Helping Clients Thrive!
Helping Clients Thrive!
Business, Corporate and LLCS
INTELLECTURAL PROPERTY (IP) CHECKLIST
It is important to develop, monitor and monetize your business’ intellectual property. Many times, it becomes its largest asset.
In dealing with companies, we find the following events are the necessary times to check in on your intellectual property, making sure that it is registered and protected.
Buynak Law operates a Business Compliance Program in which we review businesses (LLCs, Corporations, etc.) on a yearly basis. Reviewing the status of an entity’s intellectual property is part of that review.
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Formation of your entity for ownership of the IP
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Funding and Reserves (should include IP costs/fees)
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IP Planning (copyrights, patents, trademarks, trade secrets, etc.) to have a plan for investors and financial institutions
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Clearance Letter (before operating use, offerings)
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Availability of intellectual property protection (e.g., trademarks)
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Anticipated Investors/Loans concerning IP
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Cease and Desist Letters (offering, operational start up)
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Assignments of IP
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Employees, Independent Contractors, Developers, etc. (naming the proper IP owner is important)
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Sale in All or Part of the Business (merger, acquisition)
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Sales of IP
DO NOT DEFER – your IP rights MAY be forfeited if not protected!
BUSINESSES CAN BE SUED IN STATES WHERE THEY REGISTER
Businesses, usually corporations, can be sued in states that they register even if they actually do not do business that that state or are not located in that state. Thus, a plaintiff can forum shop to find a favorable venue for their case.
An example is a business which is incorporated in California, is operating & has operations in California & Nevada, has an accident in Nevada, but has elected to also register their corporation in Pennsylvania. The ruling this year from the U.S. Supreme Court in Mallory v. Norfolk Southern Railway allowed an individual employee alleging injuries to sue the railway in Pennsylvania, a location where neither the plaintiff or railway had any association, except the corporation’s paper registration.
As a business owner, watch where you register your corporation and remove registrations if you are no longer operating in a particular state. Otherwise, you are offering an open forum to a plaintiff unnecessarily.
RATIFICATION AND VALIDATION OF CALIFORNIA CORPORATE ACTIONS
Under California law, California Corporations may ratify or a California Superior Court may validate otherwise lawful corporate actions not incompliant, or more importantly not in compliance, with the California Corporations Code, the Corporation’s Articles or Bylaws and a plan or agreement to which the corporation is a party, in effect at the time of the corporate action. A ratification generally requires the Board of Directors to adopt resolutions setting forth the corporate actions to be ratified, the nature of the noncompliance and related information. Shareholders must also approve the ratification if their approval would be required, at the time of the ratification, for the type of corporate action now proposed to be ratified. The ratification is also subject to any higher approvals that were required for the original corporate action when that action was taken.
For small corporations, it is important for Unanimous Consent Actions or Minutes of a corporation, whether those are by the Boards of Directors or the shareholders, to include a ratification provision of all previous actions, to avoid the specific ratification approaches newly authorized. Please realize, however, that you may be ratifying an action that is against your interest unknowingly and you may well want to have the specific ratification procedures utilized when subsequent ratification is appropriate or necessary.
DIRECTORS' OVERSIGHT LIABILITY
Directors can be held liable for failing to provide oversight of company operations. The Boeing Board gave no oversight to any safety issues during the 737 MAX software problems that were known to management, in fact, the public. Specifically,
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No board committee was specifically tasked with overseeing airplane safety and every committee charter was silent with respect to airplane safety.
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The audit committee focused on financial and production risks, not on airplane safety risks.
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The enterprise risk visibility process overseen by the audit committee focused on financial and production risks and did not specifically emphasize airplane safety.
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The Board’s yearly updates on compliance did not address airplane safety; airplane safety was not a regular agenda item at Board meetings.
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Management did not report to the Board on safety issues, the Board did not have a means of receiving internal reports and complaints about safety.
Some takeaways:
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Have Board processes to gain information about actual and potential company problems, all on a regular basis.
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Take action as a Board and individually concerning company issues, especially those known to the public, as is part of the “job”.
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Boards guide the company; they are not just auditors for company profitability.
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Directors of the Board should ensure that they are adequately indemnified and insured for their activities (or inactivities) for the company, all to avoid personal liability.
EMPLOYERS MUST PROVIDE HARASSMENT PREVENTION TRAINING
Under California law, California Corporations may ratify or a California Superior Court may validate otherwise lawful corporate actions not incompliant, or more importantly not in compliance, with the California Corporations Code, the Corporation’s Articles or Bylaws and a plan or agreement to which the corporation is a party, in effect at the time of the corporate action. A ratification generally requires the Board of Directors to adopt resolutions setting forth the corporate actions to be ratified, the nature of the noncompliance and related information. Shareholders must also approve the ratification if their approval would be required, at the time of the ratification, for the type of corporate action now proposed to be ratified. The ratification is also subject to any higher approvals that were required for the original corporate action when that action was taken.
For small corporations, it is important for Unanimous Consent Actions or Minutes of a corporation, whether those are by the Boards of Directors or the shareholders, to include a ratification provision of all previous actions, to avoid the specific ratification approaches newly authorized. Please realize, however, that you may be ratifying an action that is against your interest unknowingly and you may well want to have the specific ratification procedures utilized when subsequent ratification is appropriate or necessary.
BUSINESS (INDEPENDENT CONTRACTORS) EMERGENCY LEGISLATION ALLOWS MANY, MANY MORE INDEPENDENT CONTRACTOR RELATIONSHIPS, RATHER THAN REQUIRING EMPLOYMENT. WRITTEN AGREEMENTS WITH QUALIFYING REPRESENTATIONS ARE IMPORTANT.
In response to the public outcry after AB 5 (which made almost every worker an employee), immediate legislation (AB 2257) has been enacted which allows many work situations to be an independent contractor arrangement and not employment. Some of these arrangements that are exemption (that can be a independent contractor arrangement) are
•Business to Business Relationships, where a contractor “acting as a sole proprietor, or a business entity formed as a partnership limited liability company or corporation contracts to provide services to another such business”. Pretty broad – does it override previous legislation (no) so make sure that there is a written agreement with all of the qualifications of the business/entity stated. Further, this law provides that the “employees” working for the contracting parties will be scrutinized as being properly classified – employee or contractor.
•Single Engagements which the “a stand-alone non-reoccurring event at a single location or a series of events in the same location no more than once a week”.
•Specialty Professions such as consulting, caddying, wedding planners, interpreters – and the list is expected to grow – but it does NOT include gig economy workers, transportation, franchising, and the motion picture and television industries. We are awaiting the upcoming vote on some of these.
•Professional Services such as appraisers, photographers, photojournalists, videographers, translators, editors, etc which are determined by the common law test for employment, called the Borello test
•Music Industry & Performers but musicians & vocalists who do not receive a royalty from the sound recording or musical composition must be paid minimum & overtime wages.
And more is coming as there are 34 stand-alone bills still pending – that’s a lot of lobbying effort by groups that want to be treated “special”. If you are going to employ an independent contractor, it is important to have a clear written agreement that sets forth the terms of the engagement and qualifies the person as exempt from employment laws. Don’t take the risk as an employer and find that yourself faced with an individual employee claims and a PAGA (see below) claim when they leave or are terminated. These agreements are a usual part of having an outside general counsel for your business to rely on from time to time.
BUSINESS (EMPLOYMENT) – IN SETTLING EMPLOYEE WAGE & HOUR LAWSUITS, EMPLOYERS MUST GAIN FULL RELEASES OF THE INDIVIDUAL CLAIMS AND PAGA REPRESENTATIVE ACTIONS.
The California Labor Code Private Attorney General Act of 2004 (PAGA) allows private citizens to sue individually in court on behalf of the state for violations of the California wage and hour laws and to recover substantial attorney fees for violations on behalf of “aggrieved” employees. These type of cases are not subject to arbitration as they are brought on behalf of the state of California by “private attorney generals”. These are “representative actions” and not class actions. Individual actions and representative actions can be brought by the same person --- and settlement of the individual action does not settle the representative action. Kim v Reins (2020) 9 C5th 73. Settlement releases of both actions must be gained if a business is to be completely released of liability to the employee. Follow this link for Typical Settlement Language to Resolve the PAGA Action.