On May 11, 2022, at 12PM CT, the latest LG Webinar will focus on branding concerns from trademark, licensing and litigation perspectives. Presented by Joseph LaPlaca, Roenan Patt, and Kevin Thompson, this webinar will focus on the issues from multiple viewpoints which should be considered when branding your company. Kevin Thompson will discuss general IP concepts relating to branding, Joseph LaPlaca will discuss common branding concerns which arise when licensing your IP, and Roenan Patt will discuss common pitfalls when branding which could help you avoid litigation. This webinar will help brand owners issue-spot these areas of concern and know when to consult with their LG Attorneys. A recording will be available later for those who register. To register, visit https://bit.ly/37pDMnK.
Branding is important to any company, but especially to startups. For a startup, particularly at the outset, its intellectual property may be its only asset. It’s important to understand how protectable this new brand may be, both as a sword and as a shield. It’s important to be able to stop others from infringing, but the new brand also needs to be safe from interference from third parties. Rebranding later on can be the death knell of a business. It’s important to consider all aspects of branding, including packaging, the website, any promotional materials, and whether or not to have a social media presence. How will your business interact with its customers? How will new customers find your business?
To learn more, please attend the webinar, or reach out to Kevin Thompson at (312) 368-0100 or email@example.com with any questions.
Some judges have an extraordinary ability to explain their decisions in an easily understood and relatable manner. Such was the case in a very recent decision involving whether an employer’s commercial general liability insurance policy (“CGL”) covered an employee’s claims under the Illinois Biometric Information Privacy Act (“BIPA”). In State Automobile Mutual Insurance Company v. Tony’s Finer Foods, No. 20-cv-6199, Judge Steven Seeger of the United States District Court for the Northern District of Illinois was tasked with deciding whether a standard exclusion in a CGL policy relieved the insurer of its duty to defend a BIPA claim. BIPA is an Illinois statute that, among other things, requires private entities that obtain biometric information from an individual to first inform the individual that the information was being collected and stored and obtain a release from the subject. In the employment context, oftentimes employers collect biometric information (such as fingerprints) for time keeping purposes. In the last seven years, litigation over alleged BIPA violations have exploded and employers often look to their insurance companies to assist in the defense. Judger Seeger ultimately held that the “employment-related practices” exclusion did not preclude insurance coverage, undoubtedly good news for employers.
An “Employment-Related Practices” exclusion is common in CGL policies. Essentially, the exclusion precludes coverage for certain employment-related claims made by employees against their employers. In the policy at issue in the State Automobile case, coverage was specifically excluded for “personal or advertising injury” to “any person” arising out of “(a) refusal to employ that person; (b) termination of that person’s employment; or (c) employment-related practices, policies, acts or omissions, such as coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation, or discrimination…” The court recognized that subparts (a) and (b) were not at issue and the only question was whether the underlying lawsuit was about an injury to the employee arising out of “employment-related practices.” The insurance company argued that the exclusion applied because the case arose out of the manner in which employees clock in and out of work. While the argument was “an appealing one,” the court took a closer look at the exclusion and determined that it did not apply. First, the court recognized that the exclusion was the “third part of a trilogy” with the first two parts covering hiring and firing. The judge reasoned that the third subpart, “arising out of employment related practices,” read with parts one and two appears to apply specifically to adverse employment action “and not any and all claims about something that happens at work.” The judge further stated that even though clocking in or out is an employment practice or policy, the fact that the text then contains a “laundry list” of targeted disciplinary practices, “using one’s finger to clock-in and clock-out is an awkward fit in that string, at best.” In determining that the third clause, when read in tandem with the first two clauses, could not be interpreted as generally excluding all claims arising out of employment, Judge Seeger cited to the well-known and respected Sesame Street doctrine of “one of these things is not like the others – one of these things just doesn’t belong.” After recognizing that other courts have come to differing conclusions, the court nonetheless ruled in favor of the employer and denied the insurer’s motion for summary judgment on whether it had a duty to defend the BIPA claim.
If you would like to discuss these or similar issues in more detail, please contact Howard L. Teplinsky at (312) 368-0100 or firstname.lastname@example.org.
On the two-year anniversary of when the world shut down, I found myself reflecting on how my life as a commercial litigator has changed. COVID-19 has disrupted the entire judicial system as we once knew it, forcing courts with already congested dockets to shutter and quickly embrace modern technological advances to enable remote proceedings. With rare exception, Zoom hearings have now become the default, as have years-long delays and undesirable uncertainty—all of which lead to increased costs. While as counsel we have always been faced with the dilemma of how to most effectively and efficiently resolve contentious business disputes consistent with our clients’ objectives, with the COVID-related backlogs courts across the country are facing, arbitration and mediation offer desired alternatives.
Arbitration and mediation are confidential proceedings, whereas litigation is not. Court proceedings are open to the public and copies of nearly all filings are accessible to anyone. Thus, particularly in high-stakes disputes, many businesses prefer the opaque nature of alternative dispute resolution.
What are the primary differences between arbitration and litigation?
• Generally speaking, arbitration is more flexible, less formal, less expensive, simpler, and quicker than a trial.
• Arbitration affords flexibility in the selection of panelists, whereas judge assignments are purely random and, for defendants, depend entirely on where the plaintiff files the case. With arbitration, the parties can select arbitrators with a specific expertise or background in the relevant industry or subject matter of the dispute.
• With arbitration, parties have greater flexibility and control over deadlines and the discovery process. Among other things, parties can limit the types of discovery exchanged as well as the number of depositions.
• Arbitration promotes finality. When the arbitration panel renders a decision, this terminates the dispute (subject to a court’s confirmation of the award, or any of the very limited grounds for challenging an award), whereas the appeal of a court decision can prolong the proceedings for years to come.
What are the primary differences between arbitration and mediation?
• In arbitration, a neutral third-party acts as the judge, hears evidence, and makes a binding decision.
• In mediation, a neutral third-party offers non-binding recommendations and negotiates with the parties to assist them in reaching a resolution. However, unless all parties agree to specific deal points and terms of a resolution, the process is non-binding.
• Parties can agree to mediate a dispute at any point, whereas with arbitration, the hearing typically happens only after motion practice, discovery, and pre-hearing briefing.
The best method of dispute resolution depends on the particular facts and circumstances of your case. Bearing in mind that some disputes are contractually required to be resolved via mediation and then arbitration, having counsel experienced in business disputes is critical to evaluating the risks and benefits of each option. If you would like to discuss these or similar issues in more detail, please contact Katherine A. Grosh at (312) 368-0100 or email@example.com.
Levin Ginsburg previously updated our clients on the proposed changes to Illinois non-compete and non-solicitation law (See March 30, 2021 blog here). That legislation passed on May 31, 2021, was signed into law August 13, 2021, and takes effect January 1, 2022. The new law is not retroactive, so it will not impact any agreement entered into before the new year.
Employers must understand this new law and how it will impact their restrictive covenant agreements with employees. The key requirements are as follows:
- Employers may not enter into non-compete agreements with any employee earning $75,000 or less per year. This salary threshold is scheduled to increase by $5,000 every 5 years through 2037.
- Employers may not enter into non-solicitation agreements with any employee earning $45,000 or less per year. This salary threshold is scheduled to increase by $2,500 every 5 years through 2037.
- Every restrictive covenant must include a notice for the employee to consult with counsel, which must be given to an employee 14-days before the restrictive covenant is executed.
- The new law codifies legal precedent that requires an employee to work at least 2 years before continued employment would be considered sufficient consideration for the agreement. As a result, employers will be required to provide some professional or financial benefit in exchange for signing any agreement in order for the agreement to be deemed enforceable at the time of execution.
- A restrictive covenant will be unenforceable if the employee was terminated or furloughed due to the COVID-19 pandemic or under similar circumstances (yet to be defined).
- The law does not allow a court to entirely rewrite a restrictive covenant, but gives the court broad discretion to modify or delete provisions of a covenant rather than hold the entire covenant unenforceable.
- Finally, the new law will require employers to pay an employee’s attorneys’ fees if the restrictive covenant is deemed unenforceable.
These changes will have a significant impact on an employer’s decision to require its employees to sign non-compete and non-solicitation agreements. Employers should begin working with their employment counsel now — well before the new law’s effective date of January 1, 2022 — to ensure their agreements are enforceable and avoid the risk of litigation and liability for an employee’s attorneys’ fees.
For assistance in drafting enforceable restrictive covenants and protecting your business, reach out to Walker R. Lawrence (firstname.lastname@example.org), a partner in Levin Ginsburg’s employment law practice, or Joseph A. LaPlaca (email@example.com), an associate attorney at Levin Ginsburg.
The board of directors made the decision to acquire a company for $100 million. The negotiations and the due diligence process were difficult, but the board finally approved the acquisition and the transaction closed. After closing, the acquirer determined that the value of the acquired company’s assets were greatly overstated and the acquiring company took a loss on its books. The shareholders of the acquiring company have met to determine whether to file litigation against the directors.
In Illinois, courts have ruled that the “business judgment rules acts to shield directors who have been diligent and careful in performing their duties from liability for honest errors or mistakes of judgment”. Absent “bad faith, fraud, illegality or gross overreaching, the courts are not at liberty to interfere with the exercise of business judgment by corporate directors”. Thus, just because a board made the “wrong” business decision, does not mean that the directors are liable to the shareholders.
While the courts are reluctant to make business judgments for companies, this does not always prevent shareholders from “second guessing” decisions of the board. Illinois law provides that a corporation may indemnify its directors and officers from any liability if such director or officer “acted in good faith and in a manner he or she believed to be in, or not opposed to, the best interests of the corporation”. Since the law is permissive, in order for a corporation to attract quality persons to serve as an officer or director, it may wish to agree to indemnify such person in such situations. It is important from the corporation’s perspective to draft such an agreement, in a manner that, while protecting the “well-intended” officer or director, also protects the company. If you have any questions about directors’ and officers’ liability to the corporation, or would like to discuss your company’s legal concerns, please feel free to contact the business lawyers at Levin Ginsburg.
For more information, please contact:
Morris R. Saunders at: (312) 368-0100 or firstname.lastname@example.org
How can a business protect its critical information when an employee goes to work for a competitor? Many employers simply assume that if it deems information “confidential,” the law automatically protects it when an employee leaves and goes to work for a competitor. That’s not necessarily the case. In order to protect its confidential information, such as intellectual property, information, systems, customer lists, pricing information and the like, an employer must take affirmative steps long before the rogue employee leaves to ensure that its information is protected. Such information can be protected from disclosure both under Illinois common law and pursuant to the Illinois Trade Secrets Act (“ITSA”).
An employer’s trade secrets, such as its customer lists, are a protectable interest. An employer has a clear and ascertainable right in protecting its trade secrets. To show information is a trade secret under ITSA, an employer must meet two threshold requirements. First, it must show the information was sufficiently secret to provide the employer with a competitive advantage. Second, the employer must show that it took affirmative measures to stop others from acquiring or using the information. Examples of steps employers typically take to keep information confidential include keeping the information under lock and key, limiting computer access, requiring confidentiality agreements, and other employer efforts to advise employees that the information imparted to them must be kept secret. Establishing this second prong is where employers typically fall short.
Where employers have invested substantial time, money, and effort to obtain a secret advantage, the secret should be protected from an employee who obtains it through improper means. Although employees may take general knowledge or information with them that they developed during their employment, they may not take confidential information, including trade secrets. The taking does not have to be a physical taking by actually copying the names. A trade secret can be misappropriated by physical copying or by memorization. Using memorization to rebuild a trade secret does not transform the trade secret from confidential information into non-confidential information. A trade secret can also be obtained through reverse engineering
Whether and how an employer keeps information secret is one of the most important factors when determining whether information is a trade secret. When information is generally known or understood in an industry, even if it is unknown to the public at large, it does not constitute a trade secret. If a business fully discloses information throughout an industry through a catalog or other literature, it is not considered a trade secret. If the information can be readily duplicated without considerable time, effort, or expense, it is not considered a trade secret. If a customer list, for example, is generally available to all employees and the employees are not required to sign confidentiality agreements, the list is likely not considered a trade secret.
By far the most litigation in this area is over whether an employer’s customer list is a confidential trade secret. Whether customer lists constitute trade secrets largely depends on the facts of each case. Customer lists and other customer information can be considered a protectable trade secret if the information has been developed by the employer over a number of years at great expense and kept under tight security. However, the same type of information is not protectable where it has not been treated as confidential and secret by the employer, was generally available to other employees and known by persons in the trade, could be easily duplicated by reference to telephone directories or industry publications, and where the customers on such lists did business with more than one company or otherwise changed businesses frequently so that their identities were known to the employer’s competitors.
Illinois courts have found that customer lists do not constitute protectable trade secrets where, for example: a) the particular industry was competitive and customers often dealt with multiple companies; b) the employer had failed to produce sufficient evidence to demonstrate that the customer list was subject to reasonable efforts to protect its secrecy; and c) sufficient efforts had not been taken to maintain the list’s secrecy. To be a protectable trade secret, the employer must demonstrate the information it seeks to protect was sufficiently secret to provide it with a competitive advantage. However, for steps to be deemed sufficient to protect a trade secret, extensive steps must be taken to protect both the electronic and hard copies of the purported trade secret.
For more information regarding the protection of a company’s confidential information, please contact:
(312) 368-0100 or email@example.com
The heading of this blog is a misnomer. There is no such thing as being litigation proof. Anyone can sue your business for any reason and meritorious or not, you will still have to defend the claim.
Still, there are many important steps a business can and should take to reduce its exposure and put itself in an advantageous position in the event a lawsuit is filed. Here are two simple actions that every business, large and small, should take in order to be a little bit more secure in today’s volatile world.
1. An Updated Employee Handbook
Employee handbooks set forth company policy for all employees to follow. Handbooks are useful reference materials that employees can rely upon to guide their day to day activities. They are also evidence of a company’s practices that can be introduced in the event of a lawsuit.
As a business grows, it should be mindful that different laws will apply to it. For example, once a business employs 15 employees, that business is now subject to the provisions of the Americans with Disabilities Act (“ADA”). Once that happens, an employee handbook should be modified to include language related to the reasonable accommodations that the business will make to comply with the ADA. If an employee with a disability were to file a claim under the ADA, a company with a handbook containing reasonable accommodation language would have a stronger argument that its practice is to comply with the ADA, than a company without such a policy in its handbook.
Also, business owners must be mindful that the law is constantly changing. For example, Illinois just enacted a law that requires an employee’s existing sick leave be granted to employees not only while they are sick, but also to care for sick family members (read more about that law here – https://lgattorneys.com/illinois-employee-sick-leave-act). Illinois businesses should amend their handbooks to reflect the change or discuss the pros and cons of moving away from sick leave/vacation time to paid time off that does not differentiate between sick leave and vacation time.
2. Record Retention Policy
If a company becomes involved in litigation, regardless of the issue, there is going to be a records request for all relevant documents in anyway related to the underlying lawsuit. This often involves emails and other electronic communications.
Having a records retention policy is important for several reasons. First, it ensures that all documents are kept for the optimal amount of time to conduct business without clogging servers or storage spaces. Second, it ensures that a company isn’t holding any documents for longer than legally required. Should a business be subject to a records request, a business is required to produce the documents in its possession. A plaintiff in a suit cannot use a document against you if you do not have it (and are not legally required to have kept it). Third, there are many record retention laws specific to different areas of business. A record retention policy can make sure a business does not violate the law by getting rid of documents too soon.
It is important that the business in question follow its policy universally and not on an ad hoc basis. As long as there is not a litigation hold in place requiring a company to keep all related records, then the company is free to follow its record retention policy without inadvertently destroying evidence and leading to a claim of evidence spoliation.
By consulting with an attorney and preparing an employee handbook and records retention policy, a business can take important first steps toward avoiding litigation, or at least being better placed to withstand a lawsuit if one comes its way.
For more information about developing an employee handbook or record retention policy appropriate for your business, please contact:
Robert Cooper at:
firstname.lastname@example.org or 312-368-0100.