3 Ways to Protect your Company’s Intellectual Property

When you have employees sign agreements with your company, it’s important that you keep in mind how those agreements contribute to protect intellectual property. As a general rule, employers who employ someone to work at their company do not have any right to restrain those employees from taking with them their knowledge or skills gained at the company. If you have sensitive intellectual property that you don’t want exposed to a competitor, what should you put into your employee agreements when someone starts? Can you add something to their employee agreement after they’ve started if you realize you didn’t have it in writing already?

Here are 3 things that we recommend putting in your employee agreements:

1. Confidential information clause.

Many employee agreements include a confidential information clause. This section of the agreement restrains the employee from using confidential information in future employment. It’s important to note that Pennsylvania law restricts the scope of these clauses to information that is truly confidential. Although not in Pennsylvania, a story that illustrates this point comes from Chicago courts, where Jimmy John’s had all its employees sign confidential agreements in an attempt to keep them from competing at other sandwich shops in the future as employees. This was held to be a violation of the law, in that there was nothing confidential about making sandwiches.

Similarly, you can’t just say that your information is confidential: you have to have something that is worth protecting. This “thing” that you want to protect could be a trade secret, a confidential process or even something like a customer or employee list. Confidentiality clauses are great, but they only protect that which you are already protecting. This is why it is best to supplement your confidentiality clauses with protection on your server and computers, as well as an employee handbook that reminds employees of the types of information that they are not to share with outsiders. In some cases, courts will even allow you to enforce this once they leave and go to another company.

2. Work for hire clauses.

Employees who work for you and come up with an invention, even on company time, may still be able to claim that they have ownership of rights of the invention. That’s why it is important that employers have a clause in their contract that says that anything that is invented in the scope of their employment belongs to the employer. Once again, as above, this is not a catch-all clause. The property that is being referenced must be something that was actually invented, and not merely some new way of doing something that is already in existence. An employee who is increasing their skills or doing better at the job that they are assigned has not invented something just because they have a better a way of doing it within the company. However, if they’ve invented something brand new, something that no one else has ever thought of, something that’s new both inside and outside of the industry, a work for hire clause can ensure that the invention belongs to the company and can only be used by the company in the future.

Courts have traditionally upheld these restrictions, especially where patents are involved. Having a work for hire clause in the agreement allows the company to be owner of the patent, rather than the individual or team that worked on it. This is also why it is important to have standard employee agreements across your whole company. If several people collaborated on the idea, it is important that all of them have signed some form of this agreement.

3. Trade secrets.

What happens when you discover something that can’t really be patented but which is a secret in your industry? Maybe it’s a special technique that no one else has figured out, a special recipe that’s impossible to reverse engineer or duplicate, or a complicated piece of machinery that is only used at your company? Your company may be able to restrain others from using it by claiming the trade secret doctrine. Trade secrets are a complicated area of law and they are claimed far more commonly than they are able to be proven. Nonetheless, if your company really does own something that is a secret, protecting it becomes vitally important. That is why you want to have an agreement with your employees that identifies the trade secrets and makes it clear to the employee that the employee can’t use it outside of the scope of the company’s employment, including once they leave. Such agreements are enforceable but are strictly construed against the employer.

Can I require existing employees to sign new agreements?

This brings us to an important question. What if you’ve been working with certain employees and you become concerned that they may use your intellectual property or leave your company? If that’s the case, it is still possible to have those employees sign agreements, but courts have generally held that you have to offer the employees something new—something more than ongoing or continued employment—in order for them to be legally enforceable. Some employers will offer a bonus for those that sign the agreements and others have offered promotions and a raise. It is important that any such contract be supported by some additional consideration that the employee was not entitled to already.

Conclusion

Contact the business lawyers at Cornerstone Law Firm to support your business. If you own a business with intellectual property, it’s important that you have lawyers who understand the world of IP, including copyrights, trademarks, patents, trade secrets and more. At Cornerstone Law Firm our business attorneys have litigated these cases to the highest level and can explain the ins and outs of your situation to you. Contact us today for a consultation on your business needs and let us help you figure out how to protect yourself now and in the future.

Cheated Out of Commissions

If you’re in sales, you know the unique challenge of living and dying by your sales number each month or quarter. Working hard to continue to impress your employer and avoid the “What have you done for me lately?” mentality is part of the rough-and-tumble world of sales. But what happens when your employer tries to cheat you out of the commissions you’re owed? In today’s blog post, we tackle some of your options if your employer is reneging on an agreement to pay you a commission.

There are primarily three ways that our attorneys see employees cheated out of commissions. First is when an employer changes the terms of commissions partway through a job. The second is a lot more like a scam, where an employer goes around promising new salespeople jobs that pay commissions and then fires them after a few months of collecting sales before they ever pay. The third is when an employer tries to use complicated formulas to hide how much money is being made from sales.

First: Do you have to accept a change of commission?

In a situation where an employer changes the terms of the commissions in the middle of a project, Pennsylvania law has generally recognized that they have to pay what has been previously agreed to. As a simple example, if your employer agrees that for every service job you sell, you get 10% of the price, they can’t change in the middle of a sale that is almost completed and say now you only get 5%. They can, however change the rate for future sales. The gray area starts where an employer changes terms in the middle of a time period which might affect open sales. In this example, suppose an employer raises a base salary, but cuts commissions to 5% starting immediately on all sales, including those not concluded. In this instance, the change may be lawful, but the employee may also have the right to insist on the old contract until those sales are finalized.

Employees have several options in this situation. The first is to politely push back, whether by internal email or in a conversation with your boss. We always prefer to get things in writing, but even an oral conversation would suffice if there is a way to document it after the fact. An employer generally has the right to change future commissions, but an employee is within his or her rights to decline the change on open jobs.

The employer who refuses to pay earned commissions can be sued personally.

In situations where an employer refuses to pay commissions, you have powerful remedies under the law. You can sue the employer as well as any owners or officers of the employer. You are entitled to reimbursement of attorneys’ fees and penalties on top of the wages owed.

In addition, you may be part of a class action that has rights with other employees who were similarly cheated. If your “draw” doesn’t rise to the level of minimum wage with the time you’ve put in and without your commissions, you may also have a claim under the Minimum Wage Act in Pennsylvania or the Fair Labor Standards Act (FLSA) under federal law. Both of these allow powerful remedies.

If the math is complicated, make sure you’re not getting cheated.

Employers are allowed to offer complicated schemes to determine payouts and commissions, and sometimes these are in everyone’s best interest. But if the formula is complicated, make sure you are double-checking the numbers. If your pay is dependent on how much the company is making, you’re entitled to check the books regularly to see that your pay is being correctly calculated. In counseling employers, we often advise them that simple is better, because even unintentional mistakes can lead to lawsuits, attorneys’ fees, investigations and more.

Conclusion

If you have questions about a commission or unpaid wages, we welcome you to call us at Cornerstone Law Firm and set up a consultation with one of our attorneys. Our attorneys help employees who have been cheated out of wages to be made whole and to ensure that employers don’t get away with giving them less than what they deserve. We also counsel employers and help them find fair ways to compensate employees that make everyone more successful. Call for your consultation today.

Who owns an LLC?

Limited liability companies are one of the most important tools available to business owners to keep their assets safe. Forming an LLC under Pennsylvania law provides protection against creditors and provides clarity of ownership in case an employee or someone else tries to claim that they have some right to ownership of your company.

In Pennsylvania you do not have to list who the owner of an LLC is on the Department of State website. In most cases, the Department of State will not have any information at all, either public or private, about who the owner of the LLC is. Unfortunately, this sometimes brings about disputes between different people who claim to be owners of an LLC. So, who owns an LLC and how can you prove it?

The first and best evidence of ownership of an LLC is what is written in the operating agreement. An operating agreement is signed between the members of an LLC and lays out their ownership interest. In most cases, the ownership interest of an LLC cannot be changed without a unanimous vote of all owners. In rare cases, it can be done with a majority vote and a buyout where the operating agreement has specially provided for that option.

But what happens if you don’t have an operating agreement? What do you do if there is no written documentation at all of who the owners are? This can lead to some very messy situations, including where oral agreements between the alleged owners come into play. Courts will allow testimony to the ownership of an LLC that is oral, even if there is no signed or written document to back it up. Other evidence, such as history of transactions, proof of money invested, evidence regarding the time or effort invested (known as “sweat equity”) and evidence of statements made to third parties are all relevant in determining ownership.

Of course, the best way to prevent a dispute over ownership is to make sure that your operating agreement clearly outlines who the owners are and that you have clear rules laid out in advance on how someone can be purchased out of their ownership interest if there is a conflict. This allows a company to continue as a “going concern” and allows the owners to avoid conflict in advance. If your company doesn’t have this clear documentation, now is as good a time as any to reach out to a business law attorney and get this matter straightened out once and for all.

At Cornerstone Law Firm our attorneys help clients everyday to work out ownership disputes and to try to avoid them in advance, if possible. Our attorneys have litigated multi-million dollar disputes over LLC ownership, and have helped negotiate favorable resolutions out of court as well. If you own an LLC or if you’re part of a group of owners of an LLC, reach out to us to talk about your options in ensuring that your ownership interests are safe for the long term.

Does it have to be Notarized?

We are often asked by clients whether it matters if a certain document is notarized. Under Pennsylvania law it is a very rare circumstance that a document must be notarized. The reason a notary stamps a document is to confirm that the signature is from who it purports to be from. This means that if Bob Smith says that they signed the document, the notary has checked the ID of Bob Smith and confirmed that it is indeed Bob Smith.

Beyond that, a notary stamp does not prove anything about a document. It does not prove whether the document is legally binding, whether it’s valid, whether there are defenses to it, or who is at fault for not upholding the contract that it is on.

Notary stamps are typically strongly recommended on wills because the person who signed it will not be alive when it is testified to. Notary stamps are important on Power of Attorney documents because of how important the powers are that the person is giving away. And, of course, banks and insurance companies often require documents to be notarized before they are mailed in to prove that it really is who is signing it, since they won’t meet the person.

Beyond these situations notary stamps really aren’t required. This is common question that we get. “I signed this document, but it’s not notarized. Does this mean I can get out of it?” The short answer is no, at least not because of the lack of a notary stamp. Now none of this means that getting something notarized is a bad idea, but simply that it does not in and of itself make a document any more binding than it already was.

If you are looking to dispute a document, notarized or otherwise, Cornerstone Law Firm can help. Contact us today for a consultation.

Eminent Domain: Theirs for the Taking?

We might be cheering when traffic circles are installed to curb accident occurrences or when roads are widened to accommodate an increase in traffic. Over time, country fields can give way to schools and public parks as a result of growing populations. Done in the name of progress, these projects certainly provide a public benefit, but they can come with private detriment. It is commonly the case that private parties hold legal title to the land needed for these public improvements. For this reason, it is important for all landowners to understand their rights when their private property might be seized for a public purpose.

Eminent domain is the legal doctrine by which a governmental body is permitted to condemn private property for public use. Often called a “taking,” this ominous sounding legal power might seem unopposable, but it is no foregone conclusion that any proposed taking will be permitted as constitutional. The landowner has various grounds on which to challenge a taking because the exercise of this power must conform to legal requirements. It is for the government to show that its exercise of eminent domain does not violate the constitution or state law.

First, any taking of private land must be for public use. Pennsylvania’s Property Rights Protection Act amending Title 26 expressly limits the powers of state and local governments to condemn private property for use by private entities. Outside of the enumerated exceptions, the government must show that its intended purpose for the land serves a public benefit and is not being used for a private enterprise. Common examples of recognized public purposes are roadways and schools.

Second, the government must pay the private owner just compensation for the property. The private owner is not relegated to taking just any offer extended by the government. The fair market value of the property is the standard measure, but this measurement will change in the event that only a portion of the property is taken. When only a portion of the property is taken, just compensation will be the fair market value of the entire property less the value of the portion remaining (fair market value minus the portion not being taken).

In the ideal situation, the landowner and the government will reach an agreement regarding the sale price and proceed with the property transfer without court intervention. When the parties cannot agree on a price, or when the landowner does not wish to sell, a condemnation action will commence. Not all condemnation cases are resolved in favor of the government. Pennsylvania caselaw provides many examples of attempted takings which were not permitted by the courts, so it is important to understand your rights and how you can fight to protect your property.

If you have been notified that the government intends to seize your property, or if you are facing a condemnation action, the attorneys at Cornerstone Law can help. Contact us to schedule a consultation today.

Contract Basics: The Pen Actually Can Be Very Mighty

You would be hard-pressed to find an adult in the United States who never has signed a contract. You rent an apartment; you sign a contract. You enroll your children in daycare; you sign a contract. You borrow money for school; you sign a contract. You join a gym; you sign a contract. This does not include the plethora of subscription services so common these days like entertainment streaming, cell phones, music services, product delivery services and so many more. We execute many contracts without a second thought, but not all contracts are created equally. Signing on the dotted line for that hotel room or rental car does not carry the same weight as entering into an agreement to buy or sell real estate, but the legal obligation you create when doing so remains the same.

Although the law is concerned where a contract is procured through fraud, misrepresentation, or duress, the courts aim to preserve our autonomy to contract with one another freely. The law does not concern itself with whether the terms of the agreement are reasonable or whether any party possessed enough knowledge to enter the agreement. The parties to any contract can have different levels of sophistication, and bargaining power might be unequal, but each one is legally bound to know the terms of the contract entered. The stroke of that pen comes with a duty to understand the document, and that is where many fall short.

Contracts can be difficult to understand simply because of the manner in which they are drafted. The legalese in many standard provisions can seem unintelligible to most, and some contracts will contain dozens of these confusing terms. However, ignorance is no excuse under the law, particularly when an agreement contains a provision indicating that the parties agree that its terms are fair, just, and reasonable. It is customary for contracts to contain such provisions which serve to cut off future challenges to that contract by one manner or another. These can be explicit waivers of rights, such as waiving your right to a jury trial to resolve future disputes, or implicit waivers like the one above. When you agree in writing that the contract is reasonable, you waive your right to challenge its reasonableness in the future even if you did not understand what you were signing.

While most would think to enlist the help of an attorney for contract drafting or negotiating, contract review is just as important. Agreements involving large sums of money or long-term obligations are most critical. A 5-year service contract can look great today, but circumstances can change for either party over that long a period, and that must be considered. An agreement requiring a sizable non-refundable down payment could result in a great loss if the agreement falls through for a reason other than a breach. From lawn service contracts to pre-nuptial agreements, any legally binding document must be reviewed thoroughly to ensure that you understand both your obligations and your rights under it.

Whether you need a contract drafted, negotiated, or reviewed, the experienced attorneys at Cornerstone Law can help. Contact us to schedule a consultation today.

Peer-to-Peer Carsharing: A Sunday Drive or a Nightmare Ride?

Not all side hustles are created equally, but they all come with serious considerations. Of course, the first consideration for most is financial. After all, the whole point is to supplement your income. The upside must be worth the investment of time and capital, if any, as well as the relevant risks. Even if all you are doing is selling homemade peanut brittle to people you know, there is a risk. What happens if your product makes someone seriously ill or even worse? Risk assessment must be part of that initial analysis, and the side hustle trends seem to get riskier every day.

Just like that mountain cabin or that spare room, many have turned to peer-to-peer car rental services to make an extra buck. These services function much the same as their property rental cousins. Vehicle owners rent their vehicles to other drivers through an app like Getaround or Turo, and the rate is typically hourly. Renters might need the car only for part of the day to run errands or make a special trip to a location devoid of access to public transportation. It seems like a great idea to make money with a car that would have sat unused while helping someone in the process. However, there are many unfortunate places where this type of arrangement could lead.

The two main concerns are damage to property and injury to individuals. When you drive your car, you rely on your insurance coverage to protect against those risks, but that coverage as written could prove worthless in a peer-to-peer car rental scenario. The Pennsylvania legislature has recognized this issue and has passed Senate bill 1222 as a result. This bill, as amended, requires carsharing companies to provide additional insurance to fill the gap when a vehicle owner’s policy excludes the peer-to-peer rental from coverage. The problem is that the coverage provided by the carsharing company might be much less than the vehicle owner enjoys under his or her own policy, meaning that an accident still could pose an unreasonable risk when compared with the relatively meager income gained from this enterprise.

When we think about lending someone a car, we might think that damage to the car is the big risk, but a dented fender or a cracked windshield really sits on the conservative side of the damage spectrum. The truth is that damage to the car might be the least significant risk you take when lending your wheels to someone else. Consider that any motor vehicle accident could result in significant damage to another’s property or the death of anyone involved. The potential litigation could be something much more than most would envision ever encountering. This is why it is important to understand fully the risks involved in these trendy ventures before handing over those keys.

Whether you are considering starting this kind of side business or any side business, or whether you already started and are in need of legal assistance, the attorneys at Cornerstone Law can help. Call us for a consultation today.

Occupational Licensure Defense and Appeals

Pennsylvania requires a licensure for a number of professions including nursing, inspecting cars, running a day care, cutting hair and many more. If a government agency is threatening your license to work, you have a right to counsel to defend yourself and to fight for your right to continue working.

When the government says your license is suspended or revoked, it can feel like you are guilty until proven innocent. The process can be complicated, and it can be very difficult to get clear information from the government agencies that govern your licensure. Depending on which license you have, sometimes you face suspension or revocation before you even have the chance to attend a hearing. Pennsylvania law also permits certain licensing boards to compel a licensee to submit to mental or physical examination as part of their investigation. In some cases, your hearing might be before an administrative law judge or hearing officer who is not particularly experienced in the field in which you are licensed. Their uninformed opinion of your situation can result in a permanent black mark against you if you do not act quickly.

Fortunately, you have a right to appeal any such determination by any board in Harrisburg. These appeals can go to the Court of Common Pleas of the county in which you live or to the Commonwealth Court. Every process is a little different, but all licensure appeals processes should give you the chance to challenge the case against you. In putting on your own defense, you have the right to present evidence, to hire expert witnesses who can testify that you have met all the appropriate licensure standards, and to have an attorney examine the Commonwealth’s witnesses.

In some cases, you might be limited in your appeal to presenting the evidence you presented at your first hearing, so it is important to have an attorney involved from the outset. Furthermore, an attorney can help you determine which evidence will strengthen your case and present it in a clearer light. Depending on the type of licensing issue, you can ask the Commonwealth agency attempting to suspend or revoke your license to temporarily stay that decision so that you can work while the appeal proceeds. This is important because some appeals can take several years to be heard. Obviously, you will want to work while the appeal goes forward.

If you are facing a licensure suspension or revocation, call the attorneys at Cornerstone Law Firm so that we can help defend you and protect your license.

Short-term Rentals & Long-term Headaches

Having a side hustle is becoming more and more popular by the day, and many people sure could use some extra income. This is why companies like Airbnb and VRBO have become so profitable. If you can take a current asset like your house and use it to generate extra income with little or no additional investment, why not give it try? Of course, not everyone in this rental arena is leasing a single room at a time. Some have taken this on as a larger investment opportunity, purchasing properties for the sole purpose of using them as short-term rentals. Regardless of the avenue chosen, whether the property owner is a person or a type of entity, starting a short-term rental business might not be so easy depending on zoning laws.

Before deciding to enter the short-term rental market, the first step is determining whether the municipality has an ordinance specifically addressing short-term rentals. These are not uncommon in larger cities and areas known for tourism. Even a town like State College passed its first such ordinance last year and already is considering changes to those rules based on how the industry operates practically. This kind of ordinance typically addresses:

  • limits on length of stay
  • limits on the number of nights a property can be rented in a given year
  • limits on the number of rooms which can be rented, occupancy limits
  • parking requirements

A municipality also might have different rules depending on whether an entire property is rented or just a portion of an owner’s already-occupied home, as well as a requirement to register as a landlord or obtain a rental operating license.

Where such ordinances exist, there are not too many questions to ask. The problem is when there is a lack of this kind of clear guidance, which is the case in most municipalities. In those instances, interpreting the local code and determining how it applies to your specific situation can be difficult. A number of different factors can make or break your plan to use the property as a short-term rental based on zoning requirements and prohibitions. These can include:

  • whether the property will be inhabited by the owner while also being partially rented
  • the language of related ordinances regarding other kinds of rentals
  • whether the property is owned by a person or an entity
  • how the code defines terms like “family” or “single-family dwelling”
  • whether the municipality wants to limit traffic in the zoning district

Since zoning ordinances specifically addressing short-term rentals are still generally lacking in Pennsylvania, and particularly in more rural areas, the issue has been brought to the courts on a number of occasions. Unfortunately, those cases have been decided in various ways, which only muddies the waters. Barring these specific ordinances, it is too easy and too common to enter the short-term rental market only to be slapped with a zoning code violation as a result. That is why due diligence is necessary before renting that room or that cabin for the weekend. While variances can be requested, a denial can mean that a rather large investment will not produce the intended return.

If you are considering entering the short-term rental space, your local attorneys at Cornerstone Law can help you navigate this emerging market. Give us a call to schedule a consultation today.

 

If you’d like to read more about rental properties, check out our post on Legal Things to Know Before Investing in Rental Properties.

August 2022 Review

This month the attorneys at Cornerstone Law Firm have been busy with:

  • landlord/tenant actions all over the state
  • personal injury cases that are settling and going to court
  • insurance disputes
  • contractor fights
  • a trade secrets and corporate freeze-out trial

Attorney Stephanie Rauch-Mannino has spent much of her month working out final custody arrangements for families that are splitting up, challenging a post nuptial agreement for unfairness, litigating the proper amount of child support to be paid to a single mom and working on a final distribution of assets in several divorces.

Attorney Tony Distasio has been handling landlord/tenant work for Section 8 clients, where evictions are based on everything from unpaid rent to allegations of criminal misconduct and violence. Attorney Distasio has been everywhere from Pittsburgh to Philadelphia this month as part of hearings on these issues.

Attorney Carl Carrero has been writing briefs and motions and has been to court to handle a request for a delay of a sheriff sale. As sheriff sales pickup and foreclosures continue, Attorney Carrero and the Cornerstone Law Firm team are expecting to see more last-minute litigation over attempts to sell houses after foreclosure.

Attorney Joel Ready began the month handling a 2-week trial on a claim regarding trade secrets and a fight over corporate ownership of a large company. From there, he has handled several contract disputes. He has also been finalizing a few guilty plea agreements in the last 2 weeks to ensure the best possible deal for individuals facing criminal charges.

Finally, the whole staff at Cornerstone Law Firm has been working to ensure that clients’ wills are being drafted, contracts are getting signed, deeds are being drawn up and filed, and that clients are getting quick responses to their concerns. If you have a question about your legal issue, call Cornerstone Law Firm today so we can help you.