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10 TIPS TO PROTECT YOUR INTELLECTUAL PROPERTY FROM UNAUTHORIZED TRANSFER WITHIN YOUR IP LICENSE

Protecting your software and other intellectual property (IP) assets is very important in protecting your business. Consider implementing some important practices to increase your protections and controls. By considering these tips and including some of these provisions in your IP License Agreement (IP Licenses), you reduce the risk of your software or other IP being transferred without your consent and you will be in a stronger position in the event of a dispute.

IS YOUR BUSINESS PROTECTED AGAINST A POTENTIAL UNWANTED AND/OR UNAUTHORIZED ASSIGNMENT AND/OR TRANSFER OF YOUR INTELLECTUAL PROPERTY?

  1. Current positions and trends in the law to be aware of: The current guideline under general contract law, is that a contract that is silent on assignment and/or transfer is considered freely assignable/transferable unless adverse consequences (which are material) exist for the non-assigning party or a statue or public policy specifies otherwise (see Restatement (Second) of Contracts § 317(12) (1981), and also see UCC § 2-210 (1)(a)(2003). This differs with the transferability of IP Licenses as a Licensee’s rights are generally not assignable unless the IP License contains the express permission for its assignment or the Licensor otherwise provides such express consent (see Practical Law Company, IP Licenses: Restrictions on Assignment and Change of Control, Ziff and Deming, Practical law Publishing 2012/  https://www.skadden.com/sites/default/files/publications/Publications2679_0.pdf).The parties to the IP License need to consider clauses that are necessary to prohibit or permit the assignment/transfer of the agreement depending on various future circumstances, for example a sale or merger of a business, a reorganization, or even a mere name change for example a sale or merger of a business, a reorganization,  or even a mere name change.

DO YOU WANT TO DO BUSINESS AND GRANT INTELLECTUAL PROPERTY RIGHTS TO THE CLIENT YOU ARE DEALING WITH? HAVE YOU VETTED YOUR POTENTIAL INTELLECTUAL PROPERTY LICENSEE PROPERLY?

  1. Ensure that you are comfortable with your potential client and want to do business with this entity. Conduct an internet search, even a financial/accounting search to check out your potential clients or customers, employees and suppliers. Ensure that this client is an individual or company you want to do business with and would want to work with or even recruit. Does this client anticipate upcoming changes in its business that would affect the IP License, such as changes in control, sale, name or branding changes, acquisitions, reorganizations, that can be shared with you? If these changes are brought to your attention upfront, the IP License can contain the necessary language to allow for this as mutually agreed between the parties.

UNDERSTAND YOUR POTENTIAL INTELLECTUAL PROPERTY LICENSEE’S BUSINESS ORGANIZATION AND LICENSING NEEDS NOW AND IN THE FUTURE

  1. Document who your client is and ensure that the client provides clear and convincing evidence of any organizational changes that could affect the IP License (Need to keep the original Licensee organization intact as a whole, not sell off parts). Communication with your client(s) is key. Ensure that the client provides you with any documentation regarding a sale, acquisition, change in ownership or control, even a name change so that the proper changes to the IP License can be made documenting the changes and providing a paper trail showing who is the Licensee and therefore, who has authorized rights to use the IP in accordance with the IP License.

IS YOUR LICENSE GRANT WITHIN YOUR IP LICENSE AGREEMENT THE BEST THAT IT CAN BE?

  1. Make your license grant as clear and protective as necessary. Check and double check that you have thought of and covered for any future scenarios that could come up. Consider all present and future aspects that you want to protect with your IP and license grant and ensure that you include the words “non-transferable” and “non-assignable” as part of the license grant and as you see fit to protect your business and your IP.

DOES YOUR IP LICENSE AGREEMENT ADDRESS TRANSFER FEES IN ACCORDANCE WITH BEST INDUSTRY PRACTICES?

  1. Consider whether it makes sense to include language regarding a transfer fee upfront within your IP License. You may consider adding language within you IP License, within the license grant, that any permitted transfer would require a transfer fee to the Licensee at the time of such transfer.

HAVE YOU REVIEWED AND UPDATED YOUR ASSIGNMENT PROVISIONS WITHIN YOUR CONTRACTS AND LICENSES LATELY? ENSURE THESE ASSIGNMENT PROVISIONS ARE IN ACCORDANCE WITH BEST INDUSTRY PRACTICES AS WELL.

  1. Assignment Provision. As stated with the license grant, ensure that your assignment provision includes the exact language that you need to protect your IP and to control who your Licensee and other authorized current or future users may be. Consider a broad restriction on assignment or transfer which is prohibited without your consent and include language within this provision “even by operation of law or in the event of an assignment, sale, or merger.” This extra language could assist and strengthen your position against an unauthorized transfer or assignment of your IP in the event that a state law allows for the automatic assignments due to a sale of a business.

HAVE YOU HAD THE TERMINATION RIGHTS AND PROVISIONS REVIEWED WITHIN ALL OF YOUR BUSINESS AGREEMENTS, CONTRACTS, AND LICENSES TO ENSURE THESE ARE IN ACCORDANCE WITH CURRENT BEST PRACTICES?

  1. Termination Rights. Considering all of the factors mentioned with the potential unwanted or unauthorized transfer of IP (in Part 1 of this article), leads to the importance of including a protective termination provision within your IP License. Your termination rights should allow you to control and/or prevent transfers due to future circumstances that change your original Licensee. It may be unreasonable and difficult to have the Licensor’s right to terminate for convenience (any reason) due to the fact that the Licensee paid for the continued right to use the software to run its business provided payment was made and the use is in accordance with the IP License. The Licensor should consider inclusion of some reasonable termination rights or suspension of use rights in the event of an unauthorized and/or unapproved transfer or in the event of a change in control or sale without Licensor’s consent.

DOES YOUR INTELLECTUAL PROPERTY LICENSE GRANT YOU THE RIGHT AS THE BUSINESS OWNER TO INCREASE FEES AS COMMERCIALLY REASONABLE?

  1. Rights to Increase Fees. Another approach to consider is ensuring that your IP License and/or your maintenance or support agreement allows you, the Licensor, to increase fees upon notice for any business reasons. This could be another approach in protecting yourself in the event of an unauthorized unpaid for transfer as the Licensor could notify the Licensee of the planned increase in fee and in the event that the Licensee does not agree with the increase or does not pay, the IP License could be terminated accordingly (either by the Licensee as allowed or by the Licensor with notice and due to non-payment). This is a way of allowing you, as the Licensor, to get out of a business arrangement that is not in accordance with your original intent and could be used as a last resort to stop any unauthorized use of your IP within your contractual rights.

HAVE YOUR HAD YOUR LICENSES AND CONTRACTS REVIEWED BY AN ATTORNEY LATELY?

  1. Retain an attorney to review your contracts. Retaining an attorney to review complex contracts especially when dealing with a new client or business partner is recommended to ensure that you have considered all of the protections that you need (especially taking into consideration specific needs or technicalities of your business, your IP, or jurisdictional laws). Business owners do opt to utilize standardized contracts found online for particular transactions to save time and costs but many times the protections and technicalities and jurisdictional laws that we discussed in this memo are not taken into consideration and therefore, utilizing an attorney for initial review and on-going complex negations is a recommended practice to identify risks and strengthen your protections.

YOUR BUSINESS SHOULD CONDUCT INDUSTRY BEST PRACTICES FOR ON-BOARDING AND ON-GOING TRAINING WITH EMPLOYEES ON ALL ASPECTS OF YOUR IP AND ASSOCIATED IP PROTECTIONS!

  1. Conduct on-board and on-going training of your employees. Employees should undergo training on business practices and processes, especially customer facing employees. This is to provide the necessary guidance to your employees to ensure that they are aware of the concerns and protections required with IP Licensing and to ensure that your company is current with any compliance requirements based on the laws pertaining to your business. Businesses can save money and avoid unnecessary disputes by ensuring that all employees are aware of the risks and protections needed with your IP licenses.

Should you have any questions about business law or any other laws that may affect your business, or would like to schedule a free initial consultation, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800 or contact us online.

Waltz, Palmer & Dawson, LLC is a full-service law firm with various areas of service to assist your business, including: Employment Law, Intellectual Property, Commercial Real Estate, Business Immigration, Litigation and general Business Law services. Individual services include Estate Planning, Wills and Trusts, Probate, Guardianship, Divorce and Family Law, Collaborative Divorce & Mediation.

This article constitutes attorney advertising. The material is for informational purposes only and does not constitute legal advice.

To subscribe to our business e-newsletter, pleases send an email request to www.info@wpdlegal.com

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3701 Algonquin Rd. Suite 300
Rolling Meadows, Illinois 60008

Phone: (847) 253-8800
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NEW ILLINOIS LAWS IN 2019 REQUIRE EMPLOYERS TO REEVALUATE POLICIES AND PRACTICES

 

As 2018 is coming to an end, now’s the time for employers, business owners, and HR professionals to turn their attention to the new year. Here is a look at what you can expect in 2019.

Employee Reimbursement for Business Expenses

Effective January 1, 2019, amendments to the Illinois Wage Payment Collection Act (IWPCA) will require employers to reimburse their employees for “all necessary expenditures or losses incurred by the employee within the employee’s scope of employment and directly related to services performed for the employer.”

“Necessary expenditures” is defined as “all reasonable expenditures or losses” the employee incurs in performing job duties and which primarily benefit the employer. However, employers are not required to reimburse for losses caused by employee negligence, normal wear or theft (unless the theft results from the employer’s negligence). Nor are employers required to reimburse unauthorized expenses, requests that fail to comply with written reimbursement policies, or costs exceeding employer-established expense caps. Employers may also limit the timeframe for submitting reimbursement requests, but employees must be allowed a minimum of 30 days to submit requests.

Illinois employers should establish or update expense reimbursement policies before the January 1, 2019, effective date. Policies should at least include:

  • The types of expenses that are reimbursable;
  • The amount or proportion of the expense eligible for reimbursement;
  • The type of documentary evidence (receipts, invoices, etc.) required for reimbursement; and
  • The time period in which employees have to submit documents.

Equal Pay Protections for African-American Employees

Effective January 1, 2019, an amendment to Illinois’s Equal Pay Act of 2003 (“IEPA”) expands the statute to cover pay discrimination between African-Americans and non-African-Americans. The amendment will prohibit employers from paying African-Americans less than non-African-Americans who are performing “the same or substantially similar work.” (The IEPA previously was limited to ensuring equal pay between male and female employees.)

Senate Bill 405 “Hutchison Law”

Effective January 1, 2019, Senate Bill 405 requires all companies that make a bid or offer for a state contract have a sexual harassment policy in place. Additionally, the law requires companies that claim EDGE tax credits to include their sexual harassment policy in their annual report to the state.

Amendments to the Illinois Human Rights Act

Recent amendments to the Illinois Human Rights Act (IHRA) broaden employee rights and impose new, immediate notice requirements on employers. Under the new amendments, complainants now have up to 300 days to file a charge with the Illinois Department of Human Rights (IDHR). This change mirrors the filing period provided under federal law for filing discrimination charges with the Equal Employment Opportunity Commission. The amendments also update the posting and notice requirements of the IHRA to include specific information about employee rights to be free from sexual harassment. Public Act 100-0588 amends the IHRA at 775 ILCS 5/2-102(K) and directs that employers must post the notice issued by IDHR and, importantly, include the same content covered in the notice in their employee handbooks.

Because the IHRA applies to employers with one or more employees in cases involving allegations of sexual harassment, disability discrimination, pregnancy discrimination, and retaliation, the new posting and handbook requirements extend to all employers operating in the state of Illinois.

Paid Breaks for Nursing Mothers

Effective August 21, 2018, Illinois amended its Nursing Mothers in the Workplace Act (820 ILCS 260/10). The amendment now requires employers to pay for “reasonable” break time spent expressing breast milk, no matter how long it takes or how often it needs to occur. A limit of up to one year after the birth has now replaced a previously undefined period. Previously, it was required that the break time to run, when possible, concurrently with any break time already provided to the employee. However, the new version states that the break time “may” run concurrently but it no longer is required to. Instead, an employer is required to provide “reasonable” break time as needed by the employee unless to do so would create an “undue hardship” as defined under the Illinois Human Rights Act (which is a fairly high burden for an employer to meet). The “undue hardship” standard is higher than the prior version, which allowed employers to refuse or restrict lactation breaks if to do so would “unduly disrupt the employer’s operations.” The bottom line is that Illinois employers must immediately review their policies on expressing breast milk and further ensure that employees’ pay is no longer being deducted for those breaks.

Additional Protections for Military Service Members

Effective January 1, 2019, the rights of Illinois employees serving in the military will be governed by the Illinois Service Member Employment and Reemployment Rights Act (ISERRA), Public Act 100-1101. The new law will protect the employment and benefits of any service member who leaves their job to serve either the state or country. Furthermore, ISERRA has been expanded to protect all members of the armed forces.

Emergency Medical Services Employees Exempt from One Day of Rest Act

Illinois’s One Day Rest In Seven Act (“ODRISA”) was amended, effective August 24, 2018, to exempt on-call employees of private companies licensed under the Emergency Medical Services (“EMS”) Systems Act. ODRISA requires employers to provide employees with at least 1 day of rest in a 7-day period, and that employees who work at least 7.5 continuous hours be provided a 20-minute meal break no more than 5 hours after starting their shift. The recent amendment to ODRISA, however, provides an exemption to EMS employees who are required to be on call for 8-hour periods. Under the amendment, those employees must only be allowed to eat a meal at some point during the 8 hours they are on call.

New Government Office for Enforcing Chicago Employment Ordinances

Beginning on January 1, 2019, Chicago will have a new agency tasked with enforcing the city’s employment ordinances: The Office of Labor Standards (“OLS”). The OLS will investigate and respond to employee complaints under the City’s minimum wage, paid sick time and anti-wage theft laws. These types of complaints were previously handled by the Department of Business Affairs and Consumer Protection, which is responsible for business licensing and enforcement of consumer fraud ordinances. It is likely that this change will result in an increased focus on enforcement of City employment ordinances.

Should you have any questions about the new laws for 2019 or any other laws that may affect your business, or would like to schedule an initial consultation, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800 or contact us online.

Waltz, Palmer & Dawson, LLC is a full-service law firm with various areas of service to assist your business, including: Employment Law, Intellectual Property, Commercial Real Estate, Business Immigration, Litigation and general Business Law services. Individual services include Estate Planning, Wills and Trusts, Probate, Guardianship, Divorce and Family Law.

This article constitutes attorney advertising. The material is for informational purposes only and does not constitute legal advice. To subscribe to our business e-newsletter, pleases send an email request to www.info@wpdlegal.com

 

ILLINOIS EMPLOYERS NOW REQUIRED TO REIMBURSE EMPLOYEE EXPENSES

What is the New Law regarding the Illinois Wage Payment and Collection Act (“IWPCA”)?

On Aug. 26, 2018, Governor Rauner signed into law an amendment (Public Act 100-1094) to the Illinois Wage Payment and Collection Act (“IWPCA”), which will  go into effect January 1, 2019, requiring employers to reimburse employees for costs that are incurred in direct relation to their work for the employer. The amendment requires employers to reimburse employees for “all necessary expenses that are incurred by the employee within the employee’s scope of employment and that are directly related to services performed for the employer.” The law defines “necessary expenditures” as those “reasonable expenditures or losses required of the employee in the discharge of his or her employment duties and which [primarily] benefit the employer.”

What is the Purpose of the New Law regarding the Illinois Wage Payment and Collection Act (“IWPCA”) ?

The IWPCA amendments were written with an eye towards compensating employees who use personal devices or equipment for work purposes and employers’ failure to reimburse employees for the work-related costs incurred through use of personal devices. Examples of potential reimbursement claims may include:

  • personal cell phone data plans when supervisors call those phones with work-related inquiries
  • home internet bills when employees are required to get online to handle work issues
  • remote equipment, like routers and other computing necessities

What Is Not Allowed to be Reimbursed?

However, the new law makes it clear that employers are not required to reimburse employee expenses or losses in the following circumstances:

  • the loss or expense is due to the employee’s own negligence;
  • the loss or expense is due to normal wear;
  • the loss or expense is due to theft (unless the theft results from the employer’s negligence); or
  • the employee fails to comply with the employer’s written reimbursement policy.

What are the Requirements for Reimbursement?

To be eligible for reimbursement, the following criteria must be met according to the new law:

  • The expenses or losses must have been incurred in the scope of the employee’s employment and must be directly related to the services the employee performs for his or her employer.
  • The employee must submit the expense or loss to the employer with supporting documentation within 30 days after incurring the expense or experiencing the loss. If the employee’s supporting documentation is missing or nonexistent, the employee must submit a signed statement explaining the missing documentation.
  • The employee must comply with the employer’s written expense reimbursement policy.

With the passage of the IWPCA amendment, Illinois becomes the ninth U.S. jurisdiction to statutorily impose expense reimbursement requirements on employers. The other eight jurisdictions are California, the District of Columbia, Iowa, Massachusetts, Montana, New Hampshire, North Dakota, and South Dakota. Given the proliferation of “bring your own device” (BYOD) policies” and employee use of personal cell phones, laptops, tablets, and other equipment for business use, employers in these jurisdictions must determine when and if the use of such devices constitutes a reimbursable business expense.

Although Illinois employers will have to wait until 2019 to see how courts in Illinois interpret the new law, court decisions from California provide some useful guidance as California’s expense reimbursement law has very similar language to the Illinois. In California, employees have continued to successfully argue that employers must reimburse employees for expenses such as data plans, Internet bills, and other computing expenses regardless of the marginal cost to employees. For example, courts have found that employers must reimburse employees who use their cell phones for work-related calls, even if those employees have unlimited phone/data plans and incur no additional expenses as a result of the calls. In those instances, California courts have required employers to reimburse a reasonable percentage of the employees’ phone bills. Similarly, even if an employee would have purchased the exact same data plan or equipment with or without job requirements, courts have ruled that reimbursements were necessary.

An employer is not liable under the new IWPCA unless the employer authorized or required the employee to incur the necessary expenditure or the employer fails to comply with its own policy.

What are the Damages for Violating the New IWPCA?

The new law does not amend the remedies generally outlined in the IWPCA. Therefore, the potential damages an employer might be liable for can, include damages equal to 2 percent of the underpayment per month of non-payment, in addition to the reimbursement amount.

What Can Illinois Employers Do?

Illinois employers are not obligated to reimburse expenses if there is written policy and the employee failed to comply with that policy. As such, Illinois employers should be vigilant in implementing reimbursement policies to minimize any liability that may be created through failure to comply with the IWPCA’s new reimbursement provisions. If the employer’s written expense reimbursement policy establishes specifications or guidelines for necessary expenditures, the employer is not liable under the new amended law for the portion of the expenditure amount that exceeds the specifications or guidelines of the policy so long as the employer does not institute a policy that provides for no reimbursement or de minimis reimbursement. Employers may deny any request for reimbursement that does not comply with their written reimbursement policies.

Should you have any questions about the Illinois Wage Payment and Collection Act or any other laws that may affect your business, or would like to schedule a free initial consultation, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800 or contact us online.

Waltz, Palmer & Dawson, LLC is a full-service law firm with various areas of service to assist your business, including: Employment Law, Intellectual Property, Commercial Real Estate, Business Immigration, Litigation and general Business Law services. Individual services include Estate Planning, Wills and Trusts, Probate, Guardianship, Divorce and Family Law, Collaborative Divorce & Mediation.

This article constitutes attorney advertising. The material is for informational purposes only and does not constitute legal advice.

To subscribe to our business e-newsletter, pleases send an email request to www.info@wpdlegal.com