Tag: company

Unexpected Liability for Service Providers

With “hacking” and identify thefts becoming all too common place, each service provider must place more and more emphasis on protecting itself from legal liability caused by not only its own actions, but the actions of the company(ies) to whom it outsources. This article provides an introduction to contracting for service providers with an eye toward gaining legal platform upon which to adequately defend itself, if necessary.

In addition to government compliance, which will vary depending upon the industry, any company that collects personal information during the course of providing its services must take steps to safeguard itself from legal liability arising due to unwanted disclosures.  One way to provide a legal safety net is to consider the applicable issues in the service provider’s agreement.  The following is an abbreviated checklist.

  1. Whether personally identifiable information will be provided to service provider’s employees, and if so, what measures are taken to narrowly tailor the need to expose such information to only those employees or third parties who need to know in order to provide the service.  In considering this, a service provider may want to consider identifying types of employees or third parties that may be exposed to such information, or even listing such persons and having them sign a confidentiality agreement with respect to such information.
  2. When does a service provider have to notify a customer of a security breach?   Is there an obligation to notify customers of a potential privacy-related compliance issue?  Or, only when a security breach has occurred?  If a security breach is defined, service providers will be required to undertake all tasks from notification to remediation and payment for such remediation upon receipt of a complaint.
  3. While necessary, service providers will want to limit their contractual obligations to comply with compliance with IT management standards such as the International Organization for Standardization certification.
  4. If the service provider receives credit card information of customers, then at the very least, the following issues must be considered:
    1. Limitation of access of personal information to authorized employees or parties
    2. Securing business facilities, data centers, paper files, servicers, backup systems and computing equipment (mobile and other equip with info storage capability;
    3. Implementing network/ device application, database and platform security
    4. Securing info transmission storage and disposal
    5. Implementing authorization and access controls with media, apps, operating systems and equipment
    6. Encrypting highly sensitive personal information stored on any mobile media
    7. Encrypting highly sensitive transmitted over public or wireless networks
    8. Strictly segregating personal information from and info of service provider or its other customers so that personal information is not commingled;
    9. Implementing appropriate personnel security and integrity procedures and practices (conducting background checks, and providing appropriate privacy and info security training to service providers’ employees.

If you have any questions regarding your liability for disclosure of personal information, please contact:

Natalie Remien at:

nremien@lgattorneys.com or (312) 368-0100.

The Truth About Trademark Goods and Services

Many people think if you own a trademark registration with the USPTO, then you can claim trademark rights for that mark in connection with all goods and services under the sun – that the owner of a trademark owns the right to use it however they want.   Conversely, some sophisticated businesspeople believe that they cannot use a particular trademark simply because someone else is using a same or similar trademark.   While that is sometimes true, it is only true if such use would cause confusion amongst consumers in the marketplace.

A somewhat entertaining recent case illustrates this concept.  The owner of a company that sells tackle and other fishing gear and supplies called Land O’Lakes recently sued the well-known dairy company of the same name for trademark infringement alleging that the use of Land O’ Lakes on butter and other products was causing consumer confusion with their use of the trademark in connection with fishing tackle and related products.   The Northern District of Illinois rejected that notion, hook line and sinker (pun intended), stating that it was highly unlikely that anyone would confuse a relatively small tackle company with the large dairy company. See, James G. Hugunin, Land O’ Lakes Outdoors, Inc. et al. v. Land O’Lakes, Inc., Seventh Cir. No. 15-2815, issued March 1, 2016.

While it is not surprising that the court did not find a likelihood of confusion between butter and fishing tackle, it does bring to the light a couple common trademark misconceptions:  (1) I own it for all things and (2) I can successfully stop others from using that trademark for any other good or service, no matter how unrelated.

Clients ask all the time – If I have this “trademarked” (and usually they mean the moment they apply for a trademark registration) then other people cannot use it, right?   Nothing could be farther from the truth.   While unfortunate, the law cannot prevent anyone from doing anything.   At best, though, if you own strong rights in your trademark in your area of goods and services, then if someone uses a similar mark for similar goods or services, you may be successful at stopping them (through an injunction) or otherwise recovering damages (money) from them. A party that has taken the time to protect and use their trademarks correctly is much better suited to enforce their rights against others.

If you have any questions in this area, please contact:

Natalie A. Remein at:

nremien@lgattorneys.com or 312-368-0100.

Important Notice to Privately Held Corporations: Compliance with Corporate Formalities Helps Stave Off Personal Liability

Many believe that by incorporating their business, they are shielding themselves from personal liability.

However, to avoid personal liability for the business’s actions, the business must have a separate identity apart from its shareholders, officers, directors, and employees. Strictly following corporate formalities, such as maintaining annual consents, maintaining corporate records, and meeting additional requirements can help maintain protection from liability.

The Illinois Appellate Court, in Buckley v. Abuzir, 2014 IL App (1st) 130469 (2014), recently held that while traditionally shareholders, officers, directors, employees, may be held liable if the business’s corporate formalities and additional procedures are not followed, now, even certain third parties, may face liability if such third parties exercise certain amounts of control over the business.

At a minimum, a corporation must have adequate capitalization, issue stock, observe corporate formalities, maintain corporate records, not commingle funds, not divert corporate funds from the business, and maintain arm’s-length relationships among related entities.

To protect shareholders, officers, directors, employees and now certain third parties from personal liability, business owners should review their books and records. If you have any questions regarding corporate law or business law matters, please contact:

Morris R. Saunders at:

(312) 368-0100 / msaunders@lgattorneys.com

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