Ask a Lawyer with Kameron Kramer

QUESTION: I recently purchased an investment property. I was told by someone I should form an LLC to protect myself. The realtor who sold me the property says my home owners insurance is sufficient enough. What do you think?

ANSWER: While the proper insurance (homeowners, liability, landlord, etc.) is always a must, having an LLC own a property, either investment or rental, is almost always going to be a very good idea. There are many instances where your insurance may not cover certain items, or there could be liability limits on your insurance. But, if you have your property in an LLC, and that LLC is formed and run properly, you are going to shield yourself from personal liability. Insurance does not offer that protection. This insures that only those assets owned by that LLC are subject to that lawsuit and not your personal assets. I usually tell clients, the more LLCs, the better. This simply separates all assets. That is how huge companies operate. If you own 5 rental properties, for instance, ideally you would have a separate LLC for each property. And then you could even go a step further and have an LLC that is solely the management/rental LLC. Having these layers of protection shield you from personal liability. And while having multiple LLCs does create some extra bookkeeping, when it comes to taxes, the default tax classification for a single member LLC is a disregarded entity. This means that the income and capital gains from the LLC pass directly to the individual owner, with taxes only being paid by the owner. Thus, the term “disregarded entity” is a bit of a misnomer in that it is only disregarded for tax purposes, but you are enjoying all of the benefits of the LLC as a liability shield. So get that insurance and put that property into an LLC and you will be protecting yourself as much as possible.

QUESTION: I have submitted for a trademark a couple of times now for my business. It keeps being rejected. I fixed the things that they USPTO said the had problems with the first time but when I sent it in, they still had problems with it and even found issues with things they didn’t have a problem with the first time around. It is frustrating. I feel like the USPTO wont even consider an application from a regular citizen. Is this some sort of racket to drum up business for attorneys?

ANSWER:I understand your frustration, and while sometimes it does seem that the USPTO won’t even consider an application from a regular citizen, that is really not the case. The USPTO’s only concern is the application itself, regardless of who submits that application. That being said, lawyers experienced in trademark law have a lot of expertise in anticipating many of the rejections from the USPTO, and then overcoming those rejections. In fact, a lot of our work and expertise goes into making sure the client’s mark and application are sufficient as to minimize any potential rejections by the USPTO. But, if a rejection is received, an experienced trademark attorney is usually expecting it, and has, hopefully, informed the client of that real possibility prior to the filing of the application. All that advice applies to trademarks for marks that are already being used, or marks that companies have spent considerable amounts of money developing already, but speaking to a trademark attorney prior to deciding on a final trademark for your business/product is the best course of action. If, for example, you are looking at launching a new product, come up with a few possible brand-names and/or logos and provide those to the trademark attorney. The trademark attorney can look at those marks and advise on which, if any, would be trademarkable, and the likelihood of potential rejections by the USPTO with respect to each mark. Then, you can make an educated choice as to which mark you wish to use. It’s much better to know that early on before spending a lot of money on developing/using the mark, and then either getting hit with a cease and desist letter from a company that has previously be using that mark, or the USPTO rejecting your mark.

QUESTION: I own a local restaurant and I’m looking at expanding, both in the State and across the nation. I have some recipes that are amazing that customers love, and until now, I have been the only person who knows what exactly is in these food items. These recipes are why my restaurant is so popular. What do I do now that I am wanting to open additional stores and will not be able to be present all of the time?

ANSWER:This is a great problem to have, and your best course of action is to protect the recipes via trade secret protection. Trade secrets are simply proprietary information, such as methods, formulas, devices, process, that a company uses to obtain a competitive edge over its competition. You have two main options here. If your recipes are such that you can make the food items yourself and then send them to all of the restaurants, that would be a good idea. This could be the case if the real secret to your recipes are spice mixtures or other sauces. If that’s the case, you could mix the spices and/or sauces yourself, and then ship them out to the companies. That would ensure that your recipes remain secret, and therefore subject to trade secret protection. If your recipes are such that they require disclosure to other individuals, then you need to take certain steps and implement protocols to ensure the recipes truly remain secret, and therefore subject to the trade secret protection. First, you need to physically keep the recipes safe and secret. If they are kept at multiple locations, they need to be marked as CONFIDENTIAL and TRADE SECRETS and stored in a a secure location that only authorized individuals have access to. Second, you need to identify these key individuals who will be privy to the recipes. You need to limit the number of people who know the recipes, so having only a manager or two at each location who knows the recipe would be a good idea. Third, all employees need to sign agreements relating to the recipes. These agreements should have clauses relating to non-disclosure, confidentiality, non-solicitation, assignment of inventions, and non-compete. Forth, you need to educate your employees on the trade secret protections, especially those individuals who will have access to the trade secrets. You need to educate them as to the value of these trade secrets and the risks that they, and you, risk if they disclose your trade secrets, either purposefully or inadvertently. This also includes your monitoring of your employee’s compliance of these regulations you have put in place. Finally, if you are required to disclose the recipes to any individuals other than your employees, make sure you obtain signed agreements with those individuals as well prior to any disclosure. It is important you implement all of these processes right away, as failing to do so initially could result in you losing trade secret protection for your recipes. If you take those steps and, for example, one of your employees takes the recipes to another restaurant, you have legal recourse under the trade secret statute against that employee and you can stop the other restaurant from using the recipes since they were obtained by improper means.