◊ VRP Law-The Intellectual Property and Employment Law Blog.
Provided by Vihar R. Patel and Sponsored by Enterprise Law Group, LLPThe Prevailing Wage Act, Private Contractors and TIF financing!
The Prevailing Wage Act requires that all laborers, workers and mechanics employed by or on behalf of public body engaged in public works be paid no less than the general prevailing hourly rate. 820 ILCS 130/1. This hourly rate includes cash wages plus fringe benefits, such as, training, health and welfare, insurance, vacations, and pensions paid generally, in the locality in which the work is being performed for employees in similar public works projects. 820 ILCS 130/2.
The Prevailing Wage may b e significantly higher than the market wage. The Prevailing Wage Act applies to all projects financed in whole or in part by certain funds created by statute or bonds issued pursuant to certain statutes. 820 ILCS 130/2. In a recent case, the Fourth District Appellate court had to decide if a private developer building private family residences in a tax increment financing district receiving a portion of the tax increment from the project is subject to the Prevailing Wage Act.
The Fourth District Appellate Court found that the private developer was not subject to the Prevailing Wage Act, because it received a portion of the tax increment for building residences in that district. Town of Normal v. Hafner, No. 4-09-0121, 2009 WL 4263546 (4th Dist. 2009). Effective, January 1, 2010, the Prevailing Wage Act, was amended to more clearly define “public works” as projects financed in whole or in part with bonds, grants, loans, or other funds made available by or through the State of any of its political subdivisions.
If you have any questions or concerns about whether or not you are subject to the Prevailing Wage Act or entitled to a Prevailing Wage, then please feel free to contact us.
What is the term of my Patent? Patent Term Adjustment (PTAs)
It used to be that a issued patent’s term was seventeen (17) years, however, that term has been extended for most currently issued patents. Typically, a currently issued patent will expire twenty (20) years after the date of filing; however, there are circumstances in which the length of the patent term may be adjusted (PTA).
For example, in the biotech and pharmaceutical sector a issued patent’s term can be extended for up to five (5) years to offset regulatory delays. See 35 USC 156 (f). However, the USPTO is responsible for calculating the term of a patent. See 35 USC 154 (b). If for some reason the owner of a issued patent is dissatisfied with the USPTO’s determination of the Patent Term, then he, she or it must file a request to extend the term of the patent within a 180 days from the date of issuance. See 35 USC 154 (b) and 37 CFR 1.705.
Thus, if you believe you are entitled to a extension of the Patent term you must file a timely petition the Director of Patents to extend the term of your patent. Recently, the Federal Circuit rejected the USPTO’s definition of the term “overlap” and required the USPTO to recalculate the term of a patent in Wyeth v. Kappos. This will require the USPTO to recalculate the term for many issued patents.
The PTA can effect the value of a patent and several additional business decisions, such as, the licensing royalties and rates to negotiate, the date at which a generic can come on to the market, the amount of reasonable royalties a licensor or a purchaser can expect in a merger, the period of exclusivity that a owner has to develop follow through inventions, and many similar concerns.
If you have any concerns or questions regarding the analysis for determining a PTA and how it can impact your business decisions, then please feel free to contact us.
Sole-Proprietorship, S-Corporation, C-Corporation, LLC, P or LLP-What do I Choose?
Selecting the appropriate business structure can be a difficult, but important part of your business venture. There are a variety of considerations, such as reducing personal liability, ability to transfer ownership, voting rights, tax implications, and the costs involved in creating the right structure.
Each business entity has its own unique advantages and disadvantages, for example:
A Sole-Proprietorship does not require formalities, separate bank accounts, but you may still be required to get certain licenses and permits. In addition, your personal assets are exposed to any claims made against the business.
A Corporation has the advantage of creating a separate legal entity and protects you and your personal assets from claims against the business. The Corporation can raise funds, hold assets, transfer assets, but requires formal documents (such as, Articles of Incorporation, Shareholders Agreements, By-Laws, Minutes, Officers, Consents, a Board of Directors, and Annual Reports).
A Close Corporation allows the owners to operate the Corporation without a board of directors, but requires an election and Amended Articles of Incorporation to be filed with the Secretary of State’s (SOS) Office. However, a Close Corporation requires some restriction on stock transfer.
An S Corporation avoids having to pay taxes as a Corporation, but has formalities regarding elections with the IRS, disbursement restrictions and restrictions on the size of business that can operate as an S corporation.
A C Corporation must pay taxes as a corporation, but avoids disbursement and size restrictions.
A Limited Liability Company (LLC) creates a similar separate legal entity to a Corporation and protects against exposing an owner’s personal assets to claims against the business. The LLC can raise funds, hold assets, transfer assets, but requires formal documents (such as, Articles of Organization, Operating Agreement, Written Consents, Members and/or Managers, and Annual Reports). However, the initial filing fees for a LLC are slightly higher than a corporation.
Partnerships allow individuals join together and carry own as co-owners of a business. Partnerships are separate legal entities that can own and transfer assets and pay taxes. However, the partnership does not incur a separate tax such as corporate tax. Typically, a written partnership agreement should be prepared, but it does not have to be filed. However, general partnerships do not permit the partners to shield personal assets from claims against the business.
Limited Partnerships require a statement of qualification to be filed with the SOS’s office. These are similar to a general partnership, but limited partners are not liable for the wrongdoing or mistakes of other partners.
These are just some of the considerations that go into creating and selecting the appropriate business structure. Some others are ownership and licensing of intellectual property, need to avoid commingling of funds, ability to transfer ownership of business and business assets, accounting compliance, etc. Selecting a business structure is often dependent on the business plan of the owners.
If you have any concerns or questions regarding selecting the right business structure for you, then please feel free to contact us.
Fraud in the Purchase of Securities: Reliance needs to be alleged properly!
Alleging common law fraud against accounting firms for fraudulent statements in financial reports is not as easy as it may seem. In Dloogatch v. KPMG, the court stated that shareholders may state a common law fraud claim, if they can overcome standing issues, the proscription against derivative claims, and federal preemption.
However, the common law fraud claim must still be plead with particularity. In other words, alleging that shareholders ”relied” upon the financial reports and were “damaged” is insufficient to state a common law fraud claim. These types of complaints will typically get dismissed pursuant to a properly crafted motion to dismiss.
In alleging fraud actual reliance must be alleged with specificity. Where a holder is attempting to assert that he would have sold the stock, but for the fraudulent statements; more details are require. For example, the particular misstatement, why it would have led to the holder’s sale of stock, the amount of stock that would have been sold, the dates of the purported transactions and similar specific information is required to allege “actual reliance.”
Although the Dloogatch v. KPMG case dismissed the holder’s complaint for fraud in connection with not selling stock based on an accountant’s report; in reality, the case opens the door to making holder claims in IL. If you have any additional concerns or questions relating to prosecuting or defending these matters, then please contact me.
The Illinois Regenerative Medicinal Institute (IRMI), What is it?
The Illinois Regenerative Medicinal Institute (IRMI) is a division of the Illinois Department of Public Health. It was recently established by the Illinois General Assembly to further stem cell research and improves the health care services that Illinois citizens receive. No matter, which side of the debate you fall on, you should be aware that the IRMI is empowered to provide funds to help stimulate stem cell research.
The IRMI is responsible for creating grant programs that further many objectives, including the following: 1) improve the health of Illinois citizens through stem cell research; and 2) promote the translation of stem cell research into clinical practice and the transfer of technology to the biomedical and technology industry.
The IRMI has and is still promulgating rules for the types of grant programs, eligibility for grant programs, conditions for use and disbursement of funds, etc…However, if you are established business or start up engaging in research on stem cells, then you have a new potential source for funds.
You can find additional information at Stem Cell Funding or contact us for additional inquiries.
Funding for Hospital Improvement Projects
The State of IL has enacted new legislation granting the Illinois Department of Public Health (“DPH”), the ability to award grants for improving, renovating, or replacing the hospital’s equipment and technology. See. 20 ILCS 2310/2310-640(a). Such projects may be for a variety of hospital concerns such as, safety standards, building codes, maintaining or improving buildings, improving health information technology, or patient safety. Id.
A hospital that meets the criteria is eligible to receive a grant of not less than $2,500,000 or more than $7,000,000. 20 ILCS 2310-640 (b). For a hospital that does not meet the criteria, DPH may make a one time capital grant to any public or not for profit hospital located in counties of less than 3,000,000 in habitants. 20 ILCS 2310/2310-640 (c).
Eligible hospitals must have a Medicaid inpatient utilization rate of ten (10) percent for the rate year beginning October 1, 2008. The grant consists of a base payment of $170,000 for each acute hospital in an urban area, or $340,000 if located in a rural area. In addition, the hospital may be awarded $45 multiplied by the number of total Medicaid inpatient days for each hospital.
This new source of funding is not only an important consideration for hospitals, but also for established and new construction, technology, and consulting companies that provide services to hospitals. If you have any concerns or questions regarding this new source of funding for hospitals, then please feel free to contact us.
Buying and Selling a business (Mergers and Acquisitions)
Properly negotiating and structuring a purchase or sale of a business can be a challenging endeavor. Having a good team of accountants, legal advisers, valuation experts, tax advisers, lenders or investors is crucial to successfully buying or selling a business. There are a variety of considerations in buying or selling a business, but there are two major ways to structure a deal: an asset purchase or a stock purchase.
An advantage of an asset purchase is that it allows the buyer to be selective in terms of the assets that it wants to acquire from the target company. Also, the buyer is generally not liable for the seller’s liabilities, unless the asset purchase agreement has such language. Some disadvantages of an asset purchase are that the bill of sale must be comprehensive enough to ensure that no key assets are overlooked and third party consents will likely be required.
Some advantages of a stock purchase are that the business identity, licenses, permits can be preserved, and continuity of the business may be maintained. However, the buyer may be liable for unknown or contingent liabilities, and may be forced to contend with the seller’s minority shareholders.
Also, there are variety of employment and intellectual property law considerations that go into structuring a proper purchase or sale of a business. Such as the following:
a) negotiating key employee agreements and non-competition restrictions;
b) contending with collective bargaining agreements;
c) resolving anticipated or outstanding claims by employees;
d) acquiring the desired intellectual property (business name or marks, copyrights, patents or trade secrets);
e) restricting the other party from using the intellectual property (business name or marks, copyrights, patents or trade secrets); and
f) recording assignments or transfers of intellectual property (business name or marks, copyrights, patents or trade secrets).
Properly, structuring a purchase or sale of a business can often mean the success or failure of the venture. If you have any concerns or questions regarding the purchase or sale of a business, then please feel free to contact us.
Failure to contest arbitration properly, can waive access to courts!
Plaintiff was acquired by a new company and sued the defendant on a breach of contract theory in an American Arbitration Association (“AAA”) Complaint. The AAA Complaint alleged breach of a written agreement; however, Defendant counterclaimed requesting reformation or rescission of the contract from the arbitrator. The Defendant asserted a mutual mistake of fact as the basis for seeking a reformation remedy, and alternatively sought rescission of the contract.
In the arbitration proceeding, the Plaintiff asserted that reformation was not necessary as there was no mutual mistake of fact and no scrivener’s error. However, Plaintiff did not argue that an arbitrator could not reform a contract. Subsequently, Plaintiff filed a motion with the trial court to vacate the arbitration award asserting that the arbitrator lacked the authority to reform the 2004 written contract.
The trial court held that Plaintiff’s failure to assert at arbitration that the Arbitrator lacked the authority to reform the contract was a waiver of the argument. The trial court held that to object to arbitration, a party must object to the arbitration proceeding in a timely manner. The appellate court affirmed and stated that there is a mandate by the Illinois Supreme Court that arbitration awards should be construed as to uphold their validity whenever possible.
The presumption is that an arbitrator did not exceed his or her authority, and will grant a petition to vacate an arbitration award only in extraordinary circumstances. Judicial review of an arbitration award is extremely limited. Consequently, litigators must be more cognizant and advise their clients of the need to assert all claims and arguments in arbitration proceedings.
See: First Health Group v. Ruddick, N0 1-083236; 2009 WL 1940702 (1st Dist). First Health Group Corp_Arbitration.
Discrimination based on genetic information prevented by GINA!
GINA is not the name of my favorite aunt, but the acronym for the Genetic Information Nondiscrimination Act (42 USC 2000 et. seq.). GINA prevents the discrimination of individuals on the basis of their genetic information for providing health insurance (Title I) and employment (Title II). Title II will be effective as of November 21, 2009.
GINA will prevent “covered entities” (employers, labor unions, etc…) from discrimination against current and former employees, union members, apprentices and trainees based on their genetic information. GINA has prohibitions against intentionally acquiring information about your employees, union members, apprentices, and trainees. If a “covered entity” has genetic information about these individuals, then it must keep the information in the strictest of confidence.
“Genetic Information” is defined as follows: any information about an individual’s genetic tests, including requesting or receiving genetic services, the individual’s family members’ genetic tests or the manifestation of diseases or disorders among the individual’s family members. “Genetic tests” is defined as an analysis of human DNA, RNA, chromosomes, proteins, or metabolites that detects genotypes, mutations or chromosomal changes.
GINA authorizes the EEOC to enforce its prohibitions against discrimination, acquisition and dissemination of genetic information. Employees must file a charge with the EEOC to enforce their rights under GINA. Feel free to contact us to understand how to implement policies and practices that comply with GINA, or to assert your rights under GINA.
Pooled Patent Licenses, Patent Misuse and Price Fixing
Recently, the Federal Circuit agreed to hear the Princo v. Phillips case en banc to decide whether or not Sony, Phillips, Taiyo Yuden and Ricoh’s agreement to pool patents and jointly license technology relating to the “Orange Book” standard for making CD-Rs and CD-RWs was a form of Patent Misuse and price fixing amounting to an Antitrust violation? Phillips provided the joint licenses to this technology to Princo, but Princo stopped paying the fees for the license and claimed Patent Misuse.
Patent Misuse is not a new defense, but an old equitable defense. The idea behind Patent Misuse is to prevent business practices that do not violate any law, but drew anticompetitive strength from the patent right and thus were deemed contrary to public policy. Phillips I, 424 F.3d at 1134 (quoting Maillinckrodt, Inc., v. Medipart Inc., 976 F.2d 700, 704 (Fed. Cir. 1992). Typically, in a Misuse analysis, courts will focus on determining whether or not the patentee has imposed conditions or restraints that derive their force from the patent, and increase the scope of the patent with anticompetitive effect. Phillips I, 424 F.3d at 1134 (quoting C.R. Bard Inc. v. M3 Sys., Inc., 157 F.3d 1340, 1372 (Fed. Cir. 1998).
In Princo v. Phillips, the court recently held that there was Patent Misuse, because the Lagadec Patent was a non-essential patent that was pooled into the licensing agreement. In other words, the court held that the pooling of a patent that was not essential to the “Orange Book” standard was an expansion of the scope of the other patents. The Court also emphasized and seemed to find that there was an agreement by Sony and Phillips to combine and pool their individual (digital and analog) solutions to the wobble signal that is used to control the recording speed in creating CD-Rs/RWs.
The court focused on the fact that only one of these two solutions is needed and found that the Lagadec Patent (digital) solution was non-essential. The court stated that since Sony and Phillips ultimately chose to define the Orange Book standard with the analog solution, the Lagadec Patent was non-essential. The Federal Circuit has agreed to hear a motion for a rehearing en banc, and may make some important changes to the patent licensing, misuse and antitrust standards.
For a review of the Petition for Rehearing from the ITC, please see attached: Princo-Petition for Rehearing en banc – ITC
