Barnhart Law PLC » Articles & Outlines

New America Invents Act, the Most Comprehensive Patent Reform Act in 175 Years

Constance R. Barnhart — Sun, 18 Sep 2011 23:37:05 +0000

On September 16, 2011, President Obama signed into law the Leahy-Smith America Invents Act (the “Act”), which the U.S. Patent and Trademark Office (USPTO) termed “the most comprehensive overhaul to our nation’s patent system since 1836.”

The Act (H.R. 1249), co-sponsored by Senator Patrick Leahy (D-VT) and Rep. Lamar Smith (R-TX), was passed by the U.S. House of Representatives on June 23, 2011 by the Senate on September 8, 2011 by decisive bi-partisan votes in both chambers.

For more information on the America Invents Act, See our article, President Obama Signs into Law Most Comprehensive Patent Reform Act in 175 Years, in Barnhart Law PLC’s TechLawBits – Technology & Internet Law Updates Blog.

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Outline Of Some Issues And Typical Terms In International Agency Or Distribution Agreements

Constance R. Barnhart — Mon, 12 Sep 2011 04:20:40 +0000

I. Preliminary Issues

A. Agency or Distributorship Relationship Appropriate?

1. Consider other possible forms of doing business abroad: Deal by Deal Direct Sales to End Customers, Joint Venture, Licensing, Acquisition of a Foreign Company, Establish a Foreign Branch or Subsidiary.

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2. Define Nature of Relationship:

a. Agency (Agent does not take title to the goods, but sells them for the manufacturer (or other seller) and is compensated by a commission on his sales):

• Does not buy or sell for own account;
Does Not Take Title to the Goods
• Solicits Orders for Manufacturer/ Supplier
• May be Independent Contractor, Agent or Employee of Manufacturer/ Supplier
• Manufacturer/ Supplier Sells Directly to End Customer
• Compensated by Commissions or Salary
• Usually Bears No Credit Risk with respect to Customers
• Maintains no Warehouse or Inventory
• May be Exclusive or Non-exclusive in given Territory

b. Distribution (Distributor purchases the goods, takes title and then re-sells them, being compensated by the spread between his sales price to customers and the purchase price he pays for them):

• Buys Goods From Supplier,
Takes Title in Own Name, and
Re-sells the Goods For Its Own Account
• Compensated by Markup Received on Resale of the Goods (the spread between his sales price to customers and the purchase price he pays for them)
• Independent Entity;
Does Business in its Own Name;
No Authority to Obligate Supplier;
• Bears All Commercial and Credit Risk on Sales to End Customers
• Usually Maintains Inventory and Physically Distributes the Goods to its Customers
• Usually Sells in Original Packaging with Manufacturer’s Labeling
• May have Exclusive or Non-exclusive Right to Sell Supplier’s Goods in given Territory

c. Some hybrid.

3. Consider Pros and Cons of Commission Agent/ Sales Representative vs. Distributor:

a. Commission Agent/ Sales Representative:

(1) Pro:

•Greater Control/ Supervision By Supplier
•Greater Profit on Sales to Supplier
•Avoid Anti-Trust Concerns; Clauses Restrictive of Agent are Permitted

(2) Con:

• More Commercial & Credit Risk On Supplier
• Local Laws Protective of Commercial Agents:
• Regulate Compensation
• Restrict Termination: Require Notice & Indemnity or Compensation
• Require Registration or Grant other Rights to Agent which Cannot Be Contracted Out Of
• May Be Deemed an Employee, Protected Under Local Labor Laws (Especially if Power to Bind Supplier to Contracts)
• May Cause Supplier to Have a “Permanent Establishment” — Deemed Doing Business in the Foreign Country — for Tax Purposes (Especially if Agent has authority to bind Supplier to Contracts and/ or is economically dependent on Supplier)

b. Distributor:

(1) Pro:

• Less Commercial Risk on Supplier
• May Be Subject to Fewer Local Protective Laws; Greater Freedom of Contract
(Tho: Beware. Check Law of Country Involved. E.g. Belgium regulates Distributors but not Commission Agents. E.g. Some Latin American Countries treat Agents and Distributors Alike.)
• Generally Avoid Risk of Deemed Employee
(Tho: Beware. Supplier May be Jointly and Severally Liable for Distributor’s Obligations to its Employees under Local Labor Law)
• Generally Avoid Risk of “Permanent Establishment” for Tax Purposes
(Tho: Beware. Substance Over Form or Title)

(2) Con:

• Less Control/ Supervision by Supplier
• Lower Profit On Sales to Supplier
• Potential Anti-Trust Concerns arise from restrictions on Distributor (E.g. Resale Restrictions; Minimum Purchases)
• Depending on Country: May Still be Subject to Local Protective Laws

B. Consider Applicable laws in the Agent’s or Distributor’s Country

1. Need for experienced international counsel who has working relationship with local counsel in Agent or Distributor’s country and can obtain and interpret for you advice of local counsel

2. Types of Foreign Protective Laws common with respect to Agents and Distributors:

International Intellectual Property Licensing: Basic Introduction & Checklist

Constance R. Barnhart — Sun, 11 Sep 2011 00:19:54 +0000

A. General – Overview & Introduction to Intellectual Property Licensing Across International Borders

1. Next Step to Expand International Operations? Licensing of patent rights, trade secrets, know how, copyrighted software or other technology, and trademark rights (collectively referred to hereafter as “Technology”) to overseas party for exploitation (manufacture, use and sale) abroad is often a next step (after exporting) to expand international operations – whether by companies around the world into the U.S. market, or by U.S. companies abroad.

2. License defined: A conveyance of a right under a patent, trademark or copyright which confers less than the grantor’s entire bundle of rights is a license rather than a sale or assignment. A license may grant rights to use, manufacture and sell. The licensee does not acquire legal title to the intellectual property, only a temporary right to use it, and only to the extent provided in the License Agreement. A purchaser/ assignee of the rights takes subject to all prior outstanding licenses (unless license is terminated pursuant to terms of license agreement or by negotiation prior to sale).

3. Some Advantages:

a. A relatively inexpensive and quick way to tap foreign markets: Can license to others the right to manufacture and sell your products abroad without the need to make a large direct equity investment abroad
b. Fewer financial and legal risks than owning and operating a foreign manufacturing facility or participating in an overseas joint venture
c. Licensing the Technology to enable a local company to manufacture and sell in that market (in exchange for a royalty) may be way to get around foreign import restrictions on products which could make export to those countries too costly or impractical .
d. Potentially an inexpensive way to test market abroad
e. Potentially a way to obtain help in funding R & D and to acquire foreign technology (through cross-licensing agreements or grant-back provisions, granting Licensor rights in the improved technology developed by the Licensee)
f. Franchising = a primary way of expanding and exporting service businesses through licensing of Technology, know-how and processes and procedures of doing business developed by the Franchisor, together with the provision of training, administrative support and advertising, in exchange for royalties from the Franchisees. Note: Franchise arrangements are heavily regulated in the U.S. by the individual states.

4. Some Disadvantages:

a. You may create a potential competitor overseas, who has knowledge of your Technology. Note: A U.S. Licensor can often prevent unauthorized exports to the U.S. by foreign licensees by filing unfair import practices complaints under Section 337 of the Tariff Act of 1930 with the U.S. International Trade Commission and by recording U.S. Trademarks and Copyrights with the U.S. Customs Service.
b. Intellectual Property concerns:

(1) Need to police use of Technology by your foreign licensee in order to preserve your rights, yet may be difficult
(2) Piracy and counterfeiting rampant in certain countries
(3) Enforcement lax in certain countries

c. Quality control concerns: Difficult to assure foreign manufacturing will meet your high quality standards. Can result in damage to your reputation, trademark and goodwill.
d. Usually produces lower profits than exporting and selling the goods you have produced

5. Types of license agreements

a. Exclusive vs. non-exclusive
b. Not assignable, unless agreement specifically so provides
c. Licenses by implication: E.g. license by estoppel implied from acts of licensor in permitting use without objection

6. Important to investigate prospective foreign licensees carefully before entering into agreement

7. Important to consult qualified attorney experienced in international transactions, before you agree to license your Technology abroad. The experienced international attorney will consult with local counsel (with whom he or she may have a working relationship) in the licensee’s country, to become informed of and assure compliance with requirements of the national and state or local laws of that country.

E.g. Some countries require pre-registration and government approval of license agreements, limit or require certain terms in license agreements, regulate and specially tax royalties, or prohibit royalty payments exceeding a certain rate. Note: The E.U., in particular, has issued detailed regulations governing patent and know-how licensing.

Check also E.g. any bi-lateral treaties in effect between the licensor’s country and the prospective Licensee’s country; the foreign country’s product liability laws, exchange controls, antitrust and tax laws, laws affecting or prohibiting re-patriation of royalties and dividends

8. Enforcement; breach; importance of injunctive relief

9. Antitrust concerns. Consult counsel.

10. Tax concerns. Consult counsel.

11. For U.S. Licensors: U.S. Export License required from Department of Commerce? Especially important to check in cases of advanced technology.

B. Basic Checklist of Terms to be Included in a License Agreement (Note: This checklist is not exhaustive. There may be other terms to be included, depending on your particular technology and factual situation. You must consult a competent attorney with experience in intellectual property licensing.)

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Outline: Introduction to Intellectual Property Protection

Constance R. Barnhart — Mon, 29 Aug 2011 04:05:38 +0000

I. Basics of Intellectual Property Protection in the U.S.

A. Patents

1. U.S. Patents are granted upon application to United States Patent and Trademark Office (“PTO”), for new, useful, and non-obvious inventions, determined to meet the statutory criteria, after examination, by U.S. PTO.

A U.S. Patent grants to patent owner the exclusive right to practice his invention, to manufacture, use and sell goods thereunder, and to exclude others (or license such rights, in whole or in part, to others for compensation). Under current U.S. law, patents are granted for a period of 20 years from date of application (Was 17 years from the date the patent is issued under previous law).

2. In the U.S., there is no Common Law or State patent protection — Protection of Federally Registered patents derives from the U.S. Constitution — Article I, Section 8, Clause 8:

“The Congress shall have Power … To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;”

Federal Patent Act of 1952, 35 U.S.C. §§ 1 et seq., passed by Congress pursuant to the above Constitutional authority, delineates patent rights in the U.S.

3. A Patent protects, and grants exclusive rights in, the actual invention — the idea itself — and all expressions thereof, as opposed to Copyright, which protects only a particular expression of an idea. (This is why owners of computer software increasingly seek patent protection, rather than copyright protection. Copyright protection does not prevent “reverse engineering” to discover, copy and re-write source code, altering its expression slightly, but using the idea of the copyrighted code to perform the same function.)

4. The Patent application process is highly technical. A Patent Attorney, specially licensed before the PTO, is required to prosecute a patent application.

5. Until passage of the new America Invents Act, which was signed into law by President Obama on September 16, 2011, U.S. Patent law had differed from patents granted in most of the rest of the world as follows:

Articles/ Outlines – Corporate Law Matters

Barnhart Law PLC — Tue, 12 Jul 2011 19:05:35 +0000

More Articles & Outlines will be posted soon

Acquiring a Business in the U.S.: 10 Ways Attention to the “Legal Terms” Can Enhance the Economic Value of Your Deal

Constance R. Barnhart — Tue, 17 Aug 2010 05:36:00 +0000

Pointers from the perspective of the Scandinavian, European or other Non-U.S. Buyer,
also applicable to U.S. Buyers

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As tentative news of incipient financial recovery begins to unthaw stock markets and credit markets, there are reports of increasing interest in IPO’s in Europe and India and we see early signs of a re-awakening of interest in mergers & acquisitions activity in the U.S. This early prospecting for acquisition targets is fueled by the availability of bargains presented by a plethora of troubled companies left by the Great Recession which we are struggling to overcome.

Favorable exchange rates, relatively favorable macro-economic economic indicators just reported by the U.S. Government for the second quarter this year, and federal Stimulus monies (particularly for the renewable energy and medical IT sectors) available under President Obama’s American Recovery and Reinvestment Act of 2009, all combine to provide incentives for acquisition investments in the U.S. over the next several months and next year.

We currently are seeing increasing interest among our Scandinavian and European clients in investing in U.S. assets, acquiring or partnering with U.S. companies, or entering the U.S. market to raise money or start up operations to tap U.S. markets — particularly in the renewable energy and information and communications technology sectors.

Following are ten tips or pointers on how attention to “legal terms” can enhance the economic value to the Buyer of a deal acquiring a business in the U.S. Based on our more than 30 years of experience in this area, we believe that consideration of these points may be helpful to Scandinavian, European or other Non-U.S. – as well as to U.S. – companies contemplating the acquisition of a business in the U.S. in the near future. Read more »

Acquiring a Busines in the U.S. (PowerPoint Presentation)

Constance R. Barnhart — Mon, 17 Aug 2009 05:25:05 +0000

This PowerPoint Presentation on Acquiring a Business in the U.S., updated in 2009, accompanied lectures delivered by Constance R. Barnhart at law firm seminars in Stockholm, Sweden and Oslo Norway.

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Incentives for Wind Energy Development in the U.S.

Constance R. Barnhart — Mon, 17 Aug 2009 04:57:37 +0000

Published in EnergyPulse, November, 2008
Updated March, 2009

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AUTHORS UPDATE MARCH 8, 2009: As described in the following article, the federal Renewable Electricity Production Tax Credit (PTC) for wind energy (Section 45 of the Internal Revenue Code of 1986, as amended) was previously set to expire on December 31, 2008. Since this article was written, the PTC has been extended by law two times:

First, The Emergency Economic Stabilization Act passed by Congress and signed into law by President Bush on October 3, 2008, extended the PTC for wind energy through December 31, 2009. The Emergency Economic Stabilization Act of 2008 contained within it Division B, entitled the “Energy Improvement and Extension Act of 2008.” Title 1(A), Section 101 of this Energy Improvement and Extension Act of 2008 extended the PTC for wind and for refined coal facilities for one year, making it applicable to such facilities placed in service before January 1, 2010.

Second, The American Recovery and Reinvestment Act of 2009 (popularly known as the Economic stimulus package), signed into law by President Obama on February 17, 2009, extended the PTC for wind energy for an additional three years through December 31, 2012. Division B, Title I(B), Part I (Tax Provisions; Renewable Energy Incentives), Section 1101, extended the PTC for wind energy, making it applicable to
wind energy facilities placed in service before January 1, 2013. The American Recovery and Reinvestment Act of 2009 also provides several other very significant federal incentives for wind and solar energy development in the United States, which will be the subject of another article.

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2008: The United States wind energy generation market is booming, attracting more and more foreign investors. In 2007, for the second year in a row, more new megawatts of wind generation capacity were installed in the U.S. than in any other country in the world.(1) The American Wind Energy Association and the Global Wind Energy Council have confirmed that a record 5,244 Megawatts were installed in the U.S. in 2007, more than double the 2006 number, meaning that U.S. wind power generating capacity grew some 45% in 2007.(2) This was the third consecutive year of record-setting growth in U.S. wind energy, with remarkable and accelerating growth continuing in 2008. The European Wind Energy Association projects that the U.S. will overtake Germany as the world leader in installed wind energy capacity by the end of 2009.(3)

International wind energy investors and industry players are flocking to the U.S. They see that the U.S. is the fastest-growing market in the world for wind power, with greater potential for future growth than European markets, given that wind energy projects still provide only 1% of installed generating capacity in the U.S., as opposed to as high as 10% in some European countries.(4) In addition, the U.S. has more large open spaces with high winds, allowing the installation of larger and more efficient projects than possible in much of Europe.(5)

Several factors are now encouraging this remarkable growth in U.S. wind energy development and investment: Read more….

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All Footnotes found in attached PDF Version of this Article.

Opportunities In Sweden & Norway For U.S. Strategic Buyers: Part II – Norway

Constance R. Barnhart — Fri, 01 Jun 2007 04:42:53 +0000

Published in The Metropolitan Corporate Counsel, June 2007.

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As discussed in Part I of this series, similar trends currently characterize the private equity (“PE”) and mergers and acquisitions (M&A) environments in the U.S., Sweden and Norway:

increasing M&A buyout activity by PE firms,
sales of companies through competitive controlled auctions,
less negotiation of purchase agreements, with fewer representations and warranties, almost no conditions to closing, and weaker indemnities from sellers,
a shifting of risk to buyers, as more PE capital chases acquisition opportunities, and
a consequent upward tendency in price; basically a seller’s market.

On a recent business trip, I discussed this subject with partners at seven major law firms in Stockholm and four major law firms in Oslo, with whom we work.

My Swedish and Norwegian colleagues acknowledged developments like those above, but pointed out important differences in their markets. These differences present opportunities in Scandinavia for U.S. strategic or PE buyers, looking to acquire new technology or make negotiated strategic acquisitions. Read more …

Opportunities In Sweden & Norway For U.S. Strategic Buyers: Part I – Sweden

Constance R. Barnhart — Wed, 02 May 2007 03:59:02 +0000

Published in The Metropolitan Corporate Counsel, May 2007.

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The international business world is shrinking and converging. But, trends still differ across borders, and out of the differences come opportunities. On a recent business trip, I discussed the subject of this article with partners at seven major law firms in Stockholm and four major law firms in Oslo, with whom we work. We compared current trends in private equity (“PE”), mergers & acquisitions (“M&A”), and public market activity in our countries.

We found similar trends in our three markets: Read more….