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Confidential Conversations: Protecting Attorney-Client Privilege

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Written by Lindsey Karm
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Filing or defending a lawsuit is a major life event, a life event most people do not want to experience. It’s also one of the few major life events that you cannot fully share with your friends and family, at least while the lawsuit is going on. Why? Because of that pesky (but very helpful) thing known as the attorney-client privilege.  

Everyone has heard of the attorney-client privilege, but what is the privilege exactly? First, it is not the end all, be all protection for any and all communications with an attorney. What many people don’t know is that the attorney-client privilege can be broken. The attorney-client privilege protects confidential communications between clients and attorneys. The key is that communications between CLIENTS and attorneys are protected–not communications that include third parties.  

The attorney-client privilege allows for and encourages open and honest communications between clients and attorneys. With the privilege, clients can share sensitive information with their attorney without the fear that the attorney will later disclose that sensitive information to others. The privilege also protects communications from being compelled as evidence in court. The general rule is that attorneys cannot be compelled to disclose confidential client communications during legal proceedings. 

Specifically, the privilege shields the disclosure of communications that are made for the purpose of seeking and receiving legal advice. Communications – both verbal and in writing – about legal rights, case strategies, and matters related to the representation of a client are all protected under the attorney-client privilege. The privilege is not absolute, however. The privilege does not apply to any communications made for the purpose of committing a crime or fraud, and it may not apply if the attorney-client communication is made in the presence of a third party who is not essential to the attorney’s legal representation of the client.  

The client holds the attorney-client privilege, which means the client can also waive the attorney-client privilege. Unfortunately, this sometimes happens without the client ever meaning to waive the privilege. If a client voluntarily discloses privileged information to a third party, the privilege is waived. This waiver can be something as simple as a client sharing their attorney’s legal advice or case strategy with a close friend or relative. In our digital world, texting, emails, and social media, make it easy to unintentionally make this disclosure without even thinking about it. The waiver can be completely innocent, but it can’t be undone. The best practice is always to keep conversations between the attorney and client and to otherwise wait until the lawsuit is over.  

Not being able to talk through a lawsuit with a friend or family member can be incredibly frustrating. A lawsuit is stressful, but that’s why it’s even more important to trust your attorney, to talk to your attorney, and to keep the lines of communication open with your attorney. An attorney and client are a team. Trust and candor are key to making the attorney-client relationship work, and the attorney-client privilege is critical to fostering an open and honest relationship.  


These materials are made available by Stibbs & Co., P.C. for informational purposes only, do not constitute legal or tax advice, and are not a substitute for legal advice from qualified counsel. The laws of other states and nations may be entirely different from what is described. Your use of these materials does not create an attorney-client relationship between you and Stibbs & Co., P.C. The facts and results of each case will vary, and no particular result can be guaranteed. The facts and results of each case will vary, and no particular result can be guaranteed.


 

Topic: Commercial Litigation
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Say “Yes” To The Trade Dress

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Written by Michael D. Ellis
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Recently, I spoke with a client who asked about obtaining trade dress protection for a line of innovative and fashionable dresses she had designed and developed for girls and women. Despite its name, however, trade dress has nothing to do with latest fashion trends, runway collections, or dresses in the traditional sense.

Trade dress is a type of trademark that covers the aesthetic or visual elements that create the overall commercial look and feel of a product or service and that distinguishes it from others in the market. Trade dress can include packaging, color schemes, and even the design of the product itself. As with any trademark, trade dress protection—when appropriate—serves to ensure that consumers can identify and associate a particular product or service with a specific source. This is because trade dress protection prevents or limits others from using the same or confusingly similar elements in competing goods or services.

To obtain trade dress protection, the aspiring trademark owner must show that the trade dress is distinctive and nonfunctional. Distinctive means that it readily identifies you as the source of the good or service, generally because it is memorable and notable. It can be inherently distinctive or have acquired distinctiveness through consumer recognition over time. Nonfunctional means that it is not essential to the purpose or use of the good or service.

Some well-known examples of trade dress include the shape of Coca-Cola bottles, the red soles of Christian Louboutin shoes, the color of the wrapper for Reese’s Peanut Butter Cups, and the color, décor and design of Taco Cabana restaurants. Regarding the Chistian Louboutin shoes, the trade dress protection only covers the red soles and does not protect the design, shape, or functionality of the shoe itself.

While trade dress does not cover new designs of actual dresses, other forms of intellectual property, including utility or design patents, could provide protection against potential theft and infringement. For the client mentioned above, we filed several design patent applications that cover various ornamental features of the dresses. To learn more about the different types of patents, please see Stibbs & Co. attorney Jeff Wendt’s blog: https://www.stibbsco.com/can-i-patent-that/ 

Trade dress is an important, but often overlooked, type of trademark protection. If your product or service has unique aesthetic or visual elements, contact our office to schedule an appointment to discuss registration of that trade dress for increased legal protection.


These materials are made available by Stibbs & Co., P.C. for informational purposes only, do not constitute legal or tax advice, and are not a substitute for legal advice from qualified counsel. The laws of other states and nations may be entirely different from what is described. Your use of these materials does not create an attorney-client relationship between you and Stibbs & Co., P.C. The facts and results of each case will vary, and no particular result can be guaranteed. The facts and results of each case will vary, and no particular result can be guaranteed.


 

Topic: IP
4 min remaining
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Can I Patent That?

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Written by Jeffrey L. Wendt
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I often get this question from aspiring inventors. For those having little experience with patents, it is often eye-opening to begin by explaining the difference between the various types of patents available.

Utility Patents and Design Patents

One of the initial discussions to have with a patent attorney or agent registered to practice before the U.S. Patent & Trademark Office is to figure out how to protect your invention. “Utility” patents cover devices, methods, chemical and biological compositions, engineered biological organisms, so-called “software” patents, and similar “useful” inventions. Examples may be medical devices, cell phones, computers (hardware and software), cleaning chemicals, magnetic pipe inspection methods, and the like. This is opposed to “design” patents, which cover the ornamental features or overall shape of a physical object, such as the shape of a soda bottle, or a paisley design on a vase.

The next conversation should be around the cost of protection.  Utility patents are complicated documents. The primary focus of your first patent application on an invention should be to disclose the invention with enough support that you will be able to claim many inventions later in follow-on patents.  It is rare that an invention is completely covered by a single patent. Developing a patent portfolio should be a goal, similar to a stock portfolio, and like a stock portfolio, a patent portfolio allows you to readjust, trim and groom from time to time.

Getting back to the cost of protection, for a utility patent application, a good pre-search estimate is that preparing and filing a U.S. provisional patent application (PPA) or non-provisional patent application (NPA) would range from $10,000 – 15,000, plus U.S. Patent and Trademark Office (USPTO) fees, draftsman’s fees, paralegal fees, and possible non-English document translation fees. This estimate could change after review of the search results, and/or based on exactly what the inventors want to pursue a patent on. For example, there may be several additional embodiments of the device and/or methods that come to mind, requiring additional claims, drawings, and description.

Design Patents

These cover the non-functional appearance aspects of an item or apparatus and can be useful to obtain quick and relatively inexpensive patent protection. The cost to prepare and file a design patent application is typically half the cost of a utility patent, in most cases.

Advantages of design patent are that design patents are relatively easier to obtain than utility patents; there are no “maintenance” fees for design patents; and the term of 15 years runs from the date of grant, not the filing date. One disadvantage is that they may be easier to avoid infringing.

In some cases, it may be desirable to file a design patent application as a “continuation” of a utility patent application since many physical objects have both utility and design aspects. However, the best approach is to file separate utility and design patent applications on the same date, so that they may not be used against each other later.

Plant Patents

A plant patent is granted by the United States government to an inventor (or the inventor’s heirs or assigns) who has invented or discovered and asexually reproduced a distinct and new variety of plant, other than a tuber propagated plant or a plant found in an uncultivated state. The grant, which lasts for 20 years from the date of filing the application, protects the patent owner’s right to exclude others from asexually reproducing the plant, and from using, offering for sale, or selling the plant so reproduced, or any of its parts, throughout the United States, or from importing the plant so reproduced, or any part thereof, into the United States.

The USPTO also accepts utility patent applications having claims to plants, seed, and the genes of plants. Intellectual property protection for seed-reproduced plant varieties other than a utility patent is available through the USDA’s Plant Variety Protection Office, Washington, D.C., which should be contacted for information regarding non-patent intellectual property protection for such varieties.

 Whatever the invention, it must be “novel” and “nonobvious”

After the patent application is filed, the main hurdles to obtaining a patent will be showing the patent claims to be novel and nonobvious. The burden is initially on the patent examiner to show that your patent claims are not novel and/or obvious in view of what is known to the public. The process of interacting with the Patent Office examiner is called “patent prosecution” and can take several years for utility patents unless the patent application is expedited using a petition as mentioned above. Design and plant patents typically have a much shorter prosecution. Appeals can be taken to a board of appeals in the Patent Office, and then even to U.S. courts.

Conclusion

The type of patent to pursue depends on the type of invention: utility, design, and plant patents are the main patent protections available today. Protection of patentable inventions takes careful planning and budgeting, and execution of that plan and sticking to the budget. Obviously, how much any individual or business entity is willing to spend to obtain protection depends on the importance of the invention. The employment of competent patent counsel is crucial to meeting the goal of creating a protectable patent portfolio.


These materials are made available by Stibbs & Co., P.C. for informational purposes only, do not constitute legal or tax advice, and are not a substitute for legal advice from qualified counsel. The laws of other states and nations may be entirely different from what is described. Your use of these materials does not create an attorney-client relationship between you and Stibbs & Co., P.C. The facts and results of each case will vary, and no particular result can be guaranteed. The facts and results of each case will vary, and no particular result can be guaranteed.


 

Topic: IP
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Unraveling the Risk: Estate Planning and Artificial Intelligence

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Written by Maggie Griffin-Book
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In today’s rapidly evolving technological landscape, Artificial Intelligence (AI) stands at the forefront of innovation with its boundless possibilities. In simple terms, AI refers to computer systems capable of independent thinking, much like humans. AI is already an integral part of our daily routines, subtly weaving itself into everyday life, from unlocking our phones with face ID to interacting with virtual assistants like Apple’s Siri, or even embracing the potential of self-driving cars like Tesla’s. The goal of AI lies in accomplishing tasks with superior accuracy and efficiency that outpaces human capabilities.

How accurate is AI?

As Artificial Intelligence (AI) continues its rapid evolution, the burning question in the legal field is, “How accurate is AI?” The answer lies in the specific AI model and the nature of the task at hand. AI’s incredible speed and accuracy are revolutionizing industries, including the legal profession, where it has proven particularly adept at legal research and analysis.

OpenAI’s ChatGPT models are undergoing intriguing experiments that include the Uniform Bar Exam (UBE). Specifically, two different ChatGPT models took one section of the UBE that tests legal knowledge across seven subjects through 200 multiple questions and is referred to as the Multistate Bar Examination (MBE). ChatGPT-3 did not pass the UBE with an accuracy of only 50.3%, which fell short of real human test-takers’ average of 68%[1]. However, ChatGPT-4, showcased substantial improvement when it passed the UBE with 75.7%[2] accuracy, surpassing the average of human test-takers.

While AI’s progress is commendable, limitations persist. Mechanical issues or technical glitches may hinder AI’s performance, leading to inaccessibility. Additionally, AI’s lack of understanding and consciousness limits its ability to grasp ambiguous or complex data fully. Human biases embedded in algorithms can lead to unintentional inaccuracies and biased content generation.

Will AI replace Estate Planning Lawyers?

In the realm of estate planning, attorneys utilize many different documents to achieve a family’s asset protection goals while mitigating their exposure to estate, gift, and income tax. Because each family has different goals ranked by individual priorities, attorneys need to evaluate each family’s priorities in order to design the proper estate plan for each family. I often explain during initial consultations that the “academic design” focused on hard factors such as estate tax mitigation and lifetime trusts for children may not be the best fit because it does not achieve the client’s preference to prioritize a simple administration.

While each AI system holds promising potential to streamline specific facets of estate planning such as drafting and formatting, it is unlikely that AI will replace the necessity for human estate planning attorneys to create the estate plan design itself. Clients’ needs are diverse and not always driven by pure logic. Estate planning frequently includes emotional discussions related to selecting agents to make emotional decisions regarding end-of-life care and incapacity. This human element of Estate Planning challenges AI’s automation and could potentially lead to devastating inaccuracies such as creating a HIPAA Release only when the client needed a HIPAA Release and Medical Power of Attorney before being declared incapacitated.  The empathy, experience, and guidance that comes from working with an experienced Estate Planning Attorney plays an indispensable role in designing and executing an estate plan tailored to the client’s goals that will easily be administered by their family.

[1] AI program earned passing bar exam scores on evidence and torts; can it work in court? (abajournal.com)

[2] Bar exam score shows AI can keep up with ‘human lawyers,’ researchers say | Reuters

https://www.aspenwealthmgmt.com/wp-content/uploads/2022/08/digital-estate-planning.jpg

https://th.bing.com/th/id/R.eadaed4d488d61fe729b6434936092ea?rik=MA5R0KWJp5bc8Q&riu=http%3a%2f%2fblogger.io%2fwp-content%2fuploads%2f2020%2f07%2fAI-1.jpg&ehk=5GQ37AT12mzLgjTQj2NuYmz1yagzw4bHXyNGq2tTjYw%3d&risl=&pid=ImgRaw&r=0


These materials are made available by Stibbs & Co., P.C. for informational purposes only, do not constitute legal or tax advice, and are not a substitute for legal advice from qualified counsel. The laws of other states and nations may be entirely different from what is described. Your use of these materials does not create an attorney-client relationship between you and Stibbs & Co., P.C. The facts and results of each case will vary, and no particular result can be guaranteed. The facts and results of each case will vary, and no particular result can be guaranteed.


 

Topic: Probate and Estate Planning
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Pride and Principle…and Lawsuits

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Written by Adam R. Fracht
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For most businesses, filing lawsuits is an unfortunate but necessary tool to help the business succeed, especially when the business is owed money by, or has been wronged by, another business. There are a host of good reasons to bring a lawsuit, but there are also some reasons that warrant caution.

Let’s start with principle. It is not uncommon to hear a client justify a lawsuit by saying “it’s the principle of the matter.” In fact, this is one of the most common justifications cited when a business decides to pursue its first lawsuit. Not that principles don’t matter—they certainly do—but repeat litigation frequently teaches an equally important truth: principles alone can be quite expensive.

Outside of law firms, most businesses are not “in the business” of lawsuits. Lawsuits are something tacked-on to a business’ already busy schedule. Lawsuits include time-intensive document searches, oral depositions, expert witness reports, mediations and, ultimately, a trial. Worse yet, a business typically cannot recover for its own time invested in such efforts.

This brings us to another consideration: an expectation of fully recovering attorney’s fees. Many legal claims—including breach of contract claims—typically allow a successful plaintiff to recover its reasonable and necessary attorney’s fees, but even then, some caution is advised. What a court determines to be “reasonable and necessary” is not always equivalent to what the plaintiff actually incurred. Moreover, a typical business lawsuit is overwhelmingly likely to be resolved by settlement before a trial actually occurs, and thus the recovery of attorney’s fees is frequently a matter of settlement discussion, not a court’s adjudication. As most lawsuits are the result of the plaintiff and defendant disagreeing on who is at fault, it is common to see the defendant insisting that both parties “eat their own fees” to get the deal done. Whether, or to what extent, the plaintiff is willing to do so is of course up to the plaintiff.

Another concern is the sunk cost fallacy. Put simply, the sunk cost fallacy is when a party feels they’ve invested too much into a plan of action to quit the plan. In a lawsuit, after a year or more of battling with the opposing party over evasive discovery responses and compel motions, exhausting all-day depositions, and a smattering of summary judgment motions, it is often hard for a plaintiff to swallow the huge investment of time, money and resources already put into the lawsuit, and attempt settlement in light of the realities mentioned above.

Does this mean that pushing forward—even on through trial—is never appropriate? Of course not. But a business’ decision to go to trial should be motivated by the realities of the business and the strength of the case, not by principle alone, nor by a gut feeling that we’re too invested to turn back now, and fully aware that not all attorney’s fees incurred are likely to be recovered. A lawsuit for a business should be treated no differently than any other business decision – every step along the way, the business should ask itself, “what achieves the best outcome for the business while minimizing ongoing costs to the business?”

After all, it’s not personal; it’s just business.


These materials are made available by Stibbs & Co., P.C. for informational purposes only, do not constitute legal or tax advice, and are not a substitute for legal advice from qualified counsel. The laws of other states and nations may be entirely different from what is described. Your use of these materials does not create an attorney-client relationship between you and Stibbs & Co., P.C. The facts and results of each case will vary, and no particular result can be guaranteed. The facts and results of each case will vary, and no particular result can be guaranteed.


 

Topic: Commercial Litigation
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The CROWN Act: Governor Abbott Signs the CROWN Act on June 12, 2023

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Written by Joshua A. Redelman
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In June, Governor Greg Abbott signed into law Texas’ version of the Creating a Respectful and Open World for Natural Hair (CROWN) Act making it the 21st state to enact such legislation. The CROWN Act, a new law targeting race-based hair discrimination, requires employers to reassess their grooming and appearance policies. 

Advocates of the CROWN Act have long argued that it is a vital piece of legislation that encourages inclusiveness and diversity by prohibiting schools and employers from defining the standards of “professionalism” surrounding hair texture and hairstyles. The Texas version of the CROWN Act protects braids, locks, and twists that are commonly associated with a particular race or national origin, including hairstyles historically associated with Black people.   

Now that we have the CROWN Act, what should employers do? The CROWN Act takes effect on September 1st of this year. So, to ensure compliance with the CROWN Act, employers should carefully review their current grooming and appearance policies outlined in their employee handbooks. Start by identifying any provisions that could potentially discriminate against natural hairstyles or protected styles. Look for language that imposes a Eurocentric standard or singles out specific hairstyles associated with certain racial or ethnic groups. 

Next, employers should modify the policies to align with the principles of the CROWN Act. Focus on language that promotes inclusivity and cultural sensitivity. Replace ambiguous terms like “neat” or “professional” with more objective criteria that do not target specific hairstyles. Consider including a statement that explicitly allows and celebrates natural hair and protective styles while maintaining standards of cleanliness and safety.  

However, updating your employee handbook is only the first step; educating your workforce about the CROWN Act and its significance is equally important. Employers should conduct training sessions or workshops to raise awareness about hair discrimination, cultural sensitivity, and the importance of embracing diversity generally. 

If you need assistance modifying your employee handbook to comply with the CROWN Act or have questions regarding workplace diversity and inclusion, contact the team at Stibbs & Co. Let us help you create a workplace that embraces and respects the unique identities of your employees. 


These materials are made available by Stibbs & Co., P.C. for informational purposes only, do not constitute legal or tax advice, and are not a substitute for legal advice from qualified counsel. The laws of other states and nations may be entirely different from what is described. Your use of these materials does not create an attorney-client relationship between you and Stibbs & Co., P.C. The facts and results of each case will vary, and no particular result can be guaranteed. The facts and results of each case will vary, and no particular result can be guaranteed.


 

Topic: Uncategorized
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Will ChatGPT Replace the Need For Attorneys?

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Written by Adam R. Fracht
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Artificial intelligence has revolutionized many industries, with some predicting that it will eventually replace human workers altogether. One such industry that has been impacted by the rise of AI is the legal profession. However, while AI-powered chatbots such as ChatGPT have made great strides in the legal field, they cannot replace the expertise and experience of human attorneys.

Great introduction, right? That entire paragraph is—verbatim—courtesy of ChatGPT. AI software like ChatGPT has incredible potential in the sense that it is available 24/7, has vast knowledge with a data library updated to 2021, and best of all, it’s free. With the recent news of ChatGPT passing the LSAT, concerns have risen that this technology may ultimately replace the need for human attorneys. Nonetheless, as with all great things, there are limitations, and even ChatGPT knows its limits. While it can draft a basic lease with the click of a button, there are certain human qualities and other factors that AI simply cannot replace.

For starters, as noted above, ChatGPT is not up completely to date with the law. At the time of the date of this publication, ChatGPT only has information up to 2021. Therefore, it is unable to draw on laws or other authorities that have changed since that time. Additionally, there have been reports of misinformation, which decreases credibility.

Even where ChatGPT is drawing from the most updated information, there are still restrictions when it comes to real-life legal practice. Every client has a unique situation and—as amazing as it is—ChatGPT is not able to take every factor into account when determining an appropriate legal strategy.

Likewise, ChatGPT would have great difficulty weighing such factors against each other, which is frequently a complex analysis that also depends on a client’s unique goals and financial circumstances. This is a consequence of the software’s answers being crafted based on the data it’s provided rather than deductive reasoning. 

Perhaps most importantly, ChatGPT will have great difficulty replacing the human element that makes up great lawyering – things like persuasion and charisma. Lawyers are in the business of convincing judges, juries, opposing parties, and even their own clients, to adopt certain positions as the right positions. People relate to people in ways that machines greatly struggle to do – just think of the difference between a customer service call being answered by an automated system versus a real person; as “humanlike” as machines can be, we immediately feel a disconnect when we’re talking with a machine.

While innovations in technology are becoming increasingly advanced and the threat of job replacement is on the rise, there are various roles a computer will never be able to replace. Good lawyering is one of them.


These materials are made available by Stibbs & Co., P.C. for informational purposes only, do not constitute legal or tax advice, and are not a substitute for legal advice from qualified counsel. The laws of other states and nations may be entirely different from what is described. Your use of these materials does not create an attorney-client relationship between you and Stibbs & Co., P.C. The facts and results of each case will vary, and no particular result can be guaranteed. The facts and results of each case will vary, and no particular result can be guaranteed.


 

Topic: Uncategorized
6 min remaining
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Overview of the Litigation Process

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Written by Brittney Boerner
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When considering whether litigation is the right step for their business, clients must consider several important factors, including the expense of litigation relative to the debt at issue, the viability of collection from the possible defendants, and the location where the lawsuit must be filed. One factor that is frequently surprising to clients is the length of time involved in the litigation process. A lawsuit can potentially last years, making consideration of such an investment of time—before initiating the lawsuit—crucial.

The timing of litigation is determined by the Texas Rules of Civil Procedure, the Texas Civil Practice and Remedies Code and any applicable local rules. Most counties and courts have their own specific set of rules and timelines that must be followed.

A lawsuit begins with the filing of an original petition, which, at a minimum, outlines the plaintiff’s claims against one or more defendants. It can take several weeks to gather the necessary information and documentation to draft the original petition. Conversely, in some instances where emergency action is necessary due to the likelihood of an immediate and irreparable injury, a lawsuit must be filed within days and may ask the court for emergency action.

Once the lawsuit has been filed, each defendant must be served with a copy of the petition by a local constable or private process server. If the defendant is easy to locate, service can often be effectuated within a few weeks of the filing of the original petition, however, if the defendant cannot be easily located, effectuating service may take several months. Your attorney may even have to make an application to the court to serve the defendant through alternative means (by mail, email, social media, etc.), a process that can take several months to complete.

After service is complete, each defendant has the opportunity to make an appearance in the lawsuit and file an answer. The Texas rules (applicable in Texas state courts) require that a defendant file his or her answer on or before 10:00 a.m. on the Monday after the expiration of twenty days after the date of service. Realistically, this can result in the defendant’s answer deadline to be almost a month after service. Answers can range from a simple “general denial” of the claims asserted to a counterclaim filed by the defendant against the plaintiff. If no answer is timely filed and no appearance is made by defendant, your attorney can request that the court award a default judgment against the defendant that may include interest and attorneys’ fees (typically, by this point, the lawsuit has been pending for at least a few months). The default judgment concludes the plaintiff’s claims in the plaintiff’s favor. After the judgment is deemed final—thirty (30) days after the judgment is awarded—the plaintiff may proceed to post-judgment collection against the defendant.

If, however, the defendant files an answer, the court will often issue a calendar of deadlines for the parties called a Docket Control Order (“DCO”) which sets a trial date, outlines all applicable court deadlines, and sets the deadlines for the parties to conduct any necessary discovery. The trial setting will often be six to nine months after the issuance of the DCO, and it is not uncommon for the initial trial setting to be delayed or rescheduled several times before getting assigned a final trial setting. Trial settings can be moved for any number of reasons, including at the request of the parties due to schedule conflicts or the need for additional time to conduct more discovery, or at the request of the court due to an overcrowded trial calendar.

Once the defendant has answered the lawsuit, the discovery portion of the lawsuit begins. Discovery allows each party to gather all necessary information and documentation from the other parties or from third parties regarding its claims and defenses. The amount of discovery allowed is sometimes dependent upon the dollar amount at issue. Discovery can consist of written requests to other parties for documentation and information and may include deposition testimony from one or more persons. The need for discovery is very case-specific. Some cases require little to no discovery whereas—in other lawsuits—discovery may take years, requiring multiple extensions of the initial trial setting. If discovery requests are made, the receiving party must timely respond, or risk being sanctioned by the court. If expert testimony is needed, a party can anticipate additional costs and time associated with locating and retaining the necessary expert and coordinating his or her review and report, as well as reviewing and rebutting any expert reports issued by the opposing party.

Most courts require that the parties attend mediation in the weeks or months leading up to trial. Mediation can be a half day or a full day (or more in rare cases), depending on the specific facts and circumstances of the lawsuit. Mediation gives the parties the opportunity to consider any settlement options of the lawsuit before embarking upon the costly and time-consuming process of preparing for a trial. Often, once the parties mediate, there will be a better understanding of not just the existing evidence related to their respective claims and defenses, but also the perspective of the other party and their goals in the lawsuit.

Upon the completion of discovery, and once the remaining court deadlines have passed, the parties must begin to prepare for trial. Parties are often surprised to learn that their trial setting is shared by other lawsuits and that there may be a preferential ranking of cases for the day. It is not uncommon for there to be last-minute changes in the trial setting depending upon how many lawsuits are set for trial on the same day, the types of lawsuits set that same day, whether those lawsuits are a jury trial or a non-jury trial, the number of days the parties anticipate needing for the lawsuit, the availability of the witnesses and the scheduling system used by each court. The end result of all of these variables is the potential that the parties prepare for trial multiple times before the trial actually happens.

Most courts will conduct a pre-trial conference a week before the scheduled start of the trial. The pre-trial conference provides the judge the opportunity to familiarize himself or herself with the lawsuit. The judge may authorize or prohibit certain witnesses and certain evidence and may make rulings to narrow the outstanding issues of a case. This pre-trial conference may be the first time the judge is deeply learning about the lawsuit, and the decisions he or she makes at the pre-trial conference may significantly alter the case to a client’s benefit or detriment.

Once the pre-trial conference has concluded, the parties are set to proceed with the trial. The trial can last anywhere from a half a day to several weeks depending on the number of parties and the claims involved. Counsel for both sides will provide a short opening and closing statement to familiarize the judge and/or jury with the forthcoming evidence and testimony. The plaintiff has the first opportunity to present its evidence and witness testimony to prove its claims and defenses, and the defendant can then cross examine that evidence. The defendant then presents its defenses and, if applicable, its counterclaim, and the plaintiff has the same chance to cross examine that evidence. The parties must follow strict rules regarding the relevance and admissibility of the content of witness testimony and any documentary exhibits as outlined in the Texas evidentiary rules.  After each party with an affirmative claim has presented its witnesses and evidence, the trial is closed and the jury will deliberate and issue a verdict or, if a non-jury trial, the judge will render a judgment.

Clients are also surprised to learn that the conclusion of trial may not be the end, but rather the beginning, of the appeal and/or post-judgment collection process. Even though the trial has concluded, the case may remain open for years, either by making its way through the appeal process or because the party who obtained a monetary judgment continues to pursue the other party via the post-judgment collection process.   

While litigation is often the right choice for a business, it is important to understand that the process can move slowly and take years. Clients must be prepared to devote significant time and resources to the litigation process and must maintain a level of comfortability with the strict rules governing lawsuits as well as the uncertainty of potential outcomes. Please feel free to contact our office if you have questions about whether litigation is appropriate for your business dispute.


These materials are made available by Stibbs & Co., P.C. for informational purposes only, do not constitute legal or tax advice, and are not a substitute for legal advice from qualified counsel. The laws of other states and nations may be entirely different from what is described. Your use of these materials does not create an attorney-client relationship between you and Stibbs & Co., P.C. The facts and results of each case will vary, and no particular result can be guaranteed. The facts and results of each case will vary, and no particular result can be guaranteed.


 

Topic: Commercial Litigation
4 min remaining
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When the Past Comes Back to Haunt You: Preferential Payments in Bankruptcy

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Written by Kelly D. Clark
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Simply mentioning the word “bankruptcy” can evoke a wide range of reactions from people—most of them unpleasant.  And rightfully so, because when a party files for bankruptcy—especially a business—other businesses or individuals who dealt with the debtor business before the bankruptcy will often lose money or equipment when the dust settles.   

Anyone who has ever been involved in a bankruptcy understands that a bankruptcy affects many parties—not just the debtor seeking bankruptcy. Often, bankruptcy negatively affects vendors that conducted business with the debtor in the months and years leading up to the bankruptcy.   The bankruptcy trustee, a person appointed to oversee the administration of the debtor’s bankruptcy estate, has wide latitude to control that bankruptcy through the federal Bankruptcy Code. One of the strongest tools in a trustee’s proverbial “toolbox” is the power to “avoid” payments made by the debtor to a creditor within a certain time prior to the bankruptcy filing.  These payments are referred to as “preferential payments” or “preference payments.”  Preference payments are a transfer of interest of the debtor in property for the benefit of the creditor, on account of an antecedent debt, made while the debtor was insolvent, that left the creditor better off than it would have been and the creditor asserted its claim in a Chapter 7 liquidation. 11 U.S.C. §547(b). Generally speaking, these payments are made by the debtor in the ninety (90) days preceding the debtor’s bankruptcy petition’s filing. See 11 U.S.C. §547(b)(4)(A). Absent an affirmative defense under 11 U.S.C. §547(c), the payment can be “avoided” by the trustee, and the payments must be returned or repaid by the creditor or the creditor risks being sued by the trustee—even though the creditor did nothing wrong.  This doesn’t seem fair—certainly not to the creditor—however, in the context of the bankruptcy court, no creditor should be preferred over another in the months preceding the bankruptcy.  Hence, the term “preference.”   

While there are defenses under 11 U.S.C. §547(c) that can reduce or in some cases defeat the amount sought by the trustee as a preferential payment, many creditors are initially at the mercy of the diligence of the trustee.  If the trustee and creditor cannot resolve the allegation of the preferential payments through settlement, and the trustee files a lawsuit, the creditor now has to defend against that lawsuit. One defense commonly asserted by creditors referred to as the “ordinary course of business defense.” In order to succeed in such a defense, a creditor must typically demonstrate that either (i) the debt was incurred by the debtor in the ordinary course of business or financial affairs of the debtor and the transferee (i.e., the creditor), or (ii) the deal was made under ordinary business terms. In re KLN Steel Prod. Co., LLC, 506 B.R. 461, 468 (Bankr. W.D. Tex. 2014).  These two prongs are referred to as the “subjective prong” and the “objective prong.”  Id. Only one of these two prongs need be proven to successfully establish the defense. See G.H. Leidenheimer Baking Co. v. Sharp (In re SGSM Acquisition Co.), 439 F.3d 233, 240 n. 4 (5th Cir. 2006) (acknowledging that after the 2005 amended Code, “the second and third prongs of the ordinary course defense have become disjunctive rather than … conjunctive”). 

The “subjective prong” focuses upon “whether the transactions between the debtor and the creditor before and during the ninety-day period are consistent.” ACP Ameri–Tech Acquisition, LLC, 2012 WL Adv. No. 10-9029, 2012 WL 481582 at *8 (Bankr.E.D. Tex. Feb. 14, 2012) (quoting Lightfoot v. Amelia Maritime Svcs. Inc. (In re Sea Bridge Marine, Inc.), 412 B.R. 868, 872 (Bankr. E.D. La. 2008)).  

The “objective prong” centers upon whether the payments are consistent with the “customary terms and conditions used by other parties in the same industry facing the same or similar problems.” Gasmark Ltd. Liquidating Trust v. Louis Dreyfus Nat. Gas Corp. (In re Gasmark, Ltd.), 158 F.3d 312, 317 (5th Cir. 1998); see also Gulf City Seafoods, Inc. v. Ludwig Shrimp Co., Inc. (In re Gulf City Seafoods, Inc.), 296 F.3d 363, 368 (5th Cir. 2002).  

The defense of preferential payments claims can be a long and tedious process that can have disastrous financial consequences for the unwary creditor.  At a minimum, the creditor should insist that the trustee clarify the specific dollar amounts that could be subject to an offset, the insolvency amount at the time of the alleged preferential transfer, why a reduction based on new value added is not applicable, whether the ordinary course of business defense applies, and the factors and documents the trustee reviewed and relied on to make that determination.    

Should you receive a bankruptcy notice identifying you or your company as a potential recipient of preference payments, promptly seek counsel to adequately advise you of your rights, liabilities and potential applicable defenses as a creditor in the bankruptcy.  


These materials are made available by Stibbs & Co., P.C. for informational purposes only, do not constitute legal or tax advice, and are not a substitute for legal advice from qualified counsel. The laws of other states and nations may be entirely different from what is described. Your use of these materials does not create an attorney-client relationship between you and Stibbs & Co., P.C. The facts and results of each case will vary, and no particular result can be guaranteed. The facts and results of each case will vary, and no particular result can be guaranteed.


 

Topic: Finance
4 min remaining
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What is a Title Commitment and Why is it Important?

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Written by Sarah Micle
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Real estate transactions, whether commercial or residential, involve documents. So. Many. Documents. Among all this paperwork is usually a commitment for title insurance. With so many other documents, it can be tempting to ignore this one, but the title commitment contains valuable information about the subject property that merit both the buyer and seller’s attention.

What is a title commitment anyway? It is a legal contract between the title company issuing the commitment and the party to whom the commitment is issued, typically the buyer and/or lender, and is provided before closing. The title company commits or promises to issue a policy of title insurance according to the terms set out in the commitment after closing. In Texas, there are state-specific forms regulated by the Texas Department of Insurance, and forms generated by the American Land Title Association (ALTA) can also be used.

Let’s review a few key elements of the title commitment and how this information can impact a transaction.

  • Schedule A. This schedule provides basic information about the proposed title policy and the property itself. Both the buyer and seller should review this information for accuracy. Confirm that the proposed insured is the buyer and the policy amount is correct (usually the purchase price for an owner’s policy). Also verify that the party in which title is vested is the seller.

Why is this important? Confirming this information ensures that the title policy will be issued to the correct party and in the correct amount. If the seller is paying the title policy premium, they ensure they are not overpaying. If the party in which title is vested is not the seller, then this will need to be addressed before closing. The seller may think they own the property (“I inherited it from my mother and I’ve been paying the property taxes for 20 years!”), but the real property records may indicate otherwise.

  • Exceptions – Schedule B (TX commitment)/Schedule B-II (ALTA commitment). This is a list of items that the title policy will not cover. Some exceptions are generic and others reference specific documents recorded in the real property records in the county in which the property is located. Copies of these documents are usually provided by the title company along with the commitment. Exceptions include restrictions on use of the land, easements running across the property, mineral interests, and leases on the property. The buyer should review each exception carefully and consider how it could affect the ownership, development, and use of the property. A survey can help to identify the location of easements, building setback lines and other physical encumbrances. The contract governing the transaction may allow the buyer to object to certain exceptions. The seller should also review the exceptions to be aware of potential objections by the buyer.

Why is this important? Exceptions may reveal information about the property that could negatively impact the buyer’s ownership, development, and use of the property. Is the proposed use of the property restricted? If there is a utility easement in an area to be developed, does the easement document allow for buildings, driveways, or other improvements in the easement area? Are there existing improvements located in an easement or setback area? What rights do the owner of a mineral interest or lessee of an oil and gas lease have to the surface of the property?

  • Requirements – Schedule C (TX commitment)/Schedule B-I (ALTA commitment). These are requirements by the title company to issue the title policy and can include documents to be provided to the title company, documents to be signed, and liens and other monetary encumbrances to be paid off and released. Both the buyer and seller should review this schedule to identify requirements that apply to them. The contract governing the transaction may stipulate how these items are to be handled.

Why is this important? The title company will not close, or issue the title policy, without complete satisfaction of these requirements, which can take time. For example, an old mortgage on the property was paid off years ago, but the appropriate release document was not recorded in the property records.

This is just scratching the surface of the wealth of information contained in this important document.

So why is the title commitment important? It alerts the buyer and seller to issues affecting title to the property, exceptions that will not be covered on the title policy, and conditions that must be met prior to closing. However, the title commitment and subsequent title policy do NOT guarantee that all issues related the property are known and that there will not be issues related to the property in the future.

It is good practice to have an attorney conduct a thorough review of the title commitment and associated documents so that you, as a buyer or seller, are completely aware of the issues that affect the property and would not be covered by the title policy post-closing. We at Stibbs & Co., P.C. have the skill set and experience to handle real estate matters for both buyers and sellers. Please contact our office to schedule an appointment to discuss your real estate needs.


These materials are made available by Stibbs & Co., P.C. for informational purposes only, do not constitute legal or tax advice, and are not a substitute for legal advice from qualified counsel. The laws of other states and nations may be entirely different from what is described. Your use of these materials does not create an attorney-client relationship between you and Stibbs & Co., P.C. The facts and results of each case will vary, and no particular result can be guaranteed. The facts and results of each case will vary, and no particular result can be guaranteed.


 

Topic: Real Estate
2 min remaining
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Suit on Sworn Account: The Basics

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Written by Anne McBroom Balke
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Oftentimes, business clients come to us needing help to collect on unpaid invoices. Contrary to common belief, businesses can pursue unpaid invoices even if there is no signed contract between the parties. Although there are many ways to initiate collection efforts, including sending a demand for payment, significant debts often ultimately require a lawsuit. One claim we frequently pursue in collection litigation is called a “suit on sworn account” (“SOSA”).  

Although typically brought in conjunction with other claims such as breach of contract, SOSA claims are used as a procedural tool to overcome the lack of a formal, signed contract, such as when the debt is evidenced only by documents like purchase orders or invoices, however informal. And, as discussed below, a SOSA claim forces the debtor to swear under penalty of perjury to any denial of the claim asserted, an awkward position for honest debtors.

SOSA claims are appropriate when the claim is founded upon an open account or other claim for goods or services. Any company in the business of providing goods or services for a fee is eligible for this type of claim. So long as a “systemic record has been kept,” the account has been adjusted for “all lawful credits and offsets,” and the primary damages the company seeks are the unpaid debts, a SOSA claim is likely viable.

The perks? As mentioned above, once the plaintiff creditor has filed its petition, the burden is on the defendant debtor to respond with a specific sworn denial as to why the debtor doesn’t owe the funds claimed. This is a heightened burden compared to most other claims and a general denial of the claim by the debtor will not suffice. If the debtor fails to file a sworn denial stating why the debt claimed by the creditor is not legitimately owed—a technical requirement—the court is allowed to grant judgment to the creditor even if the debtor generally denies or questions the validity of the debt.

So, despite the fact that there might not be a contract between the parties, SOSA claims can be successfully asserted to obtain judgment for creditors, and can sometimes provide a technical win when the debtor is unwilling to swear to the denial of the claim, or possibly just forgets.

If your company needs to collect on unpaid invoices or any other similar claims, Stibbs & Co. is happy to help.


These materials are made available by Stibbs & Co., P.C. for informational purposes only, do not constitute legal or tax advice, and are not a substitute for legal advice from qualified counsel. The laws of other states and nations may be entirely different from what is described. Your use of these materials does not create an attorney-client relationship between you and Stibbs & Co., P.C. The facts and results of each case will vary, and no particular result can be guaranteed. The facts and results of each case will vary, and no particular result can be guaranteed.


 

Topic: Commercial Litigation
3 min remaining
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Jury Duty: The Importance of the Dreaded Letter

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Written by Lindsey Karm
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The dreaded jury summons. The majority of us – lawyers included – have opened our mailbox and found that inconvenient letter from the District Clerk’s office. Let’s face it – none of us have time for jury duty. We have work, family commitments, errands to run, and anything else to do besides going down to the courthouse for jury duty.

I admit it – I’m guilty of those thoughts too, but after ten years as a lawyer and almost eight years working in a Texas District Court, I can honestly and one hundred percent tell you that jury service is one of the most important civic duties you can perform.

That point was recently driven home for me in an unusual way. While on vacation in London, I attended a performance of Agatha Christie’s play ‘Witness for the Prosecution’. The play is the story of Leonard Vole, a man accused of murdering a wealthy widow in order to inherit her money and estate. Performed in London County Hall, a former government building in London, the play is staged in a courtroom, giving the play an intense atmosphere. Agatha’s play is based on a 1925 short story and has played to audiences around the world since 1953.
The fun twist for this play? The audience members sitting in the jury box actually vote on Leonard’s guilt and innocence after watching a thrilling trial take place. While attending the play, I had the pleasure of just that – sitting in the jury box in the courtroom and on the jury itself. Like a jury in a real trial, the jury audience members take an oath from a judge, listen to testimony from all sorts of witnesses, hear attorneys make their cases and argument, and determine Leonard’s fate with a vote of guilty or not guilty.

And while ‘Witness for the Prosecution’ is fiction and theater, the jury’s role is pivotal to the ending of the play. Like the play’s ending, our system of justice would not exist without jurors – people just like you and me. Working in the court system, I had the unique opportunity to see time and time again that our jury system only works when people take that jury summons seriously. When people don’t show up for jury duty, trials and justice are delayed. When you receive that dreaded jury summons, it’s important to remember that it was sent to you because there are individuals on the other side of the coin waiting for their chance in court and that need your assistance in resolving whatever road they find themselves on – whether that be civil, criminal, or family.


These materials are made available by Stibbs & Co., P.C. for informational purposes only, do not constitute legal or tax advice, and are not a substitute for legal advice from qualified counsel. The laws of other states and nations may be entirely different from what is described. Your use of these materials does not create an attorney-client relationship between you and Stibbs & Co., P.C. The facts and results of each case will vary, and no particular result can be guaranteed. The facts and results of each case will vary, and no particular result can be guaranteed.


 

Topic: Uncategorized
2 min remaining
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Planning for the Modern Relationship-DINK

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Written by Maggie Griffin-Book
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Many young couples in the United States are enjoying the “Dual Income No Kids” (DINK) lifestyle. A large category of DINKs are unmarried. According to the 2008 census report, there were 6.2 million unmarried partner households in the United States. Pew Research Center reports that since 1995, marriage rates have declined 7% while cohabitation has increased by 4%.[1] Each unmarried partner is typically focused on their career and building their net worth independently of their partner.  That means more assets and liabilities to consider when cohabitating with a significant other.  

Those of us that fall into the unmarried DINK category should have foundational estate planning documents in place. The reality is that your partner is not your legal spouse and neither Texas nor federal law protects us when it comes to financial decisions, medical decisions, and taxes. My recommendations for all similarly situated DINK Young Professionals out there:

  • Prepare Financial and Medical Powers of Attorney – You don’t have the right to pick up your partner from day patient surgery without a Medical Power of Attorney or consent to the plumber working on a leaky pipe in the house that does not have your name on the deed.
  • Prepare a Cohabitation Agreement – You want to make sure the fear of common law marriage does not stunt the growth of your current relationship. Prepare a Cohabitation Agreement before moving in together to ensure common law marriage is not on the table until you both want it. This simple agreement allows you to create a joint financial plan and the peace of mind in knowing a potential breakup will not be served with divorce papers. If you plan to purchase property together, you should prepare a property agreement to characterize the joint ownership as your separate property and confirm the percentage ownership.
  • Write a Will – all of the assets that you are accumulating are your separate property and will not transfer to your partner by default state law in the event of your passing.

It is important to have these documents in place because you never know what life will throw your way. In the case of any financial, medical or relationship matters, you want to have a plan arranged before a problem arises.


These materials are made available by Stibbs & Co., P.C. for informational purposes only, do not constitute legal or tax advice, and are not a substitute for legal advice from qualified counsel. The laws of other states and nations may be entirely different from what is described. Your use of these materials does not create an attorney-client relationship between you and Stibbs & Co., P.C. The facts and results of each case will vary, and no particular result can be guaranteed. The facts and results of each case will vary, and no particular result can be guaranteed.


[1] The state of marriage and cohabitation in the U.S. | Pew Research Center

 

Topic: Probate and Estate Planning
4 min remaining
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The Secrets to Online Safety

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Written by Michael D. Ellis
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Cybersecurity and other online threats to businesses are, unfortunately, an increasingly common occurrence. In addition to phishing, spoofing, and other well-known email scams, cyber criminals are deploying increasingly sophisticated attacks. In recent months, our office has been contacted by many clients who have been victims or attempted victims of numerous cybersecurity attacks. Below are some tips and points to help prevent or address a cyberattack or other online threats.

 

  • Pay Careful Attention To The Sender’s Email Address: While seemingly obvious, failing to take this precaution can have a significant harmful impact on your company. Employees should always check to make sure the name displayed matches — exactly — the actual email address. A nefarious sender can change the display name to whatever is expected to most likely get a response, including a manager’s or coworker’s name. In addition, make sure that the actual email address is from the expected sender and not just a similar domain. For example, if the expected sender was Acme, Inc., which had a web domain of acme.com, any emails from Acme, Inc. would likely come from @acme.com email addresses. A client in this situation started receiving emails from an @acmeinc.com email address, which turned out to be fraudulent.  
  • Buy Your Business’s Domain Name, as well as adjacent names: Domain squatting or cybersquatting—where a third-party registers the domain name for your company and offers to sell it for a (sometimes exorbitant) price—is a practice as old as the Internet itself. Depending on what trademark rights you have in your business’s name, you may have options to challenge the cybersquatter under trademark law, the Anticybersquatting Consumer Protection Act, or the Internet Corporation of Assigned Names and Numbers (“ICANN”) dispute resolution procedures. While these options can end with a positive result, the procedures are often cost- and time- intensive. A better approach is to take preventative measures. It is generally a good idea to obtain the domain name for your business, as well as any “adjacent” names. These adjacent names include abbreviations, confusingly similar variations, and the corporate structure for your business. Using the Acme, Inc. example from above, the business owner should consider obtaining acme.com, www.acmeinc.com, www.acmecorp.com, and, potentially, www.akme.com. A business should also consider the “.net,” “.biz,” and,”.info” domain names for their business as well. Cost is always a consideration, but registering your business’s domain name early could be important to preventing more costly litigation or dispute-resolution procedures in the future. Another benefit is that you will preempt the ability for a cybercriminal to impersonate your business by using your business’s domain name to defraud third parties.
  • Get A Trademark Registration: Many businesses—particularly start-ups and early stage companies—overlook the importance of trademarks. A trademark registration protects your business or product name in your industry and provides mechanisms to help ensure that a competitor or fraudster does not benefit from your business’ goodwill. Addressing trademarks early—including both a clearance search and an application for registration—can help mitigate future and more expensive issues. It can be devastating for a young business to spend years building up their brand, only to then receive a cease-and-desist letter from a prior user of that name. Rebranding (or defending a trademark suit) is an expensive and arduous process that can often be avoided by taking early steps to protect your trademark(s). While often not thought about in the context of “cybersecurity,” ensuring that your business properly protects its name and related trademarks can be very important when fighting cybersquatters or fraudsters.  
  • Be Wary Of Third-Party Escrow Or Holding Companies: Online marketplaces, such as eBay, Craigslist, and Facebook Marketplace, are popular platforms for both individuals and businesses to sell goods. A business will setup a virtual storefront that allows users to browse and purchase goods. But consumers can sometimes be skeptical that the online storefront is “real,” and are understandably concerned that the purchased good will never be received. Third-party escrow or holding companies offer services in which a buyer’s payment is held in escrow until delivery of the purchased good is confirmed. In theory, this practice protects both parties to the transaction because the seller does not ship the good until the escrow company confirms receipt of the purchase funds. Unfortunately, scammers will pretend to be an escrow service and buyers will purchase fake goods by sending the money to the fake escrow company. To make matter worse, the scammers will list a real company for the contact info, so the real company begins receiving angry calls demanding delivery of the goods. For businesses, following some of the other tips in this article—such as purchasing the proper domain names—can help mitigate this risk. For buyers, it is important to take the extra step of verifying that the escrow company is legitimate and has a relationship with the seller. Often, a simple telephone call to the escrow company can prevent fraud before it happens.
  • Cybersecurity Or Cyber Liability Insurance: Often offered by the same providers of other business insurance, a cyber liability insurance policy can provide coverage events and incidents that are not covered by typical E&O, CGL, or other business liability insurance. Because this is an emerging industry, costs and coverage can vary greatly. However, there can be third-party coverage, such as the loss of customer data, as well as first-party coverage, such as losses caused by a business’s internal network being taken down. Cyber liability insurance can also help with remediation costs, such as legal, investigative, and communications.   

These materials are made available by Stibbs & Co., P.C. for informational purposes only, do not constitute legal or tax advice, and are not a substitute for legal advice from qualified counsel. The laws of other states and nations may be entirely different from what is described. Your use of these materials does not create an attorney-client relationship between you and Stibbs & Co., P.C. The facts and results of each case will vary, and no particular result can be guaranteed. The facts and results of each case will vary, and no particular result can be guaranteed.


 

Topic: IP