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We have discussed the potential risks that remote working poses to a company’s trade secrets on this blog before. Business owners are likely aware of these concerns, since many of their workers are using their home internet, and maintaining digital security can be complex outside the company’s physical boundaries. However, it bears repeating that business owners must take precautions since a recent case demonstrates the gravity of this particular risk. RECENT CASE HIGHLIGHTS TRADE SECRET RISKS ON DIGITAL PLATFORMS Even though this case was in Delaware courts, California business owners should take note of the elements of this lawsuit. Near the end of 2020, Smash Franchise Partners, LLC, filed a case claiming trade secret misappropriation. The company had held open meetings over the popular video-conferencing platform Zoom to discuss: Franchising opportunities Business strategies Growth opportunities One of the attendees used the information offered in these meetings to launch their own business in competition, leading to the lawsuit. However, the Delaware court ruled against Smash Franchise Partners’ claim. THE PRIMARY ISSUE: FAILURE TO TAKE REASONABLE STEPS The World Intellectual Property Organization (WIPO) defines that a trade secret must meet three requirements. Businesses must: Keep the matter secret, so it is valuable to the business in the commercial world Ensure only a few people know the trade secret Take reasonable steps to protect the trade secret and keep it confidential This last factor is the primary reason why the court ruled there was no misappropriation of trade secrets in this recent case. The company did not take steps to restrict who attended the Zoom meetings. Additionally, they did not treat confidential information differently from non-confidential information. Therefore, the matters discussed could not be considered trade secrets according to WIPO’s rules. WHAT ARE THE TAKEAWAYS FOR CALIFORNIA BUSINESS OWNERS? This case shows just how important it is for business owners in California and across the country to take precautions and make sure they protect their trade secrets – especially while working virtually. Business owners must take such reasonable steps for two reasons: To prevent trade secret theft or misappropriation To effectively take legal action in cases of misappropriation Trade secrets are invaluable in the business world. It is critical to learn from matters like this and avoid the risk of damaging consequences and litigation.

How do business owners determine if a competitor has infringed on their trademark? It might seem straightforward if a start-up uses a name too similar to your company’s, or other companies sell products with designs that match your logo too closely. The evidence of infringement might be clear, but there is one more factor that influences infringement – confusion. CONFUSION: THE BASIS FOR INFRINGEMENT CASES The likelihood of confusion is often at the center of most trademark infringement cases. This concept refers to the confusion on the consumer’s part. For example, if two trademarked products share a similar name, consumers might confuse the source, or maker, of those products. Generally, the United States Patent and Trademark Office (USPTO) will review the likelihood of confusion in the process of registering a trademark. That way, they can ensure it does not resemble one that a business has already registered. However, as Forbes reports, these cases are common, and they are a considerable risk to a business’s success and brand. HOW DO COURTS DETERMINE IF THERE IS A LIKELIHOOD OF CONFUSION? According to USPTO, the likelihood of confusion is based on the similarities, specifically: The similarities between the appearance, sound, impression or even the meaning of the name, brand, logo or product. The similarities between the products or services provided by the entity. These are the most important factors to consider, since these similarities increase the risk of consumer confusion, and therefore become an issue of unfair competition as well as infringement. As a business owner in California, it is critical that you understand this concept. It can help you ensure you create effective and unique trademarks, but also protect your current trademarks – and your loyal consumers.

While the brick-and-mortar shop remains strong, there is no doubt that online commerce has become a fierce competitor in the business world, particularly in light of the past two years of Covid-19. For example, sales in e-commerce rose by 16% between 2016 and 2017 alone. The more consumers take to their computers to shop, the more businesses must strategically expand their online presence to meet this demand. This is one of the primary reasons that domain names have become a significant point of contention in trademark disputes. DOMAIN NAME DISPUTES ARE BECOMING A COMMON ISSUE Websites are now at the center of many cases involving trademark infringement, as we have discussed in past blog posts. However, why is this becoming such a considerable issue for businesses? Trademark infringement is often a risk when it comes to anything carrying a business’s name, logo or brand – including the business’s website or domain. However, there are only so many domain names available. And registering the domain name is not the same as registering a trademark, even if it gives businesses exclusive rights to use that name for their website. This can lead to disputes over similar domain names and confusion for consumers. In some cases, “trademark trolls” will even register several domain names just to hold a monopoly. As e-commerce increases each year, becoming a larger influence in a business’s strategy, it is critical to take the proper precautions to protect the online presence of a business. SHOULD BUSINESS OWNERS TRADEMARK THEIR DOMAIN NAME? Trademarking a domain name is often a beneficial route for businesses to protect: The financial investment they made in creating an online presence Their consumer base using their website and seeking their service Their brand, especially if the domain name is connected to the brand Establishing a trademark also gives businesses legal rights to act if another individual or entity infringes on their domain name and creates confusion. It is important to note that not all domain names can be trademarked. The domain name must meet the qualifications of a trademark, and business owners must still go through the steps of registering the trademark. Even so, business owners also must take great care when selecting a domain name. They should use an easily recognizable name, but one that is not similar to others in use so they can avoid accusations of infringement themselves.

Business partners do not always see eye to eye. Sometimes these differences have simple solutions; they might even help partners to grow and develop their business. However, there are some disagreements that can strain the partnership – and jeopardize the business. Disagreements over expenses, draws, operations or intellectual property can quickly lead to legal issues or litigation. In fact, intellectual property is a frequent source of such disputes, and these conflicts can be particularly complex for business partners. THE PRIMARY ISSUE: WHO OWNS IT? Most often, the partnership disputes that erupt over intellectual property revolve around the question of ownership. Does the company own it, or does one partner own the rights to use the intellectual property? This generally depends on two factors: Who created the intellectual property; and When they created it. Usually, intellectual property rights belong to the person who created it – especially if one partner created it before they formed the business. However, if the business partners created it together, it belongs to the business. ADDRESS OWNERSHIP AS SOON AS POSSIBLE The issue of ownership can often develop into a dispute when business owners wish to dissolve their partnership. One partner might claim they own the intellectual property and wish to use it in their future ventures. This could: Hinder the other partner’s future ventures or their current business Lead to larger legal disputes, such as trademark misappropriation or theft lawsuits Litigation becomes a serious risk if the ownership of intellectual property is not clear. This is why it is critical to establish ownership rights at the beginning of the partnership, or when partners create intellectual property. DOCUMENTATION IS NECESSARY Maintaining careful records is a fundamental rule of the business world. Therefore, California business owners should ensure that they: Document the details: Keep a written record about the creation and use of intellectual property. For example, business owners should note when they created it as well as who was involved in its development. Establish ownership: Business owners must address ownership of any intellectual property created and used during the partnership in the partnership agreement. Recording this information might not always prevent a dispute, but it can help mitigate disputes and inform strategies to reach a resolution for both partners.

As a result of the pandemic, many California businesses have transitioned their employees to work remotely. Some physical workplaces have since opened up, but many more are maintaining a remote work policy for the foreseeable future. For many businesses, the ability of their employees to work from home has been very helpful during this time. However, it also involves a considerable risk – namely to a business’s intellectual property. As we discussed in a previous blog post, the economic situation created by the pandemic could lead to a wave of trade secret litigation. What can business owners do to tailor their trade secret protection to this new landscape of work? 1. REEVALUATE THE PROTECTION PROGRAM Every business owner should have a trade secret protection program in place that covers essential aspects of security, including: The identification and access to trade secrets; Regulation of how and when employees use trade secrets; The establishment of confidentiality agreements; and Exit procedures to safeguard trade secrets. 2. RECONSIDER SECURITY The process of securing trade secrets changes in the digital world compared to the physical workplace. When employees – and even supervisors – work from home, business owners must ensure they review their security. It might be necessary to: Require all employees to use a virtual private network (VPN); and Send out reminders to improve security for personal home networks and Wi-Fi. Business owners might feel like they do not have much control over their security when everyone works remotely, but they must take steps to reclaim control through increased security measures. 3. REQUIRE NEW COMPLIANCE TRAINING Generally, business owners should require annual compliance training to reaffirm that employees understand the business’s trade secret security policies. However, business owners should arrange a new training for employees under these new circumstances. Business owners must be flexible. They must always be prepared to adjust their trade secret protection program as necessary to improve security and prevent legal risks.

Trade secrets play an important role in the business world, regardless of a business’s size. Whether it is a particular process, technology or even a recipe, trade secrets help to individualize the business and their products. Therefore, business owners need to protect their trade secrets to preserve their business’s success and prevent complicated litigation. This could be more important in the coming years, as a new report speculates that litigation over trade secrets could spike. WHAT IS THE CAUSE OF THIS POTENTIAL RISK? COVID-19 has led many companies across the nation to close their doors, furlough employees or even cut down on staff permanently. In turn, this means that employee mobility has increased, and likely will continue to. As businesses furlough or lay-off employees, they begin to search for new jobs. This is a natural cycle, but a report found that increased employee mobility can correlate with an increased risk of trade secret theft or misappropriation – which could lead to an increase in litigation. Employees might use knowledge from their previous employers in a new position or even to start their own business. This has happened before in the economic crisis between the years of 2007 and 2009: During the crisis, there were roughly 770 to 1,100 lawsuits over trade secrets filed; and After the crisis, from 2013 to 2015, that number increased to between 7,000 to 9,000 cases. This precedent could serve as a warning that the risk of litigation could indeed spike again. BUSINESS OWNERS SHOULD ACT NOW TO PROTECT THEIR TRADE SECRETS When it comes to trade secrets, business owners likely already have strict policies in place to protect them. However, with the potential risk businesses could face in the coming years, they must review these policies. Business owners should: Properly label confidential information; Train employees how to handle trade secrets; and Reinforce cybersecurity measures. If business owners do face trade secret litigation, they must still take action to protect their trade secrets. If a case goes to court, the California Uniform Trade Secrets Act requires business owners to reasonably identify their trade secrets before discovery. Of course, there are measures in place to protect trade secrets from the public record, but business owners must still be vigilant at every step.

Business owners work hard for what their company has achieved. Everything from the purpose of the business to the carefully cultivated clients is a valued and protected asset for entrepreneurs. Even the logo or branding represents a hard-fought victory full of symbolism, dedication, pride – and perhaps most importantly crucial brand identity and value. Consequently, when another company or individual misappropriates these important assets, either intentionally or not, it can seem like a direct attack on the livelihood of the business. Upon learning of such a misappropriation, the business owner should retain an attorney to write an impactful cease-and-desist letter to the offending party identifying the unlawful conduct and demanding that they immediately stop. CEASE-AND-DESIST LETTER BASICS There is an art to writing a cease-and-desist letter. Too strong, and it may incite resistance which may result in having to file a lawsuit to enforce your rights. Too weak and it will likely be ignored. Firmly encouraging compliance and cooperation rather than seeking punitive remediation if often preferred. For example, in 2012, the popular whiskey brand Jack Daniel’s sent a cease-and-desist letter to an author who used a likeness of their whiskey label as a cover for his book. Instead of immediately threatening legal action, the liquor mogul politely asked him to change the cover for the next printing. They even offered to help pay for a redesign. The author immediately acquiesced, declining the extra funds and making the changes. LEGAL COUNSEL PROVIDES A PROFESSIONAL EYE The Jack Daniel’s approach may not work for every company. Those looking for a more professional voice can hire a local lawyer familiar with intellectual property law. An attorney can draft a professional letter that lays out legal claims clearly and concisely.

When you hire someone new, it can be difficult to know how things will work out. Some employees are fabulous – hardworking, smart and get along well with your team. Others, not so much all the time. Maybe they aren’t so great at following rules and directions, or they don’t mesh well with your other employees. As a business owner, it’s important that you know how to deal with difficult employees while also protecting yourself and your business. Here are some tips to bring into your next employee situation: WRITE DOWN EVERYTHING It’s so important to make sure that you get documentation of problems you have with an employee and how you deal with it. Keep all emails or texts and write down key points from any conversations that you have with them about the issues. Document all incidents and if the issues persist. Even if you think the problem will be solved with a simple talk, having everything documented will be extremely helpful if things don’t get resolved or escalate. GO BACK TO YOUR COMPANY POLICIES When you started your business, you probably made policies and specific processes to help in instances like this. If you’re having an issue with an employee, lean on those policies. You can always kindly remind your employee of the agreement that they made upon getting hired. If things continue and you think disciplinary action may need to be taken, be sure to follow your stated processes carefully to protect your company. OFFER CLEAR AND CONSTRUCTIVE FEEDBACK It can be easy to talk about what an employee is doing wrong, but a good leader is able to help employees correct their behavior. Help them understand what to do differently and how they can improve. KEEP IT PROFESSIONAL Difficult employees can be frustrating to deal with. It’s easy to get overwhelmed by bad behavior, but it’s important to keep your own actions professional. Try to look at the situation calmly and objectively so that you can best understand what is going on and how to resolve it. Don’t talk about the issue with anyone who doesn’t need to be involved. Talking about employees with other employees is one of the quickest ways to escalate the situation. Don’t let a situation with a difficult employee have a negative impact on your business. If the situation persists, seek legal advice to ensure that you are keeping your company safe.

Construction contractors face professional challenges every day. Between client relations, workers, suppliers, vendors, building inspectors and a different workplace with every new job, contractors must satisfy a wide range of demands at once. To complicate matters, contractors must deal with frequent litigation over contract disputes or errors. Thankfully, many states in the U.S. attempt to reduce the volume of these lawsuits with limiting statutes. Among these protections is California’s Right to Cure statute. CALIFORNIA’S RIGHT TO REPAIR STATUTE Many states in the U.S. support a Right to Cure statute, including California. In 2002, after an adverse decision by the California Supreme Court denying homeowners the right to sue for construction defects that had not yet caused actual damage to other property or parts of a home, the California General Assembly adopted the “Right to Repair Act” (Civil Code §§ 895 – 945.5), often referred to as SB 800. When a client finds a defect or error in a contractor’s work, they must inform the contractor before filing a lawsuit. The client must allow the contractor to inspect the error and perform repairs. Sometimes though, the error might not be easily repaired. If the contractor is unable to fix the defect, they can offer alternative solutions for the client. These can include covering the cost of repairs through another company or contractor or even a cash credit. If all else fails, the client may advance their claim to the courts for a legal solution. These statutes are designed to ease court caseloads by precluding certain lawsuits and allowing parties to resolve disputes before taking legal action. LEGAL PROTECTIONS TO SAVE TIME AND MONEY Contractors with questions about Right to Cure statutes can find answers with a local lawyer familiar with construction law. An attorney can navigate legal statutes, help draft comprehensive contracts with extensive protections and assess any legal claims.

When a former employee misappropriates your company’s secrets in violation of their non-compete agreement with your company, it may feel like a punch in the gut and you may not know how to respond. WHAT DO NON-COMPETE AGREEMENTS PROTECT? Non-compete agreements protect a variety of business interests. They prevent employees from working for a competitor, or providing them information, within a certain geographical area and/or period of time after leaving your company. They may also prohibit employees from using company trade secrets if they decide to start their own business. By law, California does not enforce these agreements in most circumstances. But your company – and many others in the state – may use a properly crafted non-compete agreement, in conjunction with a non-disclosure agreement, to discourage the misappropriation of your business information. WILL EMPLOYEES FACE CONSEQUENCES? You may have concerns that a former employee will use or reveal your company’s trade secrets. California does not recognize inevitable disclosure doctrine. This doctrine assumes an employee would use your secrets in their new role and enjoins them from doing so. Yet, your company can receive injunctive relief if the employee has threatened to appropriate your secrets. A court-ordered motion will stop them from acting on their threats. When your former employee uses your company’s secrets for personal or business advantage, they have committed theft. In this case, you can file a lawsuit against them for stealing your information. Understanding the difference between non-compete agreements and non-disclosure agreements, and how they can be applied in California, will help you to implement the appropriate, enforceable safeguards to protect your business secrets.

Your company likely does its best to compensate employees in a fair and timely manner. Yet on occasion, a disgruntled employee might claim you violated wage and hour regulations. They may try pursuing a settlement, and you may worry that it will hurt your business’ reputation and finances. While your company may have made wage and hour mistakes, it’s crucial to protect it against employees seeking damages. Following these suggestions can help you do so. Follow California’s wage and hour laws California’s minimum wage will increase to $15 per hour in 2022. Currently, it sits at $12 an hour for businesses with 25 or less employees, and $13 per hour for those with 26 or more. The state and country’s fluctuating wage standards may confuse workers. But if you hire an employee at a pay rate that’s now lower than the current minimum wage, you must raise their pay to meet state standards. California’s overtime statutes decree that employees who work between eight and 12 hours in a day will receive one-and-a-half times their hourly pay. And employees who work over 12 hours in a day can receive double their hourly rate of pay. This rate also applies to employees who have worked over eight hours in a row on seven consecutive days. Some employees are exempt from this law, and it’s important to know if your employee’s work falls under this category. Keep detailed employee and pay records Make sure your company has comprehensive employee and pay records on hand. Employee records can help you identify their pay rate, pay changes and work schedule. And pay records track the number of hours the employee worked, any overtime they worked and the dates they received their paychecks. While auditing these records may help you find the mistakes your employee alleged, doing so may also dispel their claim. Wage and hour violations are serious matters. But by following California’s wage and hour laws and keeping proper records, you can protect your business against them. If your company faces a wage and hour suit, working with a legal professional can help you fight it.

Have you, as Summoner, been able to guide your Champion to destroy a Nexus or two? If you are one of the estimated 100 million active League of Legends players world with League of Legends, it is likely that you fully understand how elusive victory can be in the online battle arena. Those unfamiliar with the popular streaming game might not understand its terminology, but will regardless understand the stakes in intellectual property litigation brought by League of Legends developer Riot Games. The Beverly Hills company has filed a claim against a far less well-known esports developer called Riot Squad. In its lawsuit, California’s Riot Games claims that Chicago’s Riot Squad “hopes and intends that by its use of the Riot brand name, consumers will mistakenly believe that its esports organization is in some manner associated with, sponsored or endorsed by, or otherwise affiliated with Riot and its hugely popular products and services.” It should be noted that Riot Games has secured trademark protections for “Riot” and “Riot Games” when the terms are used in connection with esports and video games, the firm said. Riot Game has asked the U.S. District Court in the Central District of California’s Western Division to stop Riot Squad from using its trademarked “Riot” terms, award damages and require the fledgling firm to “deliver up for destruction” all products and materials using the terms. A news report on the dispute noted that Riot Squad does not own a League of Legends team. Rioters around the world are getting ready for the upcoming 10th anniversary of League of Legends with a day of streamed activities. Individuals and companies that need to protect their intellectual property can enforce their IP rights with the help of an attorney experienced in protecting client interests in intellectual property disputes.