No Termination Payment for You!

I was recently asked whether the US had any regulations similar to the EU’s Commercial Agent Regulations–pursuant to which, upon termination or expiration of certain agency contracts, the agent would be entitled to an indemnity/compensation payment. The specific question related to a sales agency agreement, but the answer for the US is valid for agency, distribution and similar agreements.  The short answer is ‘no,’ the general rule in the US is that there are no termination payments due upon termination of a ‘commercial agent’ (or expiration of the term of the agency agreement). Notwithstanding that answer, I’d point out two things for an Irish/NI company potentially appointing a commercial agent in the US: (i) the underlying agency agreement should be clear on intellectual property rights in that the ownership of principal’s IP remains with the principal, the agent’s use of that IP inures to the benefit of the principal, and that the agent, even after termination/expiration, will execute whatever document are reasonably necessary to reflect the principal’s ownership of its IP; and (ii) the underlying agreement should also be clear that the agent must return all confidential materials/information to the principal upon termination/expiration of the term.

 

Please Don’t Do This With Your US NDAs

Over the past two weeks, I’ve reviewed two non-disclosure agreements (NDAs) for Northern Irish companies that are expanding to the US. I’ve written about NDAs in the past: NDAs and You: Perfect Together. The NDAs were well-drafted, but each contained the same mistake–something I’ve seen more than once: each selected the law of Northern Ireland to govern the NDA. Each company ‘was told’ (I’m not sure by whom) that selecting NI law was appropriate–and to be sure, I’ve seen the same mistake made by Irish companies. On the one hand, there is nothing wrong with selecting NI (or Irish) law to govern a NDA…if you don’t need to enforce that NDA in the US.

Most NDAs will include language that allows the disclosing party to obtain injunctive relief in the event the party receiving the confidential information threatens to disclose/breach the NDA or actually does so. Injunctive relief in the US allows a party to obtain an order requiring the other party to stop doing something or face court sanction; it is, in the most basic sense, a fast (but temporary) resolution to a legal issue that doesn’t require the time or incur the cost of full-blown litigation. But selecting a non-US law to govern an NDA can make enforcing that NDA more difficult than it should be.

Let’s take one of our NI companies–under the NDA, they would be disclosing their confidential information to a potential distributor in Virginia (for example). Therefore, if there is an actual or threatened breach of the NDA, that breach would most likely occur in Virginia. Meaning that the court with appropriate jurisdiction over a potential injunctive relief request also is in Virginia. If the NI company goes to court in Virginia to seek injunctive relief based on the NDA, and the NDA has NI (or Irish) law as the governing law, there is a very real/significant risk that the Virginia court would decline to take action, based on the idea that the Virginia court is not the appropriate venue for matters of NI law. The court could tell the NI party to have the dispute resolved in NI and then take the NI judgment back to the Virginia court to be perfected/enforced.

That’s a lot of time and expense–so much so it destroys the value of the injunctive relief option in the first instance, at least in my view.  So, here’s my recommendation- select relevant U.S. law to govern your U.S.-focused NDA. It will make enforcement easier and more predictable.

Protecting Your Trade Secrets in the US

Remember earlier posts about non-disclosure agreements, and the role they play in defining and protecting trade secrets? Of course you do—but in case you don’t, one of them is here. I even drafted a brief two-page outline for NDAs, here.

The macro point of those posts, at least as to protecting trade secrets, is that in the US, a trade secrets owner must take all “reasonably available steps” to protect their trade secrets. In an unpublished opinion filed on May 8, 2015, the US Court of Continue reading

NDAs and You: Perfect Together

I’m about to betray that I made questionable music choices in the 1980s–but the song most relevant to this post is “Voices Carry” by the band ‘Til Tuesday. If those voices include your company’s confidential or sensitive information, your company will suffer competitive harm.  That’s why I recommend that non-US companies expanding into the US get familiar with non-disclosure agreements (NDAs), also known as confidentiality agreements. Continue reading

Protect Your IP (Really)

Every now and then, a non-US company will contact me after they have started US operations…but have not protected their intellectual property here. In some cases, the company does not have a full picture of what they have or where they could/should protect it—they have not audited what they have. Continue reading