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JOINT AND SEVERAL LIABILITY: Boilerplate Term With a Bite

The phrase “joint and several liability” is often used in contract matters.  This type of liability occurs when more than one party is involved in a contract and where both joint liability (that of all the parties to the contract) and several liability (that of each individual party to the contract) promise the action in the contract (ex. payment of the debt).  It is important that you understand the additional commitment that you are making when you agree to joint and several liability because you may find yourself solely responsible for payment under the terms of the contract.

If the terms of the contract are not fulfilled, the injured party (i.e. landlord, vendor, or bank) has the ability to seek a legal remedy from all the parties involved (joint) or each individual party (several).  If your partners are unable to pay, the injured party can look to you individually for payment of the whole debt.  The injured party has the right to collect all of its damages from any one party.  Then the party who gets stuck with the bill has the burden of seeking contributions from the other parties to the contract.  In other words, if two parties have “joint and several liability,” this means that both of the parties are in essence individually responsible for the entire amount of the contractual obligation.

If you are asked to sign an agreement as one of the parties that will be jointly and severally liable, take steps to protect yourself.  Try to negotiate an agreement that does not call for joint and several liability or ask that your individual liability be limited and separately stated.  If your only option is to sign the agreement with a joint and several liability provision, make sure that your co-party is responsible and will pay the obligation.  Remember, if he or she does not hold up their end of the bargain, you may have to pay the entire bill.

Another option is to prepare a separate written agreement with your co-party defining responsibility for the contractual obligations.  With a written agreement, if your co-party defaults and you are forced to pay the entire amount, you will have a better chance of collecting your co-party’s share of the obligation in a lawsuit.

Joint and several liability provisions are very common in many different types of contracts.  It provides added protection to the other party that they will be able to collect from someone for the debt owed.  Each party that signs a contract should appreciate that “joint and several liability” means that each of the parties are in essence individually responsible for the entire amount of the contractual obligation.

Disclaimer: The information provided in this article is for general information purposes only and should not be construed as specific legal advice.  The application of any matter discussed in this article to anyone’s particular situation requires knowledge and analysis of the specific facts involved.

Copyright © 2009, Peak Law Group, LLC
ALL RIGHTS RESERVED

Contact the Portland Attorneys at Peak Law Group for more information.

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Small Business: What Type of Insurance Do I Need?

Protecting your business investment with insurance is a critical part of small business ownership.  It minimizes the risks associated with unexpected events, liabilities, and losses.  However, as with all insurance markets, knowing and finding the best insurance for your needs is not an easy task.

Whether you are starting a business, taking on employees for the first time, or evolving your business structure, there are many variables that determine the right insurance for your small business, including your business structure, business activities, location, whether or not you hire employees, and so on.

Most of the information published in the public domain comes directly from those with the greatest amount of vested interest – the insurance companies and their agents. So it’s no surprise that navigating the maze of small business insurance laws and best practices can be confusing.

There are two fundamental types of insurance – commercial business insurance, which is not necessarily required by law, and employer insurance, which is.  Below is a summary of the types of insurance you may wish to consider to protect your assets and investments, as well as the insurance requirements you must comply with as an employer.

Types of Commercial Business Insurance

This section covers the types of insurance policies available to you as a small business owner.  Although not necessarily required by law, you would be wise to purchase enough business insurance to protect your assets against events such as the death of a partner, a natural disaster, or lawsuit.

It’s a common misconception to think that structuring your business as a corporation or LLC limits the need for business insurance.  While these business structures do protect the personal assets of the owner from business liabilities, relying on business structure alone to protect your assets is not a substitute for liability insurance, which covers your business from losses.

It’s also important to know that, in certain instances, state law may require that your particular business activity is covered by some form of insurance.  For example, if you use a car or truck for business purposes, Oregon requires that you purchase commercial auto insurance for its use.  Refer to the Oregon Insurance Division (http://www.cbs.state.or.us/external/ins/
consumer/consumer.html) for more information about what insurance is required in Oregon.

Here is a summary of the kinds of business insurance policies to consider for your small business:

  • General Liability Insurance – This insurance broadly covers and provides protection against the legal hassles associated with accidents, injuries and claims of negligence.
  • Product Liability Insurance – If you manufacture, wholesale, distribute and retail a product, this insurance protects against financial loss as a result of a product defect that can cause injury.
  • Professional Liability Insurance – If you provide a service to a customer, this insurance can protect against malpractice, errors, and negligence in the provision of those services to your customers.  Oregon requires certain professions (e.g. physicians and attorneys) to carry such a policy.
  • Commercial Property Insurance – This covers everything related to the loss and damage of company property due to a wide variety of events such as fire, smoke, severe weather, vandalism, etc.  The definition of “property” is broad, and includes lost income, business interruption, buildings, computers, company papers and money.  This is definitely one you should talk to an insurance expert about to understand your specific needs.
  • Home-Based Business Insurance – Contrary to popular belief, homeowners’ insurance policies do not generally cover home-based business losses.  Depending on risks to your business, you may add riders to your homeowners’ policy to cover normal business risks such as property damage.  However, homeowners policies only go so far in covering home-based businesses and you may need to purchase additional policies to cover other risks, such as general and professional liability.

Since there are such a wide variety of insurance policies available, always discuss your individual business insurance needs with an insurance agent or broker.

Insurance Requirements for Employers

If your small business hires employees, you are required by state law to pay for certain types of insurance. Here is a breakdown of the three key employee insurance requirements:

  • Workers Compensation Insurance – In general, Oregon businesses with employees are required to carry Workers’ Compensation Insurance coverage.  However, some workers don’t have to be covered by workers’ compensation, even if they are employees (i.e. sole proprietor, limited liability company members, etc.).  Visit the Oregon Workers’ Compensation Division page (http://www.cbs.state.or.us/wcd/communications/
    emp_info.html) for more information.
  • Unemployment Insurance Tax – If you have employees you are required to pay unemployment insurance taxes.  Employers need to register with the Oregon Employment Department by completing and sending a Combined Employer’s Registration to the Oregon Department of Revenue.  Check the Employer’s Handbook provided by the Oregon Department of Employment (http://www.oregon.gov/EMPLOY/
    TAX/docs/EDPub117.pdf) for more information.
  • Disability Insurance – In the U.S., it is mandatory to purchase disability insurance only if your business is in one of six locations – California, Hawaii, New Jersey, New York, Puerto Rico and Rhode Island.  If your business is located elsewhere, the law does not require you to purchase disability insurance for your employees; however it can be purchased and provided as part of an “employee benefit” scheme to your employees through commercial insurance companies.

Insurance coverage is available for every conceivable risk your business might face.  Cost and amount of coverage of policies vary among insurers.  You should discuss your specific business risks and the types of insurance available with your insurance agent or broker.  Your agency can advise you on the exact types of insurance you should consider purchasing.

Disclaimer: The information provided in this article is for general information purposes only and should not be construed as specific legal advice.  The application of any matter discussed in this article to anyone’s particular situation requires knowledge and analysis of the specific facts involved.

Copyright © 2009, Peak Law Group LLC
ALL RIGHTS RESERVED

Contact the Portland Attorneys at Peak Law Group for more information.

Domain Names: Danger Lurks Below the Surface

You register the perfect domain name, spend a lot of time and money to create a killer web site and open for business on the Internet. Business is good and prospects are even better until one day you receive a certified mail letter from the lawyer for ABC, Inc., notifying you that: (i) your domain name infringes on ABC’s federally registered trademark, (ii) you must immediately cease and desist from using the domain name and all references to the trademark, (iii) you must transfer the offending domain name to ABC, and (iv) pay ABC damages equal to all the profits made by your online business.

Domain names pose a specific challenge not only because of the host of options to choose from (e.g. .com, .net, .org, .biz, .info), but because some domain names are protectable under trademark law while others may infringe on the legitimate rights of trademark owners. It is important to understand that obtaining or using a domain name (1) is not a substitute for securing trademark rights (which is usually accomplished by a combination of actual use of the mark in commerce and federal registration) and (2) does not, in and of itself, create or establish any trademark rights merely by its use as an Internet address. The federal trademark and domain name registration systems exist independently with no cross-checking of the other database prior to registration. Moreover, a trademark owner does not have an absolute right to a domain name consisting of its mark, in whole or in part.

Dangers of Trademark Infringement Involving a Domain Name.

Unfortunately, the above scenario occurs far too often to domain name owners. The cease and desist letter alleging trademark infringement should be taken very seriously. Because trademark owners have a duty to protect their marks and to take appropriate action to prevent others from infringing on their marks, more often than not the trademark owner who sends a cease and desist letter intends to follow it with an infringement lawsuit unless the alleged infringer concedes to the trademark owner’s demands.

If you obtain a domain name that is identical or similar to a trademark or service mark that you do not own, you may be the defendant in a lawsuit brought under the Anticybersquatting Consumer Protection Act or an arbitration procedure brought under the Internet Corporation for Assigned Names and Numbers Uniform Dispute Resolution Policy (“UDRP”). Defending a cybersquatting lawsuit or UDRP arbitration can be very expensive, especially if you lose. The good news, however, is that there are steps you can take before acquiring a domain name to reduce and possibly eliminate the risk of trademark infringement arising from your use of a domain name.

Avoid Acquiring a Domain Name that Infringes a Trademark.

A prospective domain name owner can substantially reduce the risk that a desired domain name will infringe on a trademark by doing proper due diligence before investing the time and money in registering the domain name. You should never register or purchase a domain name without first investigating if the desired domain name is identical or similar to an existing trademark or service mark. The following is a list of the things you can and should do before you acquire a domain name to investigate possible trademark infringement problems.

1. Do a search on several popular search engines (such as Google) to determine if the desired domain name is being used as a business trade name or the name of any goods or services. Review all links that look like they could contain your desired domain name used as a business name (trade name) or the name of goods or services. If you find a business or any goods or services that are identical or similar to your desired domain name, you should probably seek another domain name.

2. Do a search at Whois.net to see if there are any domain names that use domain names that are identical or similar to your desired domain name or that contain identical or similar text. If you find a trade name or any goods or services that use your desired domain name, you should probably seek another domain name.

3. Do a search of the United States Patent & Trademark Office database called the Trademark Electronic Search System (TESS). TESS contains all federally registered trademarks and services marks, all previously filed, but dead or abandoned trademarks and service marks, and all pending applications for trademark registration.

4. Hire a reputable search firm to do a national trademark, service mark, trade name and domain name search for you. A good search by a capable search firm will do a comprehensive search of these four important categories and give you a written report of the results. If the search results show that there are any identical or similar trademarks, service marks, trade names or domain names, you should seriously consider seeking another domain name.

As an alternative, you can hire a trademark attorney to perform steps 1 through 4 for you. Frequently the question of whether a possible domain name will infringe on another person’s trademark is not obvious and requires knowledge and interpretation of trademark law. It is possible that in some cases a desired domain name will not infringe on another trademark or service mark even if steps 1 through 4 all find identical or similar marks. Whether there is an infringement problem usually depends on the facts and circumstances of each potential domain name and an experienced trademark attorney should be able to tell the difference.

There are many issues to consider when considering registering a domain name and possible trademark infringement should be one of the main ones. By taking some preemptive action, you can avoid being the recipient of a cease and desist letter alleging trademark infringement. A relatively small upfront investment could prevent you from having a very large legal bill defending a trademark infringement lawsuit or arbitration proceeding.

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Disclaimer: The information provided in this article is for general information purposes only and should not be construed as specific legal advice. The application of any matter discussed in this article to anyone’s particular situation requires knowledge and analysis of the specific facts involved.

Contact the Portland Attorneys at Peak Law Group for more information.

What’s in a Name: Trademarks, Service Marks and Trade Names (Part 2 of 2)

Now that we have those definitions out of the way, what can Greg do to protect his brand name?

Common Law Trademark

Enforceable rights in a trademark or service mark generally arise under common law by adoption and use of the mark in connection with goods and services moving in commerce.  The trademark or service mark rights acquired are enforceable in the trading area served by the user of the mark.  The first user of a trademark or service mark has the right to prevent others from using the same, or confusingly similar, mark in any manner which is likely to cause confusion among consumers, users or customers for the first user.
Before a mark is adopted, a search should be performed to determine whether the mark is available for use as intended, that is, whether the mark may be used on your goods and services without creating the likelihood of confusion, mistake or deception because of similarity to a prior mark.  Adopting a trademark without a search entails considerable risk.  Trademark infringement may be found even if the defendant innocently adopted its mark.  Having a search performed before adopting a mark costs little and makes sense because it helps avoid the expense and aggravation of changing the mark after it has been in use.

Registered Federal Trademark

Trademarks and service marks are often registered with the U.S. Patent and Trademark Office (“USPTO”).  The function of the federal statutes governing trademarks, the Lanham Act, is not to grant trademark rights (since those rights are secured by the common law principles), but rather to provide a central clearing house for trademarks through a registration process.  However, registration can create a presumption of exclusive use and provide significant advantages in enforcement actions.  Also, registration of a mark provides constructive notice of the registrant’s claim of ownership and removes any defense by a subsequent user of innocent, unknowing infringement and in effect gives national scope to a mark that has been used in only a limited geographic area.  Finally, the rights of an owner of a federally registered mark are paramount to the rights of the owner of a state registered mark.

The trademark symbol TM or service mark symbol SM may be used by anyone to alert the public that the name or symbol is claimed as a trademark or service mark.  These marks merely indicate that the user thinks he has a trademark or service mark.  The ® indicates a registered trademark, and can only be used after a trademark registration is received from the USPTO.

Registered Oregon Trademark

The state of Oregon, like most other states, provides for registration of trademarks and service marks.  Registration at the state level does not secure rights beyond the boundaries of the state.  On the other hand, registration in the state of Oregon is inexpensive ($50), easy (the form is on the Oregon Secretary of State’s website, www.filinginOregon.com/forms) and quick (trademark and service mark registrations go through a more detailed review process at the federal level).
Although state registration will not create the same degree of protection beyond the boundaries of the state as federal registration, registration in the state can be a cost effective precaution for a business that has a primary local customer base.  State registration gives you the right to exclude the later use of others of the same or confusingly similar trademark in Oregon only. State registration also provides additional enforcement rights, including minimum statutory damages of $10,000.

Another benefit is that your trademark becomes visible.  When others are conducting searches to decide what trademark to adopt, one of the databases that can be searched is state registrations.  If your registration shows up in someone’s search, they may be persuaded to use a different mark.  Registration in Oregon will not protect you from infringement claims by a possessor of a similar trade name, trademark or service mark (common law or registered).

Assumed Business Name

Any person who does business in Oregon under an ABN must register that name with the Secretary of State. The Oregon Secretary of State will not register a business name which “is not distinguishable on the records…from another assumed business name or from the name of a person.” The registration of an ABN, however, does not bestow trademark or service mark rights on the registrant.  The Oregon statute governing ABNs does not purport to give the registrant the exclusive right to use the name; the statute is intended to protect the public from confusion, not grant a private right.  Do not confuse a trademark registration with an ABN or any other corporate documents filed with state.  For instance, an ABN is filed with Oregon Secretary of State primarily for the benefit of creditors and has absolutely nothing to do with obtaining a protectable trademark registration.  The concept of protecting the name by filing for an ABN is perhaps one of the most common misconceptions in business communities.

So even though Greg, our hard-charging entrepreneur, might put the name of the business on the door, on his business cards and on his letterhead and file for an ABN, he might be prevented from using “Greg’s Gadgets” as the brand for his gadgets and services.  A company has a legal right to use a name as a trademark only to the extent that it does not infringe upon existing trademarks.  Greg should first research the name “Greg’s Gadgets” for potential conflicts and then register the name as a trademark with the appropriate entities.  He might still have more difficulty when he tries to reserve the website http://www.gregsgadgets.com, but that is yet another matter.

Disclaimer: The information provided in this article is for general information purposes only and should not be construed as specific legal advice.  The application of any matter discussed in this article to anyone’s particular situation requires knowledge and analysis of the specific facts involved.

Contact the Portland Attorneys at Peak Law Group for more information.