Chicago Business Lawyer Blog

Because it is a powerful tool for indicating the source of a good or service, Chicago business lawyers advise companies to protect their intellectual property by obtaining trademark registrations. Most items subject to trademark protection fall into one of the following categories: a phrase, a word, a logo, a symbol, an image, or a design. However, trademark protection has also been extended to various "unconventional" things including color, smell and sound.

One company that has been especially pronounced in obtaining trademark protection for unconventional items is Apple Inc. As trademark protection is very important to businesses, it is no surprise that the company has recently obtained a trademark on every possible use of "iCloud." However, this is not the first time that Apple received trademark protection for its products. In June of 2004, Apple obtained a trademark for the artistic depiction of half of an apple, while in July of 2006, the company received trademark protection for the outline of a human with a compact disk. Since then, the company has obtained numerous seemingly unconventional marks on everything from the packing of its iPhone to its glass cube retail store.

Although it is not uncommon for companies to be aggressive in protecting the image of their product, Chicago business lawyers may argue that Apple has been a little too aggressive in protecting its intellectual property. Such a perspective is supported by the company's recent suit against Samsung for purportedly infringing on Apple's trademarked packaging and icons. Getting trademark protection for odd items is, however, also quite difficult. Obtaining a nontraditional trademark requires the seeker of the trademark to convince the U.S. Patent and Trademark Office that the average consumer will associate the design in question only with the company trying to get the trademark and it takes many years to build such an association in the minds of consumers.

If you are a Chicago business owner seeking nontraditional trademark protection, Chicago business lawyers recommend pursuing the following steps: 1) provide a unique name for the product and get a traditional trademark; 2) get utility and design patents so that you can begin creating a barrier against competitors and a link to nontraditional trademarks; 3) make ads that spotlights the features that form the foundation of the association with the company; 4) apply for more traditional trademarks that help strengthen the association and boost the product; and 5) apply for the nontraditional trademark.

This item was prepared by summer research assistant Yelena R. Please contact Jeremy Gibson to discuss nontraditional trademark or other Chicago intellectual property law matters.

A judge in Cleveland recently ruled that the Ford Motor Company must pay $2 billion as part of a class-action lawsuit accusing the company of overcharging truck dealerships over an 11-year period, The New York Times reports.

Chicago Distribution Attorneys believe this case demonstrates the importance of thinking through the implications of commercial contracts to maximize supplier flexibility. Chicago distribution and sales can be crucial to a company looking to gain increased exposure in the marketplace.

In the Ford case, the company plans to appeal the ruling, which stated that it violated agreements with about 3,100 dealerships from 1987 to 1998, using "hidden discounts" and unpublished prices to increase its profits at the expense of dealerships. Ford made dealers pay a total of $800 million more than they should have for nearly 475,000 medium- and heavy-duty trucks, including tractor-trailers and bulldozers.

Damages include $1.2 billion in interest and were calculated based on the formula used by a jury that in February awarded $4.5 million to an Ohio dealership. The company, in a statement, said the pricing program benefited dealers and didn't harm them.

The lawsuit was filed in 2002 and alleged that the company set wholesale prices on the trucks that were higher than the prices buyers were willing to pay for them. The dealers could request discounts from Ford so that they would be able to earn a profit, but each dealer was unaware of how much Ford was discounting the trucks to other dealers. As a result, the prices that dealers paid for identical trucks varied widely.

Our firm handles many areas of business law in Chicago and is well-equipped to bring a lawsuit either on behalf of a company or its distributors. We work with clients to structure these agreements and negotiate distribution, franchise and sales representative agreements. Many times, our firm has seen that licensing and trade secret agreements become an important part of these contracts.

Continue reading "Ford Forced to Pay $2 Billion to Dealerships in Chicago Distribution Ruling" »

If you are an entrepreneur starting a Chicago business, you are probably interested in attracting talented people to help run your venture. One way of doing this is by granting founder's stock at the start-up stage. This will save you a lot of money since you will pay very little, if anything at all, to whomever you issue such stock. The stock's recipient will also acquire a high earning potential over the long term. If you want to take advantage of such a win-win situation and issue founder's stock, then you should keep the following three considerations in mind: 1) the vesting schedule; 2) the acceleration of vesting; and 3) tax traps.

The vesting schedule is a key consideration in granting founder's stock. First of all, what does it mean for a stock to "vest?" Vesting refers to the amount of time necessary for a founder or employee to actually acquire the right to own the shares they have been issued. The longer you have the stock, the greater your earning potential. If a founder's stock does not vest, then there is the possibility for free-riding. For example, pretend you begin a Chicago business with a co-founder yet the co-founder abandons it after 4 months while you continue working for the company over the next few years before it is sold. It would clearly be unfair for you and the absentee co-founder to be paid the same. Founder vesting ensures this does not happen. When considering vesting, it is important to keep in mind that founder's stock is the inverse of a stock option since founder's stock is subject to repurchase or transfer back. Such a right is, however, discretionary rather than automatic. This means that a company may reserve the right to repurchase but that it does not have to.

Founders are frequently concerned about what will occur to the vesting of their stock if the company is bought or if they are fired without cause. These two situations are usually considered in the context of single or double trigger acceleration. Single trigger acceleration occurs if the founder's stock agreement provides for the acceleration of vesting in one of these two situations while double trigger acceleration occurs if the agreement provides for the acceleration of vesting in both of these situations. It is generally not favorable to have single trigger provisions associated with the end of employment since equity within a startup should be earned. The argument is that if a founder no longer provides services for the company, his or her stock should not continue vesting. Some founders may stipulate having a part of their stock accelerate if the founder leaves the company for good reason or if he or she is involuntarily terminated. Generally, however, if a founder is terminated for cause or voluntarily quits, there is no acceleration.

Although vesting is a key consideration when issuing founders' stock, it is also important to not forget about the tax consequences of issuing such stock. It is expected that stocks will increase in value. As the owner of a business, you must monitor your taxes to ensure that you do not owe taxes on this increased stock value. Since an "83(b) election provision" means that the founder recognizes income on the value of the stock at the lower purchase price, it is important to include an 83(b) election in your stock purchase agreement. You must, however, file an 83(b) election with the IRS within 30 days of purchasing your founder's shares.

Typically, there are important contractual aspects of issuing founder's stock. Each recipient will have to sign a confidentiality, non-competition, and non-solicitation agreement. In addition, each recipient will also have to sign a stock purchase agreement governing the terms and conditions surrounding vesting and the repurchase of stock.

If you are starting up a new business, it is important for you to consider founder's stock as a possible option. It provides a way to obtain talent while conserving cash for other purposes during critical development needs.

This item was prepared by summer research assistant Yelena R. For your equity or other start-up business law question, please contact Chicago business lawyer Jeremy Gibson.

The owners of Vienna Beef is suing the grandson of one of the company's founders, alleging he ripped off the company's century-old recipe, the Chicago Tribune reports.

Chicago Trade Secret Lawyers have years of experience battling inside and outside the courtroom for the rights of businesses who either have been ripped off by competitors or wrongly accused of such. Trademark infringement in Chicago is a serious allegation and can do a world of damage to a business, small or large. This case demonstrates the importance of carefully preparing an intellectual property agreement to maximize your company's ability to enforce non-disclosure and non-competition obligations.

Chicagoans love their all-beef hot dogs fresh on a poppy seed bun chock full of pickles, onions, tomatoes, mustard and peppers. But they don't like ripoffs. And in this case, the allegation is that rival hot dog company Red Hot Chicago, headed by a person who had ties to Vienna, either stole the 118-year-old recipe or is lying by telling customers that its hot dogs are the real thing.

According to the lawsuit, the man who runs the rival company was formerly employed as a sales manager, but left Vienna in 1983. He signed employment and severance agreements, which included a gag order about Vienna's secret recipes. Three years after leaving, he started the Red Hot Chicago hot dog company. The lawsuit claims that he wasn't successful over the first 25 years in competing, but recently changed recipes and pretended to be Vienna.

Intellectual property, the ideas, products and other assets designed by a business or individual, are the bloodline of a successful business. Another company infringing on those ideas, patents, software or other assets must be challenged and often it requires litigation.

People across the globe can identify the Nike swoosh and the McDonald's golden arches because of great marketing by those two companies. If another company, possibly a rival, began using those symbols, which have great power in identifying those companies, Nike and McDonald's would swoop in to protect their identities.

While it may seem silly to think of a company other than Nike or McDonald's trying to use those symbols, what if a smaller less-popular company had their design stolen? While it may be less recognizable, every company has customers and a public symbol, and it can do real damage to a business if someone else is using their ideas for profit.

It's possible that these issues can be decided by dispute resolution in Chicago, such as by assessing the merits of a potential claim, contacting the other party and trying to work out the issue without court intervention. While that may be the quickest and cheapest alternative, it's not always the most likely. So, taking the case to trial and putting the allegations out into the open may also be a way of getting rivals to do the right thing.

Continue reading "Wiener Wars Heat Up in Chicago in Trademark Infringement Lawsuit" »