INTELLECTUAL PROPERTY LAW & PLANNING

Nearly every business has trade secrets and intellectual property, sometimes without realizing it. Sometimes, the most valuable assets a business has are its intellectual and other intangible property assets. One example, is Goodwill. We at  YAHNIAN LAW CORPORATION analyze, advise and consult, and many times document for client protection, all manner of protected and protectible intangible assets. These include, without limitation, trademarks, copyrights, patents, and trade secrets. Ask us to review your business. We can ascertain what intellectual property you have and help you preserve them.

It surprises many people, lawyers included, to discover that so many business transactions have an Intellectual Property impact. Yet, trademark, trade secret, copyright and other matters are abundant, though often not obvious and many times overlooked issues in such things as business sales, employment agreements and in merely conducting day to day business.

I have had many clients come to me with letters they received from another law office threatening litigation and treble damages if they do not cease and desist using the business name they have used for many years. Now, that’s a disaster, since a client in that situation would have spent a lot of money promoting their business under that name and built up quite a bit of goodwill associated with it.

Other examples include employer clients who fail to take proper steps to protect their trade secrets, such as customer lists, then find out that an employee who was fired or quit took the list to his new employer (a competitor) and is contacting the former employer’s clients to solicit business. Every new employee should be required to sign an employment agreement, and one which contains trade secret and other confidential information protections from employee use both during employment and afterwards. When a business owner or corporation is thinking of selling their business, they should take proactive steps to ensure that the prospective buyer will keep the information and trade secrets shown to them as part of the purchase and due diligence process confidential nor will use that information. Confidentiality Agreements are necessary and routinely prepared by us for our business clients.

Many times intellectual property matters also involve tax issues. As an Attorney and a CPA, with a CFP, an LLM in Taxation (NYU) and a Certificate in Taxation (UCLA), and further, as a California State Bar Certified Specialist in Taxation, Steve Yahnian is particularly suited for and experienced in the tax planning for Intellectual Property.

Our intellectual property legal services are described below.

We assist our clients with assignments of their Intellectual Property.

An intellectual property assignment is the transfer of an owner’s property rights in copyrights, trademarks, patents, trade secrets, or other intangible creations. Such transfers may occur when a client forms a new entity such as a LLC or Corporation and wants that entity to own the property, or on their own or as parts of larger asset sales or purchases. Intellectual property assignment agreements both provide records of ownership and transfer and protect the rights of all parties.

We design and prepare confidentiality or Non Disclosure Agreements for our clients.

If you are thinking of selling your business, prospective buyers will want to examine it closely. Among other things they will want to see are your customer list, and other items of intellectual property. Alternatively, if your employees have access to confidential business information—that is, your trade secrets—you can protect your company with this nondisclosure agreement (NDA).  The NDA  prohibits prospective buyers and  employees from using your trade secrets for their own gain, and from disclosing it to your competitors.

We analyze and provide copyright registration services for our clients. At their request, we also analyze and provide legal advice concerning incidents of copyright infringement.

Are you a painter, writer, photographer or musician? You’re probably aware that copyright protects your artwork, music and writing. But what is a copyright and how you get one?

A copyright is a form of protection provided by the laws of the United States to authors of “original works of authorship.” This includes literary, dramatic, musical, artistic and certain other creative works. Material not protected by copyright (or otherwise protected) is available for use by anyone without the author’s consent. A copyright holder can prevent others from copying, performing or otherwise using the work without his or her consent. Special damages and recovery of costs are available to copyright owners when they have registered them with the US Government.

Intellectual property law refers to the laws designed to protect the rights of owners and creators of intellectual property with trademarks, patents, and copyright laws to encourage the creation of a wide variety of ideas.

After working hard to develop your intellectual property (IP), you will want to protect it from others benefiting from it without your permission. Although certain IP rights are automatic, it’s still up to you to actively protect your work. If you engage YAHNIAN LAW CORPORATION to assist you, we will look for copyright violations, patent infringement or trademark infringement on your behalf.

At your request, we will also evaluate your trade secrets and design protective strategies. If you hire us, we will perform audits and analysis to ascertain if you are vulnerable to appropriation of your trade secrets. You will also want to hire us to determine if you are going to or have infringed someone else’s intellectual property and may be subject to litigation. In fact, you may have already received a ‘cease and desist’ letter from another law firm or had your trademark registration application challenged by a another party at the USPTO.

We provide Intellectual Property audit services to our clients.

Simply stated, an intellectual property (IP) audit is a tool for identifying your potential IP assets. Ideally an audit should be carried out by professional IP auditors, but often a preliminary audit can be done in-house, within your company.

Through an IP audit you can make an inventory of your potential IP assets. This helps you to:

  • Uncover unused or under-utilized assets
  • Determine ownership of these assets
  • Identify any related threats, i.e. IP infringement from your side or by others

What is an IP Audit?

An intellectual property audit is a systematic review of a company’s IP assets and related risks and opportunities. IP audits can help to:

  • assess, preserve, and enhance IP;
  • correct defects in IP rights;
  • put unused IP to work;
  • identify risks that a company’s products or services infringe another’s IP; and
  • implement best practices for IP asset management.

An in-depth IP audit involves not only a review of a company’s IP assets, but also the company’s IP-related agreements, policies and procedures, and competitors’ IP.

We have provided Intellectual Property due diligence review and analysis for clients.

Intellectual property due diligence is the investigation to determine the value of a company’s intellectual property. Intellectual property due diligence is also called IP due diligence.

A company may complete IP due diligence on their own intellectual property or someone else’s. IP due diligence is often done to prepare for a merger or acquisition.

The valuation of intellectual property involves assigning a dollar value to the non-tangible assets of an entity. This valuation is a major issue in the mergers and acquisitions field, since a potential acquiree typically claims to have accumulated a significant amount of intellectual property, and wants to be paid for it. This valuation can also be useful when deriving the value of collateral to be used in a lending situation. Examples of intellectual property are unique manufacturing processes, patents, copyrights, and brands.

It is not possible to assign an exact value to intellectual property, since the underlying notion is so vague. Instead, several valuation methods are used to develop a range of possible valuations. The acquirer then uses this information to develop an initial offer price, as well as a permissible range of increased prices that reasonably encompass the calculated value of the intellectual property. The more common methods used to value it are noted below:

Valuation Based on Replication Cost

This is the cost that the acquirer would have to incur in order to replicate the intellectual property. There is also a time component to this calculation, in that the acquirer might require years of effort in order to create the intellectual property. If the acquirer wants access to the property immediately, it should be willing to pay a premium to buy it from the acquiree.

Valuation Based on Market Price

This is the price that third parties would pay for the intellectual property if it were put up for bid in a fair market, with multiple bidders. An acquirer may want to pay more than this amount in order to avoid a bidding war with potential competitors.

Valuation Based on Discounted Cash Flows

This is the present value of the cash flows currently generated by the intellectual property, with certain assumptions included regarding possible changes in those cash flows over future years. The rate at which these cash flows are discounted to a present value is subject to interpretation and negotiation.

Valuation Based on Relief From Royalties

This approach is based on the cost that the acquirer would otherwise incur if it were required to pay a royalty for access to the intellectual property. This approach may not work if access to the intellectual property cannot be obtained through a licensing arrangement.

There has been a growing acknowledgement over the last few years among lenders and investment bankers that a company’s intellectual property is often its most valuable asset. This is so not just for high tech companies with their portfolios of patents or computer software developers with software copyrights and patents, but equally for entertainment and publishing companies and other types of businesses, whose copyrights, patents and trademarks are at the heart of their businesses. For consumer product companies — high tech or low — their trademarks are often their single most valuable asset.

To provide comprehensive counseling, we provide legal services in the following manner:

  • how each of the forms of intellectual property can be made the subject of a security interest,
  • how such security interest can be perfected and
  • how to search for existing security interests.
  • preparation of documentation to create and perfect a lender’s security interest in intellectual property

Because of their value, intellectual property often serves as collateral in the various types of financing which are essential to the functioning of today’s businesses.

Intellectual property counsel play an increasingly important role in mergers and acquisitions.

Intellectual property counsel from both sides work as part of the team to draft and negotiate the intellectual property aspects of the agreement. Even outside the technology sector, technology and intellectual property assets are a significant part of nearly every company’s value. Intellectual property claims also pose some of the most serious risks faced by modern business enterprises. A merger, acquisition, or asset sale will itself give rise to intellectual property risks that can disrupt a company’s ongoing operations in several ways. For example, as a result of the transaction, companies can lose their rights to use mission critical software or technology licensed from third parties, former employees and contractors may claim rights to key intellectual property assets, and competitors and patent trolls may attempt to exploit the transaction by raising claims of patent infringement after the deal is announced.

Buyers rely on their intellectual property counsel to help assess the value and strength of a company’s intellectual property assets, to identify and evaluate the risk of intellectual property claims against the company, to evaluate the effect that the transaction itself will have on the company’s ongoing operations, and to help ensure that they receive unencumbered title to the intellectual property assets that they acquire. Sellers in turn rely on their intellectual property counsel to ensure they have made adequate disclosure of any known intellectual property issues, to help assuage any concerns raised by the buyer, and to reduce the risk that the buyer will either refuse to close the transaction after it is announced or bring indemnification claims against the seller after the deal has closed.

The intellectual property provisions of the merger or acquisition agreement are the primary tools that counsel have at their disposal to perform those critical functions. Intellectual property counsel should be thoroughly familiar with, and actively engaged in, the drafting and negotiation of those sections of the merger or acquisition agreement. It is also important that intellectual property counsel understand the context of the transaction, the business justification, and the core issues that are likely to be encountered in order to tailor the intellectual property representations and warranties appropriately and to avoid inadvertent requests for disclosure that could harm the buyer or seller. For example, a detailed disclosure regarding known infringement of the seller’s intellectual property rights could be used to support defenses of estoppel and laches if the buyer ever decides to enforce its intellectual property rights. It is therefore important for intellectual property counsel to “work smart,” to be intimately involved with and integrated into the transaction team, and to “take ownership” of the intellectual property aspects of the transaction.

We review and also design, negotiate and prepare intellectual property licensing agreements.

One of the most exacting and critical agreements in business law practice and transactions involve intellectual property licensing. We see them in both regular transactions and business sales.

Exact and complete licensing agreements are required in order to effectively manage and maximize the profits and protection of patents, trademarks, copyrights and trade secrets.

Comprehension of  the many complexities of licensing agreements and of the intellectual property asset to be licensed are crucial if you intend to engage in a business field restricted due to  intellectual property parameters. It is mandatory if you wish to increase your revenue by controlled sharing of your own intellectual property of whatever nature it is.

Equally important is  that you have the counsel and assistance of a lawyer experienced and resourceful in  licensing of intellectual property. This is to  ensure complex issues and matters are addressed in such a way that protects your rights as well as reduces your risk. Overlooking small issues and details may result in substantial and significant business and financial losses, sometimes irreparably. We are here to help you avoid such losses.

YAHNIAN LAW CORPORATION advises its clients concerning their  business goals, concerns and priorities. We  will help you to identify and address the terms vital to your licensing situation. We will assist you with negotiations. We do this in order to reach a favorable agreement, and if appropriate, advise when the terms offered are not in your best interests. We expend our efforts in drafting and reviewing licensing agreements. Every matter is different. Thus, it is best for you to avoid generic forms or use the same forms over and over from prior transactions. They may fail to take into account the peculiarities of a given transaction or your actual needs. Bad documents can actually impair your efforts to reach your desired goals. Our  approach is designed to save you long periods of unproductive negotiation but instead, to achieve results that are lasting and profitable.

Steve Yahnian is an Attorney/CPA/CFP® with a Masters in Taxation from NYU, and a Tax Certificate (With Distinction) from UCLA. He is also a California State Bar Board of  Legal Specialization Specialist in Taxation. He also has a separate accounting practice called DSA ACCOUNTING.

As tax specialists, we both analyze tax law and render tax opinions. We also provide tax planning.

Our Intellectual Property Tax analysis and planning services include the following areas of intellectual property taxation.

Intellectual property tax planning must be carefully managed in order to obtain and protect  the financial benefits from your IP assets. Some IP transactions have more tax consequences than others, so understanding how tax law affects IP is crucial to your company’s net income and cash flow.

Most companies rely on the value of their intellectual property, intangible assets that distinguishes their company and products from everyone else’s. Businesses often focus heavily on creating strategies that help them protect and monetize their IP. But, they often fail to consider the tax aspects.

All too often, these same companies don’t place as much emphasis on properly aligning their IP management with their  tax planning strategy. When they fail to consider their IP tax liabilities existing or contingent, serious and unexpected tax consequences may result destroying the value of their IP.

It’s possible for a neglected IP portfolio to lead to profit buildup in a high-tax jurisdiction. When businesses don’t plan well, they may end up moving IP to another company or across borders and suffer increased tax liabilities or pricing risks.

Acquisitions and mergers can leave IP in places where it costs too much to own it for the little value it delivers. In addition, regulatory challenges may result from weak documentation of IP inventory and use of poor IP management.

When a company fails to conduct tax planning, it can be very costly.

Businesses need to have some certainty about where to keep core operating assets. This includes their IP and the organizational structure needed to develop and maintain it.

As tax counsel, we continually deal with the taxation aspects of Intellectual property:

  • Acquisition structuring and planning
  • Taxation aspects of licensing;
  • International Taxation issues and planning
  • Selling IP assets;
  • Amortization
  • Capital Asset designing to minimize taxation
  • Maximizing and Optimizing deduction of development costs and legal fees;
  • Creation of IP – Costs are Capitalized
  • Research and Experimentation – Costs
  • Startup Expenses and IP Deployed for Business Use – Costs
  • IP in the M&A World
  • IP in a Lawsuit
    • Treatment of Recovered Funds or Settlement Proceeds
    • Treatment of Attorney’s Fees and other litigation costs

We provide counsel, advice, strategies for protection and documents to protect Business Trade Secrets.

A trade secret is any practice or process of a company that is generally not known outside of the company. Information considered a trade secret gives the company a competitive advantage over its competitors and is often a product of internal research and development.

To be legally considered a trade secret in the United States, a company must make a reasonable effort in concealing the information from the public; the secret must intrinsically have economic value, and the trade secret must contain information. Trade secrets are a part of a company’s intellectual property. Unlike a patent, a trade secret is not publicly known.

Key Takeaways

  • Trade secrets are secret practices and processes that give a company a competitive advantage over its competitors.
  • Trade secrets may differ across jurisdictions but have three common traits: not being public, offering some economic benefit, and being actively protected.
  • U.S. trade secrets are protected by the Economics Espionage Act of 1996.

Understanding a Trade Secret

Trade secrets may take a variety of forms, such as a proprietary process, instrument, pattern, design, formula, recipe, method, or practice that is not evident to others and may be used as a means to create an enterprise that offers an advantage over competitors or provides value to customers.

Trade secrets are defined differently based on jurisdiction, but all have the following characteristics in common:

  • They are not public information.
  • Their secrecy provides an economic benefit to their holder.
  • Their secrecy is actively protected.

If a trade secret holder fails to safeguard the secret or if the secret is independently discovered, released, or becomes general knowledge, protection of the secret is removed.

As confidential information (as trade secrets are known in some jurisdictions), trade secrets are the “classified documents” of the business world, just as top-secret documents are closely guarded by government agencies.

Because the cost of developing certain products and processes is much more expensive than competitive intelligence, companies have an incentive to figure out what makes their competitors successful. To protect its trade secrets, a company may require employees privy to the information to sign non-compete or non-disclosure agreements (NDA) upon hire.

We provide Trademark/Service mark analysis and registration services.

Trademarks can be registered with the USPTO and the California Secretary of State Registration gives substantial protections against infringement and the recovery of costs against an infringer.

Your business name, the names of your key products, and your logos, packaging, the color of your business, and slogans—all of these can function as trademarks that distinguish your business and its services and products. So it’s important to choose your marks carefully and protect them vigilantly.

We provide the following trademark services:

  • choose trademarks that distinguish you from competitors
  • search for marks that might conflict with your own
  • register your mark with the U.S. Patent and Trademark Office
  • register your mark with the California Secretary of State
  • protect your marks from unauthorized use by others
  • resolve trademark disputes outside the courtroom, and
  • create an Internet presence and secure a domain name.

Registering a trademark or service mark with the U.S. Patent and Trademark Office (USPTO) makes it easier for the owner to protect it against would-be copiers and puts the rest of the country on notice that the mark is already taken. The registration process involves filling out an application and paying an application fee. To qualify a mark for registration with the USPTO, the mark’s owner first must put it into use “in commerce that Congress may regulate.” This means the mark must be used on a product or service that crosses state, national, or territorial lines or that affects commerce crossing such lines—such as would be the case with a catalog business or a restaurant or motel that caters to interstate or international consumers. If an intent-to-use application is being filed (the applicant intends to use the mark in the near future but hasn’t begun using it yet), another document must be filed for a fee once the actual use begins, showing that the mark is being used in commerce.