New Laws for Animal Trusts

Effective October 1, animal owners can create legally enforceable trusts to ensure the continued care of their dogs, cats, horses or other animals they own. Such trusts were being created even before the Maryland legislature acted in its most recent session; however, those were honorary only. The new statute provides for enforceability.

Under the statute, a trust may be created to provide for the care only of animals that are alive during the lifetime of the maker, or “settlor”, of such a trust. The settlor can set up the trust during the settlor’s life or through a will that makes the trust effective upon the settlor’s death. Either way, the trust should appoint a trustee, who holds the trust assets for the benefit of the animal, and a caregiver, who continues the care of the animal. The trust would terminate upon the death of the animal, or the death of the last surviving animal if more than one animal is a beneficiary. Upon termination, any trust assets remaining would be distributed to human successor beneficiaries as directed under terms of the trust.

The new statute also provides for courts to determine if any animal trust is funded beyond what is required for the animal’s care as envisioned in the trust. This means human beneficiaries of a settlor’s will, disappointed by the diversion of part of their inheritance to the care of the animal, may challenge the funding of the trust as excessive. For that reason, the trust should be drafted to state a detailed array of care for which trust funds may be expended. For example, a trust may authorize paying for maintenance of the fences of the pasture where a horse beneficiary romps, medical insurance, or continuation of any training or racing regimen to which the horse may be accustomed. The trust may provide further that its assets may be applied to the defense of any such legal claims. By making clear the scope of care intended, the settlor reduces the opportunity for challenges to trust expenditures.

Any concerned about ensuring continue care of a beloved animal should consider an animal trust. For more information on this topic, please contact Jay Merwin at merwin@bowie-jensen.com.

Risk of Personal Liability for Owners of Corporations and LLEs

Although corporations and limited liability entities (LLEs) are valuable tools for shielding their owners from many types of personal liability, it is important for owners to be mindful that corporations and LLEs do not extinguish all risk of personal liability.

Despite the general shield against personal liability provided by corporations and LLEs, their owners can still be held personally liable:

· for their own personal obligations (such as personally guarantying the performance of corporate or LLE obligations);

· for their own tortious or unlawful acts relating to the corporation or LLE’s business;

· for failing to withhold or pay federal or state income tax and other employment-related taxes (see this IRS publication about employment taxes and this webpage about Maryland income tax withholding);

· for failing to collect and remit state sales and use taxes (see this webpage about the Maryland sales and use tax);

· under certain laws that expressly impose liability on business owners (such as the obligation to use property received from the entity upon its dissolution for the purpose of paying the entity’s outstanding debts); and

· when using a corporation or LLE as a mechanism for perpetrating a fraud.

For more information, please contact Jeremy Garner at garner@bowie-jensen.com.

The importance of correctly worded NDAs

A trade secret is any process, method or other information that is kept reasonably secret and if known to a competitor, would give that competitor an advantage. In regular commerce, you often have to disclose trade secrets to develop, team, expand, or otherwise commercialize your products. It is critical that in making that disclosure, you obtain a properly worded Non Disclosure Agreement – and a recent case makes this point even more clear.

In Nova Chemicals, Inc. v. Sekisui Plastics Co. LTD. a trade secret holder licensed technology, but included a clause in the agreement that the obligation to keep the information disclosed confidential would expire in a defined period. The court held not only that the trade secret expired as between the parties on the date the obligation terminated, but also discussed that the trade secret itself was destroyed upon entering into the agreement defining the period when its confidentiality would terminate. This can cause grave damage to a company that relies on trade secrets. For example, trade secrets are often the basis of many employee restrictive covenants, and most confidentiality agreements except out “publicly known” information. Thus one small mistake can cause a catastrophic loss of intellectual property rights, as it did in the Nova case.

The Nova case also is a painful reminder that if a license agreement is not worded correctly, a license may last in perpetuity without a corresponding royalty payment (the Nova case noted that the parties can agree to continue making royalty payments even on expired trade secrets, but that using language that a license is “fully paid up” can be ambiguous and result in a determination that there was not intent to continue royalties after expiration of the validity of the intellectual property). Please contact Mike Oliver at oliver@bowie-jensen.com if you have questions about this issue.

Benefits of Copyright Protection

Copyrights are often considered the stuff of musicians, music companies, authors and movie studios, but your business may have material that could be copyrightable. If your business has created software programs, employee training manuals, or even advertising materials, those programs and materials may be copyrightable under federal law.

You are not required to obtain a copyright registration to be entitled to copyright protection. Copyright protection attaches to an original work the moment it is fixed in some medium; however, there are several benefits that come with registration that would not be otherwise available, and are worth the minimal expense of obtaining. Registration creates a public record that constitutes public notice the work is protected, which may deter others from copying the work without permission. In addition, registration is a prerequisite to bringing a copyright infringement lawsuit. A party may sue as soon as it registers its work, even if registration occurs after the infringement began. However, timely registration (generally within 90 days of publication or prior to the infringement) entitles the copyright holder to certain enhanced legal remedies against infringers, such as statutory damages (a set amount per infringement) and attorneys’ fees. In cases where a timely registration is not made, the copyright holder is limited to actual damages and profits, which can be difficult and expensive to prove.

For more information, please contact Kimberly Grimsley at grimsley@bowie-jensen.com.