Protecting Tenants at Foreclosure Act (PTFA)

The “Helping Families Save Their Home Act of 2009” (S.896) went into effect on May 20, 2009, and includes the “Protecting Tenants at Foreclosure Act” (PTFA), as well as amendments to Section 8 of the “United States Housing Act of 1937.” Both portions of the bill establish new Federal protections for tenants living in properties that go into foreclosure. This law preempts current state laws except where a state’s law provides stronger protections for the tenant. The PTFA included a sunset clause which scheduled this law to expire on December 31, 2012.

Effective May 20th, tenants with a “bona fide” lease that was entered into before notice of foreclosure can remain in a foreclosed home until the end of their lease, unless the bank sells the property to someone who intends to make it his/her primary residence. If the new owner intends to occupy the home, they are still required to give 90-days notice to the tenant prior to eviction. If the tenant does not have a lease (month-to-month) or current state law allows the lease to be terminated at will, there is still a 90-day notice requirement prior to eviction. Notice must be provided by the “immediate successor in interest” which, in most cases, would be the bank or the new owner.

The Act was designed to be silent on several issues which means state law will need to be consulted for further clarification.

Do You Have Trade Secrets?

Do you have trade secrets in your business?  If these trade secrets went to a competitor would it hurt your business?

A trade secret gives a business an advantage over its competition.  The secret could be a method, device, business intelligence, or formula that gives a business an advantage over its competition.  By definition a trade secret includes information, including a formula, pattern, compilation, program device, method, technique or process that derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable, by other persons who can obtain economic value from its disclosure or use.

Do you really have a trade secret?  Prove it.

Do you actively protect the trade secret?  Do you use non-competition , non-solicitation, and confidentiality agreements?  Do your employees execute such agreements with you?  How about third parties that may have access to the information?

If you don’t, good luck getting a court to see your side of things.  Federal and state laws can help you protect your secrets and help you stop others from using the secrets, but you have to take reasonable efforts to maintain secrecy.  If you don’t treat a “trade secrete” like trade secrets you will not get paid.  Look up MP Medical Inc. v. Wegman.  If you treat “trade secrets” like trade secrets, you will get paid.  Look up H&R Block v. Paramount Tax Services.

Besides the agreements referred to above, a business must have company policies in place that are documented and are actually followed practices.  Practice, practice, practice.  I cannot say it enough.

Expired Patents

Updated:  June 28, 2010. See THIS.  Federal Circuit held that Solo Cup did not have the “intent to deceive the public” required for false marking liability.  The court created a high bar for plaintiffs to overcome and the decision will put a damper on the false-marking claims.  However, some defendants may not have the same advice-of-counsel excuse that Solo Cup was able to rely upon.  The case below is still highly pertinent to businesses with patents.

Recently, hundreds of companies have been sued for false patent marking.  Federal statute creates a cause of action against a manufacturer who, with intent to deceive the public, mark unpatented products as patented. Any person may sue to collect the damages, however, half of the award goes to the Federal Government.  Damage awards may be awarded up to $500 per falsely marked article.

One of the largest of such cases is Pequignot v. Solo Cup Co. where Solo Cup Co. is being sued by a patent attorney claiming the company is misleading consumers by marking its products with expired patent numbers.  To save money on retooling and other costs, Solo Cup had continued to mark its products with patent numbers even though those patents had expired.  Pequignot sought a damage total exceeding $10 trillion based on the $500 per falsely marked article standard.

The judge ruled in Solo Cup’s favor, but the case is on appeal.  What happens on appeal will likely have great ramifications for other manufacturers.  This case is one in a series of recent cases raising false marking claims, and it highlights the potentially high stakes from falsely marking products — the maximum potential damage award against Solo was enormous. However, the court’s decision creates a high bar for plaintiffs seeking to obtain a favorable decision in such cases, at least when the defendant has acted in good faith.

This unusual case raises the question of how businesses can protect themselves from patent-marking bounty hunters.  Since federal law allows individuals to sue for false marking and reap monetary benefits, it is imperative that companies learn how to avoid false-marking liability.

First: Pay attention to the details of your patent.  When does it expire?  Stop marking the product once it does expire.

Second: Take steps to build your market base by developing a strong trademark while you have patent protection.  This will help your market dominance even after your competitors can enter your market and produce “copies” of your product.

Third: Patent your ongoing innovations.  Patent your new and improved changes to your product.  This will give you protections that will extend beyond the length of your original patent protection.

Who is an Inventor? Is it important?

Inventors on a patent should only be ones who provided inventive contribution that will be part of the material later claimed.  It can be very problematic for a company embroiled in a patent contest in court, if an inventor is listed who did not provide inventive input or an  inventor was left out who did provide inventive input.

Someone who helps build a portion of the system, but did not provide inventive input to what is described as inventive material in the patent application, is not an inventor.

Normally, the inventors will assign the patent rights to an invention to the company for which they are working for.  If someone is an inventor that is not an employee of the company then that needs to be handled properly and their assignment should be obtained.  A company should decide whether some incentive should be given to inventors, possibly stock options based on the price of the shares at the time of the invention.

Business Valuation in a Troubled Economy

The following is a quote from a gentleman that I have worked with.  This came out in his newsletter last week where he analyzed GF Data Resources’ report regarding private equity transactions:

“Now that many more of the “B” and “B+” companies had become a part of the mix, the overall pricing on deals (multiple of EBITDA) fell to the lowest level they’d seen in their 6 year history.  In Q3, the average multiple was 5.1 x EBITDA for all of their reported private equity deals.  The change in frequency distribution of “A” vs. “B” companies was dragging down the average, with more of the “B” class in the third quarter deals.”

A “B” company is a company with strong financials and is experiencing steady growth but not strong growth.  Companies working in the construction/housing sector will see their multiples at the low end.  If the buyer is using leveraged debt, the current multiple is ranging from 1.7 to 3.8 for these “B” companies.

These multiples are similar to multiples after the 2000 financial crisis.  It took six years to get the high multiples that we were seeing over the last couple years.

So the bottom line?  Pick a multiple for your forecast that is realistic yet still optimistic.  What does an investor want to see?  Optimism or Realism?

Where to Find the Consumer Price Index – Portland Area

Many leases escalate the lease rates each year based on the change in the Consumer Price Index.  In Oregon and southern Washington, the Portland-Salem index is likely the index cited.

The link to the web page with this information is http://www.bls.gov/ro9/ro9_or.htm.  Go down to the News Releases section and select the “Portland-Salem, OR-WA (Semiannual News Release)” HTML or PDF link.

The semi-annual CPI Index comes out in July or August (for Jan thru June) and the Annual CPI for the each prior year comes out in February or March.

The full list of Western News Releases and Indexes can be found at http://www.bls.gov/ro9/news.htm.

What to do in the down economy.

Survive and Prosper.

How does one position oneself to not only survive a down economy but to prosper during the difficult times?

Evaluate market opportunities. One option for companies positioning themselves to defend against economic pressures is to consider merging or purchasing other companies.  Instead of closing up shop, cutting costs, laying people off, and doing everything else you can do to keep from going under, companies can look for new solutions.  Teaming up with an established company in another market can help shift assets to more meaningful work, and help deflect some of the pressures felt at home.  Establishing a presence overseas is one way to set a company up for more aggressive growth down the road.

Insist on written contracts.  Written contract allow both parties to know the expectations of the other party, the contract is the proof that there is an agreement.  Avoid the expense and uncertainty of having to prove to a judge what the terms of your agreement were by having those terms written.

Enforce the terms of your agreements. If the customer does not pay on time, do not continue doing work or making deliveries to the customer.  If you haven’t been paid in 30 days, do not continue to supply services, material or labor, or you can be getting yourself further indebted to your customers.  You will be more successful if you seek payment early while there is still money and a well written contract will provide that the debtor has to pay attorney fees and interest on contracts that go to collections.

Collateralize your agreements. Protect yourself by collateralizing your accounts receivables where possible and filing the appropriate UCC statements.  Taking a security interest can also help you gain priority against other creditors.

Evaluate you customers. If the customer is a small company or even a one-man operation, consider obtaining a personal guaranty for the work and products delivered.  If a business is having financial difficulties and they have two bills to pay, and one of them is personally guaranteed, the bill personally guaranteed will be paid first–simply because that bill will cause the owner personal liability and therefore is more urgent.

Protect your intellectual property. Require third parties to sign confidentiality agreements.  Protect your ideas by registering copyrights, trade-marks and patents.  Use exclusivity and non-circumvention agreements with contractors, suppliers, customers, and others.

Mind the basics. Take this slow time as a time to get your “house” in order.  Update your minute book.  Review company minutes and ensure that they are all present and complete and make sure owner equity is properly documented.

Take advantage of the opportunity a down economy can offer.  Refine and focus your business and its practices and you and your business will prosper.

The Personal Law Firm

I am your personal attorney for private and business needs.  I run a small office so that I am affordable for the people who need me the most. If you need help and don’t want to pay for a large team of lawyers to work on your matter, then call me to see if I can help you. My business is based on the old family doctor model.  I am dedicated to treating the legal needs of the whole person by developing an ongoing, personal client-attorney relationship focused on integrated care.  Most problems I can take care of quickly. For those unique problems that you may have, I may call in a specialist and consult with other lawyers having unique skill sets. I work this way with you, consulting with other lawyers on specialized matters, so that I may deliver a high degree of expertise and advice at an affordable price.

The personal lawyer model has been around for many years but has been typically only available to the very wealthy and large businesses.  The “family lawyer” or “firm lawyer” was placed on retainer to represent a wealthy family in all of their legal issues.  It was common for such a relationship to span multiple generations within a family.

In unique matters, a personal lawyer serves you by consulting with other attorneys who specialize in unique areas of the law. In very complicated cases, a personal lawyer may retain other attorneys to work on a portion of your case and the personal lawyer serves as a legal manager for you to make certain the work is done efficiently and economically.

My desire is to place the concept of a personal lawyer within reach of individuals, families, and businesses.  I represent individuals and the businesses that they work hard to build.

This firm is built upon the ideals of honesty, excellence, and hard work.  We’re committed to performing our best for our clients and for ourselves. We believe in giving back to our community, and this principle is brought to life through the active and enthusiastic support we provide local business, cultural and social service groups. We like what we do and we like who we work with.

AML: U.S. Treasury Sanctions – Sigue Corp.

Sigue Corp. and Sigue, LLC of California to Pay $15 Million to U.S. Government for Anti-Money Laundering Program Deficiencies
FinCEN Announcment

The Financial Crimes Enforcement Network (FinCEN) announced the assessment of a civil money penalty in the amount of $12 million against Sigue Corporation and Sigue, LLC, a money services business headquartered in San Fernando, California, for violations of the Bank Secrecy Act (BSA). Sigue, without admitting or denying the allegations, consented to the civil money penalty. Concurrently, the Department of Justice announced today that Sigue has also entered into a deferred prosecution agreement on charges of failing to maintain an effective anti-money laundering program and will forfeit $15 million to the U.S. government. FinCEN’s penalty will be deemed satisfied by a portion of the $15 million payment to the Department of Justice.

Sigue has more than 7,000 agent businesses or “authorized delegates” located throughout the United States, providing money transmission services from the United States to Mexico and Latin America. The authorized delegates, which are typically small businesses, and Sigue each earn a small fee for the transactions conducted through these agents.

FinCEN determined that Sigue failed to establish and implement an anti-money laundering program reasonably designed to ensure compliance with the Bank Secrecy Act which led, in turn, to a failure by management at Sigue to implement measures to respond to continued patterns of suspicious activity, with repeated common characteristics, at certain agent locations. Specifically, on multiple occasions over an extended period of time, 47 agents assisted customers in the structuring of transactions represented to be drug trafficking proceeds to avoid the currency transaction reporting requirements of the Bank Secrecy Act. Sigue’s failure to implement effective internal controls, training or independent testing to manage the risk of money laundering was serious, longstanding and systemic.

“Today’s enforcement action reinforces our message on the importance of compliance by all the diverse sizes and types of financial institutions subject to the Bank Secrecy Act,” said James H. Freis, Jr., Director of the Financial Crimes Enforcement Network. “Principals of money services businesses must exercise effective oversight and control over the authorization, transactional activity and operations of their agents to ensure compliance with the BSA and prevent money laundering. Operations with sound programs minimize the risk of being misused by criminals and unscrupulous or non-compliant agents.”

In particular, FinCEN found that Sigue’s transaction monitoring system was not commensurate with the volume, dollar amounts and geographical reach of transactions processed by the money services business, resulting in the filing of incomplete and/or inaccurate suspicious activity reports. This occurred despite the repeated patterns of suspicious activity by identical or similar customers, beneficiaries and agents.

Noncompetition Agreements

Many employers require certain employees to sign agreements not to compete with the employer for a period of time (usually a year to two) after leaving employment. These agreements are intended to protect legitimate business interests of the employer, but can stifle economic growth by preventing skilled employees from working where they’re most effective.

Existing Oregon law makes noncompetition agreements unenforceable unless entered into upon initial employment or subsequent advancement. Senate Bill 248 (2007/2008) adds requirements that the employee: (1) be notified at least two weeks before the initial employment that such an agreement will be required; (2) be paid a salary to perform creative, administrative, or managerial work; (3) have access to trade secrets or competitively sensitive information; and (4) be paid at least the median income for a family of four.