Handling Confidential Information and Trade Secrets When Speaking with Investors

If you’re starting a business or have a business but want to expand, innovate, or reach out into new markets, you may be looking for investors. Investors are the lifeblood of your business, and you want to put your best foot forward in proving to them that their money is in good hands with you.

Our Chicago business lawyer at Ellis Legal explains more below.

What About Trade Secrets? 

But how do you show an investor what your plans are, why you’re a good bet, or where their money is going without giving away your valuable trade secrets? 

You may or may not know these investors, but either way, what’s to stop them from sharing the information you provide to them in your “pitch” to others, or worse—using that information themselves?

Using an NDA

Certainly, you could have every investor who hears your business plans and proposals sign an NDA. But that can be problematic; most investors won’t sign an NDA.

Real investors hear a lot of proposals. They may invest in multiple businesses. Some of those businesses and ideas may be similar to yours. They often do not want to sign an NDA that could even open the door to an accusation that they are misusing, disseminating, or misappropriating information that was protected by the NDA.

In many cases, investors don’t have to sign an NDA. If you won’t tell them about your business idea without an NDA, someone else will—they are the ones with the money that you need.

Practically, forcing an investor to sign an NDA can also give off an air of distrust or of being litigious, at least at the early stage of discussions, impressions that you’d be better off avoiding.

Keep It Simple, at First

All this means that you need to become skilled at providing a business pitch to investors that do not give away any kind of protected information or business trade secret.

There are ways to do this, especially if you work with your business attorney on proper wording and information that both informs the investor of what he or she needs to hear but also stops short of giving away any information that you may not want your competitors to learn about.

In fact, you have probably given friends or family general information about your ideas without divulging information that you consider to be proprietary or secret.

Later On, If There’s Interest

If your investors are interested and, perhaps, want to move on to a later stage of consideration and negotiations, where there will be some commitment, then there may be a bigger window to convince an investor to sign the NDA. At that point, the investor sees that he or she may get some benefit from the relationship, making an NDA much more palatable.

Speak with an experienced Chicago business litigation attorney at Ellis Legal by calling (312) 967-7629 today. During a free initial consultation, you can discuss the legal issues surrounding your investments and protecting your trade secrets.

Injunctions and Restraining Orders: How are They Used?

In most legal cases in the civil system, the question is whether a party owes money to the other side, and if so, how much. But there are times when money is not sufficient, or it’s not all that it takes to prevent harm to a party. Sometimes, it takes a court to tell someone to stop doing something that they are doing. This is called an injunction. 

Read on as our Chicago business lawyer at Ellis Legal explains injunctions further.

When Injunctions May Be Necessary

Although we think of injunctions as being used in domestic violence or other cases involving domestic disputes, injunctions also play a role in business law and commercial litigation.

An injunction is used when a party is being harmed and will keep being harmed every single day so long as the offending behavior continues. Imagine these situations:

• A neighbor has an animal that is causing damage to your property, and the damage is occurring regularly.

• Someone is using, disseminating, and profiting from your intellectual property, and this is going on daily.

• Someone is saying defamatory statements about you, and the statements are being repeated and published in numerous outlets.

• Someone has stolen your business’ trade secrets, and those trade secrets are being used by the other party on an ongoing basis.

In these cases, there is ongoing harm every day, which must be stopped.

Temporary and Permanent

You can get a temporary injunction, a permanent one, or both. 

As the name suggests, a temporary injunction is issued at or near the beginning of the case. It is the court telling someone to stop what they are doing temporarily, pending the ultimate outcome of the case. This is often useful when the case looks like it will be longer, and thus, there is little hope of ever getting a permanent injunction in an expedited manner.

Parties can seek a temporary injunction if they can show that they will suffer harm that cannot be remedied or repaired by money. The party seeking the injunction must also show that it has a reasonable chance at winning when and if the case goes all the way to trial.

A permanent injunction is entered at the conclusion of a full-blown trial, with evidence being presented. Once the final judgment is entered, an injunction can be entered by the court, along with any monetary damages that a party may have suffered.

What is a TRO? 

Although used interchangeably, a temporary restraining order, or TRO, is often used to stop harassing activity or activity that may cause physical harm or to prevent a person from engaging in certain behaviors. 

Unlike temporary injunctions, which, if granted, will usually last until the ultimate, final outcome of the trial, TROs expire automatically after 10 days unless extended by the court.

Emergencies

In some cases, a party can get an emergency temporary injunction or restraining order entered without notice to the other side. These are only for short durations of time and only when notifying the other side may take too much time or when notification may present harm to the party asking for the injunction.

Do you need to have an injunction entered or to fight against one? Speak with a Chicago business litigation attorney at Ellis Legal at (312) 967-7629 today.

Avoid Common Trust Account Scams

As lawyers, we spend a lot of time learning as much as possible about the law. But what many of us don't do is become experts in technology or how that technology can be used against us. Yes, scammers are in the legal world as well, just waiting to fool attorneys or deceive attorneys into transferring their money or looking to illegally tap into attorneys' trust accounts.

Our Chicago business and ethics attorney at Ellis Legal explains more below.

You're' Ultimately Responsible

Recognizing and avoiding scams matters; while they may be sympathetic, the ARDC does not see it as an excuse that you were fooled—you are the ultimate guardian of your trust account and ultimately responsible, both legally and as far as your bar license is concerned, for theft that happens from one of your trust accounts.

Cleared and Uncleared Funds

If you have a trust account, always be mindful of funds that are in your trust account but aren't yet available to be used. Those funds haven't cleared, but many attorneys are impatient or under pressure from rushed clients or impending deadlines, so don't wait for the funds to clear. Many attorneys figure that they wouldn't be able to do anything with the funds unless they've cleared.

But that's not true. Many banks will allow you to transfer or wire funds even though they have not cleared. 

So, if someone fools you or rushes you into cutting a check or transferring money, the funds that have not cleared aren't there. That means that your trust account is debited for whatever money you use, which leads to a trust account deficit.

Debtor-Creditor Scams

Be wary of "clients" who pressure you to disburse money quickly. Any scenario where person one is sending you funds to disburse to person 2 (usually your "client") should be monitored carefully; these "debtor-creditor" scams using a lawyer's trust account are common. The money looks like it's there, but it's not, so when you disburse it to your "client," you're actually paying that person out of your trust account funds.

Fake Accounts and Emails

Other scams aren't unique to lawyers; things like emails that look like they are from a person or a business, but they are not. Or, emails that say that your trust account has been debited (for example, for a subscription that you never signed up for) are usually scams, looking to get you to devolve personal information or information about your trust account.

Fakes aren't the only problem—the email or account you are sending money to may be a real, actual email or account, but it may just have been hacked by someone other than the actual owner.

Paper Checks

Be wary of your paper checks. The simple act of throwing them away can lead to fraud; it's easy for a wrongdoer to get a check from the trash, duplicate it, and cut a check from your trust account.

Speak with a Chicago business and legal ethics litigation attorney at Ellis Legal at (312) 967-7629 today if you have a problem with the ARDC related to your trust account or any other ethical issue. 

Common Provisions in Shareholders Agreements

If you go on the public markets, you usually will buy stock without having to sign or agree to a shareholder agreement—or at least, the terms of the agreement aren't of significant importance, given that you are just one of thousands (or more) other shareholders.

The simple fact is that when large publicly traded companies sell stock, the purchasers are really no more than investors. They have no active role in the operation or governance of the company, at least not directly.

Read on as our Chicago corporate attorney at Ellis Legal explains common provisions in shareholders agreements.

Smaller Companies

However, with smaller, midsized, or private companies, shareholders usually take on a more significant role. Because they are much more involved, having a shareholder agreement is of vital importance.

Shareholders may need more protection with a shareholder agreement, given that there is not the same assurance that a smaller business has the management or capital that one traded on the public markets does. There may also be the risk of the business closing or engaging in illegal activities.

In some cases, shareholders are given shares specifically for their engagement with the company—that is, in return for work in an area of expertise they are doing for a company.

What's in a Shareholder's Agreement? 

All of this is why a shareholders agreement becomes very important. A typical shareholders agreement will spell out what is being paid for the stock, including specifying if any in-kind services are being provided or what services are expected to be provided going forward.

The shareholder agreement will also specify whether any work needs to be done by the shareholder at all; some shareholders are just passive investors.

It may also specify what information the shareholders have rights to view and access and how and when they can make such requests. The agreements may also include confidentiality provisions.

Board Member Shareholders

Shareholders who are also board members should understand what their duties and rights are with respect to both positions, something that should be stated in the shareholder's agreements, as well as your corporate governing documents. 

Losing one position doesn't mean losing the other—most companies have procedures for removing board members, but that doesn't divest that person from ownership in their shares.

Voting

In some matters, shareholders may have a right to vote (usually with shareholders who are more active or knowledgeable about corporate operations), while more passive "investor-only" shareholders will not have any right to vote. Either way, you can structure it as you like, so long as the voting rights are spelled out in the corporate documents, as well as the shareholder agreement.

Losing Shares

Shareholder agreements will also normally spell out what happens in the case of loss of shares—can they be transferred to just anyone? What if they are lost involuntarily, such as through bankruptcy, divorce, or death? In many cases, the company has the option to repurchase the shares.

Do you need shareholders' agreements drafted or reviewed? Let us help. Speak with a Chicago business and corporate attorney at Ellis Legal at (312) 967-7629.

Legal Mistakes That Could Tank Your New Business

So you're starting a new business. This is a new beginning for you, and opportunity and success are hopefully on the horizon. You may have analyzed your business decisions in advance and strategized to make your new venture profitable. 

But what about legal strategy? There are many common legal mistakes that new business owners make that can sabotage their ability to be successful in the future. Our Chicago business attorney at Ellis Legal explains more below.

Employment Laws

One common mistake is failing to account for the numerous employment laws, which can lead to trouble. From the Fair Labor Standards Act to the Americans With Disabilities Act to workers' compensation laws to OSHA regulations and everything in between—it's easy to get lost in the nuances and details of so many state and federal employment laws.

Does your business have policies and procedures to address these laws? Is there a policy and procedure where aggrieved employees can address complaints? Do you really know when employees must be paid overtime pay? These are things that shouldn't be overlooked when starting a business.

Remote Work and Personal Devices

In today's world, we do work remotely—even if our jobs aren't entirely remote. But what happens to your important and sensitive corporate information that may be on your employees' personal computers or devices that they use when they are working out of the office?

Even if you don't have full-time work-from-home employees, a device policy, as well as policies that address what property belongs to the company and how to get that information back when the employee leaves, are vital to protecting your trade secrets and confidential company information.

Intellectual Property

Companies often design slogans, jingles, or logos—or even name the business—without giving any thought to whether they actually own the intellectual property that they are using.

Searches for all IP—your company names or slogans—should be done in advance, as should securing domain names online. And if you're using outside contractors to do any design work or musical works for your company, you'd better make sure that you, and not they, own the rights to what they create or what you are using.

Corporate Documents

Many businesses just want to get started and operate as soon as possible. Things like bylaws, procedure manuals, management agreements, or other documents that serve as the "rulebook" for how your company will operate are often overlooked or else just given a cursory bare-bones treatment (often with some random forms people find online).

Make sure you take the time to draft comprehensive governing documents that work for your specific company and that they cover all possible contingencies.

Mixing and Commingling Funds

In a smaller company, it can be easy to commingle money. The company pays for your personal car. You pay personally for some office equipment. The company's PayPal account is deposited into your personal bank accounts.

Even if you're not stealing anything, and all funds are accounted for, you're still commingling your personal funds and the company's funds. 

Take the time to separate the two and have corporate resolutions if the company will be paying personal expenses for any owner or manager of the company. Otherwise, you could end up losing the corporate legal protection that normally comes when you incorporate.

Speak with a Chicago business and corporate attorney at Ellis Legal at (312) 967-7629 today to avoid legal problems later on.

Understanding the Unlicensed Practice of Law: Avoiding Trouble

For most licensed attorneys, the question of when someone is or must be, licensed to practice law isn’t something you give much thought to. You, as an attorney, are licensed, so there is nothing to worry about, right?

Allow our Chicago ARDC defense lawyer at Ellis Legal to delve further into this topic below.

Getting Into Trouble

One way that validly licensed attorneys wind up in legal trouble is that they have staff, or paralegals, who are working for them and practicing law, often inadvertently. And when you, as a licensed attorney, allow someone working under you to practice law who is not licensed, you can be the one facing discipline by the ARDC.

That includes not just paralegals or legal assistants but any attorney whose license is suspended or who may be awaiting admission into the Illinois bar.

What is Practicing Law?

It can be hard to determine what is or what is not practicing law—or where the boundary lies between just giving advice or assisting someone and actually being a lawyer practicing law. As a general, albeit not always a helpful rule of thumb, many courts have defined the practice of law as rendering any service that requires the use or any degree of legal knowledge.

That can sound circular or tautological. But as a general rule, you may want to ask yourself whether something someone is saying is something they would need a law school education to say. If so, it’s practicing law–and someone does not need to go to court or even file anything with a court in any case to be practicing law.

Form Preparers

So, for example, assisting someone in filling out a form would not be the practice of law. Explaining to them the legal implications or consequences of their actions while filling out that form could be the practice of law.

This is the way that many companies that help people fill out divorce or family law forms, or bankruptcy forms get away with doing so: they say that they are just helping people “fill in the blanks” of forms, but they are not explaining the legal ramifications of the answers people put down, nor are they helping people strategize what the best answers would be (at least, that’s what many of these services say).

In reality, many people or services who offer to “fill out forms” (often with the promise of affordable services) are actually practicing law illegally. In many cases, there is simply no way to separate the filling out of legal forms from practicing law. Even just telling you which form to use or what response to select on a form is practicing law.

Paralegals and Legal Assistants

Paralegals are a gray area. They can, on the one hand, convey legal information you instruct them to convey to clients. 

They cannot, however, give their own advice or answer legal questions from clients without conferring with a supervising attorney. In Illinois, there must be a supervising attorney; paralegals are not allowed to work independently of a licensed attorney.

Do you have an ARDC problem or legal issue? Speak with a Chicago business and legal ethics litigation attorney at Ellis Legal at (312) 967-7629 today.

Understanding the Impact of The Case That Overturned Chevron

The Supreme Court recently passed down a decision that may not, on the surface, seem like it will impact your business. It did not get as much media attention as some other Supreme Court decisions this term. But it could upend the way you do business. Our Chicago business lawyer at Ellis Legal explores the impact of the case that overturned Chevron below.

Heavily Regulated Industries

Many of us are in businesses that must comply with heavy federal regulations. Almost every single industry, from energy and power to environmental concerns, to food service and preparation, to websites, transportation and trucking, workplace safety, how workers get paid, vehicle design and manufacture—all of it, and more, must comply with thousands of pages of federal regulations.

It is important to understand how all these regulations and rules came into existence to understand how the recent Supreme Court decision affects your business.

How Rules are Passed

We all know that Congress (or the state legislature, if we're talking about a state law) passes laws. 

However, the problem is that the laws Congress passes cannot address all the details that help people (and businesses) understand what is expected of them. Laws often need details, such as the law's exceptions, consequences, definitions, or explanations.

To make that happen, once the law is passed, the President allows his executive agencies to make rules, "fleshing out" or filling in the blanks, for what is not in the actual law that Congress passes. These rules have the same effect as laws—even though they are technically being passed by executive branch agencies and not Congress.

Executive Agency Deference

For many years, under a Supreme Court case called Chevron, courts believed that whatever these agencies did or said was generally going to be treated like a law—that the agencies would be given deference by courts in the event of any lawsuit related to the rules these agencies pass.

But now, under a case just decided by the Supreme Court called Loper Enterprises, that is no longer the case. 

The Supreme Court has said that courts do not have to give this deference or this respect to what the agencies do. Now, courts are free to interpret agency rules how they see fit, and they no longer have to assume that whatever the agencies feel or decide or pass is necessarily correct, the way they did previously.

What Will Happen Now? 

We don't yet know how this will affect businesses. On the one hand, it could make agency rules easier to challenge and give them less weight, some say lessening restrictions and rules placed on businesses.

But others have concerns that with Chevron's deference gone, businesses will now have more uncertainty—it may be more difficult to know what a court will do and when and if an agency rule is challenged. Businesses may not be certain of what could happen when a particular rule is challenged in court.

We just don't know yet. However, the way that agencies govern private businesses and industries may have changed for the better, and if you are in a heavily regulated industry, now is the time to get good legal counsel.

Don't violate government regulations. Let us help you navigate those waters. Speak with a Chicago commercial litigation law attorney at Ellis Legal at (312) 967-7629 today.