Personally Identifiable Information

In recent years, as an increasingly large amount of our information is stored on computers and throughout the internet generally, the notion of cyber security, especially in relation to Personally Identifiable Information (PII), has become a progressively important and even daunting concept.  Under Minnesota statute 325E, “personal information” means an individual’s first name or first initial and last name in combination with (1) their social security number, (2) their driver’s license or MN identification card number, or (3) their account, credit, or debit card number when in combination with any required security code or password that allows someone access to an individual’s financials.  In other words, it’s information that, if in the wrong hands, can do a lot of damage to someone, especially in a financial sense.

On the front end, there are many ways in which a person or company can limit their exposure to the risk of others accessing PII.  Generally, third-party vendors carry a particularly huge risk and because of this, contracts pertaining to privacy, indemnity, and the right to audit are widely recommended.  Additionally, and perhaps most basically, when dealing with a third-party vendor, be inquisitive—ask about their security processes, the firewalls that are in place, and encryption methods.  Questions like these may not only lead to increased confidence in a given third-party vendor, but also could result in a larger conversation about risk management or even new ideas for your own security of PII.  More internally-based precautions to consider would be getting some kind of cyber security insurance, looking into the actual physical security of certain hardware, properly training personnel on network security protocol, and having an identifiable plan for if things go wrong.

But just what happens when a breach actually occurs and PII is exposed?  A widely accepted six-step incident response cycle was developed by Kurtis Holland in 2014 with this very question in mind.  First, it is ideal to have prepared for an incident, as evidenced through a plan.  Second, you must be able to identify the breach, usually by way of an anomaly or detection software.  Third, contain the breach as much as possible in order to mitigate the risk.  Fourth, utilize either internal or external IT professionals in order to eradicate the malware.  Fifth, resume normal functions and fully recover.  Sixth, and perhaps most importantly, evaluate the incident that occurred and if necessary, make the proper adjustments to avoid it happening again.  It is also worth noting that when PII has been acquired by an unauthorized person, it is statutorily required that the person or business breached sufficiently disclose the incident in a timely manner. How to do so in compliance with the law, while still protecting your business is an important process.

When data breaches do occur, one can expect things such as lawsuits to follow not long afterwards.  For example, when the infamous Target breach of 2013 happened, effecting approximately 41 million people and thus one of the bigger data breaches in recent history, what resulted was that the company had to pay $18.5 million settlement to 47 states and the District of Columbia.  It is for this reason that it is highly recommended that you discuss things such as PII, cyber security, and breach liability with an experienced lawyer.

This article was sponsored by Vlodaver Law Offices, LLC, an experienced business solutions and transactions law firm in the Twin Cities. If you would like a free legal consultation, contact us.


Strategic Thinking for Leases & How Lawyers Can Help

In the wake of Amazon’s latest acquisition of Whole Foods, the fate of traditional, brick-and-mortar retailers may not be as bleak as it once seemed.  The world’s largest online retailer is facing certain difficulties in the realm of lease agreements, the same kind of difficulties that any tenant may face when entering into such a lease.  Oftentimes clients have a perfect location picked out, with an excellent business and marketing plan worked out, and clients and customers ready to go, however, they get a major surprise when they receive the lease from the Landlord.  Many tenants as well as landlords forget about the implications that a lease agreement holds down the road for future competition of subsequent tenants.

Stores such as Bed Bath & Beyond, Best Buy, and Target all have legal rights to halt certain operations proposed by Amazon by way of Whole Foods markets when it comes to where they may open or what they can do at various locations across the country because of their leasing rights and restrictive covenants in related agreements.

The carving out of certain provisions in leases such is a routine practice in the industry.  Tenants with enough leverage will negotiate with Landlords to have some protections put in place in order to avoid certain competition.  It is common to see proposals of various restrictions, such as no other grocery stores, electronic stores, toy stores, or discount retailers allowed in a mall so long as the tenant is leasing there.  Landlords frequently give up their business rights to substantially alter malls and therefore sacrifice tenant mix – but they do so as part of a careful negotiation.

The main issue that Amazon is facing, however, is that of neighboring retailers having clauses that, although do not bar the retailer completely, substantially limit its capabilities newly offered by Amazon.  Such limitations have the capability of vastly altering, or in some cases, prohibiting, the things that make a company unique.  Though the future for Amazon and Whole Foods is unclear, I think there will be a lesson learned of heightened focus on negotiations in general.

The question remains then, how can retailers adequately protect themselves from the e-commerce giant that is Amazon, or any competitor for that matter?  In general, a lawyer can aid tremendously in the process by providing the know-how, skills, and ultimately the language necessary for such protection.  As evidenced by the above, carefully drafted lease agreements are key and are able to withstand even the biggest and most powerful companies.  In a world where Amazon is seen as a dominant and intimidating player in a multitude of markets, this instance has taught us that companies much smaller can not only survive, but thrive in an environment where physical Amazon stores exist, albeit with adequate lease agreements.

This article was sponsored by Vlodaver Law Offices, LLC, an experienced business solutions and transactions law firm in the Twin Cities. If you would like a free legal consultation, contact us.

Key Areas of Concern When Dealing with a New Vendor

Whether you are a well-established company or just starting out, outsourcing certain services may be in your best interest; big box retailers, for example, need not concern themselves over the creation of a customer-facing app to sell their products and all of the intricacies that accompany the technological world.  In order to create said app, or do virtually any other service for that matter, businesses often hire other companies better suited to do so, whose job it is to specialize in such matters.  When engaging in these outside vendor hiring processes, it is important to take into consideration a multitude of different factors, such as reliability, insurance, assurances, and termination rights.

A vendor’s reliability is perhaps the most important factor to take into consideration when first addressing whether to do business with them.  Make sure you conduct due diligence on the company and assess their past record of entering into contracts such as yours.  Have former clients of customers favorably or unfavorably reviewed them?  Are they rated by the Better Business Bureau?  Take a look at such testimonials and ratings in order to gauge the company’s reputation and overall reliability going forward.

Another way to protect your business from the potential harm of outside vendors is to require them to obtain multiple kinds of insurance coverage.  In particular, cyber insurance can be especially helpful if the vendor in question is to have access to private electronic data, such as the personal information of customers or employees.  Cyber insurance typically covers such things as computer and data loss recovery, credit monitoring, notification expense, and other related forms of liability.  Additionally, businesses oftentimes require certain amounts and other types of insurance coverage, even conditioning their vendor contracts on being named as an additional insured party in those policies.  Paying attention to how such requirements are drafted within the contract are just as important as requiring them in the first place.

Third party service providers, perhaps now more than ever, are being required to provide a multitude of assurances to their clients, promising such things as confidentiality, risk management, compliance with expectations, and integrity.  Companies are more frequently appointing people within their organization to attend to the management of the quality of service rendered.  It is important to lay out your expectations and required assurances at the outset of any vendor-vendee relationship, as it provides a permissible roadmap of situations to come, specifying what is and is not acceptable practice.  Contractual requirements and carefully laid out details help manage expectations. Details are always helpful because the parties can help ensure that everyone understands the “rules” and alleviate concern with new relationships on how the other party may act.

Likewise, and relatedly, the termination rights of parties are also important to consider.  As a business, it is important that you have the legal right to move on from a contract that is, for a valid reason, unfavorable to you or later on becomes unfavorable to you.  Try to anticipate potential issues that may arise, such as a material breach by either party, and provide for that in contract form.  Businesses may even wish to discuss the termination of a contract based purely on inconvenience, with a potential expense being incurred on the terminating party.  In essence, you want to make sure that you are not stuck in a bad situation by predicting future problems, and figuring out a way to settle them in a way both parties can agree to, in contract form, before they ever arise.  Likewise the vendor may require fallbacks to protect their interests. Such provisions can be negotiated by both parties to achieve an agreement which works for everyone involved.

This article was sponsored by Vlodaver Law Offices, LLC, an experienced business solutions and transactions law firm in the Twin Cities. If you would like a free legal consultation, contact us.

Beware the Oxford Comma

Upon first glance, the fact that the US Court of Appeals for the First District recently upheld an appeal by five Maine delivery truck drivers of dairy products may not seem like a huge deal—it was essentially held that the drivers in question were entitled to overtime pay, something that their employer had thought they were exempt from because of Maine’s applicable law.  However, the reasoning behind the actual irrelevance of the law in the circumstance lay within its use, or rather lack thereof, of a comma separating the last two items of a list, otherwise known as an Oxford comma.  Though this case did not take place in Minnesota, the lesson it provides is manifestly true in all areas of contract law and drafting, that being: grammar truly does matter.

According to Maine’s wage and hour law, as set forth in Chapter 7 of Title 26 of the Maine Revised Statutes, an employer is not compelled to disperse overtime pay if its employees are engaged in the following activities:
The canning, processing, preserving, freezing, drying, marketing, storing, packing for shipment or distribution of:
(1) Agricultural produce;
(2) Meat and fish products; and
(3) Perishable foods.

The issue arose with regard to the lack of a comma after the word “shipment” above, meaning the drivers argued that it should be interpreted as meaning “packing for shipment” or “packing for distribution” and that since the work performed dealt only with distributing milk and not packing it in any way, their employer was not exempt from paying them overtime.  Conversely, the employer believed that the law should be read as if there was a comma after the word “shipment,” therefore splitting the tasks not eligible for overtime pay into “packing for shipment” and “distribution” generally.  An alternative version of the law, with the Oxford comma included, would in pertinent part read: “The canning, processing, preserving, freezing, drying, marketing, storing, packing for shipment, or distribution of . . . .”  This interpretation would better delineate the fact that both those involved in packing for distribution as well as simply distribution are subject to the law, rather than two kinds of packing.  Without it, however, the law as it stood remained unclear.

Ultimately, the court came down on the side of the dairy drivers, declaring that “ambiguities in the state’s wage and hour laws must be construed liberally in order to accomplish their remedial purpose[.]”  To longstanding proponents on either side of the classic Oxford comma debate, this comes as a weighty precedent in its favor.  A non-legal example of the comma’s relative importance can be seen in sentences such as: “This book is dedicated to my parents, Elvis Presley and God.”  With that said, opponents say the use of it is oftentimes unnecessary and generally displeasing in a visual sense.  In general, however, it is important to note that what should be aimed for is clarity, not blind adherence one way or the other.  This is perhaps especially true in the legal field where so much can be misinterpreted or misunderstood from an outsiders’ perspective already.

In brief, though the events that took place and the legal consequences that followed did not occur in Minnesota, they certainly could have.  The ramifications of the dairy employers’ reliance on a single missing comma ended up costing them approximately ten million dollars, and as such it goes to show us all about the importance of transparency in writing overall good grammar.

This article was sponsored by Vlodaver Law Offices, LLC, an experienced business solutions and transactions law firm in the Twin Cities. If you would like a free legal consultation, contact us.

Ten Things to Consider When Taking a Product or Service to Market

1. Basic business structure. First and foremost, it is important to make sure that your enterprise is incorporated correctly, whether that be as a sole proprietorship, partnership, LLC, or otherwise.  Making sure that you have completed the applicable governing documents in order to legitimize the overarching business is essential to making sure that a product launch runs smoothly and without legal issue.

2. Separating yourself and employees from competition. Many products or services grow out of pre-existing ones, however, it is critical that those in charge of the operation, as well as any employees, separate themselves from possible conflicts of interest or potential competitors of the product or service in question.  Doing basic background checks of employment history is a common way in which new employers come to know of any hindrances of an employees’ ability to work, such as non-compete agreements or confidentiality agreements.

3. Clear contracts. Contracts with processors, retailers, suppliers, and otherwise all need to be in good standing and properly executed by the time a product goes to market.  Ideally, they should be kept up to date and crucially specific, going well beyond the basics of what is being bought or sold, for how much, and when.  They should also abide by all applicable laws and customs and therefore consulting a reputable attorney is critically important when accomplishing this task.  All too often companies will utilize a generic contract that provides miniscule amounts of protection (if any) and that leaves clients with too much exposure to risk.

4. Licensing. If you are a relatively small company and would perhaps like to broadly expand yet you don’t have the resources to do so, you may want to consider licensing as an alternative approach to taking your product to market yourself.  Licensing is a tool that allows you to essentially enter into a legal agreement with another and have them pay you for your ownership of a product or idea.  It’s important to note here, however, that licensing agreements bring with them a myriad of other legal considerations to think about in and of themselves so it is important to not think it is the perfect legal solution.

5. Laws around sales and marketing. Sales and marketing are integral parts of making a new product launch a successful one.  However, even though the ever-expansive internet may make reaching target markets exceptionally easier than ever before, the laws surrounding just what you can and can’t do are equally broad.  For example, you must be careful not to include copyrighted infographics or photos in marketing as well as make sure any user data you may be collecting or using for such purposes is, in fact, legal.

6. Confidentiality. It is generally a good idea to keep new products or services, especially those of a “new” or “unique” nature, relatively private in order to preserve them until they are ready for the broader market.  From a legal perspective, it is important to prevent public disclosure, otherwise you may lose your ability to file for intellectual property rights protection.  Non-disclosure agreements are also commonplace in such scenarios, even when dealing with information that is merely sensitive and not specifically product-related.

7. FDA approval. If you are considering taking a market that is generally susceptible to applicable United States Food and Drug Administration Laws, it is very important to make sure you are abiding by all applicable rules in relation to that enterprise as well.  The FDA approval process is notorious for being not only costly but time-consuming, so make sure to allot for such provisions in both your overall budget and timeline.

8. Trademarks and patents. Trademarking and patenting certain concepts or ideas is often a good idea in terms of protecting your own interests, though it also reassures you that your business is unique in nature and is not already trademarked or patented as well.  It is a good idea to comb through the website of the United States Patent and Trademark Office, either by yourself or with the help of a lawyer, at and do a bit of background research.  You might also consider looking internationally in this regard if you plan to expand as well.

9. Understanding liabilities. Be sure to know the risks associated with your product, and reasonably protect yourself against them.  For instance, it may be in your best interest to specifically limit your liability in contracts by placing carve out clauses relating to such in the various agreements you use.  Likewise, indemnification clauses are another common way businesses protect themselves, namely by stating that if a specific action occurs, a different party, like a supplier for instance, is held responsible.

10. Hiring and experienced lawyer. Lastly, and as you’ve seen, partially woven throughout this list, it is important that you consider consulting with an experienced business attorney when embarking on taking a product or service to market.  Entrepreneurs face specific challenges when beginning a business venture, and receiving adequate, competent legal advice is vitally important to starting off on the right foot.

This article was sponsored by Vlodaver Law Offices, LLC, an experienced business solutions and transactions law firm in the Twin Cities. If you would like a free legal consultation, contact us.

Five Things to Think About When Dealing with Purchasing Contracts

  1. Determine what factors are most important to you and your business. Whether it’s price, quality, terms of payment, or otherwise, it’s important to remain introspective into your own company and discover what is truly the most important factor in your own circumstance.  Undoubtedly, price will oftentimes be the most common determinative factor, but it’s often helpful to list out all factors in order to determine the best supplier fit.  If, for instance, prices are relatively the same across suppliers, but the delivery schedule of one is much more favorable to your business over another, it’s important to note and prioritize that.  Likewise, if a price is suspiciously low, you may want to look at other important factors to you to make sure that such a supplier is not taking shortcuts elsewhere.  Creating a list of business go-to items will help the legal analysis for the contract.
  1. Take a look at indemnification provisions. If something goes wrong with the purchased product, you may want to make sure you are protected by the supplier company.  Indemnity clauses obliging one party to pay for any damage or loss incurred, are oftentimes commonplace in purchasing contracts, but it is important to make sure that they are correctly incorporated into such a contract and that you, the buyer, are adequately protected.
  1. Consider what warranties and representation provisions are in play. When a seller contracts with a buyer for something, representations and warranties are implicit within the sale.  For example, the seller is representing him or herself as the owner of such product, with the legal right to do so, while the warranty may be that it is free of defects and if a defect does occur, the seller may fix it up to a certain future time.  Delve into the specifics of these things to make sure they are preferable and realistic in your own situation.
  1. Don’t limit yourself to one supplier. It is easy to fall for the apparent ease of dealing with a singular supplier, but don’t let that discourage you from playing the field.  Competitive pricing for differing products exists, so make sure to talk to multiple suppliers before settling down on just one, and perhaps even let them know you are quoting different sources.  If suppliers know you are doing your homework and not simply settling for convenience, they are more likely to grant you a better deal.  Conversely, however, it’s also possible that a single vendor may give better deals to those who do lots of business with them or who sign on to long-term contracts, so make sure to take those discounts into consideration as well.
  1. Choose a type of supplier agreement. When considering different suppliers and looking into future timelines, one may want to reflect on whether perpetual or finite period of time contracts are best.  While contracts that run in perpetuity may further streamline negotiations, they can sometimes create problems when a party’s circumstances, whether financial or otherwise, change over time or if one party feels their terms are unfavorable.  By contrast, finite contracts may require a great deal more work when it comes time to renew a business relationship. They may result in having to find a new supplier however, this also means that each party ends up with more freedom and flexibility as well as the ability to legally get out of unfavorable contracts under more reasonable timelines.

This article was sponsored by Vlodaver Law Offices, LLC, an experienced business solutions and transactions law firm in the Twin Cities. If you would like a free legal consultation, contact us.

New JOBS Act Regulations, Equity Crowdfunding, and Alternatives

Looking to invest in a startup online?  Have your own entrepreneurial idea that may require additional funding?  There have been recent changes in the law that may affect just that.

Certain provisions of the Jumpstart Our Business Startups (JOBS) Act recently came into effect as of May 2016.  Most importantly, Title III of the Act reduced restrictions around equity crowdfunding.  Small businesses are now able to raise more capital through online investments by being accessible to all potential investors.  Now, any individual can invest their money in these early-stage businesses, with the only caveat being that the amount they can invest ultimately depends on their net worth.  This is different than prior rules because it used to be prohibited for any individuals with a net worth of under a certain standard to invest at all, whereas now there are, in essence, tiered amounts permissible for all.  Conversely, if you’re going to be on the other side of the transaction and are looking for investors in your company, it’s important to note that the company itself is subject to minimum disclosure requirements as they pertain to the totality of cash raised.

Equity crowdfunding, however, also involves a great deal of risk.  In addition to the possibility that an investment may be significantly, if not entirely, lost due to the venture failing, it likewise is seen as a more expensive option in general.  It also may be difficult to read and understand all available information and data provided without the assistance of a financial or legal professional.  Such an endeavor may also take up a lot of company bandwidth, and there may be unforeseen pressures associated with the venture.  Due to these factors, it’s possible that such an extensive legal undertaking may not necessarily be for you.  If that’s the case, many alternatives are available:

  1. Borrowing from a bank is likely the most common scenario one imagines when building out his or her company.  Banks may grant loans to individuals or companies at a pre-determined rate of interest, oftentimes offset by a security interest or collateral. There are many loan options but not all business can qualify for a loan. Working with an experienced business attorney and business banker will be key if you go this route. Sometimes, however, the company is too new or has some unique aspect which prevents it from getting a loan, and so another option may be private investors.
  2. Borrowing from private investors, such as friends and family, is another viable option.  One should decide at the outset whether this kind of payment is structured like debt or equity, and treat it as such.  Putting the parameters of the agreement in writing is also highly encouraged.
  3. Active partners may help contribute financially to a business while also taking on some of the work associated with it.  This option may benefit a business by growing the expertise within it while freeing up time, however, the control and overall dynamic of the business may change and future profits may need to be aptly divided.

This article was sponsored by Vlodaver Law Offices, LLC, an experienced business solutions and transactions law firm in the Twin Cities. If you would like a free legal consultation, contact us