So Sue Me: The Most Common Ways Companies Enter Litigation

    GavelThere are seemingly endless ways a company can find itself dealing with legal issues and more particularly in a situation where litigation is involved. Here are some of the most common ways it is likely to occur.

    Claims made by employees
    Employees are a big source of potential litigation. You should  have an employee handbook that sets forth policies on issues central to the employer-employee relationship, such as confidentiality, discrimination and harassment, overtime rules, employee absences, sick leave, vacation time, and other employer rights and employee benefits. This is especially true if you have 15 or more employees, because certain specific federal laws apply to such businesses.

    Policies should be simple and clear, and all managers/supervisors should be intimately familiar with them. Moreover, these policies must be applied consistently. While it will not totally eliminate them, operating your business so that your employees abide by and adhere to provisions of the handbook will greatly reduce the likelihood of employee-initiated lawsuits.

    Buying inventory and selling products
    Terms and conditions of buying and selling should be an area of focus. Your purchase and sales order forms should be reviewed and revised by an attorney periodically to ensure that the terms and conditions give you critical advantages if a dispute arises with a customer or supplier. At a minimum, the terms and conditions that you want to review include terms on payment, risk of loss and warranties. Without certain essential terms, if a dispute arises, an attorney will only be able to work with the documents available at the time of the transaction.

    In addition, requiring that the other side litigate all disputes in your jurisdiction (a “choice of forum” provision) will likely reduce lawsuits against your company. At the very least, such provisions will limit the amount of money you expend on a lawsuit. Additionally, a provision to have the case tried only before a Judge (instead of a jury) or an arbitration provision may also limit the time and money typically necessary for litigation.

    Finally, if you have to pursue amounts owed to you, make sure that your forms allow you to recover your costs of collection, including, but not limited to, attorneys’ fees.

    Intellectual property protection and use
    Pay close attention to protecting intellectual property. You do not get the right to do business under a particular name just by incorporating or filing a name registration in your state. The only way to properly select and protect a name is through a trademark search and registration with the U.S. Patent and Trademark Office.

    Your company’s name is not likely its only valuable intellectual property. Patents protect those who invent or discover new processes, machines, manufacturing methods, or any new or useful improvement thereof. Trademarks protect words, names, symbols, sounds and even colors that distinguish goods and services from those manufactured or sold by others. Copyrights protect original works of authorship. Patents and trademarks are registered with the U.S. Patent and Trademark Office. Consider the intellectual property your business uses and seek to register it as early as possible to avoid problems.

    Prevention is better than cure
    It’s a very old adage, but it applies as equally to legal matters as it does to medicine. If you prefer a sports metaphor instead, “the best defense is a good offense.” Bruce Lee referred to this as “the art of fighting without fighting”.

    You must plan now to reduce disputes later. Disputes can take all shapes and sizes. If you involve an attorney early for proper planning and documentation for all aspects of your business, it will help you focus on what you do best – making money through your business.