come to speak with me years ago. Had he spoken with me much earlier, I would have given him some very simple advice that possibly could have saved him a lot of heartache. Below are a few thoughts that you will want to consider before having any discussions or making any deals concerning your screenplay.

First, you want to “hardwire” protection into your screenplay or script.  By that I mean, you want to include as many original, creative and fresh elements into your work as possible. The protections directed to this area of the law are constructed to protect expression, not ideas. Consequently, you want to include a large number of memorable and colorful quotes, detailed descriptions of original scene settings, creative or unconventional dialogues and plot twists, and other creative literary elements of this nature. If you disclose a firefighter screenplay to hypothetical producer James Hollywood, you will have very little protection simply by virtue of Mr. Hollywood’s subsequent production of a movie about a firefighter. You will, however, have a much stronger position if Mr. Hollywood’s movie includes creative elements that are common with those appearing in your screenplay.

Second, be sure to register your work. I strongly recommend getting a federal copyright registration for any screenplay or script that you believe to be worth sharing with any third-party. Information about acquiring appropriate copyright protection can be found at www.uspto.gov . In addition, there are other registration or date-authenticating services that you will want to consider in the case of screenplays or scripts. For example, it is typically advisable to register you screenplay with the Writers Guild of America. Submissions may be registered online at www.wgawregistry.org.

Third, use appropriate confidentiality and/or nondisclosure agreements with any third-parties prior to disclosing your screen play.

Fourth, use common sense. Trust your natural reservations. If you do not understand something, do not do it. Too often, writers are pressured into disclosing content they are not really comfortable with disclosing. In addition, I strongly discourage unprotected mass screenplay mailings. I may be more cynical than most but, in my view, the practice of mass mailing is generally dangerous in just about every field in which screenplays are valued. I also have a similar distrust of verbal agreements in such industries. On verbal agreements here, I have two maxims, the second of which governs the first: 1) Unless you have absolute trust with whom you are dealing, get it in writing. 2) Trust no one absolutely. If there is ever a question, trust your instincts.

 Contributed by Tennell Lockett