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Tips for Borrowers Negotiating a Loan: Part 4 Existing Lenders

Clint M. Hanni
April 2017

New loans are more complicated when a borrower already has an existing loan with another lender. It’s all about collateral. Here are some tips to keep in mind:

1. Keep the old lender in the loop. If the old loan will remain in place, new lenders may only be willing to extend a loan if there is unencumbered collateral available to secure a new loan. For this reason, it’s wise for a borrower to: (i) know exactly what collateral has already been pledged to other lenders; and (ii) keep as many of its assets unencumbered as possible to use as collateral on additional loans. Existing lenders may be willing to release some of their collateral to secure a new loan, especially when the borrower will benefit from additional credit that the existing lender is unwilling to extend. As always, be careful to keep the old lender in the loop when looking for new or additional lenders.

2. Intercreditor Agreement. It’s common for two or more lenders to make loans secured by a single borrower’s collateral. To do this, they will enter into an intercreditor agreement that specifies the priority of each lender’s collateral. There are two possible scenarios: (i) the lenders can split the collateral between them, each maintaining a first priority position (e.g., one lender will take inventory as collateral, and the other lender will take equipment), and (ii) each lender can take the same assets of the borrower as collateral, with one lender being in a first priority position and the other being in second position. Intercreditor agreements can involve contentious negotiations between competing lenders, and it’s important for the borrower to have competent counsel to act play the role of a mediator. Many loan deals have failed to close because the lenders could not reach agreement on the intercreditor document.

3. Payoff Letter. When a new loan will be paying off an old loan, the old lender will be asked to provide a letter that details exactly how much principal, interest and fees are outstanding. The payoff letter should also state that, upon payment in full of all amounts owing, the old lender releases its lien on the borrower’s assets. Some lenders forget their obligation to release liens, and it can cause future problems for the borrower. Experienced finance counsel will help the borrower remember this important step and save money in the long run. Visit https://www.richardsbrandt.com/practice-areas/utah/bank-finance-attorney

Read Tips for Borrowers Negotiating a Loan: Part 5 Closing Documents

The Work-product Doctrine: Application Generally

February, 2016

Introduction

The work-product doctrine provides an attorney a certain level of autonomy regarding mental impressions, conclusions, opinions, and legal theories surrounding a case. This article discusses the applicability of the work-product doctrine generally.

Utah Work-product Generally

The work-product doctrine is a judicially created doctrine now codified in Utah Rule of Civil Procedure 26(b)(5). The work-product doctrine protects documents that are prepared in anticipation of litigation or for trial by or for another party or by or for that other party’s representative. Utah R. Civ. P. 26(b)(5). Documents that convey the mental impressions, conclusions, opinions, or legal theories of an attorney or party are afforded heightened protection as “opinion work product.” Gold Standard v. American Barrick Resources Corp., 805 P.2d 164, 168 (Utah 1990). The party asserting work-product privilege has the burden of establishing its existence. See id. at 170.

The discovery procedures under the Utah Rules of Civil Procedure were substantially amended in 2011. Subsequent Utah decisions clarify that the amended language in Rule 26 maintains the same application as the former language in Rule 26. See Allred v. Saunders, 2014 UT 43, ¶¶ 15-19, 342 P.3d 204 When interpreting the work-product doctrine, Utah courts can continue to rely on both pre-2011 Utah case law and federal case law interpreting the federal rule. See Gold Standard, 805 P.2d at 167-68; Allred, 2014 UT 43 at ¶ 17.

However, the work-product doctrine is not absolute. Non-opinion work-product may be discoverable if the party seeking discovery can show a substantial need for the information and that it cannot be obtained without substantial hardship. Id. This represents the dual policy goals aimed at preserving the adversary system and providing attorneys with a zone of privacy permitting effective client advocacy. See Featherstone v. Schaerrer, 2001 UT 86, ¶ 9, 34 P.3d 194.

Application

For written materials to fall under the work-product privilege, three criteria must be met: (1) the materials must be documents and tangible things otherwise discoverable, (2) prepared in anticipation of litigation or for trial, (3) by or for another party or by or for that party’s representative. Gold Standard, 805 P.2d at 168. For a party to assert work-product protection, the party must show that the documents or materials were prepared in anticipation of litigation by or for a party or that party’s representative. See S. Utah Wilderness Alliance v. Automated Geographic Reference Ctr., 2008 UT 88, ¶ 29, 200 P.3d 643.

In Utah, “an inquiry to determine whether a document was prepared in anticipation of litigation should focus on the ‘primary motivating purpose behind the creation of the document.’” Gold Standard, 805 P.2d at 170. Utah law seems to preclude documents that were prepared in the ordinary course of business if the primary purpose of the document was not to assist in anticipated litigation. Id. at 171 (“If in connection with an accident or an event, a business entity in the ordinary course of business conducts an investigation for its own purposes, the resulting report is producible in civil pretrial discovery.”). However, this analysis does not categorically preclude documents that have the markings of business purpose.

Documents prepared in the “regular course of business” and “in anticipation of litigation” are not always mutually exclusive and dichotomous fields.

Many business decisions are made in anticipation of the inevitable litigation. The “because of” inquiry offers a more administrable standard, effectively resolving uncertainty at the margins in favor of work product protection. At the same time, protection is not unduly expanded if the document would not have been produced but for the anticipated suit. Evaluating the risks of litigation that a business plan will face is often integral to the plan and is in this sense generated in the course of business. There is no persuasive reason to deny work product protection because the document has these marks of business purpose, if it was prepared because of the anticipated litigation.

Moore’s Federal Practice, § 26.70(3)(a).

Thus, even documents that have the markings of business purpose may be protected by the work-product privilege as long as the primary purpose of the document was to assist in anticipated litigation.

Conclusion and Recommendations

The work-product doctrine, while not absolute, allows an attorney a certain level of autonomy regarding the mental impressions, conclusions, opinions, and legal theories surrounding a case. Not all documents relied upon by an attorney in forming their legal theories will be afforded an absolute privilege, however. It is therefore imperative that business entities and individuals involved in litigation discuss the work-product doctrine with their counsel.

The contents of this piece are not legal advice, and this piece does not create an attorney-client relationship. Brad Liddell can be contacted at 801-531-2000 or brad-liddell@rbmn.com. Or visit https://www.richardsbrandt.com/practice-areas/utah/litigation-attorneys/

Is It a Covenant or a Condition?

February, 2016

When drafting or entering into a contract, whether it be a sales agreement, a real estate purchase contract, a lease, or a services contract, it is important to understand the differences between a covenant and a condition. A covenant is a promise by one party to do something for the other party – the bargained-for exchange between the parties. A condition is an event or occurrence that will trigger one or more obligations under the contract. Until that event or occurrence takes place, there is no obligation to perform under the contract. Understanding the difference between covenants and conditions is essential in preparing or entering into a contract, as the failure to perform a covenant can lead to a breach of contract and damages, whereas the failure of a condition relieves the parties of one or more obligations under the agreement.

The Utah Supreme Court revisited covenants and conditions in its recent opinion in Mind & Motion Utah Investments, LLC v. Celtic Bank Corp., 2015 UT 94, this time for purposes of interpreting a real estate purchase contract (“REPC”). In Mind & Motion, the parties entered into a REPC for the purchase of a large piece of property to be developed into condominiums. The property was partially entitled, having approved plans, but no plat had been recorded. Thus, in the REPC, the parties agreed that Celtic Bank would record the plats by a date certain. After extending the deadline to record the plats once, Mind and Motion refused to extend the deadline a second time and filed suit for breach of contract to recover its earnest money deposit, liquidated damages, and attorneys’ fees. 2015 UT 94 at ¶¶ 2-3.

The District Court granted summary judgment in favor of Mind & Motion, finding that the recording provision in the REPC was a covenant, not a condition, and that Celtic Bank had breached the REPC by failing to timely record the development plats. On appeal, Celtic Bank argued that the recording provision was a condition, not a covenant, because its performance depended on the actions of third parties, in this case various county departments and employees who had to approve the plat before it could be recorded.

In affirming the grant of summary judgment in favor of Mind & Motion, the Utah Supreme Court looked at the language that the parties used in the REPC. Relying on terms such as “shall record” and “agrees to record”, the Court held that such language in the context of the agreement, which also included hard deadlines and the use of conditional language in other provisions, rendered the recording provision mandatory, thereby imposing an obligation on Celtic Bank. Thus, the Court concluded that the recording provision was a covenant. 2015 UT 94 at ¶¶ 24-31.

In rejecting Celtic Bank’s arguments, the Court noted that the recording provision did not contain any conditional terms, such as “until”, “unless”, “in the event”, etc. The Court contrasted the mandatory language of the recording provision in the REPC with the conditional language of an exhaustion clause in an insurance policy, which was the issue when the Utah Supreme Court last visited the subject of covenants and conditions. See McArthur v. State Farm Mut. Auto. Ins. Co., 2012 UT 22, ¶ 28, 274 P.3d 981.

The Court’s decision in Mind & Motion is a pointed reminder of the importance of paying close attention to the specific language of a contract and the need for precision to ensure that contract accurately reflects the agreement of the parties. A failure to do so can cause a party to assume obligations it did not intend to, or worse, be liable for a breach of contract on matters that may not be within the party’s control.

The contents of this piece are not legal advice, and this piece does not create an attorney-client relationship. Steven H. Bergman can be contacted at 801-531-2000 or steven-bergman@rbmn.com.

The Work-product Doctrine: Application to Documents Relied on and Prepared by Business Entities’ Internal Investigations

February 2016

Introduction

As litigation becomes more complex and as businesses become more sophisticated, issues begin to arise as to what documents and materials are afforded protection. For example, in construction disputes, the issue of causation is typically complex. Parties often will hire third-party consultants or engage in their own internal investigation into the issues presented. If these investigations are made at the request of a party’s attorney, the issue of work-product is less pronounced. However, where a business entity investigates and produces internal reports either before hiring an attorney or without the explicit direction of their attorney, the documents and materials relied upon and prepared may not be afforded any protection. This article discusses the applicability of the work-product doctrine to documents and materials relied upon and prepared by business entities’ internal investigation.

Utah Work-product Generally

The work-product doctrine is a judicially created doctrine now codified in Utah Rule of Civil Procedure 26(b)(5).[1]

Business Entities’ Internally Prepared Documents

Documents and materials prepared by a party may be afforded work-product protection, provided that the documents and materials were prepared in anticipation of litigation. Attorney involvement in a client’s preparation of documents and materials is only a factor to be weighed in the work-product analysis. The courts must look to the primary purpose of the client-prepared documents or materials in order to determine if the work-product privilege may be afforded. Gold Standard v. American Barrick Resources Corp., 805 P.2d 164, 168 (Utah 1990). Thus, client-prepared documents without the request of counsel do not categorically preclude the work-product privilege.[2]

In the 1990 Utah Supreme Court case Gold Standard v. American Barrick Resources Corp, Gold Standard challenged the assertion that certain memoranda prepared by Getty Oil were work-product. The Getty Oil memoranda were prepared two and a half years before a complaint by management-level employees without the involvement of counsel. Gold Standard argued that the memoranda cannot be treated as work-product because there was no attorney involvement. The court disagreed and stated that the rule in Utah is that “attorney involvement is only one factor to be weighed in determining the applicability of the work-product privilege. The fact that no attorney was involved may suggest that a document was prepared in the ordinary course of business and not in anticipation of litigation.” Id. at 170. The Utah Supreme Court stated that “an inquiry to determine whether a document was prepared in anticipation of litigation should focus on the ‘primary motivating purpose behind the creation of the document.’ If the primary purpose behind the creation of the document is not to assist in pending or impending litigation, then work-product protection is not justified.” Id. Further, “the mere possibility that litigation may occur or even the mere fact that litigation does eventually ensue is insufficient to cloak materials with the mantle of work-product protection.” Id. at 169. “If in connection with an accident or an event, a business entity in the ordinary course of business conducts an investigation for its own purposes, the resulting report is producible in civil pretrial discovery.” Id. at 171 (quoting Janicker v. George Washington Univ., 94 F.R.D. 648, 650 (D.D.C. 1982)). Thus, the court held that the memoranda were not work-product as “they were not prepared by an attorney or at the request of an attorney or by someone doing investigation at the request of an attorney; nor were they otherwise prepared to assist in litigation.” Id.

Therefore, for any business-prepared documents and materials to receive work-product protection, done without the assistance or request of an attorney, the documents and materials must be prepared with the purpose of assisting in an anticipated or actual litigation. Whether a document is prepared in anticipation of litigation is a question of fact to be determined on a case-by-case basis. See Askew v. Hardman, 918 P.2d 469, 475 (Utah 1996) (“whether a document prepared by an insurer is prepared in anticipation of litigation is a question of fact to be determined by the trial court on the basis of the evidence before it”).

Conclusion and Recommendations

While business-prepared documents and reports that were prepared in anticipation of litigation do not automatically shield those documents and reports, it does allow the business entities attorney to, at a minimum, attempt to protect work-product of the business entity. These potential situations would involve questions of fact, where the critical inquiry would be if the reports created were done so in anticipation of litigation and not in the ordinary course of business. If the subject documents or reports serves a dual purpose, i.e. a business purpose and a litigation purpose, then the claim of work-product will receive greater scrutiny. Therefore, it is a recommended best practice to engage an attorney as soon as a potential litigation is known. Where an attorney is involved and where the attorney directs the production of business-prepared documents there is a greater probability that those documents and reports receive work-product protection.

[1] For a more expansive discussion on the Work-Product Doctrine in Utah, please see a previous blog posting.
[2] Utah law seems to preclude documents that were prepared in the ordinary course of business if the primary purpose of the document was not to assist in anticipated litigation. “If in connection with an accident or an event, a business entity in the ordinary course of business conducts an investigation for its own purposes, the resulting report is producible in civil pretrial discovery.” Gold Standard, 805 P.2d at 171.

The contents of this piece are not legal advice, and this piece does not create an attorney-client relationship. Brad Liddell can be contacted at 801-531-2000 or brad-liddell@rbmn.com. Or visit https://www.richardsbrandt.com/practice-areas/utah/litigation-attorneys/

What is a trademark?

October 2015

A trademark is a word, phrase, symbol, or design (or some combination of the foregoing) that designates origin of a product or service and distinguishes it from competitors.

What is eligible for trademark?

Trademark registration can be granted on distinctive names, logos, and slogans.

What is the difference between a registered and unregistered trademark?

No doubt you have seen the ® and the ™ symbols, and wondered about the difference between the two. The ® symbol is used to designate a trademark that has been registered with the United States Patent and Trademark Office (USPTO); the ™ symbol is used to designate either pending marks, state marks, or a common law trademark that is unregistered and isn’t susceptible to the entire bundle of rights available to a registered mark.

How do I register a trademark?

To register a trademark requires filing an application with the USPTO. To register a trademark requires a detailed trademark search for conflicting senior marks prior to registration, as well as knowledge of the goods and services categories. As a result, it is in your interests to hire an experienced trademark lawyer.

Q: And now it’s time for a question based on the information above: Suppose I have been using my trademark, Acme-Zenth, to market my widgets for the past 10 years without ever registering it. Now another user has come along and begun marketing its widgets under the same name. Can I stop them? Can I stop them from using the word “Acme” to market an entirely different class of goods or services?

A: The answers are yes and no. Your prior use of the mark should serve to prevent a later user from using your mark or a confusingly similar mark for a class of goods and services that is identical or similar to, your goods and services. However, your use of the mark for widgets does not prevent a later user from legitimately using a similar mark (or even the same mark) for goods that are unrelated, say, sealing wax, rather than widgets.

What rights do I gain if I register my mark?

By registering for U.S. Federal Trademark protection, you’ll be eligible for several benefits, including:

• Treble damages in some cases of infringement
• The right to use ® in your trademark
• A streamlined process for securing your domains and usernames at social sites like Facebook, Twitter, and YouTube
• Significantly stronger protection than ‘common law’ (aka. unregistered) marks. This can make it much easier to recover your property, if someone happens to use your company name as their Twitter handle.

Can I register sounds, smells, or colors?

If they are distinctive, yes. The NBC chime is a registered trademark. So is Dow-Corning’s distinctively hued pink insulation. And certain perfume fragrances have also been trademarked.

Use it or lose it

Once your trademark has been registered it should be used. If your mark is not put to use, its registration is liable to be cancelled on the application of a third party who can show that it has not been used. In most countries, a mark will not be cancelled unless it can be established that there has been at least three years of non-use. In this context, it would be advisable to check the legal position in the country or countries for which your mark has been registered.

The contents of this piece are not legal advice. Consult with an attorney prior to embarking on any legal matter. Barry Scholl is a business litigation and corporate governance attorney and can be contacted at 801-531-2000 or barry-scholl@rbmn.com.

What is a Copyright and Why Should I Protect It?

October 2015

In my practice, clients often confuse copyright and trademark. That’s understandable, given that the two both protect what is sometimes called intangible intellectual property, yet they protect very different types of rights. Below we will delve into the realm of copyright.

What is a copyright?

Stated simply, copyright protects original creative works. It applies to literary works such as books and articles (including this column), artistic works such as paintings and sculpture, and musical works, including musical scores and recordings. You might also be surprised that copyright applies to computer code, choreography, and even architecture. However, it does not protect facts, ideas, systems, or methods of operation.
So let’s put our copyright knowledge to the test with the following questions, shall we?

Q: I have a great idea for a sci-fi opus about pixies on Mars that I don’t want my downstairs neighbor to steal before I can get it written down. Can I copyright it?

A: In a word, no. (If you answered yes, then go back and re-read the preceding paragraph, particularly the last sentence—copyright does not protect ideas.)

Q: I have a great original novel about pixies on Mars; unfortunately, it’s already been rejected by every commercial publisher in existence (hey, it’s ahead of its time!). Can I copyright it anyway?

A: Yes. So long as the work meets the other requirements set forth immediately below, there is no requirement that the work be commercially published—or published at all. This also goes for your musical composition or new dance steps.

How do I obtain copyright?

Assuming that your original work of authorship is in “a tangible medium of expression” (i.e., it is written down or recorded), and also assuming that it contains a “modicum of originality,” you don’t need to do anything. A “common law” copyright vests automatically to your work, and you should provide copyright notice on your works in this way “Copyright © 2013 [your name here]”). You may apply the copyright notice and use the “©” symbol without registering the copyright. However, if you do timely register your copyright in the U.S. Copyright Office of the Library of Congress (within three months of the publication date), your copyright registration will give you additional protection from infringement, including a legal presumption of validity and the ability to recover statutory damages. Attorneys’ fees for infringement may also be available. Importantly, a certificate of registration is required before you can file suit in federal court for copyright infringement.

What does having a copyright allow me to do?

Under the 1976 Copyright Act, having a copyright gives you the exclusive right to do (and authorize others to do) the following:
• Reproduce and publish the work;
• Prepare derivative works based on the original work;
• Distribute copies or recordings of the work;
• Perform the original work publicly; and
• Display the original work publicly

How do these rights really work?

For the purpose of illustration, let’s try applying the above rights to a basic fact pattern. Turning back to the questions above, if I finally publish my book about pixies on Mars, it becomes a bestseller, and then I discover, to my horror, that my downstairs neighbor is composing a rock opera based on my book and even includes the same characters, can I stop him from publishing it?

The answer is yes. As noted above, as the copyright owner, you control the right to create derivative works based on your copyrighted novel, which would generally sequels, spin-offs, and, yes, even rock operas.

How long does registered copyright protection last?

Generally, for works created after January 1, 1978, copyright protection lasts for the life of the author plus 70 years, but there are exceptions.

Where can I go for more information?

This column provides a brief snapshot look at copyright law. The U.S. Copyright Office also provides a good overview of basic copyright law, which you can find at www.copyright.gov.

The contents of this piece are not legal advice. Consult with a business law and corporate governance attorney prior to embarking on any legal matter. Barry Scholl can be contacted at 1-801-531-2000 or barry-scholl@rbmn.com.

8 THINGS TO KNOW ABOUT RECEIVERSHIPS

May 2015

A Receivership case is an insolvency proceeding, roughly akin to a bankruptcy. However, the rules governing Receiverships are not as well-defined as in a bankruptcy proceeding. It is possible for someone who has made an investment or purchased an interest in a company or property to be drawn into a Receivership case based on the conduct of other persons or entities. A lender holding a lien on property may also be drawn into a Receivership case if the property is subject to a Receivership order.

If you become part of a Receivership case or if a Receiver makes a claim against you, here are some important things to know:

1. A Receiver is an officer appointed by the Court who is given custody of specified assets with direction to liquidate them and distribute the proceeds. A Court order is typically required to appoint a Receiver, and the terms of the order describe the Receiver’s duties and powers.

2. The appointment of a Receiver often comes at the request of a government law enforcement agency, such as the United States Attorney’s Office or the Securities and Exchange Commission. When such an agency brings an enforcement action against someone, that person or entity’s assets may be placed in receivership to preserve them for the victims of wrongful conduct.

3. The Receiver stands in the shoes of the owner(s) of the assets committed to his or her custody. For example, if an entire company is placed in Receivership, the Receiver stands in the shoes of that company. Nevertheless, the Receiver may be given power to set aside or undo certain actions taken or transactions entered by the person or entity before the Receiver was appointed.

4. A Receiver can only act in accordance with the instructions and authorizations of the Court that appointed him or her. If the general appointment order does not give specific authorization, then the Receiver must seek additional approval before pursuing a certain course of action. For example, the Receiver must be previously authorized to file claims against third persons, to sell or abandon the assets placed in the Receiver’s custody, or to distribute the proceeds of assets liquidated.

5. With the Court’s authority, a Receiver may file claims against third persons or entities to recover monies paid or assets transferred to them if the Receiver believes the circumstances were unlawful.

6. The Court has broad power and discretion to fashion appropriate remedies in a Receivership case. For that reason the Court’s rulings on various issues may be handled differently than in a typical civil action.

7. The Receiver is paid from the assets placed in his or her custody, and the Receiver’s fees have priority over other claims. Fees earned by the Receiver must be approved by the Court before they are paid, and typically are based upon rates and parameters set forth in the order of appointment. Likewise, other costs incurred by the Receiver are reimbursed only after approval by the Court.

8. In most civil litigation, parties reach a settlement because of (a) the burden of legal expenses and (b) the desire to avoid further litigation. In a Receivership case, the Receiver often does not feel those motivations as would a party to a traditional lawsuit. The Receiver does not have a client who is paying legal expenses from its own funds, but instead the Receiver is being paid from the assets of the receivership estate. Also, being a Court-appointed officer, the Receiver does not have a personal connection to the issues of the case, and therefore does not face the emotional burden that often weighs upon a traditional civil litigant.

We often handle Receivership litigation. I have represented lien creditors and other claimants in Receivership cases and have also been appointed as a Receiver myself. If you have questions about a Receivership matter, please contact us.

Utah One of the Leading States for Advanced Industries Employment

advanced industries employment

February 2015

A recently released report from the Brookings Institution entitled “America’s Advanced Industries: What They Are, Where They Are, and Why They Matter” highlights the strength and diversity of Utah’s economy. The report defines an industry as an “advanced industry” if it meets two criteria: 1) the industry spends heavily in research and development (R&D spending per worker in the 80th percentile or higher or more than $450 per worker); and 2) the industry employs workers with a high degree of STEM (science, technology, engineering, and math) knowledge above the national average of 21% of all workers. Using these criteria, the authors of the report identified 50 industries that invest heavily in research and development and employ highly skilled workers. These 50 industries include manufacturers, energy providers and service providers in a variety of industries, such as aerospace products and parts, motor vehicle-related manufacturing, computers and peripheral equipment, chemical products, energy industries, computer systems design, data processing and hosting, and software publishers. Many of these industries are developing “disruptive technologies” that are redefining both the workplace and our daily lives.

Overall, the State of Utah was one of only seven states where more than 10% of the workers are employed in advanced industries. And the Salt Lake City, Provo-Orem, and Ogden-Clearfield metropolitan areas were all ranked in the top 15 among large metropolitan areas with the highest percentage of advanced industries employment. While Utah’s three largest metropolitan areas are among the leaders nationwide in advanced industries employment, the composition of that employment differs from region to region. Ogden-Clearfield’s advanced industries employment was geared more towards manufacturing industries, with Ogden ranking as one of the five areas most specialized in advanced manufacturing industries. Conversely, Provo-Orem, with a large number of technology companies contributing to its reputation as the Silicon Slopes, is one of the five areas with the highest concentration of advanced services industries. The report also identified Provo-Orem as one the fastest growing areas in the advanced industries area. Finally, Salt Lake City had a more diversified industry base, reflecting a mix of both manufacturing and service industries.

The importance of these industries to Utah is evident in its impact on the Utah economy. While responsible for more than 10% of all jobs in the State of Utah, advanced industries account for more than 18% of the total output for the state, exceeding $24 billion in 2013. The advanced industries in Utah also indirectly support another 100,000 jobs in Utah, or more than 8% of Utah’s total employment.

The Executive Summary and the Full Report, along with interactive data and support tables, are available at http://www.brookings.edu/research/reports2/2015/02/03-advanced-industries#/M10420. Summaries of employment, output, and growth for the State of Utah and the Salt Lake City, Provo-Orem, and Ogden-Clearfield metropolitan areas are attached.

PDF – Provo UT – Advanced Industries Analysis

PDF – Utah – Statewide Advanced Industries Analysis

PDF – SLC UT – Advanced Industries Analysis

PDF – Ogden, UT – Advanced Industries Analysis

Steven Bergman is a Shareholder and Attorney with the law firm of RBMN, specializing in business law, real estate law, and appeals.

Protecting Your Intellectual Property in a Distribution Contract

intellectual property law

February 2015

In a case still unfolding in United States District Court for the District of Utah, there is a lesson to be learned for all who want to ensure protection of their intellectual property. In December 2013, the U.S. District Court for the District of Utah granted partial summary judgment in favor of the defendant 4EverYoung Limited d/b/a Dermapenworld (“4EverYoung”) regarding plaintiff’s defenses to specific performance. The court concluded that twelve affirmative defenses asserted by Derma Pen, LLC (“Derma Pen”) against 4EverYoung’s demand for specific performance were not sufficient to excuse its obligation under a sales distribution agreement to sell its trademark and domain name.

Intellectual Property Doc w PenThis case shows the importance of understanding the implications of including a first right of refusal or a contingent right to purchase intellectual property when an agreement is terminated. The lawsuit arose after Derma Pen decided to terminate its sales distribution agreement with 4EverYoung pursuant to Section 11 of the contract.

The court undertook an analysis of the terms of agreement in light of 4EverYoung’s motion for partial summary judgment. The district court determined there were two contingent rights pursuant to the agreement: first, Derma Pen was required to offer the trademark/domain name for sale to 4EverYoung upon termination of the contract pursuant to section 11 after establishing their value; and, second, 4EverYoung had the right of first refusal if Derma Pen received an offer for purchase of the intellectual property from any third-party. The court found that termination of the contract pursuant to section 11 triggered the contingent rights, but no third party ever offered to purchase the trademark or domain. The court determined that Derma Pen’s obligation to establish the valuation of the trademark and domain name and to offer them for sale was triggered but that “Derma Pen has never offered the Trademark and the Domain Name to 4EverYoung.”

Next, the court evaluated Derma Pen’s twelve affirmative defenses in response to 4EverYoung’s request for specific performance, finding that none excused Derma Pen’s obligation to offer its trademark and domain for sale. The court’s decision severely affected Derma Pen’s case and allowed 4EverYoung to request specific performance, requiring Derma Pen to establish a value and offer the trademark and domain name for purchase by 4EverYoung.

This case is a great example of why an intellectual property owner must fully understand of the rights and obligations contained in any contractual agreement before executing the contract, as well as the implications of terminating that contract. A contingent obligation to sell intellectual property may be acceptable during negotiations, but understanding your obligations under the contact is essential to protecting your rights.

NHTSA Grants Petition for Inconsequential Determination

inconsequential determination

January 2015

Richards Brandt clients China Manufacturers Alliance, LLC (“CMA”) and Double Coin Holdings Ltd Obtain Favorable Outcome on Petition for Inconsequential Determination Before the National Highway Safety Traffic Administration (“NHTSA”).

Double Coin is one of the world’s largest manufacturers of truck, industrial, and off-the-road tires. CMA is the North American subsidiary of Double Coin. In late May of 2014, NHTSA’s Office of Defects and Investigations notified CMA that two of the Double Coin model tires it was selling did not includeTruck Tire Code
a load range symbol. The Federal Motor Vehicle Safety Standard (“FMVSS”) No. 119 establishes strength, performance, endurance standards for truck tires, as well as marking requirements. Among the ten marking requirements is inclusion of a load range symbol.

CMA and Double Coin submitted a noncompliance report. We then helped CMA and Double Coin prepare a petition for inconsequential determination seeking exemption from the remedy provisions of the Motor Vehicle Safety Act. CMA and Double Coin also commenced an internal review of all tires being sold. From this review, CMA and Double Coin determined that additional tire models were missing the load range symbol, and CMA and Double Coin took the necessary steps to ensure that going forward all Double Coin tires had the load range symbol.

CMA and Double Coin then submitted a revised noncompliance report and we worked with CMA and Double Coin on a revised petition for inconsequential determination to cover all tire models at issue. NHTSA published CMA and Double Coin’s Petition on September 14, 2014. See 79 Fed. Reg. 55068. In the Petition, we argued that the missing load range symbol was inconsequential to motor vehicle safety because Double Coin tires meet or exceed the strength, endurance and performance standards of FMVSS No. 119 and because the information conveyed by the load range symbol was included on all Double Coin tires by Double Coin’s optional inclusion of a load index symbol and ply rating on each tire. Additionally, all Double Coin tires, consistent with the marking requirements of FMVSS No. 119 contained appropriate maximum load/maximum pressure information. After considering CMA and Double Coin’s Petition, NHTSA agreed, granted the Petition, and exempted CMA and Double Coin from the remedy provisions of the Motor Vehicle Safety Act. See 79 Fed. Reg. 78562.

Contact me for more information or questions on this or other regulatory or product liability matters at 801.531.2000 or steven-bergman@rbmn.com.

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