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Memphis Business & Commercial Law Blog

Issue preclusion and trademark claims in Tennessee

A recent ruling by the Supreme Court of the United States has the potential to dramatically affect some trademark litigation cases. In its ruling, the court found that decisions by the Trademark Trial and Appeal Board, or TTAB, an administrative agency, can preclude further litigation in court regarding the issue.

This is the first time that an administrative agency's decision has been ruled to have the weight of issue preclusion. Issue preclusion, deriving from the common law, is the idea that once an issue has been litigated and a judgment handed down, the parties are prevented from further litigating it through the court system.

Avoiding costly legal mistakes for Tennessee businesses

Small business owners sometimes make mistakes that can be characterized as lazy legal errors. These mistakes can subject the business as well as the owner to potentially thousands of dollars in penalties and losses. It is important for small businesses to be aware of these errors and then to take steps to prevent their occurrence.

One of the biggest small business mistakes made by owners is failing to select the appropriate form of entity. This is commonly done by sole proprietors or consultants that do not understand the need to organize. Separate business entities can provide protection to the owner from the reach of civil lawsuits. If a business is not organized, such lawsuits may name the individual owner as a defendant, putting personal assets at risk.

Retaliatory firings open door to lawsuits for small businesses

When humans interact, conflicts can arise, but small businesses in Tennessee that hope to avoid costly discrimination lawsuits should be aware of how the law can support a disgruntled employee. When it sided with the employee in a case against the Burlington Northern & Santa Fe Railway Co., the U.S. Supreme Court created a new standard by which a retaliatory firing is defined.

A proactive company may be able to limit or avoid employment litigation by taking employee complaints of discrimination or harassment seriously. In addition, it is important to note that employees have rights to legally protected activities, like voting and leave for giving birth. Participation in these activities cannot be used as grounds to punish the employee.

Understanding more about employee disputes

Employers in Tennessee may benefit from understanding more about landmark cases that could potentially impact any disputes individual employees. Learning more about the differences between employees and contractors may also be advantageous. Contractors are typically easier to terminate than people hired as employees. In addition, these workers usually have fewer options for pursuing a wrongful termination lawsuit than applicants hired as employees.

At one time, differentiating between an employee and contractor depended on how the employer defined the job position. The legal system began refuting this notion in 1996. Despite signing contracts stating they were not eligible for employee benefits, contract workers were able to reach a successful settlement with Microsoft establishing that they ought to be recognized as employees and entitled to stock options since they were included in organizational charts and corporate functions. Many were also afforded their own offices. The courts identified the workers as common law employees, overriding the fact that they were hired through a third-party employment agency.

Assigning partnership value in Tennessee

Tennessee startups and joint ventures require special planning. Among the other facets of starting a business, one must also consider the relative value of each person's contributions in the past, present and future. Assigning relative value is simple because individual perceptions may color how contributions are weighted. This step is important to preventing potential problems or legal disputes later, but is frequently overlooked in the planning process.

For example, two people entering a partnership may elect to establish equity at 50 percent each. However, the partner who had the original idea may be considered more valuable to the company, because without the idea, the business would not exist, which might change how interest is divided. In addition if on partner is established as CEO while the other remains at arm's length as a consultant, this would change the equity equation.

The importance of buy sell agreements

As Tennessee residents may know, business owners may benefit from having a buy sell agreement in place at the outset of the company's existence. Operating a business with multiple owners may be risky without one. Having a previously structured agreement may prevent problems when one of the owners dies, gets divorced, goes through a bankruptcy or is no longer able to work. Commonly called a buyout agreement, it is used to control when and to whom an owner can sell all or part of its interest and at what price. The remaining co-owners are allowed to buy out the individual's share of the business using one of several formats.

Often, a buyout agreement is activated when an owner is divorcing. Under Tennessee law, marital property is divided in an equitable fashion. If the owner operated or started a business while married, the ex-spouse may thus be entitled to a share of the business. In this case, the spouse would become a future business partner, which the current owners may not want to see happen. Accordingly, the current owners, using a buyout agreement, may have the ability to offer to buy out the divorcing owner's interest.

Liability and tax considerations in partnerships

Starting a business with two or more people can provide a large number of benefits. The venture may benefit from contributions from multiple sources, and money, property and ideas may be shared between the entrepreneurs, spurring growth. However, it may be important for the parties to choose a formal structure that defines the venture. General partnerships, limited partnerships and limited liability partnerships all provide different benefits and drawbacks and affect liability and management rights.

Typically, general partnerships are straightforward arrangements that allow parties equal rights and responsibilities. In addition, the liability for debts incurred by the business are the responsibility of each party. However, this structure might provide owners with a lower tax rate because all proceeds generated by the venture are reported at an individual level.

How to increase the value of a company before a sale

Business owners in Tennessee may benefit from having a basic understanding of what factors influence the valuation of a company. Using this knowledge, a business owner could plan the sale of a company in advance by making business decisions that are meant to increase their company's market value.

One of the most important numbers that potential buyers look at is a company's earnings before interest, taxes, depreciation and amortization, or the EBITDA. This number will be compared to a company's annual revenue and viewed as a percentage of that revenue. If sales are steadily increasing at a company each year, a potential investor will look at a multiple of the EBITDA to determine the future cash flow at a company and the real value of the investment.

Trademarks for Tennessee businesses

When you are in business, a trademark can be the key way in which your company is recognized by the public and potential customers. As such, your trademark should be memorable, and after you obtain it, it will necessarily need to be protected in order to prevent others from co-opting it.

You will need to research your intended trademark to make certain it is not already in use. This may involve an extensive investigation. After you have established it, you may need ongoing representation to protect yourself from trademark infringement, as it could cause your business significant losses.

Beastie Boys awarded $1.7 million in copyright case

Tennessee residents might be interested in a lawsuit that the Beastie Boys filed against Monster Energy Co. The hip-hop group, well known for their hit song "(You Gotta) Fight For Your Right (To Party!)", sued the makers of Monster energy drinks for $2 million after the company used five of their songs for an online commercial that ran for five weeks.

Although a jury ordered Monster to pay the Beastie Boys $1.7 million in damages, lawyers for the group say that the Beastie Boys spent more than that in the copyright violation case. After over two years of litigation and an eight-day trial, the Beastie Boys' lawyer's fees added up to a total of $2.38 million. Lawyers for the group say that these costs were mostly the result of Monster's refusal to negotiate a pre-trial settlement and the company's effort to overturn the jury's original verdict.

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