VRP Law Group, P.C.

A Boutique Business, Employment and Intellectual Property Law Firm

Archive for the ‘This Weeks Update’ Category

Information Technology and Intellectual Property Audits: What are they? Why do we need them? What do we need lawyers for?

Tuesday, November 11th, 2014

Information Technology (IT) and Intellectual Property (IP) Audits are more and more common place and necessary for today’s trusted advisers and professionals. The more effort you take to make sure that you protect your client’s confidentiality, intellectual property, personal information, banking information, tax information, business strategy and marketing plans, is protected the better of you will be. VRP Law Group’s IT Audits consist of the following: 1) Review of your Technology Service Agreements; 2) Reviewing and Identifying Gaps if any, in any ISP or network security settings; 3) Making sure that there is an immediate and prompt investigation that identifies vulnerabilities, breaches in data security, documents and preserves the investigation and the evidence gathered during the investigation; 4) providing good terms of use and privacy policies for use of your client’s websites or your own website; 5) Creating good internal controls to protect extremely sensitive information, intellectual property and vital trade secrets; and 6) having effective IT communication policies, password protection means, and effective training and communication of such policies to your employees and IT vendors.

Moreover, making sure that you use trusted IT vendors and manage any change in network and internet service providers to ensure that proper security protocols and change management procedures are followed by your employees, your current and future trusted vendors. Without having someone like VRP Law Group that can oversee the process and/or identify the gaps, vulnerabilities, and coordinate an effective investigation and response the change management procedures may be ineffective in addressing data security issues. These data security issues can lead to liabilities for identity fraud or theft, breach of client’s confidentiality, misappropriation of your trade secrets, vital research and development memos, confidential consulting opinions, freedom to operate opinions, willful infringement opinions, patentability analysis, prior art search analysis, fraud upon the USPTO, US Copyright or Trademark Office, or many sometimes unforeseeable problems, until a lawsuit is filed.

Empowering yourself, your employees to deal with these problems without the worry of irrational fears and implementing the necessary change management procedures is a challenging endeavor. VRP Law Group is here to help you see and identify the foreseeable and legitimate risks without heading down the wrong path or becoming an individual that is unable to see anything, but impending doom in terms of managing its assets, confidential information, intellectual property and other vital competitive advantages that may be a lure for any hacker. Using our IT and IP audits will enable you to make sure that you work closely with experienced technology counsel, cyber Law, data privacy law, and intellectual property counsel. This is always a team endeavor to make sure that you focus your clients, entrepreneurs, small or large companies’ resources on the right breach or vulnerabilities to document and preserve the corrective measures and ensure that future or repeated incidents are minimized.

Your clients and you will sleep a bit easier at night with having VRP Law Group’s IT and IP Audit professionals looking after you, your clients, your intellectual property, your change management procedures, and related information technology matters. For more go to: www.vrplawgroup.com, www.bipeblawg.com, www.eebrunchclub.com

Commercial Loan Documentation Practices of Lenders and Bankers: The Good, the Bad and the Ugly!

Thursday, October 2nd, 2014

Most commercial banks and lenders utilize laser pro or commercially available loan documents for most typical loans. However, there is a tendency to issue and send various letters and amendments to the promissory note throughout the process that often can create a misunderstanding, a lack of meeting of the minds and ambiguities in the interpretation of the promissory note and/or any associated guarantees.

In a recent case, the Lender had issued two letters of credit, executed a promissory note, and a guarantee without taking the time to cross-reference the documents and fully incorporating the borrowing bases in both all documents. The total amount of the loan or the line of credit was increased from 2 million to 2.6 million, but without incorporating the changes in the letter agreement and the original promissory note in the Additional Terms section. Thus, the bank was essentially an unsecured creditor or lender for the excess or increase in the amount of the line of credit from 2 million to 2.6 million, because that amount was only secured against 75% of the accounts receivables.

Unfortunately, the integration provision and the letters were not explicitly referencing the borrowing bases and the Additional Terms section of the new commitment letter did not incorporate the increase in the line of credit and reference additional collateral. This created a problem when the bank went to enforce the original note, because it did not reference the change or increase in the line of credit. Without this change being explicitly incorporated into the promissory note and cross-referenced in the letters of credit and the amendment increasing the borrowing base, the bank was essentially unable to secure the full amount of the line of credit against the accounts receivables or the borrower’s other assets.

For more go to: www.bipeblawg.com, www.eebrunchclub.com, www.corporateacquisitionsattorney.com

Impact of the Definition of a Judicial Entity and the Principles of Corporate Citizenship on the Internet!

Tuesday, September 9th, 2014

The most important part of any inquiry into corporate citizenship and a foreign national’s international business of any enterprise is determining, which, laws will apply. It is extremely difficult for any international company to plan for expansion into new countries without considering the impact of the citizenship of each of its Members. Limited Liability Companies and C-Corporations are the most preferred type of structures for purposes of corporate expansion and acquisition of corporate funding. Unfortunately, it is very difficult to determine the citizenship of each Member or Transferee and ensure that the Operating and Membership Agreement has the proper restrictions to ensure that you do not run afoul of the LLC’s corporate Citizenship rules.

If a foreign national is doing business in the US, then its ability to take advantage of local laws and tax regulations will be subject to the citizenship of each Member. For purposes of diversity jurisdiction, each individual’s citizenship will be considered for purpose of subject matter jurisdiction. Thus, if, you have an individual from China or Brazil, the first, inquiry, is whether or not the entity will be recognized as a US citizen, corporation or partnership. Once, this is determined based on the citizenship of each individual member and at least, one individual is a US Citizen, the Corporation will qualify for US Citizenship or legal entity status of a Judicial Entity for purposes of being able to take advantage of local laws.

However, when you have international citizens that conduct business in the US or reside in the US this raises a bit of a concern about the potential conflict between corporate citizenship rules the regulations relating to taxation of the individual. Each country has an incentive to ensure that their local tax revenues are maintained; thus, this issues is particularly, important for online companies and foreign nationals looking to do business in the US. The U.S. has entered into a tax treaty with most major countries to avoid double taxation of income to the LLC or Corporation. The idea being that if, you have paid taxes overseas, then you are not required to pay more taxes on the funds that are brought into the U.S. However, with respect to individuals that live in international countries, but stay in the U.S. for less than 180 days, they are able to avoid having to pay income taxes in the U.S.

For more go to: www.corporateacquisitionsattorney.com, www.bipeblawg.com, www.iptrialattorney.com or www.chicagobusinesscounsel.com

Corporate Asset Transactions are Subject to Continuation Rule and Fraud Exceptions for Successor Liability to Attach!

Friday, August 8th, 2014

A corporation that purchases assets from a seller is generally not responsible for the liabilities or loans relating to the assets that are transferred. The general corporate rule favors against liability of the new owners in a simple asset transaction. However, an asset transaction is not something that is guaranteed to avoid successor liability. If there is commonality in ownership of stocks or units, management, officers or directors of the Successor company, then the Successor Company does not escape liability and maybe liable for unpaid payroll taxes, mortgages on the real estate, property tax liens, salary or payroll expenses, retirement benefits or anything else that would be on the books of the selling entity.

This general rule stems from the continuation rule, which, does not apply to arm’s length transactions. In an arm’s length transaction the buyer is generally not held responsible for any liabilities if, there is an intervening owner or company that breaks the chain of ownership. Moreover, commonality of employees is not sufficient to demonstrate commonality for purposes of the continuation rule. The only, other instances, wherein, the Successor Company is liable have to do with the following circumstances: 1) fraud is for the purpose of escaping liabilities or debts of the selling entity by the buyers; 2) where the sale involves the consolidation or merger of the buying entities and the selling entities; 3) where the buyer signs and assumption of liabilities agreement or an assumption of agreement.

The reality is that in Illinois the Continuation Doctrine is often, applied to instances where the Seller has commonality of ownership of stocks or units, officers, managers, or control of operations with the immediate Buyer. However, in instances, where there is an intervening buyer or an intervening seller, and there exists a commonality of ownership of stocks or units, officers, managers or control of operations the continuation rule may apply if, the intervening entity is a mere straw man to escape the liabilities. Unfortunately, this requires a fairly similar allegation and analysis relating to the exception for fraud.

Thus, in corporate litigation or transactions, the corporate attorney and corporate litigation counsel must be cautious in making sure that the transaction is fully explored during discovery and there is an allegation of fraud in additional to mere continuation of the selling entity. Moreover, a review of the corporate transaction and deal documents along with the liens on the assets the original seller, the ownership and accounts of the intervening buyer/seller, and the final buyer’s books of accounts and commonality of ownership of stocks or units, officers, managers or control of the intervening and the original entities must be examined to figure out the applicability of either, the continuation doctrine or the fraud exception for successor liability to attach.

Use of Template Forms in Domestic and International Transactions-What about choice of law and jurisdiction?

Thursday, July 24th, 2014

We have all been involved in having to represent a client that has come to us after downloading a form or using a template provided by the other party, from searching the web or some friend, and found him, her or itself in a dispute with the other party. Now, in the increasingly global market it is even more problematic for individuals to deal with each other in a pragmatic manner without using good choice of law and jurisdictional provisions. It is very hard for individuals that use competing forms, poorly drafted forms and templates, or a Hodge podge of clauses or provision thrown together without any understanding of the business, litigation and transactional risks involved.

Unfortunately, this arises from a situation where individuals are in a rush to close the deal, but fail to grasp that there may be more loss from closing the deal than delaying or negotiating the deal further. In order to ensure that the parties have a clear grasp of their rights and their obligations it is crucial to ensure that you know which law will govern over the parties transaction and any dispute arising from it. It is common place for most states long arm statutes to provide for personal jurisdiction over any transaction that arose out of a contract or the performance of a contract within that state or from a personal injury arising from a product or service offered within that state.

However, it is much more difficult to sue a person in a state where the dispute arises from a contract that was not performed in the state, made in the same state, or services rendered were unrelated to the contract when the party is an international company. This makes it harder to pursue claims against an international party that may have operations in the United States, but not any shareholders or members that are citizens of the United States. Thus, often times, a business deal may be negotiated without a full grasp of the implications for purposes of enforcing the Agreement that is negotiated.

Many times, the company may not be a citizen of the state or the United States. Thus, it requires domestic clients to be cognizant of the need to acquire consent to jurisdiction in hers, his or its local state of operations, a convenient venue within the United States, or a domestic or international arbitration panel. Moreover, it is equally as crucial to be able to include a choice of law provision or incorporate by reference a treaty that the international party or the foreign country is a signatory and has executed.

Moreover, incorporating the Hague Convention on the Taking of Evidence into your Agreements and Choice of Law provisions is a very simple way to ensure that you are able to establish the consent required for exercising personal, subject matter jurisdiction and decide the substantive law that will be used to resolve any disputes to these transactions involving international parties. For more see the following: Battle of Forms and Choice of Law Analysis

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