Chicago Business Lawyer Blog

This is to provide and discuss a few practice points collected at a recent, mid-August meeting sponsored by the Midwest Business Brokers and Intermediaries associaton ("MBBI").

For background, the membership of MBBI includes business brokers, M&A intermediaries, investment bankers, attorneys, accountants, banks, SBA lenders, valuation service providers, individual buyers, private equity groups and corporate buyers. Members may represent buyers or sellers of businesses with revenues ranging from a few hundred thousand dollars to over $100 Million. In addition to helping business owners confidentially sell or acquire companies, members have expertise in performing business valuations, raising capital and providing financing, legal, and accounting services related to the M&A transaction. More information is available at www.mbbi.org.

The meeting attendees including a number of prospective buyers looking to purchase small manufacturing businesses. The consensus seemed to be that even well-qualified buyers with adequate resources are finding it difficult to locate suitable businesses for sale. It may be that the recession has led to a larger pool of buyers who once were employees, but after layoffs and the like, now want to try to control their own fate by purchasing an existing business.

An informal survey of attendees indicated that even for relatively small deals, it remains most likely that the parties will enter into a "letter of intent" or "LOI" rather than proceeding to negotiate a definite agreement right away. An LOI is a short, preliminary agreement that usually sets out briefly the transaction scope, structure and pricing elements and establishes an exclusivity period. It is similar to a term sheet. It usually is helpful to confirm that the parties are on the same general page, before proceeding to incur the time and expense of due diligence and hasing out all the transaction details. Typically, care is exercised to address the degree to which an LOI is binding or non-binding.

Another key point mentioned was the concept of seller's or owner's discretionary income. Often valuation methods may include a consideration of price to earnings ratio or a multiple of net income. So, under such a method, the higher the income, the higher the purchase price expected. Buyers should be aware that net income for privately held businesses often is suppressed by non-essential expenses incurred at the choice or preference of the owner. For example, an owner may elect to take a higher level of salary, have family members or friends be compensated for services to the business or, with some reasonable business basis, channel vehicle, networking, subscription and other expenses through the operation. Accordingly, buyers should not be surprised when seller's take the position that such expenses should be added to the operating results of the business for valuation purposes.

Jeremy A. Gibson is a Chicago business lawyer with significant experience in the buying and selling of businesses. Please contact us to discuss your merger & acquisition issue or other concern. We are availabe to work with business buyer or sellers throughout the area, including Arlington Heights, Buffalo Grove, Chicago, Deerfield, Des Plaines, Evanston, Glenview, Highland Park, Hinsdale, Lake Forest, Libertyville, Mount Prospect, Naperville, Northbrook, Oak Brook, Palatine, Rolling Meadows, Schaumburg, Skokie, Oak Brook, Oak Park, Vernon Hills, Waukegan, Wheeling and Wilmette.

There was an interesting piece in this past weekend's New York Times Magazine describing how brazen, entrenched and sophisticated the infrastructure is for making copies of brand name merchandise.

The article, entitled "Inside the Knockofff-Tennis-Shoe Factory," provides a look at how counterfeit products of famous brands are ordered from and made at the manufacturing centers in the Putian area of China. Among other things, authorities indicate that this business is attractive to criminal enterprises because the sanctions if caught are much less than those for trafficking in illegal drugs.

The story also details the ups and downs of U.S. federal enforcement efforts:

In 1998, the National Security Council studied the impact of intellectual-­property crimes and concluded that federal law-enforcement efforts lacked coordination. An executive order soon followed, sketching out the role of the National Intellectual Property Rights Coordination Center. Two years later a makeshift office opened in Washington, but after 9/11, chasing counterfeit goods lost priority. Ballman said: "Resources and focus changed overnight. Agents were detailed elsewhere and moved away from thinking about I.P. to counterterrorism and weapons of mass destruction."

The Obama administration has made intellectual property more of a focus. "Our single greatest asset is the innovation and the ingenuity and creativity of the American people," President Obama said in a speech in March. "But it's only a competitive advantage if our companies know that someone else can't just steal that idea and duplicate it with cheaper inputs and labor." To implement his intellectual-property strategy, Obama appointed an intellectual-property-enforcement coordinator, while Immigration and Customs Enforcement invigorated the property-rights coordination center.

Can such efforts make a difference? "You're not going to arrest your way out of this," Bob Barchiesi, president of the International Anticounterfeiting Coalition, told me in a despairing tone this past spring. As long as there is a demand, he insisted, there will be supply. He had just returned from a trip to China, the point of origin for nearly 80 percent of all goods seized by Customs and Border Protection in the previous fiscal year. One day, Barchiesi observed a factory raid where counterfeit jeans were seized by the Chinese authorities. The factory, its employees and all its equipment remained in place. Barchiesi called the raid a "propaganda show."

So, it will remain to be seen if it is feasible to suppress the knockoff artists. However, there are a variety of business and legal reasons that make it important for owners of patents, trade secrets, trademarks and designs to police their rights and protect their intellectual property. These range from creating a credible deterrance threat to avoiding waiving ones' IP rights.

Contact Jeremy A. Gibson & Associates, PC if you believe your proprietary interests are being infringed. Our Chicago intellectual property lawyers can help assess your rights and develop and implement a prudent protection strategy. We are available to provide business law advice and representation in Chicago, Deerfield and throughout the region.

I'm not sure if it's just a coincidence, but lately I have had several consultations all of a sudden with pairs of individuals who were assessing leaving their current jobs either to start a new business in a related industry or move to a competitor or similar firm. They were smart to review their obligations and risks of legal action by their employers because of each of these clients had signed what is often referred to as a "non-compete" or a "non-competition agreement."

Technically, these kinds of contracts usually go by a variety of names, such as a "confidentiality and nonsolicitation agreement" or "proprietary information and inventions agreement" or some variation thereof. In fact, only a minority of proprietary agreements with employees actually say that competition is prohibited. Instead, the primary aims of such contracts is to (1) establish ownership of employee work product, (2) provide for no unauthorized disclosure or use of employer trade secrets or other confidential information, (3) prevent soliciting of established company clients for a similar new employer and (4) prohibit inducing other employees of the company from leaving. Often, such obligations will be effective for from six to 18 months from the last date of employment.

Now, as a practical matter, one or more of these types of obligations may well have the effect to limiting competition for some period of time. Generally, most states are reluctant to enforce an outright ban on employees joining a competitor in some capacity. After all, an individual generally should have an opportunity to make a living in the same industry that he or she has been working in. However, courts are very willing to allow a company to protect its intellectual property, including inventions and trade secrets, and customer relationships that it created substantially from scratch.

Accordingly, employees need to be careful and think through their potential risks and liabilities before they make a move. A complicating factor is that no-competes and other proprietary agreements tend to be very broadly worded and one-sided in favor of the employer. So, even the most innocuous new business or job arguably may inherently involve the use of IP developed in part at a previous employer or involve dealing with some of the same customers.

While every case has to be reviewed in light of the particular company, job, customers and non-disclosure agreement terms, here are a few basic questions to consider the likelihood of employer enforcement action:

• Have you been working on developing secret new products, services or methods?


• Did you have any work-related inventions?


• Are you a very senior level employee?


• Are any other employees going to the same place as you at about the same time?


• Are you going to a competitor?


• Will you be doing substantially the same function or work?


• Will you be calling upon or working with any of the same customers or suppliers?


• Does your new situation have the potential to result in lost business or opportunities for your employer?


• Does the company have any history of suing departing employees?

Jeremy A. Gibson is an experienced intellectual property attorney and has drafted numerous proprietary agreements and handled a variety of non-compete and similar enforcement situations in Chicago, Illinois and surrounding areas. Our Illinois business lawyers are available to meet with you in offices around the region, including Chicago, Deerfield, Naperville, Northbrook, Oakbrook, Rosemont, Schaumburg and Skokie. Just contact us anytime.

The U.S. Copryight Office announced yesterday amendments to anti-circumvention regulations pursuant to the Digital Millenium Copyright Act that would exempt "jailbreaking" the Apple iPhone from being illegal under federal law. The exemption was requested by the Electronic Frontier Foundation.

Here is an excerpt of the news release, which can be found at www.copyright.gov:

"The Librarian of Congress has announced the classes of works subject to the exemption from the prohibition against circumvention of technological measures that control access to copyrighted works. Persons making noninfringing uses of the following six classes of works will not be subject to the prohibition against circumventing access controls (17 U.S.C. § 1201(a)(1)) until the conclusion of the next rulemaking . . .

(2) Computer programs that enable wireless telephone handsets to execute software applications, where circumvention is accomplished for the sole purpose of enabling interoperability of such applications, when they have been lawfully obtained, with computer programs on the telephone handset.

(3) Computer programs, in the form of firmware or software, that enable used wireless telephone handsets to connect to a wireless telecommunications network, when circumvention is initiated by the owner of the copy of the computer program solely in order to connect to a wireless telecommunications network and access to the network is authorized by the operator of the network . . .

The Copyright Office is conducting this rulemaking proceeding mandated by the Digital Millennium Copyright Act, which provides that the Librarian of Congress may exempt certain classes of works from the prohibition against circumvention of technological measures that control access to copyrighted works."

Apple has proffered a number of reasons for preventing its customers from accessing applications, which basically can be summarized as Apple wanting to control the iPhone experience in the name of preventing the user experience from being degraded by unapproved vendors and apps that might not be available through the iTunes marketplace.

In general, from a business law perspective, this decision can be seen as of a piece with other legal restrictions that prevent a seller from trying to monopolize its customers. For example, in other settings, sellers in the past have tried to require customers as a warranty to maintain goods on a certain schedule using only the seller for services. This type of blatant restriction or tie-in generally is not permissible under antitrust and fair competetion laws. Instead, for example, rather than a car buyer having to use an auto dealer for onoging service, a purchaser should be free to choose independent shops and providers.

Similarly, although the Copyright Office's decision is rooted in intellectual property and copyright infringement considerations, it should be seen as an indication of suspicion of post-sale limitations on a purchaser's choices. Accordingly, business owners and managers should exercise care when contemplating legal ways to lock in or restrict their customers discretion after a sale.

Chicago business lawyer Jeremy A. Gibson is experienced in distribution & sales and intellectual proprty counseling would be pleaded to discuss your business law questions about the Apple iPhone jailbreaking case or similar post-sale requirements.

I was talking to a businessman the other day about an investment he was considering. He is looking at one of those self storage facilities. It seems like an attractive opportunity at the right price. It's fully leased with many longtime tenants for its almost 200 units. It appears to be a relatively simple and stable business model, with relatively few workers, utilities or expenses. The purchaser gets not only the operation but the real estate as well. This seems promising and no red flags jumped out.

However, even though I try to be very practical about risks and expenses, I encouraged him to be very thorough and consider zoning, geotechnical and environmental assessments. Why? Because when you're entering into a merger or acquisition or loan or similar transaction you have to worry about more than your own worries. You have to consider what the next investor, purchaser or lender is going to think or do. In other words, you don't want to get stuck with the hot potato or left standing when the music stops.

For example, I have had a long-time specialty in managing environmental risks and matters for mergers, acquisitions, divestitures and financings. It's clear that when the deal centers around factories, refineries, mines and the like no one is going to question doing extensive due diligence about the potential for chemical contamination to present material hidden or contingent liabilities. But, with less alarming properties and businesses there's often an understandable tendency to want to avoid the expense of environmental studies or tests. Still, if there's a decent chance that these issues will come up down the road anyway, then it is far better to bite the bullet and deal with it upfront, rather than have an issue be unearthed when you're now stuck with problem.

Once I was involved in litigation that arose when the purchaser of a sand and gravel pit later discovered that a previous owner had his trucks collect waste drums on their return trips and then bury them in a corner of the property. This eventually resulted in a multi-million dollar remediation. There's no guarantee that standard environmental investigations would have diagnosed this condition, but it would have been preferable to have made the attempt. And, this can apply to other aspects of a business that can present time bombs, including potential employment, product liability, regulatory compliance and contractual obligation risks.

So, if you are considering investing in new business or property, remember that it's important to worry about the concerns of the other guy, in addition to your own, to avoid getting stuck in the middle.

The Chicago business attorneys of Jeremy A. Gibson & Associates, P.C. are experienced in mergers & acquistions and other due diligence scenarios and are available to meet you in our Chicago, Deerfield and other satellite offices.

I began my career as a business litigator and have continued to be involved in filing or defending lawsuits ever since. One of the things that I learned from litigation is that you have to be very thorough in gathering facts, reviewing applicable precedents and thinking it all through. Invariably, my view changed after this process, no matter what everyone else around me was saying. That's why part of our motto about tailor our services is: "We do this by listening intently, thinking creatively and, where needed, challenging conventional wisdom."

This brings me to the reaction to LeBron Jame's televised announcement last night that after hearing out five or six teams he's going to join the Miami Heat, assuming that all the contract details get ironed out. I'm not a huge NBA fan, I'm much an NCAAF, NFL and NCAAB follower. And, I didn't plan to watch his special on ESPN. However, I was free and having some pizza with my daughters, so I turned it on as the Chicago Bulls still were a longshot. It was interesting to explain the situation to my uninformed daughers, because they quickly grasped the human factor of deciding to stay in one's hometown, seek out the highest caliber situation or simply join one's friends.

But, what was even more interesting to me was the universal press and blogosphere reaction trashing LeBrown's show. From a business, and contract negotiation, perspective, I completely disagree. First, while there's no doubt that LeBron has a healthy ego like most superstars, I was struck by overall how mature, thoughtful and articulate he was, particularly given that he never attended college. And, it's odd that the very people who complain about the artificial buzz, hype and the like are the ones who choose to write it about. Next, the free agency and negotiation process carefully orchestrated by James, Dwyane Wade, Chris Bosh and others seems sophisticated and far-sighted. It completely turned the tables so that now the draftees had the power of the drafters. Finally, the NBA itself has turned its annual draft into a long build-up and televised extravaganza and nobody seems to complain about that. Ultimately, this neutral observer has empathy for Cleveland fans and residents, but finds LeBron's performance superior to that of those who cover him.

So, thank you LeBron for a reminder that it's important to think for oneself and it's not always easy to be in the minority. You have provided a valuable lesson that careful review, planning and analysis can result in a better outcome, whether negotiation a contract or resolving litigation.

Chicago business attorney Jeremy A. Gibson would be happy to discuss your favorite sports and business or law analogies, along with your corporate, contract or other question, at our Chicago business law office, Deerfield business law office or other suburban office.

In my last post, I noted that businesses should pay attention to several contract drafting and negotiation practices that can protect them from significant, or even catastrophic, liability. Now, I want to focus in on a potentially important aspect of these issues: the relationship of indemnification and liability limitation provisions.

First, it is common to seek to prevent liability for certain types of indirect or remote types of damages, such as from business interruption, lost profits and government sanctions. Second, companies frequently try to cap their liability related to a contract either to the amount of their revenues or some other reasonable sounding level, such as $100,000 or $1 million. Third, there are many instances where businesses agree to indemnify and "hold harmless" the other party from all damages (including the incurrence of attorneys fees) arising from, on the broad side, their breach of the agreement or law, or, on the narrow side, their intentional misconduct or gross negligence.

In my experience, these tendencies often result in some unanswered contract questions: Is the indemnification obligation subject to the limitation on the types of damages? And, similarly, is the indemnification obligation subject to the cap on the total amount of damages? If not, then the entire effort to manage exposure or risk will be undermined - particularly if the indemnity is very broad.

For example, if the indemnitor must hold harmless the indemnitee for any breach of the agreement, no matter the degree of maliciousness or culpability, then the breaching party not only faces unlimited exposure, but may have to pay the indemnitee's legal expenses as well. So, the indemnitor should try very hard to make sure that the remedy and damages limitations expressly apply to the indemnification. However, if there's a much narrower obligation, such as indemnification only for intentional misconduct, or personal injury, then it is more difficult to argue that a cap should apply.

So, it is essential to remember to think through limitation and indemnification mechanisms and make sure the relationship has been addressed. Otherwise, there may be a gaping hole in the efforts to make a contract armor-plated or bulletproof.

Our Chicago business lawyers have extremely deep experience with all types of contracts and agreements, including the risk management points discussed above. Contact us to speak to a Chicago contract lawyer about your particular needs. We are available for meetings in Chicago and Deerfield and many surrounding towns.

Recently, I consulted with a new client about some corporate matters. The client provides certain routine and specialized maintenance services to building owners and operators. In the course of discussing the business, I obtained a copy of the company's standard services agreement with customers. This form had been used with a number of customers for a long time without incident. But, it was a time bomb.

If you are a vendor or seller there are several basic protective steps you can take with contracts that literally can save your business. And, virtually all purchasers will find them acceptable most or all of the time because these measures are reasonable and done by the purchasers themselves when acting as a supplier. However, this client had not focused on this matter.

In short, every vendor or seller should make some effort to: (1) disclaim all warranties except those that are specifically provided; (2) limit aggregate liability to the amount of the purchase or some other reasonable amount; and (3) avoid liability for consequential or punitive damages. If this is not done, then the vendor or seller potentially faces unlimited or very high liability if something goes wrong and the purchaser's business is interrupted or suffers lost revenues or profits. For example, what if the maintenance client's personnel accidentally disconnected or damaged network wiring that caused lost data or brought down online sales? It's unlikely this client expects to have such high potential liability where it is getting paid a relatively small amount; but that can happen without the right contract provisions.

These are just some of the items in the fine print of contracts that can be easy to ignore or gloss over but actually can be critically important for when that one in a thousand or million event happens. So, take some care to make sure you have appropriate contract and agreement forms and have them reviewed every so often.

We have extremely deep experience with all types of contracts and agreements, including the risk management points discussed above. Contact us to speak to a Chicago contract attorney about your particular needs. We are available for meetings in Chicago and Deerfield and many surrounding towns.

A federal district court judge's ruling last week in favor of Google's YouTube demonstrates that it can be difficult to hold online service providers liable for copyright infringement for content posted by users.

Viacom had sued YouTube (before it was acquired by Google) for more than $1 billion in damages arising from numerous instances of Viacom television shows or other content made available on the website. Viacom argued that YouTube should be secondarily liable for copyright infringement because executives knew that such conduct was occurring and desired such postings to help drive the growth of YouTube.

The federal Digital Millennium Copyright Act struck a balance to protect both internet service providers ("ISPs") and copyright holders. ISPs generally have a safe harbor for liability from infringing content posted by users so long as: (1) they do not financially benefit directly from the infringing activity; (2) they are not aware of the infringing material or circumstances that would make such material apparent; and (3) they remove (or "take down") purported infringing material with reasonable speed upon receiving notice.

Although the court acknowledged that YouTube management knew some infringement was happening and may have felt the infringing content helped bring contributors or viewers to the website, the judge found that overall YouTube did not have specific knowledge of which uploads constituted copyright infringement and YouTube took down thousands of posts promptly upon receiving notice from Viacom. (YouTube has since taken more aggressive efforts to monitor and police infringing material in the first place.)

Accordingly, unless the ruling is overturned on appeal, it will serve as a powerful precedent to protect diligent ISPs, who generally are easier targets with deeper pockets than the individuals who post infringing content.

Jeremy A. Gibson is an attorney experienced in handling Internet and intellectual property matters, such as the copyright infringement issues noted above. We are available to serve and meet with clients in Chicago and Deerfield and other areas. Contact us for a complimentary consultation with a Chicago business lawyer.

Recently, there has been a lot of unwanted attention on the credit default swap market and its role in contributing to the economic meltdown and need for Wall Street bailouts. It is beyond our scope today to comment on whether one person's portfolio insurance or hedging is another's bet at a casino. However, I can say from personal experience that there is a sensible and useful role for insuring the unknowns involved with the purchase and sale of a business.

On several occasions, I have arranged so-called "representation and warranty" or environmental insurance policies in connection with mergers and acquisitions matters. These facilitated reaching the closing by providing assurances that certain risks would be capped and assets would be available if contingencies materialized. In other words, if it turned out that there were hidden problems with the acquired assets or problems that were worse than expected, such as accounting, product liability or regulatory compliance issues, then there would be a mechanism in place.

For example, when a family business that had numerous shareholders was being sold, both the buyers and sellers found the insurance option appealing. The sellers wanted to fund their retirements and estate plans and not have potential post-closing liabilities hanging over their heads for the typical one to three or more years that indemnifications remain in place. Likewise, the buyer, and its lender, preferred to seek a claim against one large, creditworthy institution rather several, dispersed individuals of uncertain wherewithal.

In another instance, the seller was a subsidiary of a foreign corporation and was liquidating its U.S. businesses and assets. The buyer also was a foreign company and was inexperienced with evaluating and assessing the potential liabilities of acquiring a manufacturing business. So, the buyer insisted upon procurement of an insurance policy to cover the risks that long-term cleanups of groundwater contamination would exceed the available estimates.

Insurance can be an excellent tool for helping close deals. But, it is important to understand that it is not a magic wand. Before a reputable insurer will take these risks from the shoulders of the parties, it will want to do thorough due diligence, which can be time consuming and require additional work by lawyers and other advisors. And, of course, the insurer will charge a substantial premium. Still, the comfort from having a solution in place from day one, can be well worth the effort and expense.

Jeremy A. Gibson & Associates, P.C. handles mergers and acquisitions matters such as the one discussed above. We are available to serve and meet with clients throughout the Chicago, Illinois area, including Arlington Heights, Buffalo Grove, Deerfield, Des Plaines, Evanston, Glenview, Highland Park, Hinsdale, Lake Forest, Libertyville, Mount Prospect, Naperville, Northbrook, Oak Brook, Palatine, Rolling Meadows, Schaumburg, Skokie, Oak Brook, Oak Park, Vernon Hills, Waukegan, Wheeling and Wilmette. Contact us anytime for a complimentary consultation with a Chicago corporate lawyer.

Online retailers should prepare for a new front as state lawmakers and revenue authorities become more creative in finding ways to make sure that Internet transactions don't escape sales or similar taxes. Catalog companies should pay attention to this as well.

State officials have been frustrated by their inability to require e-commerce vendors like Amazon and the like collect sales taxes when they do not have a physical presence in a state. (Note: for clarification, consumers in states where Amazon or a similar vendor has a distribution center, for example, do have to pay sales tax.) In recessionary times, this seems like a major loss of revenue. And, local bricks-and-mortar retailers, who must collect sales taxes, feel at competitive disadvantage to their virtual peers.

Some states have mounted litigation to overcome Supreme Court precedent about taxing out-of-state merchants. But others aren't waiting for resolution of such efforts and are trying a new tack. They are looking to the "use" tax, which is what consumers are supposed to pay when purchasing from out-of-state sellers. However, it has been much easier to enforce the sales tax from relatively few retailers, compared to policing the use tax against all citizens.

In a twist, there are recent reports that state authorities are trying to require online retailers to provide customer data so that tax bodies can pursue use tax claims against them. For instance, North Carolina recently made a request for such information to Amazon that sent alarm bells ringing, including about potential privacy claims.

It is too early to say how this will all play out. However, sooner or later, in this time of state budget deficits, it is quite likely that the loophole for online (and catalog) sales will be plugged one way or another.

Jeremy A. Gibson & Associates, P.C. handles trademark, trade secret, domain name and other intellectual property matters such as the one discussed above. We are available to serve and meet with clients throughout the Chicago, Illinois area, including Arlington Heights, Buffalo Grove, Deerfield, Des Plaines, Evanston, Glenview, Highland Park, Hinsdale, Lake Forest, Libertyville, Mount Prospect, Naperville, Northbrook, Oak Brook, Palatine, Rolling Meadows, Schaumburg, Skokie, Oak Brook, Oak Park, Vernon Hills, Waukegan, Wheeling and Wilmette. Contact us anytime for a complimentary consultation with a Chicago business attorney.

We take a diverson today from the subject of business law with a Chicago perspective. Instead, we'll take a moment to consider the upcoming vacancy on the Supreme Court of the United States due to the announced retirement of Justice John Paul Stevens. But, still with a Chicago angle.

I happened to read an unusually compelling article regarding possible candidates. This was a very thorough, well-researched and well-reasoned piece recommending Judge Diane Wood, who sits upon the U.S. Court of Appeals for the Seventh Circuit, which is based in Chicago. The article was by Glenn Greenwald and posted at Salon.com. The article makes a solid case that Judge Wood has the principles, strength of character and collegiality to be the leading choice for the nomination. For example, she has long been able to get along with the prominent conservative jurists on the Seventh Circuit, Judges Richard Posner and Frank Easterbrook.

I've seen Greenwald's name before, but wasn't familiar with him or his work. It was refreshing to see a good piece of journalism in this age of Tweets and sound bites and I recommend it for anyone interested in this subject, particularly if you like the idea of appointing someone from outside the East Coast.

Here's the exception that proves the rule. What's the rule? Here's the rule: The time and expense to complete any legal matter will exceed whatever is estimated.

In a prior life, among other things, I managed the intellectual property portfolio for a large, global technology and consulting company. Given our profile, we had quite a few instances of typosquatters and other unsavory types putting up websites with variations of our name and domain name. So, we used a commercial Internet monitoring service to keep an eye on this and we would take action to suppress those instances that seemed infringing, damaging or otherwise objectionable.

Our service identified the website of what appeared to be a small firm in a large city in China that not only held itself out as in same business as we were, but also operated under the same name and exact same logo. In other words, they completely misappropriated our identity and trademarks, which I guess in hindsight was rather flattering. Well, this was something we could not tolerate. We actually has significant operations in China and had to stamp this out.

As a cost-effective first step, I tried emailing the firm and people in question. Not surprisingly, I got no response and there website remained up. Same result when I asked my colleagues in China to do so. Then, fearing we were about to step into a bottomless moneypit, I chatted with our outside trademark counsel, a very large firm with offices in China. Our outside counsel suggested engaging what sounded to be the equivalent of a local private investigator to visit the target and speak with anyone there. This would entail a relatively modest fee for an international matter, which was in the low four figures.

Not having any real choice, we authorized this. Before too long, we got back a thorough report of what was going on. More important, the local investigator apparently notified the personnel there of our IP rights and concerns and even obtained a promise to cease and desist from using our name and marks. I was a little skeptical that this was going to be enough, especially with the well-known piracy issues in China.

Yet, indeed our problem was solved. The offending activity stopped and we moved on to the next offensive website linking our company to inappropriate services. I can honestly say that, even with all my experience working on cross-border matters, I was amazed how easy, inexpensive and quick it was to make this go away with a few phone calls and emails. I hope lightning will strike twice someday.

Jeremy A. Gibson & Associates, P.C. handles trademark, trade secret, domain name and other intellectual property matters such as the one discussed above. We are available to serve and meet with clients throughout the Chicago, Illinois area, including Arlington Heights, Buffalo Grove, Deerfield, Des Plaines, Evanston, Glenview, Highland Park, Hinsdale, Lake Forest, Libertyville, Mount Prospect, Naperville, Northbrook, Oak Brook, Palatine, Rolling Meadows, Schaumburg, Skokie, Oak Brook, Oak Park, Vernon Hills, Waukegan, Wheeling and Wilmette. Contact us anytime for a complimentary consultation with a Chicago business lawyer.

Given the increasingly competitive nature of the job - and college and graduate school admissions - markets, students and graduates often want or feel the need to gain experience in the field of their interest by taking unpaid internships. There are even firms that advertise assistance in procuring such stints. Similarly, employers can find it both good and good for them to offer such opportunities. (On a personal note, I can say that my (paid and unpaid) internships were great steppingstones and provide great memories.)

As always, there's a catch. Employers should be alert as labor authorities are escalating scrutiny of work-based training arrangements. However tempting it is to say that no good deed goes unpunished, there is a potential concern that internships can present an issue under the federal Federal Labor Standards Act ("FLSA"). If an intern looks and acts basically like an employee, and not much like a student, then it probably is illegal to not pay him or her, as reported in a recent New York Times article.

Federal guidance on the subject provides a relatively stringent test for concluding that no wages are required: "The U.S. Department of Labor Wage and Hour Division established criteria based on U.S. Supreme Court interpretations of the FLSA for determining whether work is employment or training. In general, persons performing work will be deemed to be trainees not covered by the FLSA if all of the following criteria are met:

• the training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school;

• the training is for the benefit of the trainees or students;

• the trainees or students do not displace regular employees, but work under their close observation;

• the employer that provides the training derives no immediate advantage from the activities of the trainees or students; and on occasion the employer's operations may actually be impeded;

• the trainees or students are not necessarily entitled to a job at the conclusion of the learning experience (though employers may offer jobs to students who complete training); and

• the employer and the trainees or students understand that the trainees or students are not entitled to wages or other compensation for the time spent in training (though a stipend may be paid for expenses).

In the event that any one of these criteria is absent, the work performed by the student will likely constitute employment subject to the provisions of the FLSA." [Emphasis added.]

Accordingly, even though the probability that an unpaid internship not intended to take advantage of an intern ever would lead to a wage claim is low, care should be taken to make sure that there are substantial educational aspects to the experience. Further information is available from the Wage and Hour Division. And, of course, do not hesitate to contact our Chicago business and employment lawyers for assistance.

Life can seem so much simpler when you are a one-man or one-woman band, such as if you are a sole proprietor or owner of a business. There are no committees or meetings to deal with and you can do exactly what you want, how you want, when you want. However, there just are many times when can't or don't want to go it alone and two or more can do so much more together than apart. That's when you are talking about a "partner" relationship, whether your situation involves a true partnership (which is not so common anymore), corporation, limited liability company ("LLC") or a joint venture.

All of those different structures generally present the same sets of important planning and management issues, regardless of the legal form. And, in the vast majority of cases, it will make sense to discuss and prepare some form of relationship agreement, whatever the name. For a corporation, it will be a shareholder or stockholder agreement. For an LLC, it will be an operating agreement. For the latter situations, it will be a partnership or joint venture agreement (unless all issues are covered in the documents for any entities formed by the venture). Typically, the level of commitment is such, and the potential upside or stakes are such, that it is important not to leave arrangements unwritten or defer them until revenues or profits reach a certain level.

What might be so important that it can't wait? Here's just a short list of key topics to consider:

• Capital contributions and commitments. It is important for prospective shareholders, members or partners to have well-grounded plans for the level of investment expected of each at the outset and anticipated milestones.
• Distributions. If the common enterprise has some success and does generate profits, then an area of potential disagreement is whether to take money out or keep investing it. This will depend upon the financial and tax needs of each partner.
• Conflicts of interest. Often partners have outside business activities and interests that may well overlap and even potentially compete with the common venture. The expectations and priorities as to potential competing business opportunities and time demands should be fully explored.
• Management and control. Every business presents countless actions to take and decisions to make. Often partners have different roles and levels of participation. More often than not, some level of supermajority approval or partner consent is required for shareholder, board, officer, personnel, finance, business plan, acquisition, contract, real estate, litigation and other matters involving some threshold level of money or materiality.
• Sale or transfer of interests. Often the most essential partner matter is addressing what happens when the business seeks an additional new investor, a partner dies, a partner wants to sell his or her stake or a third party want to purchase the entire business. A host of common (and sometimes complex) techniques has developed for such situations, including "rights of first refusal" or first offer, "drag along," "tag along," "preemptive right" and "buy/sell" provisions.

I can speak from handling past partner arrangements, that it is very helpful to have worked through these issues early. For example, when a manufacturing joint venture was ended after years of collaboration, the partner agreements helped provide a much smoother separation. In fact, for that very reason, partner understandings should be viewed as serving much the same purpose as prenuptial agreements. After all, it is unlikely that any partnership will last forever.

We will cover some of the above points in more detail in the near future. In the meantime, the business attorneys of Jeremy A. Gibson & Associates, P.C. bring extensive experience and insights to such corporate matters as corporation shareholder or stockholder agreements, LLC operating agreements, partnership agreements and joint venture partnership agreements. They are available to serve and meet with clients throughout the Chicago, Illinois area, including Arlington Heights, Buffalo Grove, Deerfield, Des Plaines, Evanston, Glenview, Highland Park, Hinsdale, Lake Forest, Libertyville, Mount Prospect, Naperville, Northbrook, Oak Brook, Palatine, Rolling Meadows, Schaumburg, Skokie, Oak Brook, Oak Park, Vernon Hills, Waukegan, Wheeling and Wilmette. Contact us anytime for a complimentary consultation.