Texas-Based Retailer Agrees to Pay $1.1 Million to End Accounting Claims by the SEC

Originally published by Brent Perry.

Many retailers are finding it increasingly difficult to keep their brick-and-mortar businesses afloat. Each week seems to bring new reports of another once-popular chain shuttering its doors or filing for bankruptcy. What you don’t often see, however, is the SEC getting involved. This is exactly what occurred when the SEC alleged Conn’s engaged in improper accounting practices.

In Securities and Exchange Commission v. Conn’s Inc. and Michael J. Poppe, No. 4:19-cv-2534, the SEC alleged Texas-based specialty retailer Conn’s Inc., along with its former Chief Operating Officer (COO) Michael Poppe, engaged in improper accounting practices. In its complaint, the SEC alleged that from at least the second quarter of 2013 through the second quarter of 2015, Conn’s and its COO understated the company’s allowance for bad debts and overstated the company’s income on its financial statements. Conn’s, which offers goods and credit financing primarily to credit-restrained customers, allegedly increased the risk to its credit portfolio by lending to customers with poor to no credit histories. Unfortunately, Conn’s failed to incorporate this update into the company’s forecasting model, causing its bad debt expense to be understated and its income overstated.

In addition, Conn’s allegedly utilized a “roll rate” system in order to forecast its allowance for bad debts that included management bias. The SEC alleges Conn’s plugged overly optimistic estimates into this model that were inconsistent with historical roll rates. In 2015, Conn’s took corrective action, which resulted in significant increases to its allowance for bad debts. The retailer cited these increases when reporting a loss for its credit segment in the second quarter of 2015 and a loss for the business in the third quarter of 2015.

Both Conn’s and Poppe have agreed to settle the SEC’s charges without admitting guilt.  Conn’s agreed to a $1.1 million civil penalty and an injunction against future violations of certain antifraud provisions, including Section 17(a)(3) of the Securities Act of 1933. Poppe also agreed to a $50,000 civil penalty and an injunction against future violations of the antifraud provisions. Both settlements are pending court approval.

Houston Securities Fraud Attorneys

The attorneys at Burford Perry have more than 55 years of combined experience handling complex securities fraud cases. Our attorneys understand and will evaluate your case at every stage to help protect your business and your assets. Most importantly, our lawyers have the experience and prior success record needed to try your case and win when negotiation fails to produce acceptable results. If you are facing a potential securities fraud issue, contact the lawyers at Burford Perry to discuss your legal options.

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$2.1 Billion in Gene Testing Fraud Billed to US Medicare Program

Originally published by Cris Feldman.

Today, we are fortunate to have access to many different testing options that screen for various diseases and infections we otherwise may not know about. Genetic testing in particular is utilized to identify changes within the DNA sequence or chromosome structure and measures the results of these changes. For several unsuspecting seniors, however, recommended genetic testing was found unnecessary after a massive fraud scam against the U.S. Medicare program was revealed.

Law enforcement officials announced the end of one of the largest healthcare frauds in history after the Justice Department found Medicare had been fraudulently billed $2.1 billion for seniors coerced into taking unnecessary genetic tests for cancer.

Both the Justice Department and the Department of Health and Human Services stated 35 defendants associated with dozens of telemedicine companies and cancer genetic testing laboratories were charged with fraud. Nine doctors were among the accused. Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division said in a statement, “these defendants allegedly duped Medicare beneficiaries into signing up for unnecessary genetic tests, costing Medicare billions of dollars.”

Fraud has been a major issue for government health programs for many years. According to a 2018 report by the Department of Health and Human Services’ Office of Inspector General, since 2007 a Medicare task force has filed over 1,600 cases against nearly 3,500 defendants who allegedly fraudulently billed Medicare more than $13 billion.

In this case, fraudsters capitalized on interest and curiosity surrounding DNA testing in order to attract seniors, the disabled, and others covered by government programs. This healthcare fraud also involved the payment of illegal kickbacks and bribes to doctors and medical professionals for referring Medicare beneficiaries for expensive cancer DNA tests. These tests were eventually either deemed worthless or were not provided at all, according to authorities.

The U.S. Department of Health and Human Services Office of Inspector General previously warned about this type fraudulent activity and the peddling of DNA tests targeting victims through telemarketing, booths at public events, and door-to-door visitations. In certain cases, perpetrators billed the government over $13,000 per patient.

Houston Fraud Attorneys

Allegations of fraud are extremely serious. Oftentimes those committing the fraud have teams of lawyers to protect them, preventing victims from getting justice. If you believe you are a victim of fraud, contact the experienced civil fraud attorneys at Feldman & Feldman today.

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Free CLE webinar on November 7 to train attorneys to assist veterans

Originally published by Lowell Brown.

Just ahead of Veterans Day, the Texas Legal Services Center will host a live webinar and Q&A to train lawyers to work with low-income veterans on discharge upgrades and military records corrections.

The webinar, “Assisting Our Texas Veterans: Discharge Upgrades and the Correction of Military Records,” will take place from 1 to 2:15 p.m. CST on November 7. It is accredited for 1.25 hours of continuing legal education. Attorneys can register here.

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Some Useful Tips to Achieve What You Want

Originally published by Cordell Parvin.

I recently read a Success Magazine article: 10 Tips to Achieve Anything You Want in Life. If we worked together or you’ve been a long-time reader, you’ll know why I found the article valuable.

The very first tip is one I have suggested to every lawyer I have coached and in these blog posts many times. It is

1. Focus on commitment, not motivation. Do you remember me telling you or writing here that you have to have a big enough “why” to stick with it.

In the Success article, the writer puts it this way:

Just how committed are you to your goal? How important is it for you, and what are you willing to sacrifice in order to achieve it? If you find yourself fully committed, motivation will follow.

You’ve heard me say or read when I wrote that when you have a big enough “what” and “why,” the how will come easily.

Take a look at each of the 10 Tips. I believe you will find each one valuable.

Number 9 is Plan.

Like me, the writer suggests you plan each week with what you plan to do, when you plan to do it, and it my case I suggest you estimate how long it will take and put the activity on your calendar.

The post Some Useful Tips to Achieve What You Want appeared first on Cordell Parvin Blog.

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An Easy Exit Checklist to Prevent Employees from Leaving with Company Trade Secrets

Originally published by Leiza Dolghih.

“Hope for the best, but plan for the worst” should be every employer’s motto in handling the departure of employees.  While most will leave without any problems, some will end up breaking their non-compete agreements, soliciting their former employer’s customers and / or taking trade secrets and proprietary information to a competitor.

The following exit checklist can help any business – small or large – minimize the chances of an employee violating their post-employment duties and position the company better if it has to seek an injunction against a former employee in court:

1. Remind the employee in writing that he or she has continuing confidentiality and non-compete obligations to the company after his or her departure.
2. Provide the employee with a copy of his or her non-compete and confidentiality agreement.
3. Ask the employee where they are going and make a note regarding their answer.
4. Collect all company devices and record what was returned, when, and in what state (if any of the devices were wiped or reset by the employee, make a note and assess whether, given all the circumstances of the departure, the erasure indicates that the employee is attempting to hide something).
5. Ask the employee to sign a statement confirming they do not have any of the company’s confidential information.
6. Preserve their work e-mail for several months in case you need to review it later for pre-departure email activity indicating an intent to compete or attempts to forward confidential information outside the company system.
7. If it is a key employee, image their work computer and/or phone to preserve the record of their activities should you need to use that information in court.
8. Monitor their LinkedIn account for signs of competitive activities.

Finally, if you find out that the employee is breaching their non-compete, non-solicit of confidentiality obligations, act swiftly and contact your legal counsel.  A significant delay between learning of such activities and seeking a court order stopping the employee from engaging in such activities can undercut the company’s ability to obtain an injunction against the worker.

Leiza Dolghih is a partner at Lewis Brisbois Bisgaard & Smith LLP in Dallas, Texas and a Co-Chair of the firm’s Trade Secrets and Non-Compete Disputes national practice.  Her practice includes commercial, intellectual property and employment litigation.  You can contact her directly at Leiza.Dolghih@LewisBrisbois.com  or (214) 722-7108.

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Include the order

Originally published by David Coale.

It’s a simple but fundamental point – confirm that the record has the relevant order (or, that there is in fact such an order); see, e.g.:

• “Because the record does not show relator ever filed the motion, we cannot conclude the trial court has a legal duty to rule upon it.”  In re Johnson, No. 05-19-00708-CV (Oct. 21, 2019) (mem. op.); and
• Although appellant asks that the bond be reduced, the record before this Court does not contain a signed order setting the supersedeas bond. Without an order, there is nothing before this Court to review.” Chowdhury v. Wells Fargo Bank, No. 05-19-00965-CV (Oct. 25, 2019) (mem. op.)

 

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Mediation and its impact on your Texas Child Custody Case

Originally published by The Law Office of Bryan Fagan, PLLC Blog.

It has become a trend in recent years for courts in southeast Texas to mandate that parties must attend at least one session of mediation (and likely more) before they ever are able to have their case presented in front of a judge during a trial. As far as alternatives to having to go the “distance” in a contested child custody case, mediation is at the top of the list as far as places to go when you need a resolution to your case.

The benefits of meditation are many. You and your opposing party are able to take an active and participatory role in the process that will determine the outcome of your case. This is the case to an extent in a trial, but keep in mind you are only able to present evidence once you get in front of a judge. It is the judge who will be making the final decision in your trial.

Domestic violence and mediation in Texas

Child custody cases that involve domestic violence can be especially troublesome when taken in the context of mediation. For one, if you are the victim of acts of domestic violence as perpetrated upon you by the opposing party in your child custody case that you may not be able to negotiate to the fullest extent possible. This is often times the case because you are not only fearful of your own well-being during mediation but can also be “under the thumb” of the opposing party due to their role in supporting you economically. If you haven’t worked in a decade or more, how freely can you negotiate in mediation knowing that your well-being is tied up in the other person paying your bills?

It is for this reason that the requirement for you and your opposing party to mediate your case is waived in many southeast Texas courts when family violence is an issue. Furthermore, even if the requirement to mediate your case is not waived automatically due to family violence being involved, it can happen that if you object to having to go that the objection will likely be upheld by the judge.

In cases where there is domestic violence that has occurred between you and your opposing party do not be surprised if the judge takes extraordinary steps to ensure your protection. I have seen judges appoint third parties to attend mediation as an extension of the court in order to help prevent additional acts of violence from occurring. Many judges have “go-to” mediators who have specific experience one expertise in handling cases where there have been acts of domestic violence perpetrated by one party against the other.

If you have been the victim of family violence it is ultimately up to you whether or not you will attend mediation in your case. Some people believe that there are still benefits to be had with the process if, in fact, you feel that you can negotiate freely, considering the circumstances. On the other hand, you may feel constrained for multiple reasons and can choose to opt out of the mediation requirement of your court. Either way, this is a decision that is fact-specific and ought to be discussed at length with your attorney prior to arriving at a final decision.

International divorces- how where you’re from can impact your Texas divorce

In a city like Houston, it is not at all uncommon to encounter families who have one or both parents born internationally or at least have roots in another country. You may be in a position where you are currently living abroad while your spouse lives here in the United States. Or, you both may live here in the United States but you could own property in foreign countries. Your having had children may have created opportunities for you to visit family abroad more often. There are certainly numerous ways that your family could have international ties.

Family law in Texas becomes a tad more complicated when you consider the implications of an international divorce. The more diverse the set of facts and circumstances, the more crucial it becomes for you to be able to sort through them in a logical and clear-headed manner. In today’s blog post from the Law Office of Bryan Fagan, we will discuss this topic in greater detail.

What are the main issues relevant to an international divorce?

From my experiences, there are basically six topics that we have to discuss that relate in some way to an international divorce. Those issues would be jurisdiction, service of process, choice of law, discovery, property division and then the enforcement of the orders that are arrived at in the child custody or divorce case. While we can say with some confidence what the issues are that we need to discuss, the fact that they are all interconnected can make things more complicated.

Let’s take each of those six issues and discuss them in greater detail.

Jurisdiction- who gets to decide what?

If you are like most people who go through a divorce, you are likely chomping at the bit to have the important questions of your case decided. Who gets what property? How much child support are you going to have to pay? To what extent will you be able to see your children? These are all relevant questions that need to be answered. Unfortunately, they are questions that cannot be answered without first determining whether or not Texas has jurisdiction to hear the case. If, in fact, the state of Texas lacks jurisdiction to hear your case then you are in a position where you need to figure out what venue is appropriate.

Simply put, jurisdiction refers to a court’s authority to make rulings and issue orders in a specific legal matter that is brought before it. These rulings, in a divorce context, are usually tied to property rights and child custody. In an international divorce, you not only have to contend with the questions of whether or not Texas has jurisdiction over your case but whether or not any U.S. state has jurisdiction over your case.

Personal jurisdiction is the first issue that we have to tackle. Ask yourself whether or not you and your spouse have sufficient ties with Texas in the event that it is here that you want your case to be heard.

Next, you will need to determine whether or not a court in Texas has the authority to handle your divorce case and all the issues that are connected to it.

Finally, it could be the case that Texas and another jurisdiction both have equally strong claims to hearing your case. In that event which court should and would your case be heard in?

From the beginning of your case until its end, these are the dominant themes and questions that you will be asking yourself. The difficult part of the process is that determining jurisdiction is not always a straightforward issue. A judge in Texas may have jurisdiction over your case while a judge in another country may have an equally strong claim to having jurisdiction. In those type of situations, you and your attorney will need to determine where your case ought to be filed from a strategic standpoint.

What country’s laws should apply to your international divorce?

Family laws differ significantly from state to state in our country so I’m sure it wouldn’t surprise you to find out that the laws of divorce can vary even more so from country to country. Once you have determined which court will actually be hearing your case the next question that needs to be asked is what set of laws will be determining the contested issues in your case.

First of all, how will you file for divorce? Do you need to assert “fault grounds” for your divorce? Texas allows you to file for divorce for any reason under the sun- including no particular reason at all. However, some foreign countries do not allow you to do so. Will you need to prove adultery or domestic violence in order to get your divorce if you have to file in an international divorce?

Next, does the law of the country that will govern your divorce require that you divide the property up in your divorce along with a 50/50 basis? Texas is a community property state that, absent other circumstances, will usually require a fairly even split of the marital assets (property that came into being during the course of your marriage).

Will prenuptial or postnuptial agreements be honored?

The concept of prenups has become fairly well known through our popular culture in the United States. Coming to an agreement with your spouse-to-be while you are still on good terms regarding certain property related issues is a good idea in the eyes of the State of Texas and property agreements like this are honored in most cases.

This may not be the case for your foreign courts. When considering where you should file your divorce and attempt to establish jurisdiction this is a question you need to ask yourself: whether or not you have come to an agreement on a premarital or post-marital agreement. If you have done so it would be unwise to file for divorce in a jurisdiction that would not honor the agreement.

Spousal maintenance: to pay or not to pay?

If you are in a position where you will need to be requesting spousal maintenance be paid from your spouse to you at the conclusion of your divorce you need to do your homework to determine what laws are most favorable in this regard. Texas only recently began to allow judges to impose orders regarding the payment of spousal maintenance. Even then, these payments are typically only allowed for a relatively short period of time and under limited circumstances. The length of your marriage, for instance, must be at least ten years and you must also show that you cannot provide for your minimal basic needs otherwise.

Service of process issues for international divorces

Typically, when you file for divorce in Texas you will have a constable or private process server pick up the divorce paperwork from the courthouse, drive out to your spouse’s residence or business and have him or she served personally with notice of your lawsuit having been filed. The process can take a few days but it is typically a low-key and simple transaction to complete. It is important, nonetheless, because your case cannot proceed without your first having provided notice of the lawsuit to your spouse.

There are international treaties that are in effect that govern how you can provide notice to any person who is a resident of a country that has signed on to that treaty. While the United Nations has a treaty in place that governs this subject, each member nation interprets its contents a bit differently. From personal experience, I can tell you that this step is one that can delay a case for weeks and even months. You are best served by hiring an attorney who knows how to quickly and correctly serve an opposing party with an international service of process.

More on international divorces to be posted tomorrow

In tomorrow’s blog post from the Law Office of Bryan Fagan, we will discuss more issues related to divorce from an international perspective. In the meantime, if you have any questions about the material that we have covered please do not hesitate to contact the Law Office of Bryan Fagan. We offer free of charge consultations six days a week with one of our licensed family law attorneys. It would be an honor to meet with you to discuss your case and answer any questions you may have.

Our attorneys and staff share a commitment to putting your interests ahead of our own and to provide the best legal representation of any family law attorneys in southeast Texas. To find out what sets us apart from our competitors please give us a call today.

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‘Tis the Season for Overtime Regulations for Both the DOL and L&I

Originally published by Texas Lawyer.

 

The DOL estimates that its final rule, which will become effective Jan. 1, 2020, will extend overtime pay eligibility to 1.3 million workers. The salary threshold in the final rule is nearly identical to the $679 per week proposed earlier this year by the DOL.
      

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TYLA leads charge for Halloween Blood Drive

Originally published by Adam Faderewski.

The Texas Young Lawyers Association, or TYLA, is making a push for blood donations during the month of October. TYLA will be hosting Barristers Out for Blood drives at different locations across the state.

Donors are encouraged to participate by posting and using the hashtag #barristerblooddrive.

TYLA will be hosting these events with the Dallas Bar Association, Hunton Andrews Kurth, San Antonio Young Lawyers Association, and Texas A&M University School of Law:

• October 28 from 11 a.m. to 5 p.m. at Texas A&M University School of Law Conference Center, 1515 Commerce St., Fort Worth.
• October 31 from 8 a.m. to 5 p.m. at Bexar County Courthouse, 100 Dolorosa, San Antonio. Appointments can be made at southtexasblood.org/schedule-appointment.
• October 31 from 9 a.m. to 2 p.m. at George Allen Dallas County Civil Court, 600 Commerce St., Dallas.
• October 31 from 9 a.m. to 3 p.m. at Harris County Civil Court of Law, 201 Caroline St., Houston.
• October 31 from 11 a.m. to 3 p.m. at the Belo Mansion, 2101 Ross Ave., Dallas.

Donations can also be made at the following locations:

In Austin, San Antonio, and surrounding areas:
• American Red Cross, 2218 Pershing Dr., Austin
• South Texas Blood & Tissue Center, 8500 Village Dr., Ste. 102, San Antonio
• South Texas Blood & Tissue Center, 10555 Culebra, Ste. 107, San Antonio
• South Texas Blood & Tissue Center—Donor Pavilion, 6211 I-10 W at First Park Ten, San Antonio
• South Texas Blood & Tissue Center —Shavano Donor, 4079 N. Loop 1604 W, Ste. 102, San Antonio
• South Texas Blood & Tissue Center—Southeast Donor Room, 3158 SE Military Dr., Ste. 104, San Antonio
• South Texas Blood & Tissue Center, 651 I-35 Business Loop, Ste. 830, New Braunfels
• We Are Blood, 4300 N. Lamar Blvd., Austin
• We Are Blood—Round Rock Donor Center, 2132 N. Mays St., Round Rock
• We Are Blood—South Austin Donor Center, 3100 W. Slaughter Ln., Austin

In East Texas:
• The Blood Center —East Texas, 3520 N. University Dr., Nacogdoches
• The Blood Center—Lufkin, 202 S. Franklin St., Lufkin
• Carter BloodCare, 3080 N. Eastman Rd., Ste. 112, Longview
• Carter BloodCare, 3305 NE Loop 286 E, Paris
• Carter BloodCare, 815 S. Baxter Ave., Tyler

In Houston and surrounding areas:
• Bill T. Teague Neighborhood Donor Center, 1400 La Concha Ln., Houston
• The Blood Center—Baytown, 5010 Garth Rd., Ste. 210, Baytown
• The Blood Center—Champions, 6935 FM 1960 Rd. W, Ste. A, Houston
• The Blood Center—Clear Lake, 1153 Clear Lake City Blvd., Houston
• The Blood Center—Conroe, 2125 TX-336 Loop, Conroe
• The Blood Center—Cy-Fair, 11811 FM 1960 Rd. W, Ste. 120, Houston
• The Blood Center—Cypress, 15050 Fairfield Village Square Dr., Ste. 105, Cypress
• The Blood Center—Humble/Kingwood, 9616 FM 1960 Bypass Rd. W, Humble
• The Blood Center—Katy, 1575 S. Grand Pkwy., Ste. 600, Katy
• The Blood Center—Pasadena, 5124 Fairmont Pkwy., Pasadena
• The Blood Center—Pearland, 9223 Broadway St., Ste. 119, Pearland
• The Blood Center—Westchase, 10001 Westheimer Rd., Ste. 2117, Houston
• The Blood Center—The Woodlands, 3091 College Park Dr., Ste. 130, Conroe
• Eileen Murphree McMillin Blood Center at Houston Methodist Hospital, 6565 Fannin St., Fondren Building, 1st Floor, Rm. F104
• MD Anderson Blood Center, 2555 Holly Hall St., Houston
• MD Anderson Cancer Center, Main Building, Floor 2 near Elevator D, 1515 Holcombe Blvd., Houston

In North Texas:
• Carter BloodCare, 3955 Belt Line Rd., Addison
• Carter BloodCare, 1328 W. McDermott Dr., Ste. 250, Allen
• Carter BloodCare, 4780 Little Rd., Arlington
• Carter BloodCare, 1731 W. Airport Fwy., Bedford
• Carter BloodCare, 4201 Gaston Ave., Ste. 110, Dallas
• Carter BloodCare, 12829 Preston Rd., Ste. 427, Dallas
• Carter BloodCare, 2215 S. Loop 288, Denton
• Carter BloodCare, 2601 Flower Mound Rd., Flower Mound
• Carter BloodCare, 7260 Blue Mound Rd., Ste. 140, Fort Worth
• Carter BloodCare, 4995 S. Hulen St., Fort Worth
• Carter BloodCare, 4350 W. Main St., Ste. 105, Frisco
• Carter BloodCare, 6850 N. Shiloh Rd., Garland
• Carter BloodCare, 4146 S. Carrier Pkwy., Ste. 630, Grand Prairie
• Carter BloodCare, 7750 N. MacArthur Blvd., #115, Irving
• Carter BloodCare, 101 Town Center Lane, Keller
• Carter BloodCare, 920 U.S. 287 Frontage Rd., Ste. 210, Mansfield
• Carter BloodCare, 1515 Town East Blvd., Ste. 1151, Mesquite
• Carter BloodCare, 4701 W. Parker Rd., Plano
• Carter BloodCare, 116 E. I-20 Frontage Rd., Ste. 151, Weatherford
• Carter BloodCare, 206 Archway Dr., Woodway
• Coffee Memorial Blood Center, 7500 Wallace Blvd., Ste. 2149, Amarillo
• Texas Blood Institute, 3709 Gregory St., Wichita Falls

In South Texas:
• The Blood Center of Brazos Valley, 1701 Rock Prairie Rd., College Station
• South Texas Blood & Tissue Center, 1109 Sam Houston Dr., Victoria
• Vitalant, 610 N. Ed Carey Dr., Harlingen
• Vitalant, 1400 S. 6th St., McAllen

In West Texas:
• Vitalant, 1338 N. Zaragoza Rd., El Paso
• Vitalant, 424 S. Mesa Hills Dr., El Paso
• Vitalant, 2523 48th St., Lubbock
• Vitalant, 4706 N. Midkiff Rd., Ste. 20, Midland
• Vitalant, 2020 W. Beauregard Ave., San Angelo

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Judges Can Testify as Fact Witnesses in Attorney Discipline Cases

Originally published by Carrington Coleman.

Commission for Lawyer Discipline v. Cantu
Supreme Court of Texas, No. 18-0879 (October 25, 2019)
Per Curiam (opinion available here)
Kelli Hinson

Judge Isgur was the primary witness against attorney Mark Cantu at the disciplinary trial that resulted in Cantu’s disbarment. Judge Isgur had presided over Cantu’s personal bankruptcy proceeding. He denied a bankruptcy discharge because of misconduct by Cantu during that proceeding and prepared a 72-page Memorandum Opinion explaining his decision, which he forwarded to the State Bar. Based on the conduct outlined in the Opinion, the Commission for Lawyer Discipline brought a disciplinary action against Cantu, and Judge Isgur testified at the trial. “Judge Isgur’s testimony was relatively brief but certainly damaging to Cantu.” Among other things, Judge Isgur testified that Cantu: “displayed a pattern of omission, obfuscation and noncompliance”; “had given false oaths in the bankruptcy court”; “improperly concealed and transferred assets”; “refused to comply with lawful Court orders”; “failed to keep adequate records” as required by the Bankruptcy Code; and “withheld information from the trustee.” The jury found against Cantu, and he was disbarred.

The Corpus Christi Court of Appeals reversed, however, finding that the trial court committed reversible error by allowing Judge Isgur to testify. The appellate court relied heavily on the Texas Supreme Court’s precedent in Joachim v. Chambers, in which the Court disapproved of the admission of expert testimony by a judge in a legal malpractice case. The Supreme Court disagreed with this application of Joachim. It distinguished the Cantu situation from that present in Joachim, because Judge Isgur was testifying as a fact witness regarding conduct he personally observed, as opposed to the judge in Joachim who had no involvement in the underlying trial and was testifying as a retained expert. The Court noted that nothing in the case law or the Texas Code of Judicial Conduct prevents a judge from testifying as a fact witness in a case. And disallowing such testimony in disciplinary proceedings would “place judge-initiated grievances at an artificial disadvantage relative to other grievances in which the complainant may freely testify.” Judges have an ethical responsibility to report instances of attorney misconduct, and it would not make sense to then prevent the complaining judge from testifying at the disciplinary proceeding. So the Court reversed the Court of Appeals decision and remanded the case for consideration of Cantu’s other arguments.

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Livestock and Community Property

Originally published by Tiffany Dowell.

 

Let me start out with a disclaimer here:  I am by no means a family lawyer.  This was the one area of law I knew I did not want to practice when I went to law school.  That said, I’ve seen this issue come up a couple of times and it involves cattle, so it seems important to include on an ag law blog.

Photo by Priscilla Du Preez on Unsplash

Texas is a community property state.  Property can be categorized as separate or community.  Separate property is property that one spouse brought into the marriage, gifts given only to one spouse during the marriage, or property inherited by one spouse during the marriage so long as that property stays separate ind is not re-characterized as or intermingled with community property.  Community property consists of any income received during the marriage and any property purchased with income received during the marriage.

Under Texas law, if parties are getting divorced, the court will divide the community property as part of the divorce decree, but separate property is not divided and remains owned by the individual spouse.

All on hand at the time of the divorce is presumed to be community property.  In order to rebut this presumption and have certain property deemed separate property, the property’s separate character must be shown by clean and convincing evidence.

Essentially, in order to prove that property is separate and not part of the community estate, a person must be able to trace the property back to show that it was, indeed, separate property.  For example, if a person could show with documentation that he or she purchased a certain piece of property prior to marriage and that property was not intermingled with community property, that would likely overcome the presumption of community property.  The issue gets more complicated when separate property and community property are commingled.  In that situation, courts have held that if property is “so commingled as to defy segregation and identification,” the statutory presumption of community property applies.

In re Marriage of Stegall

The issue of cattle and community property arose in In re Marriage of Stegall, a divorce case decided by the Amarillo Court of Appeals in 2017. [Read opinion here.]

Kerry and Julie married in April 2009 and Julie filed for divorce in November 2013.  Kerry testified that at the time of their marriage, he owned 163 head of cattle.  At the time of the divorce, he owned 191 head of cows and calves.  He admitted to not being good at recordkeeping, and was inconsistent in his testimony regarding the number of cattle he owned at various times.   Kerry argued all of the cattle and calves owned at the time of the divorce were his separate property.  The trial court agreed.  Julie appealed.

The Amarillo Court of Appeals reversed the trial court’s decision and held that Kerry failed to prove the cattle were separate property.  Kerry failed to overcome the presumption of community property here because the cattle were so commingled as to defy resegregation and identification. In particular, the court noted that although cows owned prior to marriage were separate property, any offspring born during the marriage were community property.  Here, cattle born during the marriage were commingled with cattle that Kerry owned prior to the marriage, and there were no records allowing adequate tracing back or proof of which cattle fell into which category.  Thus, the court held that Kerry failed to meet the burden of proof required to prove the cattle were his separate property.  Instead, they were deemed community property.

Why Do We Care?

This is an issue that could certainly arise for livestock producers going through a divorce.  It could also have implications for families where a livestock owner dies without a will (“intestate”) because in certain situations under the Texas intestate succession statutes, there may be different heirs for community property than for separate property.  In both of these situations, the determination of whether livestock are considered separate or community property could determine ownership of the animals.

Parties wishing to keep certain livestock separate should keep careful records regarding the animals owned at the time of marriage and any offspring born during the marriage.  Without this type of detailed records, it will likely be very difficult to overcome the community property presumption.

Another option for parties wishing to keep livestock (or other separate property) separate is to enter into a pre-nuptial or post-nuptial agreement.  These are contractual agreements between potential spouses (pre-nup) or current spouses (post-nup) where the parties can agree that certain property and/or income from certain property is to remain separate and shall not be considered community property. It is recommended that parties consult with an attorney to draft these types of agreements.

Lastly, it is important for Texans to realize that just because assets may be separate property at some point, that does not guarantee that designation will always apply.  Keep in mind that any income during the marriage–whether from separate or community property–is deemed to be community property.  Here, that is why the calves born during the marriage, even if they were born from cows that were separate property, were deemed community property.  Because of this, property can easily become so commingled that tracing back and proving it separate may be difficult, or like in the Stegall case, impossible.

 

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Did the Federal Circuit Just Raise the Evidentiary Bar for Establishing Obviousness?

Originally published by Haynes and Boone Benefits Group.

Alex Lutzky
Associate
Haynes and Boone, LLP

According to the panel in OSI Pharmaceauticals, LLC v. Apotex, Inc., Slip Op. No. 2018-1925 (Fed. Cir. Oct. 4, 2019), the answer to the question posed in this article’s title is a solid no.  But considering the opinion’s precedential nature and the facts in the case, the Federal Circuit may have just given patentees extra ammunition to defeat an obviousness challenge on evidentiary grounds.  The Federal Circuit analyzed whether certain pharmaceutical method claims related to a treatment for lung cancer were obvious and concluded that the lack of efficacy data in asserted prior art showed a person of ordinary skill would not have a reasonable expectation of success in applying their teachings.  This holding reversed an obviousness determination by the PTAB in a preceding IPR of the patent at issue, and shows that for challengers mounting an obviousness challenge, prior art containing data-based evidence may be needed to be successful, particularly if the patent being targeted is in the pharmaceutical or chemical arts.

Technical and
Procedural Background

Patentee OSI Pharmaceuticals, LLC (“OSI”) owns U.S. Patent 6,900,221 (“the ’221 patent”), which it filed in November of 2000.  Claims 44-46 and 53 of the ’221 patent are directed to methods of treating Non-Small Cell Lung Cancer (“NSCLC”) with a chemical compound known as “erlotinib.”[i]  By the end of the late 1990’s, NSCLC was the leading cause of cancer deaths in the U.S., and existing therapies, particularly chemotherapy, were inadequate.[ii]  Throughout this period, investigators pursued numerous studies examining different ways to inhibit the epidermal growth factor receptor (“EGFR”) in cancers.  These studies included examining the efficacy of erlotinib to treat a variety of cancers, including NSCLC.  After an extended period of prosecution, the ’221 patent issued in May of 2005.

In 2015, OSI filed suit against Apotex, alleging infringement of the ’221 patent .[iii]  Apotex responded with an IPR, asserting claims 44-46 and 53 were invalid as being obvious over U.S. Patent 5,747,498 to Schnur in view of either an article by Gibbs printed in early 2000 or an annual SEC-required 10-K Form filed by OSI in 1998.  The PTAB instituted the IPR and found that “a person of ordinary skill would have combined Gibbs or [the] OSI 10-K with Schnur and had a reasonable expectation of success in achieving the invention” disclosed in the claims, and that “Schnur disclose[d] all of the limitations of claims 44 and 53 except the treatment of NSCLC.”[iv]  OSI appealed the obviousness decision to the Federal Circuit, and also challenged the constitutionality of the IPR process.  The panel disposed of the constitutionality issue by citation to several recent decisions, and that aspect of the opinion will not be discussed her.

The Asserted Prior
Art Discloses the Use of erlotinib to Treat Lung Cancer

There was no dispute among the parties that the asserted
prior art was available to the public before the date of invention of the
asserted claims, which was March 30, 2000.[v]  Therefore, the main issue for the Federal
Circuit to decide was whether the combination of Schnur and Gibbs or Schnur and
OSI’s 10-K sufficiently disclosed the use of erlotinib to treat NSCLC
such that a person of ordinary skill would have a reasonable expectation of
success.

Schnur disclosed a variety of chemical compounds useful for
treatment of diseases “such as cancers, in mammals.”  The patent listed erlotinib as “a
preferred compound, and [a] method for synthesizing erlotinib is
described.”[vi]  It also stated the compounds were “potent
inhibitors” of EGFR and that the compounds are “therapeutics ‘for the treatment
of a variety of human tumors
(renal, liver, kidney, bladder, breast, gastric, ovarian, colo-rectal,
prostate, pancreatic, lung,
vulval, thyroid, hepatic carcinomas, sarcomas, glioblastomas, various head and
neck tumors) . . . .’”[vii]

The Gibbs article summarized a series of published research
studies, including a study that referred to erlotinib being in clinical
trials to treat cancer.  In reviewing the
status of the clinical trials, Gibbs asserted that “these compounds appear to
have good anti-cancer activity in preclinical models . . . particularly in patients
with non-small cell lung cancer.”[viii]

Finally, the OSI 10-K plainly stated:

“[erlotinib] which targets a
variety of cancers including ovarian, pancreatic, non-small cell lung and head and neck, achieved a
significant mile-stone with the completion of Phase I safety trials and the
initiation of Phase II clinical trials in the United States in cancer patients.
[Erlotinib] is a potent, selective and orally active inhibitor of the epidermal
growth factor receptor, a key oncogene in these cancers.”[ix]

The Federal Circuit
Finds a Lack of Substantial Evidence to Support Obviousness

Despite the foregoing, the Federal Circuit panel determined
that “properly read, these combinations do not provide substantial evidence
supporting the Board’s findings of reasonable expectation of success.”[x]

Two facts colored the panel’s analysis.  First, the opinion emphasized the lengthy
process and time frame needed for a drug to proceed from conception to FDA
approval.[xi]  The process includes filing an
Investigational New Drug application following preclinical studies, followed by
Phase I, Phase II, and finally, Phase III studies that conclude with the filing
of a New Drug application to the FDA.[xii]  Second, the panel observed evidence in the
record showing that 95% of therapies to treat NSCLC never made it out of Phase
II and on to FDA approval.

Viewing the record through the foregoing lens, the opinion criticized
the examination of the Gibbs article by the PTAB.  Digging into the substance behind the
disclosure that erlotinib “appear[s] to have good anti-cancer activity,”
the panel found that the underlying study cited to support that statement did
not test erlotinib in treating NSCLC, and they noted that Apotex’s
expert agreed.[xiii]  Based on these findings, the panel essentially
disqualified the relevance of Gibbs in the obviousness analysis.

More critically, the opinion appears to hinge on its view
that the asserted prior art references “contain no data or other
promising information regarding erlotinib’s efficacy in treating
NSCLC.”[xiv]  In the panel’s view, the high failure rate of
NSCLC drugs in Phase II coupled with the lack of “efficacy data or any other
reliable indicator of success” showed that “the only reasonable expectation at
the time of the invention was failure, not success.”[xv]  Thus the Federal Circuit reversed the PTAB
and held the claims at issue to be non-obvious.

The Efficacy of the
Federal Circuit’s Analysis

Close scrutiny of the panel’s analysis demonstrates the questionable
value of this precedential decision.

The Federal Circuit’s central thesis is that, because of the
high failure rate of erlotinib targeting NSCLC in Phase II trials and
the lack of efficacy data, there was no reasonable expectation of success.[xvi]  In addition to dismissing the Gibbs
reference, the panel similarly dismisses the patentee’s very own 10-K because it lacked any data.[xvii]  As a result, the Federal Circuit rejected Apotex’s
argument that the combination of Schnur, which discloses the use of erlotinib
as a therapy against lung cancers, with OSI’s 10-K supported an obviousness
determination.

In doing so, the panel seems to disregard its own
precedent.  In Allergan, Inc. v. Sandoz, Inc., the Federal Circuit cautioned “that

[while]

formulation science carries with it a degree of unpredictability, ‘obviousness
cannot be avoided simply by a showing of some degree of unpredictability in the
art so long as there was a reasonable probability of success.’”[xviii]  What qualifies as “a reasonable probability”
will be dependent on the field of art, yet the decision is silent on this
point.  Expert testimony from both
parties acknowledged the high failure rate during drug development,[xix]
establishing that high failure rate in drug development is presumably “reasonable.”  Furthermore, in its 10-K that is to be relied
on by investors, the patentee stated that “[erlotinib,] which targets .
. . non-small cell lung

[cancer]

, achieved a significant mile-stone with the completion of Phase I
safety trials and the initiation of Phase II clinical trials in the United
States in cancer patients.”[xx]  As such, the patentee arguably believed there
was a reasonable probability of success that erlotinib would be an
effective therapy against NSCLC. Otherwise, it would not have entered Phase
II.  Thus, it could be argued that a
person of ordinary skill at the time of the invention would have recognized
that the teachings of Schnur could be applied to treat NSCLC as described in
the claimed invention with a reasonable probability of success.  Yet, the panel concluded that “a fact finder
could not reasonably find that the 10-K statement combined with Schnur would
have been sufficient to create a reasonable expectation of success.”

Conclusions

The panel’s silence on what qualifies as a “reasonable”
expectation or probability of success in this case may leave the reader
questioning the result.  Despite the panel’s
express limitation that “we do not hold today that efficacy data is always
required for a reasonable expectation of success,”[xxi]
the curious designation of the opinion as precedential means that practitioners
should consider keeping this decision on the shelf when litigating obviousness
in fields that require extensive data to support product development and
commercialization.

---

[i] Slip op.
at 4, 5.  Claim 44 is an independent
claim with claims 45-46 and 53 being dependent.

[ii] Slip
op. at 2.

[iii] OSI Pharm., LLC v. Apotex, Inc., No.
DED01-15-cv-0772, Complaint (D.Del. Sept. 2, 2015).

[iv] Slip
op. at 9-10.

[v] Slip op.
at 5.

[vi] Slip
op. at 6.

[vii] Id. (emphasis added).

[viii] Id. at 7 (emphasis added).

[ix] Id. at 8-9 (emphasis added).

[x] Id. at 15.

[xi] Id. at 3, 16.

[xii] Id. at 3-4.

[xiii] Id. at 14-15.

[xiv] Id. at 16 (emphasis added).

[xv] Id. at 18.

[xvi] Id.

[xvii] Id. at 17.

[xviii] Allergan, Inc. v. Sandoz, Inc., 726 F.3d 1286, 1929 (Fed. Cir. 2013) (quoting Pfizer, Inc. v. Apotex, Inc., 480 F.3d 1348, 1364 (Fed. Cir. 2007)).

[xix] Slip
op. at 16, 17.

[xx] Id. at 8-9 (emphasis added).

[xxi] Id. at 18.

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Example of abuse of discretion

Originally published by David Coale.

The Texas Family Code says: “In a suit in which termination of the parent-child relationship is requested, the court shall appoint an attorney ad litem to represent the interests of: (1) an indigent parent of the child who responds in opposition to the termination.” Accordingly, it is a reversible abuse of discretion not to do so. In re R.R.-L., No. 05-19-00507-CV (Oct. 23, 2019).

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Sixth Circuit Creates Split on International Arbitration Discovery Question

Originally published by Beth Graham.

The United States Court of Appeals for the Sixth Circuit has created a circuit split regarding whether 28 U.S.C. §1782(a) authorizes a federal court to order discovery in a private international arbitration proceeding.  In Abdul Latif Jameel Transportation Co. v. FedEx Corp., No. 19-5315 (6th Cir., September 19, 2019), a Saudi Arabia-based transportation company, Abdul Latif Jameel (“ALJ”), filed a Section 1782(a) discovery application related to a foreign commercial arbitration proceeding against United States-based FedEx in the Western District of Tennessee at Memphis.  Under Section 1782(a), a district court may order an individual “to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal.”

The federal district court held the arbitral proceeding did not involve a “foreign or international tribunal” and denied ALJ’s motion.  On appeal, the Sixth Circuit Court of Appeals stated the case was “an issue of first impression” despite that the United States Supreme Court provided some statutory guidance in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004).  After examining both the language and history of Section 1782(a), the appellate court held the law permitted discovery in foreign arbitration proceedings.  Consequently, the United States Court of Appeals for the Sixth Circuit reversed the district court’s order and remanded the case for further consideration.

Interestingly, the Sixth Circuit recognized in its opinion that the appellate court’s holding was at odds with two 1999 decisions issued by the Fifth and Second Circuits.  The court said, “After considering the legislative history of § 1782(a) as well as policy considerations, the Second and Fifth Circuits concluded that ‘tribunal’ includes only ‘governmental or intergovernmental arbitral tribunals and conventional courts and other state-sponsored adjudicatory bodies.’ NBC, 165 F.3d at 190; see Biedermann, 168 F.3d at 882.” The Sixth Circuit, however, disagreed:

We are unpersuaded. Even if we were inclined to permit statements in congressional reports to color our view of a statutory term, we would hesitate to rely upon such statements as did NBC. Those statements do not exclude privately constituted proceedings from the meaning of “tribunal.” If anything, what the statements make clear is Congress’s intent to expand § 1782(a)’s applicability. Although FedEx Corp. argues that “there is nothing in the legislative history suggesting the expansion extended to private arbitration,” Appellee Br. at 18, this argument fails to appreciate that the legislative history does not indicate that the expansion stopped short of private arbitration. The facts on which the legislative history is most clear are that the substitution of “tribunal” for “judicial proceeding” broadened the scope of the statute, and the repeal of §§ 270–270g removed the requirement that the United States be a party to an international agreement under which a proceeding takes place. Further inferences from the legislative history must rely on speculation.

Ultimately, the Sixth Circuit Court of Appeals found there was “no tension between § 1782(a)’s legislative history and our textual conclusion regarding the scope of the word ‘tribunal.’”

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Starting from Scratch

Originally published by Academic Support.

Prototype program design is, by definition, imperfect and subject to enhancement and improvement. Don’t deny yourselves or your students the benefit of your instincts.

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Top 10 from Texas Bar Today: Attorney-Client Communication, the 7-Year Rule, and a Post-Harvey World

Originally published by Joanna Herzik.

To highlight some of the posts that stand out from the crowd, the editors of Texas Bar Today have created a list from the week’s blog posts of the top ten based on subject matter, writing style, headline, and imagery. We hope you enjoy this installment.

10. Fifth Circuit Reverses Summary Judgment – Thomas J. Crane @tomjcrane of Law Office of Thomas J. Crane  in San Antonio

9. Texas Court Grants Mandamus Relief To Protect A Trustee’s Attorney-Client Communications From Being Disclosed To A Beneficiary – David Fowler Johnson @TXFiduciaryLit of Winstead PC in Fort Worth

8. No agent, no payment. – David Coale @600camp of Lynn Pinker Cox & Hurst, LLP in Dallas

7. 11 Different Forms of Intellectual Property – Brian Casper of Klemchuk LLP @K_LLP in Dallas

6. Construction Litigation in a Post-Harvey World – MehaffyWeber, P.C. @MehaffyWeber in Houston

5. Law Firms: One Sure Way Your Firm Can Become More Successful – Cordell Parvin @cordellparvin of Cordell Parvin LLC in Dallas

4. Can the IRS Reach Assets in Land Trusts? – Kreig Mitchell LLC @irs_tax_trouble in Houston

3. Millennials, Marriage and Mortgages – V. Wayne Ward @WayneWardLaw of Law Office of V. Wayne Ward in Fort Worth

2. What is the 7-Year Rule in Texas? – Neal Davis of Neal Davis Law Firm, PLLC @NealDavisLaw in Houston

1. Divorce, Geographic Restriction, and The Long-Distant Parent – Larry Hance of Hance Law Group, P.C. in Dallas

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FERC Revises Market-Based Rate Seller Requirements

Originally published by Energy Legal Blog ®.

On July 18, 2019, the Federal Energy Regulatory Commission (“FERC”) issued two final rules—Order Nos. 860 and 861—adopting changes to the regulations and policies applicable to companies selling energy, capacity, or ancillary services at market-based rates (“MBR”).  Collectively, the final rules make significant changes to the types of information that companies seeking to obtain or retain MBR authority will be required to provide to FERC as well as the manner in which this information is submitted to FERC.

In Order No. 860, FERC:

Energy
Paul Wight, Stephen Hug, Josh Robichaud
view

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Texas Court Grants Mandamus Relief To Protect A Trustee’s Attorney-Client Communications From Being Disclosed To A Beneficiary

Originally published by David Fowler Johnson.

In In re Alexander, a beneficiary filed suit against the trustee based on multiple allegations of breach of fiduciary duty, including an allegation that the trustee attempted to transfer the trustee position to successors in violation of the trust’s terms. No. 14-18-00466-CV, 2019 Tex. App. LEXIS 6474 (Tex. App.—Houston [14th Dist.] July 30, 2019, original proc.). The beneficiary filed a motion to compel trust documents and emails regarding same that were drafted by an attorney, but which were never executed. After the trial court granted the motion to compel, the trustee filed a petition for writ of mandamus, challenging the order on the basis of the attorney-client privilege and attorney work product.

The court of appeals first discussed the concept of an attorney representing multiple clients:

The “joint client” or “co-client” doctrine, applies in Texas “[w]hen the same attorney simultaneously represents two or more clients on the same matter.” “Joint representation is permitted when all clients consent and there is no substantial risk that the lawyer’s representation of one client would be materially adversely affected by the lawyer’s duties to the other.” “‘Where [an] attorney acts as counsel for two parties, communications made to the attorney for the purpose of facilitating the rendition of legal services to the clients are privileged, except in a controversy between the clients.’”

Id. The court stated that the trustee filed affidavits proving that the drafts and communications were prepared in the course of the attorney’s representation of the trustees and were for legal advice. The court then discussed the concept of a trustee’s communications with its counsel being privileged:

In Huie, the [Texas Supreme Court] considered whether the attorney-client privilege protects communications between a trustee and his or her attorney relating to the administration of a trust from discovery by a trust beneficiary. There, a trust beneficiary sued the trustee, alleging that he had mismanaged the trust, engaged in self-dealing, diverted business opportunities from the trust, and commingled and converted trust property. The beneficiary noticed the deposition of the trustee’s attorney, who appeared but refused to answer questions about the management and business dealings of the trust. After an evidentiary hearing, the trial court held that the attorney-client privilege did not prevent the beneficiary from discovering the attorney’s pre-lawsuit communications. The court in Huie observed that trustees “owe beneficiaries ‘a fiduciary duty of full disclosure of all material facts known to them that might affect [the beneficiaries’] rights.’” Furthermore, this duty exists independently of the rules of discovery and applies even if no litigious dispute exists between the trustee and beneficiaries. While the attorney-client privilege protects confidential communications between a client and the attorney made for the purpose of facilitating the rendition of professional legal services to the client, a person cannot cloak a material fact with the attorney-client privilege merely by communicating it to an attorney. The Huie court illustrated the point with the following hypothetical:

Assume that a trustee who has misappropriated money from a trust confidentially reveals this fact to his or her attorney for the purpose of obtaining legal advice. The trustee, when asked at trial whether he or she misappropriated money, cannot claim the attorney-client privilege. The act of misappropriation is a material fact of which the trustee has knowledge independently of the communication. The trustee must therefore disclose the fact (assuming no other privilege applies), even though the trustee confidentially conveyed the fact to the attorney. However, because the attorney’s only knowledge of the misappropriation is through the confidential communication, the attorney cannot be called on to reveal this information.

Nonetheless, the court flatly rejected the beneficiary’s argument that a trustee’s duty of disclosure extends to any and every communication between the trustee and his attorney. The court explained that (1) its holding did not affect the trustee’s duty to disclose all material facts and to provide a trust accounting to the beneficiary, even as to information conveyed to the attorney; (2) the beneficiary could depose the attorney and question him about his handling of trust property and other factual matters involving the trust; and (3) the attorney-client privilege did not bar the attorney from testifying about factual matters involving the trust, so long as he was not called on to reveal confidential attorney-client communications.

Although a trustee owes a duty to a trust beneficiary, the trustee in Huie did not retain the attorney to represent the beneficiary but to represent himself in carrying out his fiduciary duties. Contrary to Preston’s point, the Huie court recognized that communications between a trustee and the trustee’s attorney made confidentially and for the purpose of facilitating legal services remain protected. The hypothetical in Huie involved the trustee’s misappropriation of trust funds, which he revealed to his attorney for purpose of obtaining legal advice. The trustee’s misappropriation was a material fact of which the trustee knew independent of the communication.

In contrast to the circumstances in Huie, and as explained above, HHS and all the Co-Trustees had an attorney-client relationship at the relevant time, and any communications among HHS and their joint clients regarding the contents of the draft documents were made for the purpose of obtaining legal services from HHS, and the Co-Trustees’ knowledge of the draft documents was not gained independent of receiving legal advice. Accepting Preston’s view of the discoverability of the subject documents would strip the attorney-client privilege and joint-client doctrine of their core purpose and meaning. Therefore, relators had no duty under Huie to disclose the draft documents to Preston.

Id. The court also held that the trustee had not waived the privilege by testifying in a deposition about the drafts of the documents. The court held that the testimony was not specific enough to constitute a waiver. The court granted the petition and ordered the trial court to reverse its order compelling production of the documents and communications.

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11 Different Forms of Intellectual Property

Originally published by Brian Casper.

 

 

What Are All the Different Types of Intellectual Property?

Did you know there are at least 11 different forms of intellectual property (IP) that are recognized in the US? If you search the web for “types of intellectual property,” most of the results will point to articles discussing four or five, but those discussions omit or join several unique forms of legal protection for intellectual property. An awareness of the broad scope of valuable but intangible property is particularly valuable when purchasing or selling a business.

Beyond the Big Three (Copyrights, Patents, Trademarks) Type of IP

Most people are familiar with the three cornerstones of intellectual property—copyrights, patents, and trademarks—but there are several other less know forms as well. Trade secrets, trade dress, and the “right of publicity” are also legally recognized forms of intellectual property. But there are several types of intellectual property within those categories and a few extras that most people don’t usually consider that can be among to most valuable of all.

Among the patent and copyright statutes, there are also separate intellectual property protections for boat hull designs, plants, and semiconductor chips. While boat hull design and semiconductors are protected in the same U.S. Code section as copyright, the history behind them, as well as the requirements for this statutory protection, are very different from ordinary copyrights. Similarly, plant protections fall under the Patent Act but are treated differently than utility or design patents.

Telephone Numbers a Type of Intellectual Property?

Phone numbers and domain names are also important assets that are protected by law. The Telecommunications Act of 1996 created a statutory duty for telecommunications carriers to provide phone number portability. In other words, you have a right to keep your phone number. This can be an important business asset and should not be overlooked when buying an existing business. Imagine buying an existing business only to find out that the previous owner had kept the phone number and now all the customers you thought you had are calling the previous owner’s new business rather than yours. When negotiating the purchase of a business, the agreement should specify how the phone numbers will be transferred.

Domain Names Can Have Valuable IP Rights

While there are little in the way of federally recognized rights associated with domain names, they are given some protection under U.S. law. Some courts have treated them as property, and others as a contractual right—but for the most part, domain names are treated as the exclusive personal property of the owner. The Anticybersquatting Consumer Protection Act (“ACPA”), enacted in 1999, primarily protects trademark owners from other domain name registrants who register domain names that are identical or confusingly similar to a distinctive mark with a bad faith intent to profit. But conversely, if you are legitimately using a domain name in good faith, you have rights to that domain name even if it happens to be someone else’s trademark. Domain names disputes are usually governed by ICANN’s Uniform Domain-Name Dispute-Resolution Policy (often referred to as the “UDRP”). This is a private procedure that can result in an involuntary transfer of a domain name. However, if a domain name is stripped from its registrant through that process, the registrant has the right to have the dispute heard anew in a U.S. court.

Key Takeaways Regarding Types of Intellectual Property

• Make sure you understand the full breadth and scope of intellectual property before buying or selling a business.

• When negotiating asset purchase agreements don’t overlook assets like phone numbers, email addresses, and domain names.

• Domain name challenges can be done through private procedures, but these are “appealable” to a U.S. court.

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About the Firm:

Klemchuk LLP is a litigation, intellectual property, transactional, and international business law firm dedicated to protecting innovation. The firm provides tailored legal solutions to industries including software, technology, retail, real estate, consumer goods, ecommerce, telecommunications, restaurant, energy, media, and professional services. The firm focuses on serving mid-market companies seeking long-term, value-added relationships with a law firm. Learn more about experiencing law practiced differently and our local counsel practice.

The firm publishes Intellectual Property Trends (latest developments in IP law), Conversations with Innovators (interviews with thought leaders), Leaders in Law (insights from law leaders), Culture Counts (thoughts on law firm culture and business), and Legal Insights (in-depth analysis of IP, litigation, and transactional law).

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Five Contracts That Every Startup Should Have From the Beginning and Why

Originally published by Leiza Dolghih.

If you have a winning idea about a product or a service, and you intend to share this idea with others in order to build a business, you must have legal agreements that prevent those persons from taking your idea and leaving you in the dust.  It is really that simple.

Without legal agreements, anyone who learns about the product or service your startup is building, can take it and make it their own.  Remember Winklewoss – Zuckerberg Dispute over the legal rights to Facebook? In that case, both parties had the funds to battle it out in court.  However, most of the startups do not have the luxury of unlimited litigation funds to resolve disputes over the ownership of a product or an idea, especially in the early stages of the business.

So, what agreements must a startup have and how do they help protect the budding company’s business?

1. Operating Agreement – If you have several owners or co-founders of the company, an operating agreement (for LLCs) or a similar agreement (for corporations), is a must.  It records each owner’s equity contribution and the percent of ownership, explains the mechanism for resolving disputes between the owners, specifies how the company will make major decisions if there is a disagreement between the owners, clarify how an owner can exit the company, and limit the owners’ ability to sell or transfer their interest in the company to third parties.  In short, this is THE document that will govern any disputes that may arise between the owners.  Without the agreement, if the owners disagree about what direction the company should take, or whether to obtain additional investor funds, take out another loan, or hire more employees, the owners often end up in a stalemate or a lawsuit.
2. Employment / Independent Contractor Agreements – Every individual who is hired by the start up to do anything related to the startup’s business should have an employment or an independent contractor agreement that clearly states what they will be doing for the company and how they will be compensated.  Without such agreements, the startup can easily be dragged into a lawsuit by a former worker claiming they were not paid what they were promised or that they now own a portion of the company because they put in “sweat equity” into building the business. Without such written agreements, the company exposes itself to all kind of claims by former employees and contractors.
3. Intellectual Property Assignment Agreements – Every individual hired by the startup should sign an agreement assigning the intellectual property that they create for the startup to that company.  This is especially important with the independent contractors, who work for many different companies at the same time.  Without such an assignment, any of the individuals who have contributed to the creation of e.g., software code or marketing materials, can later claim that the product belongs to them, not the company.
4. Confidentiality Agreements – No startup, ever, should reveal their business ideas or trade secrets, which may include customer lists, software code, marketing strategies, or any other information that gives them a competitive advantage, to anyone without a confidentiality agreement.  This includes employees, investors, potential investors, vendors, board members, suppliers and manufacturers, and anyone else.  Such agreements do not prevent idea theft, but they act as a major deterrent and allow the company to enforce its rights in court and seek compensation (or an injunction) if a theft has occurred. 
5. Non-Competition / Non-Solicitation Agreements – Many startups dislike these agreements and some employees or contractors outright refuse to sign them.  These contracts, however, have immense value for the startups, as they provide an easy way to prevent former employees or contractors from taking the company’s confidential information to a competitor or opening a competing business using the startup’s proprietary information.  These agreements, when they are reasonable, can be implemented in a way that is fair to the employees but also serves to protect the company.

BOTTOM LINE:  Clear legal agreements help minimize the chances of litigation, which can quickly exhaust the company’s monetary resources and distract it from what really matters – building a business.  These agreements also help attract investors, who are more likely to invest in a company if they see that the company has taken the right steps to protect its intellectual property. 

Leiza Dolghih is a partner at Lewis Brisbois Bisgaard & Smith LLP in Dallas, Texas and a Co-Chair of the firm’s Trade Secrets and Non-Compete Disputes national practice.  Her practice includes commercial, intellectual property and employment litigation.  You can contact her directly at Leiza.Dolghih@LewisBrisbois.com  or (214) 722-7108.

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