Keeping your competitive advantage means protecting your intellectual property. (Note: This article is copyrighted. But feel free to use all or part of the information.)
By Ava K. Doppelt / Allen, Dyer, Doppelt, Milbrath & Gilchrist, P.A.
If your business has unique products or services that set you apart from your competition, you should do everything you can to protect and enforce your rights in those products. At the same time, you also should avoid stepping on someone else’s rights.
In other words, get to know as much as you can about intellectual property, or IP.
Intellectual property refers to certain types of intangible creations of the mind in which the owner has exclusive rights, such as literary, musical and artistic works, inventions and discoveries, as well as brand names and logos. Although many of the legal principles governing intellectual property have evolved over centuries, it wasn’t until the 19th century that the term intellectual property was first used. Intellectual property is protected through the law of copyrights, patents, trademarks and trade secrets. Most countries have their own laws and procedures for protecting intellectual property.
Essentially, if someone infringes on your protected intellectual property, or exposes your trade secrets, you may have the right to sue to protect your rights.
Copyright: a form of protection provided to owners of "original works of authorship," including literary, dramatic, musical, artistic, architectural and certain other types of original works. Copyright is generally thought to have been invented after the advent of printing press and has origins in Great Britain. The Statute of Anne (1710) was the first law to protect copyright as a matter regulated by the government and courts, rather than by private parties. The copyright clause of the U. S. Constitution authorized copyright legislation: "To promote the Progress of Science and Useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." The Library of Congress registers copyrights, which generally last for the life of the author plus 70 years.
Patent: an exclusive right granted to anyone who invents any new, useful and non-obvious process, machine, article of manufacture, or composition of matter, or a new and useful improvement, and who claims that right in a formal patent application. Patent protection is also available for new product designs and certain plants. Most types of patents last for 20 years from the date they were filed. A patent gives its owner the ability to seek an injunction through the federal court system to stop an infringer from making, using or selling the patented invention during the term of the patent.
Trademark: any word, name or symbol adopted and used by a manufacturer or merchant to identify its goods or services, and distinguish them from the similar goods or services of others. A trademark consists of words, slogans, designs or a combination of these elements. A trademark may be designated by the following symbols: ™ for an unregistered trademark or ® for a trademark registered in the U. S. Patent and Trademark Office.
Service mark: The term "trademark" is a general term that can be used to cover marks applied both to goods and services. When a distinction is made, the term "service mark" is used to refer to marks used for services, such as a restaurant or a theme park, as opposed to goods. An unregistered service mark can be designated by SM.
Trade secret: any valuable information that isn’t generally known, and which businesses keep private to give them an advantage over their competitors. For example, customer lists, marketing plans, instructional methods and pricing policies can be trade secrets. A trade secret can also be a combination of publicly known data that’s been collected through the efforts of the owner and provides a competitive advantage. A company can protect its confidential information through non-compete and non-disclosure contracts with its employees. However, this doesn’t protect against the use of trade secrets once they become known, nor does it prevent independent discovery.
One other note: While these basics are a good start, it's also important to find dynamic, effective and experienced intellectual property representation from the beginning. Be smart with intellectual property.
A year-round approach to the year-end audit can save time and money while reducing stress and headaches.
By Michael Kosinski / CliftonLarsonAllen LLP
Spring is here, but for most controllers and chief financial officers, life boils down to just two seasons: the year-end audit and every other day on the calendar. Although this time of year falls within the cherished audit off-season, finance executives would be wise to use this lull to prepare for the audit itself.
If transforming your year-end audit into a year-round exercise sounds about as fun as reading the tax code or getting your teeth pulled, consider that oiling the audit machine now will make the entire process smoother and more cost-effective down the road. Even better, it can help you leverage what could be just another compliance function into something truly advantageous for your organization.
I advise taking a three-pronged strategy for gearing up in advance and deriving the most benefit from your annual audit—both in cost and value.
1. Spend a few dollars now to save money later. Overcome your fear of the billable hour. Many CFOs and controllers I talk to are reluctant to call their CPA when questions and unusual situations arise, because they worry they’ll be charged for the time. Instead, they wait to address these issues during the audit—when CPAs are onsite anyway—thinking it will spare them the extra expense. All too often, however, these issues don't get addressed in sufficient detail because of audit deadlines and time pressures.
Most CPAs I know won’t charge you for an incidental phone call here and there, and include them as part of the overall audit package. When deeper consultation or research is called for, they’ll typically give you an estimate before moving forward with any out-of-scope work.
Consider how planning and interim work, if completed onsite now, will shorten the final year-end phase. You’ll have a more efficient audit—and be able to work on other issues that impact your organization. Two areas to look at:
Your job schedule and indirect cost allocations. You can reduce the time spent completing the job schedule for items such as excluded indirect costs at the end of the year, rather than during the audit, when there often isn’t enough time to allow the internal accounting staff to research the issues.
The document request list. Work with your auditor to determine a format that is easy for you to complete. This may be by audit section, if your books are completed in time for the auditors, or in chronological order, if they aren't yet finished.
2. Modify your closing process. Once the audit is complete, be sure to review the internal control suggestions and look for opportunities to improve your procedures. Analyze the prior year’s adjustments and reread the management letter for insights on closing. Discuss the methodology your auditor used to come up with the adjustments.
Consider using the auditor’s schedules in your closing process to provide more accurate interim financial information to management and reduce the time needed to close your books. I’ve had clients spend a lot of time and effort attempting to copy changes I made, when they could have simply asked for my work paper. You can also review your closing schedules for calculations that are particularly cumbersome. Perhaps your auditor has taken a more basic approach and can give you a calculation for simplifying your month-end closing.
3. Do your own legwork. Being prepared for your audit can help reduce fees. For instance, your administrative staff should gather your invoices, and prepare confirmations and legal letters in advance. Incorporate schedules supporting the footnotes into your closing process and coordinate schedule preparation with your auditors so they align with your closing. This will reduce the time auditors have to spend preparing schedules. Review the footnotes for schedules that you can prepare internally as well.
You may also want to prepare easy schedules, such as lease and loan maturity. Clients who organize their own information generally know more about their financial statements. As a result, they need to discuss fee increases with auditors less frequently. When a client has all the audit information ready and has no significant proposed adjustments, we can spend the extra time discussing their operations, rather than trying to put together schedules from source documents.
Better preparation will yield more accurate financial information, help control costs and create a less intrusive audit. By taking these three steps, you can convert your annual audit from a distraction to a powerful exercise in operational efficiency. The trick is to shift your thinking from the audit as a singular activity to a year-round process and make the “offseason” work in your favor.
The Compliance Challenge
By Benjamin S. Lupin / Corporate Synergies Group LLC
Why is health and welfare plan compliance such a challenge for employers?
That's an easy question. Benefits rules and regulations are constantly changing and developing, and these complexities make it understandably difficult for many employers to stay on top of details. There is a risk of legal liability and fines associated with being unaware of certain compliance obligations, errors and failure to meet filing deadlines, which means noncompliance isn’t just a human resources issue—it can have implications for an entire organization. In fact, in addition to the employer’s risk of audits, as well as lawsuits and fines, certain employees who have direct involvement with benefits plans can face personal fines.
Failure to comply with rules and regulations can also jeopardize the health plan’s tax-favored status, forcing certain benefits to become taxable, which defeats one of the primary benefits of providing the plan in the first place. As a result, it's in an employer’s best interest to be proactive by reaching out to the benefits broker, consultants and insurance carriers for advice and support. The reality is that noncompliance with laws and regulations always comes back to the employer.
The first step is an internal compliance assessment to determine if the current process meets all regulatory obligations. Begin by identifying all communications, documentation, filings and other requirements that pertain to the benefits plan. Review each component to confirm compliance with all applicable requirements. The assessment should address annual employee notices, such as HIPAA, whether the employer’s plan documents are in order, filings are meeting deadlines, etc. Developing a continuing dialogue with the benefits broker helps ensure the employer understands and meets each compliance obligation. Look for the broker to deliver a compliance report card that includes a series of questions on every plan in the employer’s offering and for all employee groups in each plan.
A main cause for confusion is filing the Form 5500, a Department of Labor document that assures employee benefit plans are operated within certain standards and that participants and beneficiaries have access to information to protect their rights and benefits. Employers want to know if they are required to file a Form 5500, what the filing rules entail, when to file, potential filing extensions and so on. The benefits broker should advise the employer about all Form 5500 filing rules, because compliance regarding this document is an important obligation.
Employers with fewer than 100 employees at the beginning of a year don’t have to worry about the filing, but organizations with more than 100 employees must file. If a Form 5500 hasn’t been filed, employers can bring their filings up to date using the government’s Delinquent Filers Program. While there is a penalty for filing late through the program, the fine is typically smaller than failing to comply and getting caught in a government audit.
Confusion can also surround requirements for maintaining plan documents in order to comply with the Employee Retirement Income Security Act, or ERISA. Nearly all health and welfare plans are ERISA-covered plans, so a formal plan document is required for employer-sponsored plans that cover two or more employees. The employer must also maintain a Summary Plan Description (SPD), a plain-language summary of what is typically a technical plan document. An SPD must be in place for all employer-provided plans and available to any participant or beneficiary who asks to review them. The SPD must also be distributed to participants. ERISA documents and SPDs aren't filed with the government; they’re for day-to-day plan administration. But if an employer can’t produce these documents during a government audit or upon request, there are penalties involved and the potential for employee lawsuits.
To protect its clients from compliance issues, the benefits broker should routinely provide summaries of changes in the laws and regulations. This sharing of information is the foundation of maintaining a good relationship between the employer, benefits broker and third parties, such as carriers. If the employer’s broker conducts an onboarding compliance assessment, it’s important to revisit every topic on the assessment every two to three years. Why? Regulations change all the time. The benefits broker and other service providers should alert the employer to all revisions and provide information on the impact of these changes.
Finally, what are important issues employers should keep an eye on?
No. 1 is healthcare reform. With all the new rules and developments, that’s the elephant in the room. Employers, regardless of their size, are obligated to stay informed and react to changes that affect their benefits plans. Sometimes employers don’t know that an aspect of healthcare reform pertains to them, and this can lead to noncompliance.
Annual notices are another issue. It’s critical to remember there are certain required notices that must be provided annually to employees. Some topics that require annual notices include COBRA, HIPAA and Medicare Part D. The employer is required to provide these notices to every employee each year, and open enrollment is a good time to distribute the documents. Noncompliance with HIPAA notice regulations, for example, brings risks of fines and lawsuits that can impact the employer and certain employees involved with the administration of the benefits. There can be per-day penalties for each day the employer fails to provide the notices, and all it takes is one disgruntled employee to create an issue.
A third important issue is the “benefits information glut.” The key to handling the constant stream of compliance information is not to be afraid to ask the benefits broker or carrier for clarification. There are no stupid questions when it comes to compliance. It’s better to ask for support now, than not to ask at all and pay later.