Thoughts from The Law Office of Tennille Christensen

If your General Liability insurance policy extends to $2,000,000 per occurrence does that mean you can just negotiate a $2M cap on liability in your commercial contracts and assume that you will be covered?

Unfortunately, No.  Most GL insurance policies are quite complex.  Here are just a few of the issues related to GL insurance that I regularly see when negotiating risk allocation in commercial contracts related to technology:

1.  There is usually a definition of an “insured contract” and it may expressly exclude many of the contractual obligations under which your business is regularly assuming liability.

**Make sure you understand what your “insured contract” coverage covers.  Note that any contractual obligations you take on that are not insured contracts directly expose the business to potential damages without coverage.

2. It is quite common for a GL policy to have an exclusion of coverage for liability related to one or more of Infringement of Patents, Infringement of Copyright, Title, Slogan, Trademark, Trade Dress, Trade Name, Service Mark or Service Name.

**Ask your insurance agent about negotiating additional coverage for some or all of these high risk items.  Note that some coverage in these areas is perceived to be so risky that insurers will not write policies for them in certain business areas.  This should help you understand just how risky it is to take on an indemnity obligation — if an insurer refuses to cover the risk for your business, you should think hard about whether you are willing to directly cover this same risk for your business partners or customers.

3. It is quite common for a GL policy (and associated riders) to have exclusions of coverage for certain assumed liabilities that would *not* have belonged to the insured in the absence of a contract.

**Many indemnities function to move risk from where it would lie under the law to an alternate party.  Before you accept an indemnity assuming liability that you would not otherwise have under the law, check with your insurance agent and make sure you understand whether that indemnity will be covered by the insurance or will potentially expose the company to direct damages without coverage.

In the last two months, I’ve received two calls that reminded me that start-up founders, employees, and the self-employed have huge legal issues outside of traditional start-up law.

So, I’ve decided to make a Public Service Announcement:  If you are self-employed or involved in an early-stage start-up, consider the following issues and seek the appropriate professionals to address them if appropriate.

1. LIFE INSURANCE. If you are:

a) an American citizen who is a start-up founder, an early stage start-up employee, or self-employed;

b) not financially independent (Note: you are financially independent *only* if you work because you want to, but you don’t have to, and you won’t have to work anytime in the future, either);

c) and you have dependents;

then you need life insurance. Period.  Unlike many more traditional careers, these groups don’t have any form of pre-negotiated survivor benefit plan. If you are a major financial contributor to your dependents’ needs, then even if you are fully vested into social security, unfortunately, it is almost certain that SS survivor benefits will not be sufficient to support your family if you die.

2.DESIGNATED DECISION MAKERS.  You need a designated decision maker who can manage things for you if you become incapacitated or die.  Yes, thinking about this is not pleasant.  But many of the individuals I work with do not have estate plans and are unmarried.  In the event something happens to them, their next of kin will be involved in all aspects of their life (including their business).  If you are not absolutely certain that every state/country where you have assets, business, contracts, or potential health issues recognizes the person you want as your next-of-kin decision maker, then you *need* to visit an estate planning attorney to figure out what documents are necessary to ensure that the person you want in charge is able to make decisions (either financially, health-wise, or both).  Founders, in addition to seeking input from an estate planning attorney, you should discuss this potential issue with your corporate attorney to understand what provisions already exist in your corporate formation documents regarding exercise of a founder’s voting rights in the event of a Founder’s death or incapacity.

3.  CENTRALIZED DOCUMENT/ACCOUNT MANAGEMENT.  In the event of an emergency, you need one location where your decision maker knows to go that outlines where and how to access all important online and physical bank, investment, credit card, billed accounts, title documents, health documents (advance care directives!), insurance policies, and anything else that may be critical.  The actual rights and responsibilities that your decision maker will have with respect to the information you store varies in each situation (again, see an estate planning attorney), but if you don’t have the information in a location where your decision maker can access it, they will be completely unable to act on your behalf.

4.  HEALTH INSURANCE AND DISABILITY INSURANCE.  The self-employed often struggle with health and disability insurance as it is can be very expensive outside of the guaranteed issue employer market (try large industry organizations or NASE). Some early stage start-ups don’t offer medical insurance due to budget constraints and many early stage start-ups don’t offer disability insurance.  Much like life insurance, if you have dependents, you should seriously consider whether you need one or both of these insurance products before you are working the start-up or self-employed sprint and unable to focus on anything outside of the business’s growth trajectory.

**NOTE:  I do not practice estate planning law, insurance law, or corporate law outside of technology transactions.  This post, like all of my posts, does not contain legal advice and I did not become your lawyer solely because you read it.  It is very possible that your situation is unique and that all of the issues I raised for consideration above do not apply to you.

It’s almost that time of year again!

Back in January, I started seeds for tomatoes, peppers, eggplant, and okra.

The okra died. I restarted them a few weeks ago and they seem much happier.

Today, the garden is a sad dried out, over-grown and gone-to-seed collection.

The peppers had seed leaves by the end of January.

But the tomatoes, despite being planted several weeks later, have completely overtaken the peppers in terms of growth.

Just a bit of labor to harvest the remaining bits (yay beets!), then we turn the beds, add compost, fertilize, and it will be a welcome home to all of the seedlings that are thrilled at this weekend’s blazing sun.

Hurray for the coming summer garden!

Yesterday, the U.S. Supreme Court released its unanimous opinion in Mayo v. Prometheus. I was pleased to see the Court affirm and clarify the unpatentability of laws of nature.

Here’s a generalized statement of the law of nature at issue in this case: Certain concentrations of a specific drug metabolite in the blood indicate (a) toxic levels to humans (too high); or (b) ineffective therapeutic levels (too low).

The method claims included a step of (i) administering the drug; (ii) determining the level of the drug metabolites in the blood; and (iii) increasing or decreasing the administration dose in accordance with prescribed tolerances for efficacy and toxicity.

A long line of case law makes it clear that laws of nature, natural phenomena, mathematical algorithms, and abstract ideas are not patentable subject matter under 35 U.S.C. Section 101. This doesn’t mean that adding additional steps to natural phenomena, or applying a law of nature in a unique way may not be patented, but we now have guidance that says those steps must be more than just the run of the mill application of standard processes regularly used in the field of the claims.

In reversing the Federal Circuit Court and affirming the District Court’s ruling, the Supreme Court clarified why these claims were not directed to patentable subject matter:

[T]he claims inform a relevant audience about certain laws of nature; any additional steps consist of well understood, routine, conventional activity already engaged in by the scientific community; and those steps, when viewed as a whole, add nothing significant beyond the sum of their parts taken separately.

In other words, you can’t add well understood, routine, conventional steps to a natural phenomenon or law of nature and have a valid patent claim. In explaining the rationale behind the conclusion, the court stated its concern and pointed out that Prometheus was in good company:

The Court has repeatedly emphasized this last mentioned concern, a concern that patent law not inhibit further discovery by improperly tying up the future use of laws of nature. Thus, in Morse the Court set aside as unpatentable Samuel Morse’s general claim for “‘the use of the motive power of the electric or galvanic current . . . however developed, for making or printing intelligible characters, letters, or signs, at any distances,’”

Great Job SCOTUS!

I’ve been very busy with work and growing my practice. Today, a client took the time to forward a comment from the opposing side:

[YOU] HAVE ENGAGED A REALISTIC LEGAL COUNSEL. HER DRAFT AGREEMENT WAS WELL-PREPARED, SHORT& TO THE POINT, AND SHE DESERVES THE COMPLIMENT.

Ordinarily, CAPSLOCK drives me crazy.

This time it made my day.