LSB 3213: FINAL EXAM
114 Cards in this Set
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Intellectual Property (IP)
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any property that results from intellectual, creative processes; often thought of "monopoly rights" over someone's original product.
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Intellectual Property's Purpose
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promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Investors the exclusive right to their respective Writings and Discoveries.
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Copyrights
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protect literary or artistic production.
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How many years do Copyrights give protection to the author's work?
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70 years of protection plus the life of the author.
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Copyright Authors are protected against:
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-Reproduction of the work
-Development of derivative works
-Distribution of work
-Public display of the work
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Is Copyright Registration required?
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No, registration is not necessary.
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What is protected under Copyrights
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-Literary works
-Musical works
-Dramatic works
-Pantomimes
-Dances
-Pictorial, Graphic and Sculptural works
-Motion Pictures
-Architectural works
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What is NOT protected under Copyrights
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ideas: one can reproduce the underlying idea of the work, the actual expression of the idea is what is protected.
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Copyright Exceptions
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-Fair Use Doctrine
-First Sale Doctrine
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Fair Use Doctrine
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one can reproduce a work without paying royalties is the reproduction is considered fair use.
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Fair Use Doctrine Factors
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1. The purpose and character of the use, including whether such use is of a commercial nature or is for non-profit educational purposes.
2. The nature of the copyrighted work.
3. The amount and sustainability of the portion used in relation to the copyrighted work as a whole.
4. The …
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First Sale Doctrine
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One who purchases a copyrighted good is allowed to sell, give away, or transfer it to anyone else, regardless of the copyright holder's wishes. A copyright owner may no longer control the distribution of their good once it's sold.
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Trademark
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a distinctive mark, motto, device, or implement that a manufacturer scans, prints, or otherwise affixes to goods it produces so that they can be identified on the market.
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Lanham Act
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gives trademark holders cause action over "trademark dilution".
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Trademark Dilution
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similar to another trademark.
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Patents
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a grant from the government that gives an inventor the exclusive right to make, use, or sell his/her invention.
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Patent Period Time
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20 years.
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How to Receive a Patent
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one must demonstrate to the satisfaction of the US Patent Office that an invention, discovery, process, or design is novel, useful and not obvious in light of current technology.
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What is Patentable?
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"whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent."
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Patent Infringement
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making use of another firm's patent design, product, or process.
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Patent Infringement Exceptions
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a patented product is made and produced in a different country.
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Patent Exhaustion
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one who purchases a patent good has the right to distribute it.
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"One of the most common, important, and pervasive legal relationships is that of ________."
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Agency
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Agency Relationship
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involving two parties where one of the parties, the agent, agrees to represent or act for the other, the principal.
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________ has the right to control the Agent in specific matters.
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The Principal
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________ are essential to business. Only through _______ could corporations ever act.
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Agents, Agents.
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T or F: Most employees are considered agents to their employers.
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True.
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The agent owes ___________ duties to the principal.
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Fiduciary
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Fiduciary Duties
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one party is legally required to act in the other party's best interest.
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A Principal is bound by an Agent's actions is the Agent has:
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1. Actual Authority
2. Apparently Authority
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Apparently Authority
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the Principal puts the Agent in a place where others would reasonably believe the Agent has Actual Authority.
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Employer-Employee Relationship
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employees are generally considered agents because they can bind their employers. Ex. A car salesman can bind a car dealership to contracts and sales.
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Independent Contractors
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-not employees and typically do not owe Fiduciary Duties.
-employers do not control the way in which an Independent Contractor performs his/her job.
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Determination of Employee Status Factors
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1. How much control does the employer exercise over the details of the work?
2. Is the worker engaged in the business of the employer?
3. Is the work typically done by a specialist without supervision?
4. Does the employer provide the supplies?
5. For how long is the worker employed?
…
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Tort Liability
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employer's are generally responsible for torts committed by employees during the scope of their employment, but not for contractors.
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Copyright Owner
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contractors retain the copyright on goods producers, whereas employers received the copyrights for items produced by employees.
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T or F: Agency relationships are typically consensual, created by a voluntary verdict.
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True.
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Agency by Agreement
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-most ________ are the product of a contract
-relationship can be implied by conduct
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Agency by Ratification
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if one approves or affirms a contract or other transaction made on their behalf by a non-agent, that person ratifies the transaction.
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Agency by Operation of Law
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in some areas, the law declares people to be agents.
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Primary Duties
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-Performance (Duty of Care)
-Loyalty
-Obedience
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Performance (Duty of Care)
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the duty to use reasonable skill in performing work.
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Loyalty
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-must act solely for the benefit of the Principal.
-cannot represent two Principals who's interests conflict.
-may not engage in "self-dealing" or benefitting themselves at the expense of an agent.
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Obedience
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must follow all lawful and clearly stated instructions.
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Agent Liability
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an Agent is liable for damages arising from breaching one's duties.
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Principal's Duties
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1. Compensation
2. Indemnification
3. Cooperation
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Indemnification
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legally protects an Agent in the case the are sued for acts arising out of their Fiduciary relationship.
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Cooperation
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must not frustrate the Agent in performing work on behalf of the Principal.
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Corporations
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fictitious entities, created by a statute.
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Legally Distinct
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each company, even if one is a wholly owned subsidiary (meaning it is completely owned and run by a parent company), is considered _________.
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Shareholders
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owners of corporations; they own share (or 'stock'), which represents their ownership interest.
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A Corporation enjoys the legal rights of a _______ in many respects. Ex. Being free from illegal searches.
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Person
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Corporation's Board of Directors
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responsible for running the Corporation.
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Board of Directors
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-elected by the Shareholders
-hire officers to conduct much of the business
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Shareholder's Attributes
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-have little ability to conduct a corporation's business.
-can sue a corporation and also can sue on behalf of the corporation.
- _______ liability is limited from the corporation's liability (unless a court pierces the corporate veil).
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Incorporation Steps
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1. Select a state of Incorporation
2. Choose a corporate name
3. Draft articles of Incorporation
4. File the articles with the State of Incorporation
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Corporate Formation
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-one is liable for all pre-incorporation contracts.
-articles must state the number of shares of stock a corporation is authorized to issue.
-corporation must list it's purpose which most states allow to be "any lawful purpose".
-most information about the ways a corporation is to be…
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Corporate Liability
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-Shareholders are not liable for their corporation's bad acts.
-a corporation can be liable for the acts of its officers.
-a corporation can be held liable for criminal acts.
-under certain very limited circumstances, one who controls a corporation can be sued for bad acts committed by…
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Piercing the Corporate Veil
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one who controls a corporation can be sued for bad acts committed by the corporate firm, essentially happens when one uses the corporate firm in order to almost fraudulently avoid liability.
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Piercing the Corporate Veil Factors
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-a party is tricked into dealing with the corporation rather than the individual.
-corporation is undercapitalized, never intended to make a profit.
-corporation is formed to evade legal obligations.
-statutory formalities are ignored.
-personal and corporate assets are commingled.
…
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Corporate Financing
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Bonds and Stock
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Bonds
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-debt
-a corporation borrows money and issues a bond to the lender stating the terms of repayment.
-bonds are freely transferrable.
-bonds have few rights other than the right to payment.
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Stock
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-equity
-ownership of the company.
-often have other rights, such as voting rights and the right to sue the corporation.
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T or F: When a corporation earns money, it CANNOT redistribute it to the shareholders as dividends or retain it as profit.
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False.
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Double Taxation
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corporation must pay taxes on its revenue, as well as the shareholders when they receive the profits.
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Holding Company
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a business entity, created by a US corporation, and incorporated in a low tax jurisdiction to avoid US taxation on certain profits.
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Publicly Held Corporation
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stock of a public corporation can be purchased freely over public exchanges, such as the New York Stock Exchange or Nasdaq.
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Privately Held (or closed) Corporation
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no public market: a person can sell their shares, but it's much more difficult.
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Nonprofit Corporation
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-formed under an IRS code to promote a charitable objective.
-nonprofit corporations may not pay dividends on profits made, but may pay competitive salaries upfront.
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Benefit Corporation
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a for-profit corporations that also pursues some socially beneficial purpose.
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Business Associations
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Directors, Officers, and Shareholders
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Directors
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the ultimate authority in every corporation.
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Rights of Directors
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1. Participation
2. Inspection
3. Indemnification
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A Director can be removed for "cause" by a ____________
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Shareholder vote
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Directors and Officers are ________ of the corporation because their relationship to _________ is one of trust and confidence.
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Fiduciaries, Shareholders
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Duty to Make Informed Decisions
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must be informed on corporate matters and conduct reasonable investigations: this requires meeting attendance, seeking information, and reviewing other relevant materials.
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T or F: A Director's dissent must be entered into the minutes or else face liability if liability arises from the act.
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True.
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The Business Judgement Rule: The Standard
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1. Directors and officers are expected to exercise due care and use their best judgement.
2. Under the "BJR", a corporate director or officer will not be liable to the corporation or shareholders for honest mistakes of judgement and bad business judgements.
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Business Judgement Rule applies to Directors and Officers when:
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-took reasonable steps to become informed on a matter.
-had a rational basis for the decision.
-did not have a conflict of interest with the underlying transaction.
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Duty of Loyalty
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Directors cannot use corporate funds or confidential corporate information for personal advantage and must remain from self-dealing.
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Typical Violations of Duty of Loyalty
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-competing with the corporation.
-unsurping a corporate opportunity.
-pursuing an interest that conflicts with that of the corporation.
-using information that is not available to the public.
-authorizing a corporate transaction that is detrimental to minority shareholders.
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Conflict of Interest
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Directors are forbidden from operating businesses that compete with their corporation. If a corporation enters into a contract in which a Director has a personal interest, the director must make full disclosure and must abstain from voting.
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Shareholders Responsibility
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1. Have no responsibility for the daily management of the corporation.
2. Chooses the Board of Directors.
3. Approval is required for certain substantial transactions.
4. Hold meeting at least annually.
5. Dividends
6. Inspection Rights
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Shareholder approval required for certain Substantial Transactions:
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-amend the articles of incorporation or bylaws.
-execute a merger or dissolve the corporation.
-sell substantially all of the corporation's assets.
-vote on the board of directors.
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Inspection Rights
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have the right to inspect books and records, but must have a proper reason to inspect the books.
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In some instances, a majority shareholder owes fiduciary duties to minority shareholders. This typically only occurs in ___________ Corporations.
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Closely Held
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Shareholder Derivative Suit
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if a corporation is hurt by a third party, the directors can bring a suit on behalf of the corporation: if the directors fail to bring suit, the shareholders can "derivatively" bring a suit against the third party.
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Before Shareholders can bring suit, they must make a __________ to the Directors to bring a suit.
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Written demand
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Shareholder Derivative Suit Factors
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1. Any harm which Shareholders suffer collectively as a group must be brought as a ____________.
2. Commonly used to sue the Directors.
3. Can directly sue when they allege a harm that is unique to them and is distinct from the other Shareholders.
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Partnerships
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arises from an agreement, implied or expressed, between two or more persons to carry on a business for profit.
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Partnerships are primarily governed by _________ law, particularly __________ law.
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Common, Agency
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T or F: Each partner is deemed to be an Agent and Principal of the other.
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True.
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T or F: A partnership is NOT a distinct legal entity.
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True, instead it is an aggregate of the individuals belonging to the partnership.
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Essential Elements of a Partnership
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-a sharing of profits and losses
-a joint ownership of the business
-an equal right to be involved in the management of the business.
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Partnership Tax Treatment
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-a partner is taxed regularly for their profits.
-a partnership is a pass through entity, meaning that the partnership entity does not pay a separate corporate tax.
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Formation of Partnerships
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can be written, oral or implied.
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Articles of Partnership
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a partnership agreement and can include almost any terms the parties want.
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Rights of Partners
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-unless otherwise specified, all partners have the equal right to manage.
-unless otherwise specified, each partner has one vote in management matters regardless of the size of their interest.
-majority rules unless it is a significant decision, then the partners must vote unanimously.…
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Matters that Require Unanimous Votes
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1. Changing the essential nature of the business.
2. Adding partners.
3. Amend the partnership agreement.
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T or F: Each partner is entitled to the partnership's profits equal to their interest.
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True.
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Fiduciary Duties of Partnership
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1. Duty of Care
2. Duty of Loyalty
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Partnership: Duty of Care
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must refrain from "grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of the law".
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Partnership: Duty of Loyalty
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-must not compete with partnership.
-must not misses partnership property.
-must not disclose trading secrets.
-or usurping a partnership business opportunity.
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Partnership Liability
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partners are personally liable for the debts of the partnership, liability is essentially unlimited. Ex. Third party can sue partner A for the acts of partner B.
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Buy-Sell Agreement
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agreement determining how assets will be distributed upon a partnership's dissolution.
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Limited Liability Partnerships
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created under a state statute, enjoys pass through taxation (meaning that the partners of the ________ are taxed for their profits, but the _________ itself is not taxed).
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Limited Liability
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one may only sue the partner committing the wrongful act, but not the other partners personally.
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LLP Formation
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must file certain paperwork with the state.
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Limited Liability Company
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hybrid that combines limited liability aspects of the corporations and the tax advantages of a partnership. (preferred structure for most small businesses)
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LLC Formation
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1. Legal entities separate from their members ( ______ have members not shareholders).
2. An organizer must file an Articles of Organization with the state.
3. A ______ is a citizen of the state in which it was formed and maintains its principle place of business.
4. Enjoys pass throu…
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LLC Management
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can either be "member managed" or "manager managed", meaning that the owners of the LLC can run the company or the can use third party directors (managers).
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LLC Operating Agreement
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- ________ can be designed to be operated in almost any way, essentially acts like a contract among the Members.
-not necessary for LLC to exist.
-State statutes fill in the gaps.
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Dissociation
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-Voluntary
-Expulsion
-Court order
-Incompetence/death
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Dissolution
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members can stipulate the conditions that dissolve an LLC.
-a court can overrule a dissolution.
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LSB 3213: FINAL EXAM