Austin TX Business Law Blog

How Can I Get Better at Negotiation?

Negotiation is a key skill in business. Done properly it can save you money, result in higher profits and help you seal the deal to obtain the right employees, suppliers and contractors. Like any skill it can improve with practice and some good advice.

A recent article in Entrepreneur shares some great tips for improving your negotiation skills. 

1. Prepare

Psychology plays a crucial role in negotiations. If you are better prepared than the other party, you may put them back on their heels and put yourself in a better position. Take time to learn as much about the other party as possible so you can capitalize on your company’s strengths and the other party's weaknesses. 

 2. Find Leverage

Take maximum advantage of your strengths. If you are the only source of a product or service, or what you offer is of much better quality or much lower price than the competition, run with that. If there is great demand and not much supply for what you sell, you are in a strong negotiating position. 

3. Be Willing to Walk Away

If you are in the position where you absolutely need an agreement, you have no leverage and you are not really negotiating. You are just setting the terms of your surrender. If the other side’s final offer is simply unacceptable or the people you are negotiating with are arrogant, demanding or inflexible, is it really worth the effort?

4. Both Sides Need a Win

If there are no benefits for the other side, there is no reason for them to agree and negotiations will be a waste of time. Be proactive and creative. Ask questions. What are they looking for and what will be acceptable to them? If you were in their shoes, what would you really want and what would you be willing to do to get it? 

Sell them on how the deal that you want will benefit them. If you see negotiations as strictly a power game where you impose your will to the maximum detriment of the other party, you probably will not come to an agreement and if you do, it will likely be the last one they ever sign with you.

5. Close the Deal

Have the endgame in mind as you negotiate. If there are several issues to be negotiated, work on the ones that will be easiest to agree on first. Once you start getting those out of the way, negotiations will build up momentum. The parties will feel more comfortable with each other. Each side will be more willing to compromise to close the deal because they do not want to have wasted all the time and energy spent in resolving the lesser issues. 

If you need help negotiating a contract in the Austin area, call business law attorney Sanjeev Kumar at (512)960-3808 for a consultation today.

 

How Can My Business Protect Our Trade Secrets?

Your trade secrets are protected by Texas common law and the state’s Uniform Trade Protection Act and they can be protected by a properly drafted non-disclosure agreement. Those agreements make it clear to an employee what can and cannot be disclosed both during and after the person’s employment. This agreement not to disclose is made in exchange for obtaining or maintaining the person’s job. 

Though there is no guaranty this agreement will not be broken, but if it is, you have legal recourse to enforce the contract and/or seek damages due to its breach. The trade secrets or intellectual property you may want to protect could be sales or marketing plans, employee contact information, customer contact lists, manufacturing processes or product formulas. 

A recent lawsuit filed by Massachusetts company A123 Systems, LLC (which makes lithium-ion batteries) demonstrates some of the issues that can accompany trade secret disputes. It claims that five former employees violated non-disclosure agreements because they either went to work for the computer company Apple, Inc., or planned to do so, and they were going to bring company trade secrets with them, according to Bloomberg. Apple is accused of aggressively hiring their employees, possibly as part of a reported effort to develop an electric car.

A123 became known in 2007 when General Motors Corp. (GM) worked with the company to come up with battery technology that could be used in its electric-plug-in hybrid car the Chevrolet Volt (GM later chose LG Chemical Ltd. to provide the batteries).

A123 is seeking a court order that would prohibit one of its former employees from breaching his employment agreement and prevent Apple from encouraging him to do so. The company also wants the court to order the return of any A123’s confidential documents that the defendants may have in their possession.

Every company has trade secrets that are vital to its ability to stay in business and grow in the future; they are worth taking steps to protect. The Kumar Law Firm in Austin can help you create non-disclosure agreements for your employees so you can protect your business. If you are interested in finding out how you can protect your companies trade secrets, call our business law attorneys today at (512)960-3808.

What litigation strategies should start-ups pursue to protect valuable intellectual property from rivals?

Austin, Texas-based start-up Allure Energy has sued Honeywell International in a case involving innovative thermostat technology.  Allure Energy's Eversense thermostat integrates location-based controls in mobile phones to allow users to control their home environment.  Allure alleges that Honeywell's Lyric thermostat infringes on two of its patents.

In its complaint in the U.S. District Court for the Western District of Texas, Allure Energy seeks damages, profits, and an injunction against Honeywell's use of Allure's technology.  The litigation also alleges that Honeywell engaged in false advertising under the Lanham Act.

In 2012, at a trade show in San Antonio, Texas, Honeywell requested that Allure demonstrate the EverSense thermostat, which is designed to detect users' locations through their mobile devices and automatically adjust temperature settings depending on whether homeowners are going out or returning home.  Allure Energy owns several patents on the technology underlying the smart thermostat.  Honeywell ordered samples and Allure Energy's CEO, Kevin Imes, thought a business partnership might be in the offing.

Instead, says Allure Energy's complaint, Honeywell took the geolocation technology that Allure developed for EverSense and incorporated it into Lyric.  Honeywell has been marketing Lyric since August 2013, according to Imes. 

Imes was previously the founder of an Austin-based intellectual property services firm, Imes IP LLC, as well as 3Gfoto Inc., a mobile imaging software maker, also in Austin.

This is not Allure Energy's first lawsuit against a competitor for infringement of its IP.  The start-up previously sued Nest Labs, now part of Google, in a Texas federal court. 

Intellectual property is often a company's most valuable asset and the crown jewel of many start-ups and growing businesses.  Patent, copyright or trademark infringement by a large competitor can be devastating to a new enterprise, requiring a forceful legal response.

The expert business and intellectual property lawyers of the Kumar law firm in Austin, Texas, can help you protect your IP.  The firm’s expert business strategists can help you choose the best course of action to prevail against competitors and prevent or resolve disputes.  Call (512) 960-3808 for a consultation today. 

Will Your Company Have a Future Without You?

If you are running your own business you are probably very focused on the here and now, making sure your business is running well and avoiding (or getting through) the many obstacles it faces. But you should also think about the future, because the future will happen whether you are prepared for it or not.

One thing to consider is succession planning which outlines the transfer of leadership in the event that you leave your company by choice (perhaps to start another business or retire) or suffer serious injury or death.  

A recent Inc. magazine article states that a Deloitte survey found:

• Nearly 90% percent of business leaders realize their company’s success depends on proper leadership succession, 

• 13% are confident with their succession plans, and 

• 54% stated lack of talent has damaged their companies.

To help plan for succession:

• Define what type of leader your company needs. What type of skills and behaviors are needed to run it? What specific actions will a new CEO need to take and what knowledge and experience will be needed to succeed? 

• Identify job specific assignments linked to business strategy which can help to prepare this person, in addition to useful feedback to make sure the person is on the right track. 

• Define how leadership talent will be promoted and identify high potential employees formally as those with potential. Give worthy candidates training, incentives and added authority.

• Track the development of needed skills. Measure candidates' problem solving and decision making skills, a candidate's emotional intelligence and his or her ability to negotiate and navigate problems with employees, customers and outside partners. 

If you are not the sole owner, succession planning should include buy sell agreements between those with ownership interests. If one party wants to sell his or her share, to whom can that interest be sold and for what price? A mechanism needs to be worked out so if a part owner is leaving the company, he or she (or his or her family) will be treated fairly.

If you own a business and want help preparing for its future, call business law attorney Sanjeev Kumar at (512) 960-3808 to schedule a consultation today.

Is patent reform being considered by Congress?

Our nation's patent system was not created with today's technology in mind. Over the years, various issues have been addressed by legislation or court decisions, but many believe a modernized law is needed. The United States House of Representatives created a Subcommittee on Courts, Intellectual Property, and the Internet in order to stay abreast of technological changes and their intersection with the law.

A subcommittee hearing was held recently to review United States Supreme Court cases in the patent arena. The chairman noted that the Innovation Act had been reintroduced in the House; the bill contains reforms to address abusive patent litigation. Lawmakers discussed the importance of venture capitalists in fueling the patent system and the danger of amending patent laws in such a way that would lead to excessive litigation and discourage product development. Patent trolls were also considered; that term refers to people or entities who purchase patents without the intent to benefit from their protections, but rather initiate patent infringement lawsuits against businesses with similar ideas. Panelists urged lawmakers to adopt changes to current patent policy that would address trolling and frivolous lawsuits.

Patent quality was cited as an important goal, striving to strengthen requirements for patent eligibility in order to reduce the number of weak or overly broad patents in the system. Patent equality was also mentioned as a priority, seeking to ensure that laws apply fairly and equally to all. An essential component to this equality would mean refraining from legislative carve-outs for certain industries. Still, the venture capital industry, particularly those involved with technology patents, has urged the House to consider the unique needs of the start-up tech space.

The Kumar Law Firm PLLC is experienced in the field of intellectual property law. Founder and principal Sanjeev Kumar is an attorney who also has a bachelors and masters degree in electrical engineering. He has filed multiple patents in his own name and has been granted a patent by the United States Patent and Trademark Office (USPTO). Contact Kumar Law Firm today at (512)960-3808 for guidance on your intellectual property issue, whether it involves patents, trademarks, copyrights, trade secrets or more.

What remedies does a business have against former corporate officers who go into direct competition against it?

When business partners, officers or employees leave the company, ownership of intellectual property can become a source of conflict. Contentious claims to Trademarks, computer source code and numerous other IP assets, often of substantial value to the company, may become the basis of a conflict. In a recent Texas case, the disputed property is the right to breed dogs—specifically descendants of Rin Tin Tin, the canine movie and television star from the 1950s and earlier.

Rin Tin Incorporated has sued several of its former corporate officers for trying to sell dogs from the bloodline of the original Rin Tin Tin. The lawsuit, filed in a Texas federal court, accuses the defendants of breach of contract, breach of fiduciary duty, trademark infringement and dilution, unfair competition and more. Dogs descended from Rin Tin Tin sell for as much as $50,000.

Rin Tin Incorporated's owner, Daphne Hereford, says she holds the copyrights and trademarks that allow her to use the Rin Tin Tin name. The company uses those trademark registrations to sell not just dogs but clothing, dog accessories, children's books and other products.

In 2008, Hereford began working with the defendants, professional breeders who had once been involved in the training program for Lassie. She appointed them officers of her company. She also registered them with the American Kennel Club as owners of some of the Rin Tin Tin Dogs. In the current litigation, she maintains that those registrations were not intended to transfer actual ownership of the dogs or conflict with other contracts and policies of her company.

A dispute over finances and the operation of the business ensued, however, and in 2014, Hereford dismissed the defendants from the company. The defendants kept a number of the dogs and refused to return them. They are, Hereford alleges, trying to breed them in violation of written commitments.

According to the complaint, when the defendants took possession of the dogs, they signed documents barring them from breeding the dogs or using them in advertising or promotions. Hereford and Rin Tin Incorporated are seeking damages and a permanent injunction preventing the defendants from using the dogs commercially.

Whether you are formulating a strategy to protect your company's intellectual property or you are already engaged in litigation, The Kumar Law Firm in Austin, Texas can help. Contact us today at (512)960-3808 to learn how our experienced business attorneys can help protect your interests.

What factors should be covered in a joint venture agreement?

A joint venture with another company may be a way to grow your business. You may want to exploit a potential market for your products or services, but your business may not have the needed resources. Perhaps there is another company that complements what you do, and the two of you could work together to open up a new market so you can both profit.

That sounds good on paper, but in reality, it can be difficult to pull off. Properly drafted agreements are crucial to avert failure of joint ventures. Some common pitfalls to consider are:
• Rapid consumption of capital: Capital is often used much faster and much earlier than expected. Failure to plan for this may result in a struggle to find more capital and agreeing to a loan on unfavorable terms. The joint venture agreement may include the option of a loan from one of the partners, but the terms should be at least as favorable as a loan from a third party.
• Arguments over control: Each partner will be accustomed to his or her leadership style, and disagreements over management often occur. To manage conflicts in the future, if and when they arise, the joint venture agreement should spell out the management structure, how decisions are to be made and how are any disagreements to be resolved.
• Desire for assets: One partner may want to control the assets of the other party. A smaller company may be willing to give more control to a larger company in exchange for capital, which could result in loss of control over the project and failure in the long run. Assets that each party brings to the venture need to be properly valued and that value should be reflected in reasonable shares of ownership and control.
• Unrealistic profit expectations: Partners want to see profits, but how should they be distributed? An agreement could list priorities as to where profits should go, including paying off debt or investment back into the business.

If you are in the Austin, Texas area and think a joint venture is something that may be in your company’s future, call business and corporate law attorney Sanjeev Kumar at (512)960-3808 for a consultation today. With his successful business background, Sanjeev Kumar provides insightful and effective counsel to business owners and entrepreneurs.

Do I have to seek design protection in each different country where I sell my products?

Businesses seeking to expand their markets to other countries have often sought foreign patent protection. That process will now be much simpler. The United States is joining the Geneva Act of the Hague Agreement Concerning the International Registration of Industrial Designs. This means that rather than filing for design protection in individual countries, applicants can file one international design application with the United States Patent and Trademark Office. From that single application, protection can be obtained from all countries that are members of the Hague Agreement.

The terms of the Hague Agreement are scheduled to go into effect in the United States in May 2015. At that time, newly-filed design patents will have a term of 15 years instead of 14 years. Another feature of the new international application is that it can contain up to 100 designs, unlike the current U.S. design patents that can only contain a single claim. The U.S. Patent and Trademark Office has not yet published its final rules on how it will handle the new international applications.

Generally, design patents protect the way a product looks; they relate to the shape or configuration of a product, or to the surface ornamentation applied to a product, or to a combination of those. To be patentable, a design has to be original. Since design has to do with visual appearance, it is distinct from how a product works, which might be the subject of a utility patent. Sometimes, products are eligible for both kinds of patents.

The Kumar Law Firm PLLC in Austin, Texas is uniquely qualified to help your business leverage its intellectual property assets. Sanjeev Kumar's business experience enhances his legal services. Contact him today at (512)960-3808 for a consultation about forming your business strategies.

Can the state require a business owner to take classes and buy equipment unrelated to the business?

The entrepreneurial spirit is usually celebrated, but one woman in Texas found nothing but obstacles in her way when trying to open a school to teach hair braiding. The Texas Department of Licensing and Regulation informed the expert hair braider that she would have to become a state-licensed barber instructor before she could open her own hair braiding school. This would have required 1,500 hours of classes and more than $20,000, in facility and equipment costs, yet none of it was relevant or necessary for a hair braiding business.

A federal lawsuit successfully challenged the licensing requirements. The judge called the rules irrational and found them to be unconstitutional. In just one example, the state required a minimum of five sinks, arguing it was related to health and safety. Braiding hair, however, does not require washing hair. As for Texas sanitation standards, the judge pointed out that a sink was not needed, as braiders could use hand sanitizer, for example.

The Institute of Justice, a legal advocacy group, was involved in bringing the lawsuit. It has been litigating similar cases around the country pushing back against regulations that are supposed to be about public health and safety but might be more about protecting certain professions after political lobbying.

For the hair braider in Texas, she is now able to open her school. It is not the first time she helped to change Texas law. In 1997, she was arrested for operating a braid shop without a barber license. That became legal in 2007.

If you have an idea for a business, The Kumar Law Firm PLLC in Austin, Texas can provide the guidance you need. Sanjeev Kumar has experience as a technology professional and engineer; his business background enhances his legal services. Contact him today at (512)960-3808 for a consultation about forming your business strategies.

Is a franchise right for you?

There are many ways to start a business, including buying a franchise. No matter which path you take for your start up, there  are advantages, disadvantages and legal challenges associated with each.

The person buying a franchise is called a franchisee. That person pays a certain amount of money up front, makes ongoing payments to the franchisor (the company that started the business) and promises to live up to the rules and conditions set forth in the franchise agreement. A franchise business provides the franchisee with a business model and normally supplies everything he or she needs to get started and maintain it.

There are a number of responsibilities and benefits that come with owning a franchise.  A prospective franchisee should be aware of the pros and cons of a franchise structure.   Though not an exhaustive list, following are some of the issues associated with a franchise business:

• Similar to an owner having substantial leeway to run his or her business, the franchisor also can have a lot of control over what he or she does. This can impact what a franchisee can do and generally would put limits on the franchisee' s control of the business operations.  If the franchisee does not like the color scheme, marketing or uniforms, they usually cannot be changed. Therefore, a franchise may not be the best form of business to pursue for a headstrong person accustomed to doing things his or her own way. 

• Just because it is a franchise does not mean it will require less work than starting a business from scratch. Even if a person buys a well known franchise, it does not mean people will be lined up at the door.

• Buying a franchise should be a lesser risk than starting a business from the ground up, but there are no guarantees. The franchisee can rely on the experience and support system of the franchisor. The franchisor would generally offer training for the franchisee and staff. The franchisee might also be able to take advantage of lower prices for supplies because the franchisor is buying in bulk and passing on the savings.

• Buying a franchise can be expensive and range from tens of thousands of dollars to over a million, though the upfront cost can vary widely depending on the franchise a person gets involved in. A person may need a wealthy partner or a healthy line of credit to get started. There are also ongoing fees normally based on a percentage of sales plus contributions to a marketing fund.

The key document in buying a franchise is the franchise agreement. It should spell out the rights and responsibilities of the parties and the penalties if the contract is breached. It is critical that you fully understand the agreement and its legal and financial impacts. The Kumar Law Firm can assist you in navigating these agreements and negotiate any changes.

If you are considering getting involved in a franchise, contact the Austin, Texas, business law and franchise attorney, Sanjeev Kumar, by calling (512)323-6060 for a consultation today.

What rights do minority shareholders have when in dispute with majority shareholders?

When starting a business you need to think about what form that business should take. One option is a corporation. You see yourself as the majority shareholder, with others, possibly investors, getting minority shares. What are the limits to the power of majority shareholders? The state’s supreme court took up that issue earlier this year in the case of Ritchie v. Rupe.

In that case a minority shareholder, Ann Caldwell Rupe, filed a lawsuit against a closely held corporation and its board of directors. She claimed the majority shareholders engaged in oppressive conduct (forcing minority shareholders to lose their rights and/or investment in a corporation to the benefit of the majority) and breached their fiduciary duties by refusing to buy plaintiff’s shares for fair value or meet with prospective buyers. 

Initially the case went well for the plaintiff. The jury found in her favor and the court ordered defendants purchase her shares for $7.3 million. The court of appeals upheld the decision, deciding the defendant directors’ refusal to meet with Rupe’s prospective purchasers constituted oppressive conduct. 

The case turned in the defendants’ favor at the state Supreme Court. It reversed the lower courts’ decisions, deciding that those courts issued orders not authorized by state statute.  The court found that the defendant directors’ conduct was not “oppressive” under the relevant statute, that the statute did not allow courts to order a corporation to buy out a minority shareholder’s investment, and that there was no common-law cause of action for “minority shareholder oppression.” The court sent the case back to trial to consider plaintiff’s breach of fiduciary duty claim.

Often a new business will start as a corporation that is closely held by its founders. Because it’s closely held by a few people, there is no open, public market for these shares. Though initially shareholders may agree to work together and have common goals, as time goes on, differences in managing the business can arise, or if a minority shareholder wants to simply sell his or her shares or retire, majority shareholders may want to limit how much they pay for those shares or put obstacles in the way of the party to find a buyer for the shares.

Before the Rupe decision, when necessary, courts ordered majority shareholders to buy shares owned by minority shareholders at a fair market price set by an independent expert. The Texas Supreme Court decision in this case ended the minority shareholder oppression doctrine in Texas, ceasing that practice by lower courts.  But, the court in Rupe didn’t leave minority shareholders totally defenseless. There are several other potential causes of action minority shareholders may be able to use depending on the circumstances, including breach of fiduciary duty claims.  

If you are starting a business and will either be a majority or minority shareholder the language of a shareholder agreement plays a critical role in the relationship between shareholders and spells out their duties and responsibilities. If you have questions about business formation, shareholder agreement or and what your rights are as a shareholder, call Austin, Texas business law attorney Sanjeev Kumar at (512)323-6060 to schedule a consultation today.