Category: Business Law

  • Simple Contracts with Foamy the Squirrel

    Merry Christmas from our Ninja family to yours! by thotfulspot from Flickr
    Merry Christmas from our Ninja family to yours! by thotfulspot from Flickr

    If you want to create a contract, the minimum you need are three things.

    1. An Offer
    2. Acceptance of the Offer
    3. Consideration

    Consideration is a legal term for a “bargained-for exchange,” which is a give-and-take between the parties. And it has to be an exchange that is reasonable. You probably have consideration if you want to sell your car for the Kelley Blue Book value vs selling it for 2 cents.

    Check out this Foamy cartoon that appears to create a contract (I heart Foamy):

    Here’s the contract offer I heard: Germaine will get Foamy a ninja for Christmas in exchange for shutting up about his disappointment over the ninja gig. And Foamy accepted with the caveats that the Ninja not be American unless it’s Chuck Norris and the penalty for not delivering a ninja would be that thugs get to rape Germaine with her own severed limbs.

    Was there consideration? That’s up for debate. Foamy can be pretty awesomely obnoxious. I can see someone offering a higher ticket item to make him shut up. The big problem I see if you can’t make a contract for something that is illegal. Owning a person is illegal which could be one interpretation of the contract’s terms. Foamy’s caveat about the severed limbs obviously doesn’t hold water.

    Check how the contract was executed:

    It sounds like Germaine was blackmailed into giving Foamy a ninja, which arguably makes this whole exchange invalid since she was afraid for her life and not acting to get the bargained for exchange. Setting that aside, I can see consideration in exchanging a toy for getting someone to shut up. Foamy could argue that both parties knew that he was bargaining for a real, breathing, human ninja, but that would make the contract invalid since owning a person is illegal. In the end, I think Foamy should take his plush ninja and be happy he got a present.

    Happy Ninja Christmas Everyone!

    You can connect with me via Twitter, Google+, Facebook, and LinkedIn, or you can email me.
    Please visit my homepage for more information about Carter Law Firm.

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    Ruth Carter

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  • Can Kasperski keep the FnB Name?

    Old Scottsdale Sign by kmaschke from Flickr

    Whenever I ask my friends where I should take my quasi-foodie parents when they visit, one of the most common answers I get is FnB. This little restaurant in Scottsdale has won a bunch of awards and gotten a lot of good press since it opened three years ago, including a mention in Food & Wine magazine. The owners Charleen Badman and Pavle Milic recently announced that they’re moving FnB to a new location at the beginning of 2013. Shortly after that, FnB’s soon-to-be former landlord, Peter Kasperski, announced he wanted to keep the name “FnB.”

    According to Phoenix New Times, he came up with the name and he likes it, but does that give him ownership rights in the name?

    Probably not.

    A trademark is the mark used with a product or service that distinguishes it from its competition and informs consumers about the source and quality of what they’re buying. In regards to a restaurant, a mark could be the name, the way the restaurant is decorated (trade dress), logos, and/or slogans. When you have a trademark, you have the exclusive right to use it on your products or services in your established market. If your register your company’s trademark with the U.S. Patent and Trademark Office, you get the exclusive right to use your mark on your products and services nationwide. No one can start a business or create a similar product with a mark that is similar to yours.

    Unfortunately, no one has registered “FnB” with the USPTO for use with a restaurant. If Badman and Milic did that, they would have exclusive control over who could open an FnB restaurant anywhere in the U.S.

    All is not lost in this story. If Badman and Milic can argue that they are known nationwide, they can make the argument that their established market is the entire country so no one can call their restaurant “FnB” without their consent. There was a case in 1948 about a fancy New York restaurant called “The Stork Club.” They had spent thousands of dollars in nationwide advertising and had been featured in news articles in newspapers throughout the country. They were able to force a small tavern in San Francisco called “Stork Club” to change its name because they made the argument that consumers might think the tavern was affiliated with the restaurant, which could hurt the restaurant’s reputation.

    What about Kasperski’s statement that he thought of the name? Trademark rights come from using the mark in commerce. From what I can tell, he’s leased property to a company that used the name. If he didn’t use it himself, he has no trademark rights in the name.

    According to Phoenix New Times, Kasperski claims he’s partners with Badman and Milic. I looked up Badman and Milic’s LLC and he’s not listed as an owner, so I’ve seen no evidence that supports that claim.

    Kasperski also said Badman and Milic will be successful without the FnB name. Given their success so far, that is probably true; however, that doesn’t change their rights in their business’ name. They were the ones who used the name in their business and build a stellar reputation. Unless there are contracts that explicit give Kasperski rights in the FnB name, I foresee him struggling to make a valid claim in the trademark rights.

    The take away lesson: If you want to avoid problems like this, talk with an intellectual property attorney about registering your trademark with the USPTO.

    You can connect with me via Twitter, Google+, Facebook, and LinkedIn, or you can email me.
    Please visit my homepage for more information about Carter Law Firm.

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    Ruth Carter

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  • Celebrity Trademark Woes

    Ivy Leaves by D H Wright from Flickr
    Ivy Leaves by D H Wright from Flickr

    In the last week there have been a few stories about celebrities running into trouble with prospective trademarks. I thought I’d break down the two major stories I’ve heard.

    Blue Ivy
    Jay-Z and Beyonce had a daughter earlier this year and named her Blue Ivy Carter. (Why do celebrities give their kids such stupid names?) According to the news report, Jay-Z filed an application to trademark her name within days of her birth. It seems very strange to me that a high priority of a new parent is starting a product line based on their kid’s name.

    To have a trademark, you have to select a mark and the product or service you’re going to use it with. A mark can be anything that will differentiate your product or services from the competition – a word, a tag line, a color, a scent, a sound, etc. Its purpose is to inform consumers about the source and the quality of the goods they’re buying. Once you register a mark with the U.S. Patent and Trademark Office, no one can use a similar mark on similar goods and services because it might lead to consumer confusion.

    Jay-Z’s trademark plan hit a bit of a snag. When he applied for the trademark, he was likely informed that there are several registered trademarks featuring the phrase “blue ivy.” One is an event and wedding planning service, another is an online furniture retailer, and another is a retail store that sells clothing, jewelry, accessories, and giftware.

    Jay-Z and Beyonce could register “Blue Ivy Carter” as a trademark, but not to sell a good or service that was similar to one of the existing registered marks. It appears they’ve registered the mark for skin care products, baby products, ring tones, key rings, and accessories among other things. The list is disgustingly extensive.

    The best part of the trademark record is where it says, “The name ‘BLUE IVY CARTER’ identifies a living individual whose consent is of record.” That’s funny.

    Khroma
    The other trademark story I heard recently involves the Kardashians. Apparently they plan to release a makeup line called Khroma Beauty that is expected to be sold in Sears and CVS Pharmacies. The problem they’re running into is the fact that there’s a salon called Chroma Makeup Studio in Hollywood that sells its own Chroma brand of makeup. I couldn’t discern in a quick search if the studio owner had registered the trademark.

    The general rule in trademark is that it’s not enough to have a different spelling of the same word as your competition’s mark. For example, if someone owed an “Alligator Furniture Store” in your city, you probably couldn’t open a competing store called “Allig8tor Furniture.”

    Even without registration, the owner of the Chroma mark gets the exclusive rights to use his mark in commerce wherever the market has been established. If nothing else, he might have a valid argument to keep Khroma makeup out of the stores near his studio. He’s asked the Kardashians to change the name of their makeup.

    When selecting a potential mark, it’s a good idea to check the U.S. Patent and Trademark Office to see if someone has already registered the mark you want to use on similar goods and services. If they are, you’ll have to pick a new trademark.

    It’s also prudent to run a simple Google search to see if someone is using the mark in commerce without registering it. If they are, you’ll have to consider whether it would be better to pick something new or use a similar mark knowing that the other user has the exclusive right to use the mark where they’re established. If you register your similar mark, you can use it everywhere in the country except the areas where your competition established itself prior to your registration.

    Feel free to connect with me via Twitter, Google+, Facebook, and LinkedIn, or you can email me.
    Please visit my homepage for more information about Carter Law Firm.

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    Ruth Carter

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  • Is Your Non-Compete Agreement Enforceable?

    Spider-Man vs. Batman by JD Hancock, Non-compete Agreements
    Spider-Man vs. Batman by JD Hancock

    When you started your job, did you read your employment agreement before you signed it? What about the employee handbook – did you read it or just sign the form that says you read it? There’s a good chance one of those documents contained a non-compete agreement (NCA).

    NCAs are a necessary evil, especially in this day when employees are less likely to stay at a company for their entire careers. These are contracts that restrict your ability to work in a similar position for a specified amount of time and geographic area if you leave the company.

    When someone’s thinking of leaving their job, they often review their NCA and ask if it’s valid. A lot of companies won’t hire you if it would violate your NCA. If you think your NCA is invalid, you can go to court and ask a judge to invalidate it.

    The court will have a hearing and weigh your interests against your employer’s. On one hand your employer doesn’t want to train someone and give them access to company information to lose them to their direct competition.  On the other hand, you have a right to choose where you work and you shouldn’t become unemployable because of a NCA.

    The validity of a NCA is governed by state laws and decisions from previous court cases. There was a great article in the September edition of Arizona Attorney Magazine by David Bray and David Ferrucci about the enforceability of NCAs. Here are some of the highlights.

    Courts generally want NCAs to have clear and reasonable provisions. If your NCA can interpreted in two ways – one that narrow and enforceable one that is overly broad and unenforceable and in the ex-employee’s favor – the court will usually rule in that it’s too broad and thus unenforceable. The court will look at whether you negotiated your NCA. Many new hires are given a nonnegotiable NCA as part of their employee handbook and they can either accept it as written or work somewhere else. If the NCA was negotiated, the court will be more likely to try to determine the parties’ intent when they wrote the contract.

    There’s also something called the blue-pencil rule in Arizona. This allows a court to excise “grammatically severable” and unreasonable provisions from a contract but keep the reasonable provisions. This keeps the whole contract from being invalid because of one invalid provision.

    You can also have step-down provisions in the contract.  An example of this would be, “This non-compete agreement will be in place for 12 months after the employee leaves the company. If a court finds this duration to be invalid, then the duration will be 9 months. If a court finds this duration to be invalid, then the duration will be 6 months.”

    A valid step-down provision will only have 2 or 3 choices and be written in good faith. A 2006 Arizona case said that good faith step-down provisions must be:

    1. Definite,
    2. Consistent with the underlying provision,
    3. Easily severable from unreasonable provisions,
    4. Have a narrow duration range, and
    5. Have a reasonable geographic scope.

    A valid NCA might result in you not being able to work for a direct competitor or in the physical vicinity of your previous employment, but your skills are likely transferable to other jobs or you can do the same job if you’re willing to do it far enough away from your previous employer.

    Read your employment contract carefully. If you’re an employee, get a copy of it before your first day on the job so you can review it and possibly have a business lawyer review it. If you’re an employer, hire a lawyer to write your NCA for you so a court will be less likely to rule that it’s overly broad or otherwise invalid.

    One word of caution: In contract cases, Arizona is a “loser pays” state. If you go to court to dispute a NCA and you lose, you’ll be paying for your attorney and the other side’s attorney.

    Feel free to connect with me via Twitter, Google+, Facebook, and LinkedIn, or you can email me.
    Please visit my homepage for more information about Carter Law Firm.

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    Ruth Carter

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  • Employers Can’t Control Personal SM Accounts

    i love my job by peretzpup
    i love my job by peretzpup

    Last week a friend of mine asked about if employers can require employees to do anything with their social media accounts. Apparently, his friend’s employer asked the employees to change the cover photos and avatars on their Facebook pages to some type of advertising for the company.

    If a company wants to be involved in social media, they need to create their own accounts on Facebook, Twitter, and any other site where they want to have a presence. They should also have crystal clear contracts with the employees and/or businesses who manage these accounts that state how they should be used, who will own the intellectual property on the sites, and who will own the accounts and followers if the employee leaves or changes positions or if the company hires another company to manage their social media.

    Back to employers telling employees what to do on their personal accounts – your personal Facebook account is your personal property. Your employer can prohibit you from being on your personal accounts during work hours or work computers and they can discipline you for violating your employment contract on it (as long as it doesn’t violate the NLRA). But to require you to promote the company on your personal page? That would be a big “Oh hell no.”

    I checked out Facebook’s terms of service and they clearly state you must use Facebook Apps for all promotions and that you will not use “your personal timeline for your own commercial gain (such as selling your status update to an advertiser).” If your employment is contingent on promoting the business on your personal account, I see a valid argument that you essentially sold your part of your timeline to your employer.

    On the other hand, companies want their employees to be happy in general and want them to support the product. I see no problem in companies making images available if employees wanted to voluntarily change their profile photos. I think it would be awesome if the company allowed employees to take pictures of themselves with a company mural or sign to use in social media if they were so inclined. This would have to be completely voluntary with no consequences, positive or negative, based on employee participation.

    I’m a big proponent of employers leaving employees alone when it comes to their personal time and social media accounts as long as the employees aren’t violating company policies. If you think your employer is asking you to do something questionable with your social media accounts, check the website’s terms of service and consult a social media attorney (like me) in your community.

    Feel free to connect with me via Twitter, Google+, Facebook, and LinkedIn, or you can email me.
    Please visit my homepage for more information about Carter Law Firm.

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    Ruth Carter

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  • The North Face vs The South Butt Trademark Saga

     

    North Face vs South Butt, Ruth Carter, trademark infringement
    The North Face vs The South Butt, photos by TerryJohnston and JL Johnson

    The North Face Apparel Corp. is well-known for their outdoor apparel. When I lived in Oregon, I became quite familiar with their brand. Their tagline is “Never Stop Exploring.” In 2010, The North Face sued The South Butt, LLC for trademark infringement when the company started selling apparel with a similar name, logo, and tagline. The South Butt’s logo uses a similar font as The North Face and incorporates a set of curved lines, similar to The North Face’s log. The South Butt’s tagline was “Never Stop Relaxing.” The South Butt even tried to sell the brand to The North Face for $1 million. When I first saw a South Butt shirt, I thought it was hilarious and I knew it was a parody of The North Face, but I figured it wouldn’t last long on the market.

    The two companies settled this dispute with an injunction that prohibited The South Butt from using The North Face’s trademarks or any mark that was similar to The North Face’s without permission. The trademark laws generally prohibit you from unfairly riding another brand’s coattails for your own benefit, confusing consumers about what the quality and source of the good they’re buying, or otherwise damaging another brand’s reputation with your trademark.

    Fast-forward to the summer of 2012, The North Face is back in court asking a judge to hold the owners of The South Butt in contempt. According to the report, the owners of The South Butt started a new company, Why Climb Mountains, LLC, and they are selling apparel under the brand “The Butt Face” with the tagline “Never Stop Smiling.” The logo also features curved lines which are similar to The North Face’s logo.

    The North Face is claiming that The South Butt owners are violating the injunction with this new line of apparel. They commissioned a survey that found that 35% of respondents associated The Butt Face logo with The North Face brand. The judge is expected to decide whether The South Butt owners violated the injunction that prohibited them from using a trademark that’s similar to The North Face.

    I understand why a company would want to create a parody of an existing company’s brand, but this story makes me wonder, “Why would you do it twice to the same company if you ended up in court the first time around?” On the flip side, this story shows that there is a market for parody brands which, if a company was looking to expand its market, that would be one option to consider.

    If you’re considering using a trademark that might be confused with your competitors’, please consult a trademark attorney in your community before you invest too much time and energy into creating that brand.

    If you want to hear more of my thoughts on this topic, or if you think this post is too long to read, I made a video.

    Feel free to connect with me via Twitter, Google+, Facebook, and LinkedIn, or you can email me.
    Please visit my homepage for more information about Carter Law Firm.

    Hat tip: JD Supra

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    Ruth Carter

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  • Venture Capital Available for Arizona Companies

    Money Plant by Tax Credits from Flickr
    Money Plant by Tax Credits

    Money doesn’t grow on trees . . . but sometimes people want to give it to you! The Invest Southwest Capital Conference is coming up on November 28th-30th at the Fairmont Scottsdale Princess Resort. This is the conference where Arizona companies can pitch their business plans and investment opportunities to over 300 venture capitalists and angel investors.

    This conference has resulted in over a quarter of a billion dollars being invested in companies since its beginning in 1992. Jonathan Coury, the chairman of this year’s conference says the event’s mission is to encourage “economic growth through capital investments in growing enterprises.” I’ve known Jonathan since I worked under him and helped launch other businesses at the Innovation Advancement Program at Arizona State University. If he believes in this conference, I believe it’s something local companies should consider if they are trying to get a significant amount of venture capital.

    Invest Southwest is geared towards companies that are looking for between $500,000 and $10 million in funding. You must apply to present to the conference. Applications must be received by 5pm on Thursday, August 30th with a $199 application fee. A selection committee will chose between 12 and 15 companies to present at the conference. If you are selected, you must pay an additional $350 presenter fee.  At first glance, $549 might seem like a lot of money to present at a conference, but not compared to the $10 million you might take home with you.

    When you are seeking venture capital, it’s best to work with an Arizona business lawyer (like me) who can help you understand your obligations when you accept money from venture capitalists or angel investors.

    Feel free to connect with me via Twitter, Google+, Facebook, and LinkedIn, or you can email me directly.
    Please visit my homepage for more information about Carter Law Firm.

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    Ruth Carter

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  • Avoid Piercing the Corporate Veil

    Shadow Theatre by tamadhanaval, Piercing the corporate veil
    Shadow Theatre by tamadhanaval

    After I published the blog post on starting a business in Arizona, someone asked me if there was anything wrong with using PayPal to accept business payments if their PayPal account is connected to a personal bank account. I cringe when I hear stories like this.

    One of the benefits of creating a business entities is it limits your liability. If you have a corporation or an LLC and the business gets sued and loses, the prevailing party can only take the business’ assets if the business is set up properly. They can’t go after your personal home, car, bank accounts, or other possessions.

    You get this protection by keeping the business assets and your personal assets separate. Your business needs its own bank account, credit card, etc. You should pay for business expenses with the business accounts and personal expenses with your personal accounts. If you don’t keep your accounts separate and you lose in a lawsuit, the prevailing party could make the argument that the business is not a separate entity but is merely an alter ego for you. If that happens they can take assets from the business and your personal property to collect their damages.

    Creating an LLC is a good start to protecting yourself against personal liability, but it may not be enough if you don’t keep your business and personal accounts independent from each other. Services like PayPal are so easy to use that it will be simple to create separate accounts for business and personal use.

    If you have questions about whether you’ve properly set up your business to protect yourself against liability, please contact a business lawyer (like me) in your community.

    Feel free to connect with me via Twitter, Google+, Facebook, and LinkedIn.
    Please visit my homepage for more information about Carter Law Firm.

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    Ruth Carter

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  • How To Start a Business in Arizona

    National Geospatial-Intelligence Agency Ribbon Cutting by US Army Corps of Engineers, Carter Law Firm, Ruth Carter
    National Geospatial-Intelligence Agency Ribbon Cutting by US Army Corps of Engineers

    This week I had two speaking engagements on the basics of starting a business in Arizona. I thought I’d expand my list of tips into the ideal timeline an entrepreneur should follow for setting up their business.

    1. Figure out what type of business you want to have.
    2. Select a name for your business. From a trademark registration perspective, it’s best to pick a name that contains a word or words that don’t already exist. Also be mindful of any business name restrictions that exist in your industry.
    3. Do a search on the U.S. Patent and Trademark Office (USPTO) website to see if someone in a similar business has registered a similar name for their business. If they have, they can prevent you from using your desired trade name. Run a Google search as well to see if someone has a similar name but hasn’t registered it with the USPTO.
    4. Create a business entity by sending the appropriate form and payment to the Arizona Corporation Commission.
    5. Open a bank account for your business. Never use your personal accounts for business expenses or your business accounts for personal expenses.
    6. If you have more than one owner, create an operating agreement. This is a contract that dictates how the company is owned, how you will run your business, and how you will resolve problems. You need this no matter who your partners are, including your spouse and family members.
    7. When you have a business, you have intellectual property – at least copyrights and trademarks, and perhaps trade secrets and patentable ideas. Create an intellectual property strategy to protect these things. This is another time when you should at least buy an hour with a lawyer.
    8. Draft contract templates for documents you will regularly use with vendors and customers. Many business owners get contract templates from the internet. This is an acceptable way to start this project, but you should have a lawyer review them to make sure they are legal and address your needs.
    9. Register your trademark with the USPTO.
    10. If you have employees, you will need employment contracts and an employee handbook that includes a social media policy that complies with the National Labor Relations Act.

    Ideally, every new business would have a lawyer to help them set up avoid any legal missteps, but many entrepreneurs can’t afford it. There are a lot of things you can do without a lawyer’s help, but you need to be well-informed about what your’e required to do when going into business for yourself and when it’s worth it to pay for a lawyer (like me).

    It’s much easier and cheaper in the long run to consult a lawyer a few times when you’re starting your business than to have to hire one to clean up the mess that can result if you do it the wrong way.

    Feel free to connect with me via Twitter, Google+, Facebook, and LinkedIn.
    Please visit my homepage for more information about Carter Law Firm.

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    Ruth Carter

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  • How To Respond If An Interviewer Asks For Your Facebook Password

    Padlocks by Jon Worth

    The news media recently exploded with reports that employers are asking prospective employees for their Facebook passwords. A few years ago, I heard of interviewers asking prospective employees if they could see their Facebook pages. This takes it to a whole new level, and I think it’s disrespectful.

    A lot of prospective employees are desperate for work, so I suspect a lot of them are complying with the request. I think a lot of people are shocked by the question and are saying “yes” without fully realizing what they are doing.

    If a prospective employer asked for my Facebook password, my first thought would be two choice words (seven letters – you figure it out). Hopefully before those words escaped my lips, I’d temper that thought with something like, “I’m a very private person. I use Facebook to connect with close friends and family. I’d rather not give you that information.” I could follow that up with a statement that all my tweets are public if they want another glimpse into who I am as a person online.

    I look at this question like when a police officer asks to look in your bag. They wouldn’t ask the question if they didn’t need your permission. You have the right to say “no” to the cop, just as you have the right to say “no” to prospective employer who asks for your social media passwords.

    When a prospective employer asks for your social media passwords, they are opening themselves up for liability. There are a lot of things an employer can’t ask about in an interview, and they can be sued if they make hiring decisions based on things like race, gender, disability, or religion. If they have access to your otherwise privacy protected Facebook page, they may see information like your race, religion, or disability that could influence their hiring decision and put them at risk of getting sued for discrimination.

    If anyone asks for your Facebook password, whether it’s your best friend or a prospective employer, the answer is always, “No.” If an employer won’t hire you because you won’t turn over your Facebook password, you don’t want to work for them anyway. A concerted effort from prospective employees pushing back against this question could be enough to make it stop.

    UPDATE (3/26/2012): Facebook is warning users not to give their passwords to prospective employers.

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    Ruth Carter

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