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Intellectual Property Protection in the United States
  • Deborah Ann Nilson
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Intellectual Property Protection in the United States
Intellectual Property Protection in the United States 1920 1080 Deborah Ann Nilson

Intellectual property can be among the most valuable assets of a business. Therefore, it is critical that businesspeople understand the different varieties of intellectual property and protect them accordingly. “Intellectual property” describes intangible assets that are creations of the mind, which may be musical, literary, and artistic works; discoveries and inventions; or words, phrases, symbols, and designs. Below is a brief explanation of the different types of intellectual property that are recognized under U.S. law.

Trademarks and Servicemarks

A trademark is a word, phrase, symbol, or design that identifies and distinguishes the source of the goods of one party from others. A servicemark plays the same role for the services offered by a party. In this article, I will use “trademark” to describe both trademarks and servicemarks. The most common examples of trademarks are a company’s name and logo. For instance “McDonald’s” is a trademark of McDonald’s Corporation. The “golden arches” logo, the large yellow M, is also a trademark of McDonald’s Corporation. These trademarks help potential customers distinguish McDonald’s stores and products from other stores and products. A user of a trademark acquires some rights to such trademark by merely using it in commerce, but in order to take advantage of stronger protections under federal law against use by another party or challenges to ownership, a trademark owner must register its trademark with the United States Patent and Trademark Office (“USPTO”). Notably, while most European jurisdictions use a class-based registration system, in the United States, a trademark owner may only obtain a trademark registration in connection with the specific goods and services the trademark owner provides or has a bona fide intent to provide.

Once a trademark is registered, a trademark owner must maintain its trademarks properly in order to retain its rights. For one thing, if a trademark owner chooses to license its trademarks, such license must include provisions giving the trademark owner control over how the trademark is used and protecting the goodwill of the trademark and the reputation of the trademark owner. Failing to exercise the required amount of control could result in loss of trademark rights. Furthermore, a trademark owner may lose its rights through abandonment, either by failing to continue to use the trademark in commerce or by failing to stop unauthorized parties from using the trademark.

Copyrights

A copyright is the exclusive legal right to print, publish, perform, film, or record literary, artistic, or musical material. The most commonly-known types of works that are subject to copyright are books, movies, songs, and computer programs (including code). The author of a written or recorded work automatically possesses a copyright in a work as soon as the work is written down or recorded as long as such work qualifies as “original” under applicable federal law. However, in order to create proof of copyright and to avail itself of the stronger protections for copyrighted works provided under federal law, including the right to bring a legal action in court, a copyright holder must register its copyright with the United States Copyright Office. Use of a notice of copyright in connection with the work is also an important tool in copyright protection.

Patents

A patent is the exclusive legal right to exclude others from making, using, offering for sale, or selling an invention. Unlike trademark rights, copyrights, trade dress rights, and trade secrets (discussed below), patent rights do not automatically arise from use or creation of an invention but must be granted by a governmental authority. In the United States, an inventor must apply for a patent through the USPTO. Moreover, unlike trademarks and copyrights, which may be registered at any time after use or creation of the underlying work, respectively, applicants may only file for a patent within one year of the private or public disclosure of an invention. The two most common types of patents issued by the USPTO are utility patents and design patents. An invention qualifying for a utility patent must introduce a useful process, machine, manufacture, or composition of matter that is novel and nonobvious. An invention qualifying for a design patent must introduce a new, original, and ornamental design embodied in or applied to an article of manufacture that is nonobvious. The term of a utility patent is 20 years, while the term of a design patent is 14 years. Apple Inc. holds design patents for the iPhone, which include, for instance, the rounded edges and the bezel on the front surface of the phones. It also holds a utility patent for the tap-to-zoom feature used in iPhones.

Trade Dress

Trade dress is the distinctive packaging of a product or design of a building, which, like a trademark, identifies and distinguishes the source of the product. For example, the restaurant chain TGI Friday’s decorates its locations in red stripes and uses the same distinctive red stripes in its advertisements. In order to be protectable, trade dress must be inherently distinctive, and its distinctive aspects must not be purely functional. Although it is more difficult to register trade dress than it is to register trademarks, trade dress may be registered with the USPTO, thereby obtaining stronger protections under federal law.

Trade Secrets

A trade secret is a formula, process, device, or compilation used in business which gives the owner an advantage over competitors who do not know or use such trade secret. For instance, the recipe used in making Coca Cola is a trade secret that has never been revealed. Trade secrets cannot be registered. In fact, the only way to protect trade secrets is to preserve their secrecy by implementing proper security and confidentiality procedures within the business which owns the trade secret and with respect to anyone outside the business to whom the owner discloses the trade secret, such as attorneys and independent contractors. If a properly-maintained trade secret is misappropriated, the owner of the trade secret may sue the misappropriating party for damages.

This article provides only a basic summary of the various types of protection available under U.S. law. Consult an attorney for specific and individualized advice tailored to the needs of your business.

Disclaimer

No Legal Advice or Attorney-Client Relationship
The information and materials available in this article are for informational purposes only and are not intended to and do not constitute legal advice, a solicitation for the formation of an attorney-client relationship, or the creation of an attorney-client relationship. The information provided may not apply to your particular facts or circumstances; therefore, you should seek legal counsel prior to relying on any information that may be found in this article. Furthermore, information provided in the article may not reflect the most recent and/or all developments in the law.

Crossing Your T's and Dotting Your I's: Employers' Compliance with Recent Labor and Employment Law Developments
  • Deborah Ann Nilson
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Crossing Your T’s and Dotting Your I’s: Employers’ Compliance with Recent Labor and Employment Law Developments
Crossing Your T’s and Dotting Your I’s: Employers’ Compliance with Recent Labor and Employment Law Developments 1920 1080 Deborah Ann Nilson

As an employer, the rapidly evolving host of state and federal laws that regulate a company’s relationship with its employees may seem overwhelming. Here is a brief summary intended to acquaint you, the employer, with a few major developments in federal and New York State and city employment and labor laws.

1. Deductions from Employee Wages

The Law: The Fair Labor Standards Act (the “FLSA”) applies to employers that employ one or more employees who are engaged in, or produce goods for, interstate commerce. It governs wage and hour laws of nonexempt employees (while the FLSA governs both exempt and nonexempt employees, nonexempt are entitled to overtime pay. Exempt employees are not. Most employees covered by the FLSA are nonexempt but not all). It requires you, the employer, to pay nonexempt employees at least the federal minimum wage and overtime for an employee that works more than 40 hours in a week. Employees that are exempt from the law are not entitled to overtime or the federal minimum wage, but employers cannot improperly dock their pay either.

Permissible Deductions: The FLSA allows for some permissible deductions such as when an exempt employee is absent from work for one or more full days for personal reasons other than sickness or disability or for absences of one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness.

Impermissible Deductions: Employers cannot deduct en exempt employee’s wage because of the “quality or quantity” of the work. This means that an exempt employee must receive a full weekly salary when any work is performed during the week (the number of hours or days worked is immaterial) and when work is unavailable but the employee is ready, available, and able to work.

New York Labor Law: Section 193 of the New York Labor Law (“Section 193”) was amended to expand the types of wage deductions that are permitted under New York State law. Section 193 now expressly permits employers to make wage deductions to recover overpayment and advances in certain circumstances, pending regulatory guidance from the New York State Department of Labor.

Bottom Line: Employers should not make improper deductions, even to exempt employees as you will lose the exemption if the company has an “actual practice” of making improper deductions from salary. You should consult counsel if considering making any wage deductions permitted by Section 193, and list any impermissible deductions in the Company’s employee handbook.

2. Healthcare Exchange Notice Requirement

The Law: The Patient Protection and Affordable Care Act (the “ACA”) requires employers of all sizes to provide their employees a written (email or hardcopy) notice of the availability of coverage, whether the employer provides coverage or not, through public health insurance exchanges.

The Notice must include – A description of the existence of, and services provided by, public exchanges; – The employee’s possible eligibility for a premium tax credit or a cost-sharing reduction if the employer’s plan does not meet certain requirements; – Information regarding possible loss of employer contribution toward the cost of employer-provided coverage if employees purchase a qualified health plan through the exchange; and – Contact information for customer service resources within the exchange.

Bottom Line: Many employers neglect to distribute such notices because the ACA does not appear to impose any separate penalty for ignoring the requirement. However, lack of explicit penalties does not translate into a lack of consequences and it is recommended that all employers comply with such requirement.

3. New York Paid Sick Leave Act

The Law: The New York City Earned Sick Time Act (the “ESTA”) which came into effect on April 1, 2014, requires most private employers to provide up to 40 hours of paid or unpaid sick leave per year to employees working in New York City which they can use for the care and treatment of themselves or a family member. By law, employers who must provide sick leave must give written notice to new employees when they begin employment and should have provided such notice to existing employees by May 1, 2014.

Application of the ESTA: – ESTA covers employers with five (5) or more employees who are hired to work more than eighty (80) hours a calendar year (employers with less than 5 employees must provide unpaid leave).
-Upon the date of hire, covered employees are entitled to begin accruing sick leave at a rate of one hour for every 30 hours worked, with a maximum of five days (40 hours) of sick leave per calendar year.
-Employers are not obligated to allow use of the sick leave until after 120 days following the date of hire.
-Employees cannot lose accrued sick leave which carries over to the next year; however, such carried over accrued sick time does not add to additional sick leave days. The employee simply does not need to accrue sick leave and can take his or her time when needed. – Employers who give at least five (5) days of part time off (sick leave and/or vacation) does not need to worry about the carry over policy when an employee has in effect used such part time off in any given year. – “Family member” includes grandparents, grandchildren and siblings (along with spouses and children), although the employee must describe the reasons for the sick leave. – ESTA imposes a notice and record keeping requirements on employers.

Bottom Line: Employers who violate the ESTA may be subject to monetary damages, penalties and equitable relief. It is of utmost importance that employers know the law, have a system for accurately calculating accrued sick leave and inform their employees of the same.

4. The New York City Human Rights Law

The Law: The New York City Human Rights Law (the “NYCHRL”) protects employees from discrimination based on traits (such as race) and retaliation for having engaged in protected activity (such as making a complaint of discrimination).

Recent Legal Development: In the case of Mihalik v. Credit Agricole Cheuvreux North America, Inc ., the Second Circuit Court of Appeals confirmed a broad construction of the NYCHRL holding that while certain conduct may not be actionable under federal or state law, that very same conduct may lead to a viable claim under the more lenient standards of the NYCHRL. It may still be difficult for employees to prove an actionable discrimination claim but the case makes it more challenging for employers to obtain summary judgment dismissing claims asserted under the NYCHRL.

Bottom Line: Companies should have detailed, written anti-discrimination policies (acknowledged by all employees in writing) in place; annual recorded training sessions of all supervisors and employees alike regarding compliance with such policies; and an efficient reporting system for inappropriate workplace behavior, including but not limited to, responsible individuals to whom to report and written records of any such complaint.

5. Social Media Policy

Background: If a company has more than a few employees, an employee handbook is a necessary reference tool not only for employees to quickly obtain their workplace policies but for employers as it provides some protection.

Recent Legal Development: The explosion of social media is hardly news to either employers and/or employees. Indeed, various recent rulings, including one by the National Labor Relations Board, attempt to define the legal boundaries between employees’ rights to express themselves (some activities are protected by federal labor laws and blanket restrictions are illegal) and employers’ right to protect their confidential information, online image and presence and/or reputation. However, this area of the law is still murky at best thus prompting companies to have written comprehensive social media policies (which should be included in employee handbooks), and in some industries, thorough training regarding the content and information which employees may share online. Such policies should include at the very least: (i) use of personal social media at work (Facebook, Twitter, Instagram); (ii) use of personal social media about the employer; and (iii) who retains control of the company’s online social media accounts (including passwords).

Bottom Line: Social media can be a valuable marketing and professional tool to recruit and develop competent teams, connect employees, encourage team building, and increase productivity. However, it is in employers’ best interest to develop clear and specific parameters that best protect the company and are in compliance with federal and state laws.

Conclusion

While this article is not intended to offer a detailed exposition of the statutes and regulations themselves, if your business has employees or is considering hiring employees, we would be happy to answer any questions regarding these developments to help your business comply with these laws and/or provide you with sample notices, authoritative information and references to fuller descriptions on these statutes and regulations.

Disclaimer

No Legal Advice or Attorney-Client Relationship

The information and materials available in this article are for informational purposes only and are not intended to and do not constitute legal advice, a solicitation for the formation of an attorney-client relationship, or the creation of an attorney-client relationship. The information provided may not apply to your particular facts or circumstances; therefore, you should seek legal counsel prior to relying on any information that may be found in this article. Furthermore, information provided in the article may not reflect the most recent and/or all developments in the law.

What You Should Know About an Independent Contractor v. an Employee
  • Deborah Ann Nilson
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What You Should Know About an Independent Contractor v. an Employee
What You Should Know About an Independent Contractor v. an Employee 1920 1080 Deborah Ann Nilson

You start a company or your business is doing well and you want to expand; therefore, you need to hire more workers. You may have heard something about the difference between an independent contractor and an employee but the choice is pretty obvious no? Independent contractors are more flexible, cheaper, and you get to avoid the hassles of wage and hour laws. In addition, your worker has no problem with an independent contractor agreement, so why would you classify him or her as an employee? The answer is simple: the classification of this worker must be in compliance with the law; it is not up to you and the worker to choose it; and it is important to get this distinction right.

The most important IRS rule and common law doctrine to keep in mind when defining your worker is 1) the amount of control your business has over the individual-the more control your company has over the worker and how, where, and when the work is performed, the more likely he or she will be considered an employee and 2) companies, however small, are in fact being audited. So, while it may be tempting to circumvent laws associated with hiring employees (especially for foreign companies hiring independent contractors in the U.S. in a matter of minutes thanks to the internet), the risk is real and increasing.

What is the difference between an independent contractor and an employee?

In determining the status of a worker, the IRS uses eleven main tests/factors organized into three main groups: behavioral control, financial control, and the type of relationship of the parties (source: IRS Publication 15-A, 2010 Edition, page 6; available for downloading from http://www.irs.gov/pub/irs-pdf/p15a.pdf).1 Each factor is designed to evaluate who controls the work and how it is performed. No factor is determinative of an individual’s status but rather, looking at the totality of those factors and circumstances of each worker, one can make a more accurate classification.

Behavioral control

1. Instructions the business gives the worker. The key consideration is whether the business has retained the right to control the details of a worker’s performance.
2. Extent of any training the business gives the worker.

Financial control

3. The extent to which the worker has unreimbursed business expenses.
4. The extent of the worker’s investment. If the worker supplies his or her own equipment, materials and tools.
5. The extent to which the worker makes his or her services available to the relevant market.
6. Method of compensation: whether a person is on an employer’s payroll and receives a steady paycheck.
7. The extent to which the worker can realize a profit or loss.

Type of relationship

8. Written contracts describing the relationship the parties intended to create.
9. Whether the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay.
10. The permanency of the relationship. If the worker can be discharged at any time and can choose whether or not to come to work without fear of losing employment.
11. The extent to which services performed by the worker are a key aspect of the regular business of the company.

Why the IRS and the Department of Labor care and what’s the risk?

When a worker is an employee, employers must pay state and federal unemployment tax, social security tax and workers compensation/disability premiums. When a worker is an independent contractor, the hiring party is not required to make any of these payments. For this reason, the IRS and the Department of Labor are getting more sensitive about misclassification and as a result more companies are starting to get audited regardless of their size. It is important that business owners understand that violations for misclassification can be steep. In some instances, there can be criminal charges for willful violations. Ultimately, if the IRS deems an independent contractor to be an employee, the punishment will likely require payment of a variety of fees and taxes including: FICA, federal unemployment tax, retroactive benefits, social security, and not to mention legal fees.

What about my intellectual property if the worker is an independent contractor?

At the IP level, this distinction is also important. If the person is an employee, his work, in the context of his employment, is regarded as “work made for hire.” This is an exception to the general rule that the person who creates a work is legally recognized as the author of this work.
However, many businesses which misclassify their workers (and have independent contractor agreements with workers who should be employees) omit to specify in such agreements that the work created in the name of the business and pursuant to the terms of an independent contractor
agreement is a “work for hire.” Failure to include this will result in any work created such as possibly pamphlets, trademarks, and customers lists to be the property of the worker, not the business.

The Bottom line

Know the status of your worker. An independent contractor is his or her own boss while an employee is much less independent and works within the parameters set by your business. Misclassification is a serious risk for a business of any size. Accurately classifying your worker will save you time and money in the long run.

Recent Developments in New York State and City Employment Law
  • Deborah Ann Nilson
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Recent Developments in New York State and City Employment Law
Recent Developments in New York State and City Employment Law 1920 1080 Deborah Ann Nilson

In NYC the Earned Sick Time Act is scheduled to go into effect on April 1, 2014, or some time thereafter contingent upon economic indicators. For the first 18 months after the law becomes effective it will apply to private employers with 20 or more employees. Thereafter, it will apply to employers with 15 or more employees. All persons performing work for compensation, whether on a full-time, part-time, or temporary basis, are counted when determining coverage. Employers with employees less than the minimum number requiring paid leave must provide the same number of days of unpaid sick leave.

Under the law, any person employed within NYC for more than 80 hours in a calendar year is entitled to the sick leave benefits. Upon the date of hire, covered employees are entitled to begin accruing sick leave at a rate of one hour for every 30 hours worked, with a maximum of five days (40 hours) of sick leave per calendar year. However, employers are not obligated to allow use of the sick leave until after 120 days following the date of hire. Employers must carry-over or alternatively, if paid sick leave, pay an employee for any unused sick leave at the end of the calendar year. However, employers may limit the amount of sick leave that can be accrued in a calendar year to five days—meaning an employee could carry-over up to five days but could not earn more sick leave in the preceding calendar year until some sick leave has been taken.

The law allows employees to take sick leave for “the employee’s mental or physical illness, injury or health condition.” Read broadly, the law may, theoretically, include an employee’s request for a “mental health day.” Employees also may take sick leave for themselves and their eligible family members, among other reasons, who: (1) need a medical diagnosis; (2) require care or treatment of a mental or physical illness; (3) have an injury or health condition; or (4) need preventative medical care.

Employers who already have or who implement a leave policy—including time off, vacation, sick, and/or personal days—that provides for leave in an amount and manner sufficient to meet the requirements of the law and allow the leave to be used for the purposes and under the same conditions as required by the law, are not required to provide additional sick leave. This is true whether or not the employee uses such leave for the employee’s own illness or that of family members.

However, all employers must provide a notice of entitlement to leave and describe the amount and terms of sick leave, including any right to unpaid leave, to all new hires. The notice must also inform employees that the law expressly prohibits retaliation for requesting or using sick leave, and that they have a right to file a complaint with the Department of Consumer Affairs. The employer must provide notice of the sick leave benefits in English and the employee’s primary language, if the employee’s primary language is Chinese, Korean, Russian, Polish, Haitian-Creole, or Spanish. Notice translations are available from the Department of Labor.

While the law does not include any requirement that employers notify current employees of the sick leave entitlement or to post a notice in areas accessible to employees, it would be prudent to do so.

In addition to the written notice requirement for new employees, the law also requires employers to retain records for a period of two years that document the number of hours worked by each employee and the amount of sick leave accrued and taken by each employee. If an employer fails to maintain or retain these records, a presumption arises that the employer has violated the law.

The sole recourse for an employee claiming to be aggrieved by a violation of the law is to file a complaint with the Department of Consumer Affairs. Initially, complaints will be addressed through mediation. If mediation is unsuccessful, and the Department determines that a violation occurred then an adjudicatory hearing before an administrative tribunal will be commenced. Violations will result in a civil penalty payable to New York City not to exceed $500 for the first violation; subsequent violations could subject employers to penalties of up to $1,000 per occurrence. In addition to civil penalties, employees may be entitled to damages from a minimum of $250 to well in excess of $2,500 depending on the circumstances.

Reasonable Accommodation for Pregnancy and Childbirth (NYC Law)

Effective January 30, 2014, NYC employers with four or more employees (including individuals classified as independent contractors) must provide reasonable accommodation to the needs of an employee for her pregnancy, childbirth, or related medical condition. However, an employer may defend against a claim under this law if the employee could not, with reasonable accommodation, satisfy the essential requisites of the job. The reasonable accommodation obligation arises when an employer knew or should have known about an employee’s pregnancy, childbirth, or related medical condition.

The law states that employers “may” be required to implement accommodations including, but not limited to, “bathroom breaks, leave for a period of disability arising from childbirth, breaks to facilitate increased water intake, periodic rest for those who stand for long periods of time, and assistance with manual labor.”

Covered pregnant or childbearing workers in New York City denied reasonable accommodations may sue and may recover from their employers, among other remedies, non-capped compensatory damages, punitive damages, and at the court’s discretion, costs and reasonable attorney’s fees.

The law requires employers to provide written notice, in a form and manner to be determined by the City Commission on Human Rights. (see http://www.nyc.gov/html/cchr/html/publications/pregnancy-infocard.shtml ), of the right of pregnant or childbearing workers to receive, from their employers, reasonable accommodations. Employers must provide such notice (i) to new workers at the commencement of employment and, (ii) by May 30, 2014, to existing workers. Such notice may also be conspicuously posted at an employer’s place of business in an area accessible to employees.

Work Rules for Models under Age 18 (New York State Law)

New York State legislation protecting minor models, including runway and print models, as child performers has gone into effect as of November 22, 2013.

Requirements of the law could include multiple forms of paperwork to register the employment of underage models. It will be necessary to carefully monitor the hours of minor models to comply with varying restrictions based on the model’s exact age and whether or not school is in session, such as not working after 10 PM on a school night and not working more than 28 hours in one week while school is in session (see http://labor.ny.gov/workerprotection/laborstandards/workprot/lschlhrs.shtm). Furthermore, in some cases, employers would also be required to provide tutors, trust accounts, and chaperones when employing minor models. Many commentators believe the best way to avoid additional fees and expenses, burdensome administrative obligations, and potential penalties is to only use models age 18 and older.

Employers who violate the law may be assessed civil penalties of up to $3,000 per violation.

Disclaimer

No Legal Advice or Attorney-Client Relationship

The information and materials available in this article are for informational purposes only and are not intended to and do not constitute legal advice, a solicitation for the formation of an attorney-client relationship, or the creation of an attorney-client relationship. The information provided may not apply to your particular facts or circumstances; therefore, you should seek legal counsel prior to relying on any information that may be found in this article. Furthermore, information provided in the article may not reflect the most recent and/or all developments in the law.

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