October, 2010

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Trademark Infringement and Available Remedies

Wednesday, October 6th, 2010

If you have registered your business trademark or service mark with the U.S. Patent and Trademark Office (“USPTO”), then you have the right to sue a party that is infringing your trademark rights. The criteria used to determine whether the use of your mark or a similar mark qualifies as infringement is whether such use causes a “likelihood of confusion” to the public. Likelihood of confusion exists when a court believes that the public would be confused as to the source of the goods, or as to the sponsorship or approval of such goods.

Courts deciding a trademark infringement action will mainly look at two issues in deciding an infringement action: 1) the similarity of the two marks, for example, are the marks identical or merely similar; and, 2) what goods or services are the marks associated with. The more similar the marks, and the more related the products or services of the two marks are, the more likely a court will find a likelihood of confusion and enjoin the offending party’s use of the mark.

Should your prevail in a trademark infringement action, you are entitled to some or all of the following remedies: 1) injunctive relief to enjoin the other party from using the mark; 2) profits the opposing party made as a result of its use of the infringing mark; 3) monetary damages you sustained as a result of the infringing party’s use of the mark; and, 4) the costs you incurred in bringing the infringement action. In addition, a court may award treble (triple) damages if there is a finding of bad faith on the part of the offending party.

Why a Single Member LLC Needs an Operating Agreement

Wednesday, October 6th, 2010

Maryland law does not require that a sole member limited liability company (“LLC”) have an existing, enforceable operating agreement on file. Nevertheless, there is an excellent reason to draft and execute one: by executing an LLC operating agreement, the single member of the LLC has drawn a line of protection guarding that person against personal liability for the business debts and obligations of the LLC.

Specifically, Maryland courts have held that the protection from liability that exists by virtue of the LLC’s formation can disintegrate if the LLC fails to observe certain corporate formalities. One of these formalities is the existence of a valid operating agreement. Having an operating agreement in place can protect the single member from liability when a third party attempts to sue the individual member in order to satisfy an obligation resulting from a debt of the LLC.

Without an operating agreement, it may prove more difficult for the sole member to avoid liability. Courts sometimes blur the line between a sole member LLC with its protection from liability for its individual owners, and a sole proprietorship where such protection does not exist. However, this line becomes more clear cut, and courts will as a result hesitate to “pierce the corporate veil” and hold an individual liable for the LLC’s debts, when corporate formalities like having an operating agreement are complied with.