Personal Property Assets and Real Property Assets

Assets – Real – Personal

Personal Property Assets versus Real Property Assets

Most companies have both personal property and real property assets. As general rule, real property includes the land, building(s) attached to the land and fixtures attached to the building(s). A personal property asset is any asset other than real property.

The Relationship Between Real Property and Personal Property

Buildings, Structures and Fixtures are Tangible Real Property

By way of illustration, your plant’s building and its fixtures (such as cooling fans, ductwork and pipes) are generally considered tangible real property. Real property assets are tangible and can become tangible personal property assets. When an old cooling fan is replaced with a newer more efficient cooling fan, the new cooling fan becomes a tangible fixture and the old fan becomes tangible personal property.

Real Property Boundaries

A deed sets forth the boundary lines of the real property. Without permission of the land owner, anyone who crosses over the boundary lines of the real property may be charged with trespassing.

Patents are Usually Intangible Personal Property Assets

The claims of a Patent “stake out” the legal boundaries of the Patent. An analogy is the 1849 California Gold Rush where miners staked out their “gold fever” claims in the Sierra Nevada Mountains.

When the Patent claim remains valid, anyone who invades the space claimed by the Patentee without permission may become a defendant in an infringement suit. Staking your Patent infringement claims can be a “rough and tumble” adventure for both the plaintiff and the defendant. Under some select circumstances, that legal tousle may result in the defendant paying treble damages.

  • A few US Patents have been issued for real properties (e.g., building components attached to land), but most Patents are valuable intangible personal property assets.

Goods Covered by Patent Claims are Tangible Personal Property Assets

As noted above, Patents are generally intangible personal property assets. However, the widgets manufactured by your company that are covered by one or more claims of your Patent(s) are tangible personal properties which could also fall under the parameters of the Several States Uniform Commercial Codes. And if your widgets are medical devices, FDA approvals of the tangible personal properties are required before the widgets can be sold for medical use in patients.

Simultaneous Multiple Property Types

What happens when a situation arises where there are simultaneous real property, personal property and intellectual property issues? This will be addressed in a future post, so stay tuned!

If you have questions about intellectual property, tangible or intangible assets, please contact Business Patent Law, PLLC and we will discuss possibilities for your business and intellectual properties.

If you would like to stay up-to-date with news that impacts your intellectual property, sign up for Business Patent Law’s Monthly Mailer™ newsletter.

Bylaws and Operating agreements for LLCs

Operating Agreements

Operating Agreements And Bylaws

Operating agreements for LLCs, or bylaws for C-corporations, are essential for successful companies. CEOs know the combination of market and governmental forces influence their company’s “up-and-down” cycles. Highly qualified directors for a corporation or members of an LLC can provide helpful advice for management. However, such advice is weighed under the purview of the company’s operating agreement or bylaws.

Operating Agreements Assist In Navigating Business Cycles

Frequently, an LLC is organized by the joint inventors of a widget. The articles of organization are filed with a Secretary of State, but the joint inventors failed to have an operating agreement in place prior to selling widgets. Sometimes the widgets (that may begin as an experiment in someone’s garage) become a multi-billion dollar international company.

Since human memories are faulty, particularly under the stress of managing a new startup, operating agreements help keep the members focused on the company’s business and profitability. Without an operating agreement, the transition from an LLC startup to an international company can be painful for the joint inventors/owners.

Key Provisions

The founders of the LLC may consider an Operating Agreement that addresses some of the following:

  • Goals for sales and profitability
  • Declaration of each member’s ownership interests in the Intellectual Properties
  • Maximum quantity and type(s) of equity units
  • Type of equity units issued for a member’s capital contributions to the LLC (e.g., licensed/leased, sweat equity, transfer of title, working capital, etc.)
  • Qualifications for membership and maximum number of shareholders (Note: membership may be limited to certain classifications of investors as defined by the federal securities acts and regulations)
  • Vesting of members rights and privileges
  • Day-to-day management of the LLC–by members or nonmembers–and restraints to management’s authority
  • Annual and/or special meetings–quorums, majority, supermajority
  • Milestones for ceasing operations or selling the LLC–asset purchase agreement, bankruptcy, equity sale, merger, re-branding the company, etc.
  • Requirements for a withdrawing member or the estate of a deceased member
  • Conditions for forced withdrawal of a member from the LLC

The success of your business and its Intellectual Properties are directly related to sales, profitability and current/future market value. A well drafted operating agreement (bylaws) can make the road to achieving your goals less bumpy.

If you have questions about Intellectual Property matters, an operating agreement or the organization of a Limited Liability Company, please contact Business Patent Law, PLLC . We welcome the opportunity to discuss possibilities for your business and intellectual properties.

If you would like to stay up-to-date with news that impacts your Intellectual Property, sign up for Business Patent Law’s Monthly Mailer™ newsletter.

LLC friendly states

Organizing Your LLC Intellectual Property Startup

Limited Liability Company – IP Startup

One or more Limited Liability Companies, can be be beneficial for Intellectual Property startups. As indicated in a prior blog, it is prudent for companies owning Intellectual Property rights to hold the Intellectual Property in a holding company and to have the goods/services associated with the Intellectual Property owned by a separate manufacturing/distribution company.

LLC Organization and Tax Law

Should organizers of a Limited Liability Company seek the advice of a tax professional prior to organization the LLC?  Yes.

Business Patent Law, PLLC does not provide tax counsel. However, with the ever-changing tax codes, organizers should consult with a tax professional. If an inappropriate jurisdiction is initially selected for the organization of the LLC, it may not be cost-efficient to redo the LLC’s organization in another jurisdiction.

Limited Liability Companies are Legal Entities

Limited Liability Companies are legal entities of the state (or District of Columbia) in which the LLC is organized.

For a Limited Liability Company with all members domiciled in the same jurisdiction, some states offer more owner friendly in-state taxation and fees to the citizen-members than other states.

You should review a state’s securities laws (and jurisdictional fees associated with the capitalization of the LLC) to determine if a state other than your home state may be better for the organization of the LLC.

As a general rule, a Limited Liability Company is treated as a pass through entity for federal income taxation purposes.

Where Should I Organize my LLC?

Where Should the Organizers Organize a Limited Liability Company? It depends

  • The nature of the LLC’s business can affect which jurisdiction is more favorable, e.g., some jurisdictions provide favorable state and local tax preferences for certain businesses
  • Some jurisdictions are more organizational, fee and tax-friendly than other jurisdictions
  • Management of an LLC can find it advantageous to organize in a first jurisdiction and locate the LLC’s principal office in a second jurisdiction
  • Some jurisdictions require out-of-state members to pay jurisdictional taxes in the jurisdiction where the LLC is organized or conducts business while other jurisdictions do not tax out-of-state members

Business Patent Law, PLLC has a history of working with tax professionals to optimize the organizational structures of LLCs. Because of our experience with different jurisdictions, Business Patent Law, PLLC (in conjunction with a trusted tax professional) can create a workable organizational structure for LLCs.

If you have questions about the organization of a Limited Liability Company or  Intellectual Property matters, please contact Business Patent Law, PLLC and we will discuss possibilities for your business and intellectual properties.

If you would like to stay up-to-date with news that impacts your intellectual property, sign up for Business Patent Law’s Monthly Mailer™ newsletter.

Patent Maintenance Fees & Annuities

Patent Maintenance Fees and Annuities

In most jurisdictions, utility-type Patents require that periodic patent maintenance fees or annual annuities be paid to maintain the Patent. These payments are usually made to the appropriate governmental body. Most jurisdictions, other than the United States, also require the payment of annual annuities.

United States Patent Maintenance Fees

Title 15 of the United States Code requires the owner of a utility US Patent to pay maintenance fees at three and one-half, seven and one-half and eleven and one-half years subsequent to the issue date of the US Patent.

What Happens if the US Patent’s Maintenance Fee Is Not Paid?

The Patent will expire if the fee is not paid prior to the expiration of the fourth, eighth or twelfth year subsequent to the issue date of the Patent.

An Example Case: Unpaid Patent Maintenance Fees

Due to a Programmer’s Error, Company A did not Generate the Payment for the Seven and One-Half Year Maintenance Fee for Company A’s US Patent for “Gizmo.”

At this point, Company B approaches Company A regarding a license of the “Gizmo” Patent. Is it possible for Company A to enter into a Valid License Agreement with Company B?

Scenario 1

Seven years and nine months subsequent to the issue date of the Gizmo Patent, Company A discovers the maintenance fee was not paid:

  • Pursuant to 37 CFR 1.362(e), by paying the maintenance fee and the surcharge during the “grace period,” Company A and Company B can enter into a license for the Gizmo.

Scenario 2

Nine years subsequent to the issue date of the Gizmo Patent, Company A discovers the maintenance fee was not paid:

  • Pursuant to 37 CFR 1.378, by filing a petition with the Director of Patents stating that the failure to pay the maintenance fee was unintentional, paying the USPTO fee for the petition and the required maintenance fee, the Director may reinstate the expired Gizmo Patent. As a general rule, the Director usually reinstates an expired Patent as long as these above mentioned conditions are met before two years subsequent to the expiration of the Patent.  Subject to any intervening rights, Company A and Company B can enter into a license for the Gizmo.

Scenario 3

Ten and one-half years subsequent to the issue date of the Gizmo Patent, Company A discovers the maintenance fee was not paid:

  • Pursuant to 37 CFR 1.378, by filing a petition with the Director of Patents stating that the failure to pay the maintenance fee was unintentional, paying the USPTO fee for the petition and the required maintenance fee, the Director may reinstate the expired Gizmo Patent. As a general rule, after two years subsequent the expiration of a Patent, the Director exercises more discretion in reinstating any expired Patent. Subject to favorable decision by the Director to reinstate the Patent and any intervening rights, Company A and Company B can enter into a license for the Gizmo.

If you have questions about your company’s Patent maintenance fees or annuities, please contact Business Patent Law, PLLC and we will discuss possibilities for your business and intellectual properties.

If you would like to stay up-to-date with news that impacts your intellectual property, sign up for Business Patent Law’s Monthly Mailer™ newsletter.

Multijurisdictional Patent Infringement World Patents

Multijurisdictional Patent Infringement

Patent Cooperation Treaty Patent Applications have the potential to mature into Patents in most nations, but currently, there is no enforceable World Patent. Unaddressed Patent infringement can reduce your company’s profits.

Patent Rights in Multiple Jurisdictions

Many companies own patent rights in at least some of the jurisdictions in which they conduct business.

What If We Don’t Own Patent Rights in Jurisdictions Where We Do Business?

A frequent multijurisdictional situation is:

My Company owns ten US Patents, three European Patents, five Chinese Patents and three Japanese Patents. The Patents cover the company’s fifth most profitable product.

At a tradeshow in Singapore, our regional vice president discovers that a Vietnamese company has duplicated our invention and is exporting the duplicated invention to Australia, Canada and Japan. Further, the Vietnamese company intends to export the invention to Germany and the United States.

What Can You Do About “Knock offs” of Your Product Overseas?

As a general rule, Patent rights are only enforceable in the jurisdiction that granted the Patent.

  • In Australia and Canada, your company owns no Patent Rights and cannot stop the importation and use of the knock off in those jurisdictions
  • If Germany is one of the European nations covered by the European Patents, then your company can utilize European counsel to assert its Patent rights in Germany
  • In Japan, your company can use Japanese counsel to enforce its Japanese Patent rights
  • In the United States, your company can utilize US counsel to enforce its Patent rights that can include a court order to stop the knock offs at the port of entry

In the global economy, when another determines that your Company’s product is profitable, it is almost inevitable that someone will attempt to “bend the rules” and trade on your Company’s market share and goodwill for their own financial gain. Without Patent rights, you have little to no recourse in most jurisdictions.

What Should My Company Do To Prevent Patent Problems?

It is astute to procure Patent rights in all jurisdictions where your business plan, business model, actual and projected market forces justify the procurement of intellectual property.

A small front-end investment in intellectual property can reap increased future multijurisdictional sales.

If you have questions about your company’s multijurisdictional intellectual properties, please contact Business Patent Law, PLLC and we will discuss possibilities for your business and intellectual properties.

If you would like to stay up-to-date with news that impacts your intellectual property, sign up for Business Patent Law’s Monthly Mailer™ newsletter.

Federal Registration of Trademarks

Federal Registration – Trademarks/Service Marks

Is Federal Registration of My Company’s Trademark/Service Mark required?

No.  However, if the company’s Trademark/brand is not registered, it becomes more difficult to enforce the company’s rights associated with its brand. If a federal Registration is not procured, then the owner of the Trademark/Service Mark must rely on State or common law precepts to prove infringement.

Federal Registration Advantages Include:

  • The symbol “®” can be placed in proximity to the Trademark/Service Mark giving notice the Trademark is registered in the United Patent and Trademark Office
  • Substantive and procedural rights attributable to federal jurisdiction (rather than using a state’s law to control adversarial proceedings)
  • Prevention of the registration of another Trademark/Service Mark in the United States Patent and Trademark Office that is confusingly similar
  • Creates a basis for international Madrid Protocol Trademarks/Service Marks
  • Constructive notice of ownership and date of first use in interstate or international commerce

Wise Business Owners Procure Federal Registration Because:

  • Over time, the Trademarks/Service Marks can mature into the company’s most valuable asset
  • Trademarks/Service Marks are foundational components of most franchise agreements
  • Trademark/Service Mark licenses can provide a royalty stream for the registrant
  • If your company does not procure a United States Trademark, another company can procure a federal Registration of your company’s Trademark and limit your company’s usage of its brand to the geographic areas in which your company’s use was prior to the registering  company’s use of your brand name
  • After five years of continuous use, your company’s federal Registration becomes incontestable, unless one or more of nine statutory defenses can be proved by the party contesting your company’s United States Trademark/Service Mark

If you have questions about your company’s Trademarks/Service Marks, please contact Business Patent Law, PLLC and we will discuss possibilities for your business and intellectual properties.

If you would like to stay up-to-date with news that impacts your intellectual property, sign up for Business Patent Law’s Monthly Mailer™ newsletter.

How To Expedite Foreign Patents

How to Expedite Foreign Patents

Will a US Patent Application Expedite Foreign Patents?

Yes, one way to expedite foreign patents is to apply for a US Patent. This approach can expedite procurement of foreign Patents in many foreign jurisdictions.

Under European Patent Office practice, the grant of a US Patent may or may not correlate with the expedited grant of its parallel European Patent.

Three General Rules for Domestic and Foreign Patents

  • The sooner the Nonprovisional Patent Application is filed, the sooner the Patent can issue
  • In most jurisdictions, the sooner the Patent issues, the less expense incurred by the Patentee
  • The sooner the Patent issues, the sooner the Patentee has enforceable patent rights, and the sooner the Patent can become a wealth-generating asset

Business Strategy to Expedite Foreign Patents (Example)

  • Regardless of the nationality of the Patent Applicant, file a Patent Application in the USPTO
  • It best for your company to originally file a Provisional, Nonprovisional or PCT Application in the USPTO — however, if the Provisional, Nonprovisional or PCT Application was first filed in another jurisdiction, a US Nonprovisional Application can be filed in the USPTO until the US statutory deadline has passed
  • If a PCT Application is not the first Application filed, a PCT Application claiming priority to a Provisional or Nonprovisional Application is filed in a PCT Receiving Office (preferably, the USPTO Receiving Office)
  • File a US Nonprovisional Patent Application shortly after the PCT Application was filed, rather than waiting until near the deadline allowed by the PCT
  • By using this procedure, it is possible for your company to receive the grant of the US Patent before parallel Applications filed in other jurisdictions are examined
  • As previously indicated, the grant of a US Patent can expedite the grant of parallel Patents in many foreign jurisdictions

If you have questions about cost-efficient business strategies for filing your company’s Patent Applications, please contact Business Patent Law, PLLC and we will discuss possibilities for your business and intellectual properties.

If you would like to stay up-to-date with news that impacts your intellectual property, sign up for Business Patent Law’s Monthly Mailer™ newsletter.

Foreign Jurisdictions for Patents

Patent Applications – Foreign Jurisdictions

How To Select the Best Path for Patent Applications in Foreign Jurisdictions

My company is contemplating filing Patent Applications in foreign jurisdictions. Is the use of the Patent Cooperation Treaty or the Paris Convention Treaty the better route?

Patent Cooperation Treaty vs. Paris Convention Treaty

Your business model and judgement determine the best course for the filing of Patent Applications in foreign jurisdictions. Both the Paris Convention Treaty and the Patent Cooperation Treaty routes have advantages and disadvantages.

Under each Treaty, the Applicant makes a claim to the priority application (document) that was filed in a jurisdiction other than the jurisdiction (country/region/union) which you desire to file the new Patent Application. The priority document can be a non-provisional, a provisional or an international Patent Application.

The Paris Convention Treaty

  • The non-provisional Patent Application must be filed before the expiration of one year following the filing of the priority document
  • For US businesses, the priority document is usually a US provisional or non-provisional Patent Application
  • If you are only filing in a few foreign jurisdictions, the Paris Convention will likely be the least expensive route to file the foreign Patent Application
  • Most foreign jurisdictions require annual maintenance fees to perpetuate pendency of the Patent Application/Patent

The Patent Cooperation Treaty (PCT)

  • The non-provisional Patent Application must be filed before the expiration of thirty months (some jurisdictions allow thirty-one months) following the filing of the priority document
  • For US businesses, the priority document is usually a US provisional or non-provisional Patent Application
  • The PCT Application can be filed as the original and priority document
  • An International Search Report is generated by the International Searching Authority of the World Intellectual Property Organization
  • When needed, the International Search Report can provide a basis for amending the claims of the PCT Application prior to entry into the national stage of a foreign jurisdiction’s Patent Office or the United States Patent Office.
  • Amendment of the claims of a PCT Application prior to entry into the national stage can result in a speedier and more cost-effective issuance of a Patent in the United States or a foreign jurisdiction
  • Most foreign jurisdictions require annual maintenance fees to perpetuate pendency of the Patent Application/Patent

If you have questions about filing Patent Applications under the Paris Convention Treaty or the Patent Cooperation Treaty, please contact Business Patent Law, PLLC and we will discuss possibilities for your business and intellectual properties.

If you would like to stay up-to-date with news that impacts your intellectual property, sign up for Business Patent Law’s Monthly Mailer™ newsletter.

Blue Sky Laws Securities and Smooth Sailing

Securities Laws: State Blue Sky Laws and Smooth Sailing

What Are Blue Sky Laws?

Blue Sky laws are another name for State Securities Laws. The first use of the term is unknown, but the first well-known use of the term was in 1917 by Supreme Court Justice Joseph McKenna. Justice McKenna wrote the Court’s opinion in Hall vs. Geiger-Jones Co., 242 U.S. 539 (1917), which upheld the rights of states to regulate securities. He wrote:

“The name that is given to the law indicates the evil at which it is aimed, that is, to use the language of a cited case, “speculative schemes which have no more basis than so many feet of ‘blue sky'”; or, as stated by counsel in another case, “to stop the sale of stock in fly-by-night concerns, visionary oil wells, distant gold mines and other like fraudulent exploitations.”

State Securities Laws

Unless preempted by federal law, each State regulates the securities of a company that are held by a citizen of the State. By way of example, unless preempted by federal law, the shares of an Ohio small business that are held by a citizen of Kentucky can be the subject of both the Ohio and the Kentucky Blue Sky Laws.

For a small business that has shareholders in several States it is wise to utilize a federal preemption to the registration requirements of the States’ Blue Sky Laws when possible.

Is My Small Business Exempt?

If your business has an exemption from the federal securities laws, you may be unclear on whether or not it is automatically exempted from a State’s securities laws.  Security laws are complex. Whether your securities are exempt depends on which federal exemption you use.

A Federal Preemption Strategy for Securities

When circumstances permit, Business Patent Law, PLLC prefers to utilize Rule 506(b) of Regulation D to obtain and exemption from the “Blue Sky” laws.  Use of Rule 506(b):

  • Provides an exemption from the registration requirements of the federal securities laws
  • Provides an exemption from the registration requirements of one or more States’ “Blue Sky” laws
  • Does not limit the amount of capital that can be raised from the private offering
  • Allows your company to offer a single class of stock to an unlimited number of “accredited” investors
  • Reduces governmental and attorneys’ costs associated with your company’s private stock offering

Rule 506 (b) is not the only federal preemption to the Blue Sky Laws, but it is probably a more cost-effective strategy for your small business.

If you have questions about the securities laws, please contact Business Patent Law, PLLC and we will discuss possibilities for your business and intellectual properties.

If you would like to stay up-to-date with news that impacts your intellectual property, sign up for Business Patent Law’s Monthly Mailer™ newsletter.

Securities for small businesses

Federal Securities Laws and Your Small Business

Small business is not automatically exempt from the federal securities laws. Depending on the circumstances of the transaction, these laws can apply to any company, partnership or organization.

What is a Security?

The Supreme Court test for determining if something is an investment contract, i.e., security:

If something is an investment contract, it is a security. In the case of Securities and Exchange Commission v. W. J. Howey Co. 328 U.S. 293 (1946), the US Supreme Court defined an investment contract as follows:

  • It is an investment of money
  • There is an expectation of profits from the investment
  • The investment of money is in a common enterprise
  • Any profit comes from the efforts of a promoter or third party

Examples of Securities Utilized by Small Businesses

Securities can include such investment contracts as bonds, derivatives, leaseholds, intellectual property investment syndicates, options, leaseholds, publication syndicates, ownership interests in limited liability companies, corporations and partnerships and stocks.

Is Your Security Exempt?

If a security is associated with your business, it will fall under the registration and reporting requirements of the 1933 and 1934 Securities Acts – unless your business has obtained an exemption from registration.

  • Obtaining an exemption from the 1933 and 1934 Securities Acts is important – most small businesses cannot afford the costs of registering the security
  • Violations of the 1933 and 1934 Securities Acts can bankrupt most small businesses
  • Be cautious in accepting any risk capital investment from a potential investor who is not an “accredited investor” as defined in SEC Rule 501 of Regulation D
  • Be cautious in accepting any risk capital investment from a potential investor where your business has not first provided the potential investor with a private placement memorandum
  • Exempted securities can be an excellent source of capital for your company, partnership or organization

Before your company accepts the at risk investment capital, contact Business Patent Law, PLLC and we will discuss possibilities for your business and intellectual properties.

If you would like to stay up-to-date with news that impacts your intellectual property, sign up for Business Patent Law’s Monthly Mailer™ newsletter.