Posts by Lloyd & Mousilli

For immediate release

Houston, Texas - March 3, 2024- 

Lloyd & Mousilli has been ranked in Chambers USA Regional Spotlight Guide and recognized as a leading small to medium-sized law firm offering a credible alternative to Big Law.

Lloyd & Mousilli was selected based on an independent and in-depth market analysis, coupled with an assessment of its experience, expertise and caliber of talent. Lloyd & Mousilli was recognised for the strength of its work in Intellectual Property.

Managing Partner, Feras Mousilli, commented “From its inception, Lloyd & Mousilli has championed the strategic value of intellectual property as both a sword and shield for its clients. We are grateful to be recognized for the quality of work and unique expertise we bring to the table.”

Background to Firm

Lloyd & Mousilli is a boutique law firm specializing in intellectual property and technology law. From its founding over a decade ago, headquartered in Houston, Texas, Lloyd & Mousilli has championed the strategic use of intellectual property.

Lloyd & Mousilli intentionally developed a team of subject matter experts to lead its intellectual property practice groups. This expertise is demonstrated through:

• 25 years of experience as a trademark examining attorney with the USPTO;
• Board certification in intellectual property law with almost two decades of exclusive patent prosecution practice;
• Niche expertise in technology licensing;
• In house counsel for enterprises such as Apple, Dell and Dolby Laboratories;  and 
• Fulbright Specialists in intellectual property and technology commercialization.  

Intellectual property counsel at Lloyd & Mousilli earn their seats at each clients’ table. For more information, please visit lloydmousilli.com. 

Background to Chambers and Partners

Chambers and Partners has over 30 years of US research in the Legal Market and is therefore uniquely placed to identify markets where there are a significant collection of leading smaller firms. Chambers is on a mission to uncover the best legal talent wherever it may be, starting with shining a spotlight on Texas.

The state of Texas, home to five of the top fifteen US cities by population, is a thriving market with a number of distinct and growing legal centers. 

Through Regional Spotlight Texas 2024, Chambers and Partners has continued to delve into the rich seam of talent on offer,  building on their existing list of the top small firms in Texas that can effectively and efficiently meet in-house counsel needs.

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The Digital Millennium Copyright Act of 1998

The federal government implemented the Digital Millennium Copyright Act of 1998 (“DMCA”) to protect those that use copyrighted material in a digital format. This provides significant liability protection for those who host interactive online media.

‍Service Providers 

“Service providers” are especially vulnerable to infringement. The DMCA defines a service provider as “an entity offering the transmission, routing, or providing of connections for digital online communications, between or among points specified by a user, of material of the user’s choosing, without modification to the content of the material as sent or received” and “a provider of online services or network access, or the operator of facilities therefore.”

Safe Harbor Protection

Unfortunately, copyright infringement is still valid even if you did not know the work was copyrighted. This is because the DMCA highlights this exact problem, and the responsibility of obtaining Safe Harbor protection is solely on the owner of the platform. It is especially important to apply for this protection if you do not know if your website has copyrighted material.

The DMCA protects work that is primarily displayed by service providers, which means your platform could be at risk for infringement without this protection. Copyrighted material on a website can include stock images, music, photography and others of the like. 

The good news is that applying for Safe Harbor protection is quite simple. To achieve this, you’ll need to create a DMCA Designated Agent account and assign a registered agent. A registered agent can be anyone of your choosing, so once you’ve selected an agent, you can click on the following link to set up an account: https://dmca.copyright.gov/osp/p1.html. Once registered, your platform is immediately covered under Safe Harbor protection. This is an easy step to take to prevent an infringement headache waiting to happen. 

Having trouble with copyright infringement?

Schedule a free consultation with Lloyd & Mousilli to discuss how to avoid committing infringement as well as how to protect yourself from infringers.

Geoffrey the Giraffe is casting an ominous shadow over one Texas family.

Last summer, almost immediately following the news that Toys “R” Us and Macy’s were teaming up to relaunch the iconic toy store in the U.S., The Toy Book reported on a detour from that forward movement as Tru Kids Brands Inc. — the WHP Global-owned parent of the Toys “R” Us and Babies “R” Us brands — took a step backward and filed a lawsuit against an independent toy store in New Jersey.

At the time, Tru Kids alleged “trademark infringement” as the store, Toys & Beyond, had moved into the space that was previously occupied by one of the two, short-lived Toys “R” Us concept stores that opened in partnership with b8ta in 2019. At the center of the complaint were issues regarding the colorful logo of Toys & Beyond and the reuse of fixtures and signage, including Geoffrey’s Treehouse, Geoffrey’s Magical Mirror, and the Play Around Theater, that were left behind when Toys “R” Us abandoned the space at the Westfield Garden State Plaza in January 2021.

On Oct. 25, 2021, The Toy Book was first alerted to a nearly identical lawsuit filed in Texas against TOYZ, a family-owned toy store that opened nearly 20 years ago. Farida Afzal immigrated to Houston from Pakistan and built a business that eventually grew to include a distribution arm and several retail stores, including a small location on the lower level of Simon Property Group’s Galleria Mall.

In its response to the complaint filed by attorneys at Baker Botts on behalf of Tru Kids Brands, Afzal Ali Enterprises, Inc. dba TOYZ noted that its store peacefully co-existed with Toys “R” Us during the time that both stores were open in the Galleria. According to the response, the scuffle began months after Toys “R” Us closed, when the Galleria landlord offered TOYZ the opportunity to expand into the former Toys “R” Us store.

Nearly a year later, the legal battle continues and it’s begun making headlines as The Houston Chronicle, alongside ABC and CBS affiliates have reported on the story. Meanwhile, a Change.org petition is calling upon WHP Global and Tru Kids Brands to drop the lawsuit, while members of the U.S. and global toy communities, including Richard Derr of Learning Express, MGA Entertainment Founder and CEO Isaac Larian, Toy World Publisher John Baulch, World Alive Founder Amy Holden, and Michael Olafsson of Monkey Fish Toys have taken to LinkedIn to express support for the owners of TOYZ and call for an end to what appears to be legal bullying in a “bleed them dry” campaign.

In Texas, it appears that Judge Charles Eskridge might agree.

On August 23, Judge Eskridge issued a scathing order against Tru Kids Brands and Toys “R” Us.

In the filing, Judge Eskridge denies a motion by Tru Kids to amend its complaint against TOYZ, stating that “the motion itself evinces undue delay and dilatory motive,” and that “the motion could also be considered abusive.”

“Toys ‘R’ Us is trying to shutter a family-owned toy store in an attempt to set a precedent for shutting down any toy store in the country that has a multi-colored logo,” Lema Barazi, lead attorney representing TOYZ for Lloyd & Mousilli tells The Toy Book. “We must — and I am confident that we will — prevail against Toys ‘R’ Us in its malicious tactics of burying small businesses in protracted litigation based on frivolous and overreaching trademark claims.”

And the tactics being used by Tru Kids brands are under scrutiny by the court itself.

Judge Eskridge says in his order that “substantial question exists regarding whether Tru Kids has initiated this action primarily for the purpose of harassing or maliciously injuring a competitor, and whether it is using the law’s procedures only for legitimate purposes.”

Tru Kids Brands was ordered “to provide by Sept. 13, 2022, an iteration of all actions it has initiated against any defendant worldwide since acquiring its interest in the Toys ‘R’ Us brand in January 2019, wherein it has alleged claims, as here, of trademark and trade-dress infringement, trademark dilution, unfair competition, or unjust enrichment relating to Toys ‘R’ Us intellectual property,” Judge Eskridge declared.

Attorneys for Tru Kids Brands did file documents to meet the Sept. 13 deadline but they did so in a sealed filing. Ahead of the deadline, The Toy Book reached out to WHP Global/Tru Kids Brands on Sept. 12, but the company did not respond to a request for comment.

While the legal dance continues to play out in court, Toys “R” Us is continuing to open its new store-within-a-store concepts in every Macy’s store ahead of an Oct. 15 completion date. Both the Galleria in Houston and the Westfield Garden State Plaza in New Jersey have Macy’s stores that are set to include Toys “R” Us departments.

Although Toys & Beyond closed its store in New Jersey, the space is currently occupied by yet another toy store: CAMP.

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Established in 2015 and founded by two young, creative entrepreneurs, Instafuel is an innovativecompany that delivers fuel directly to customer vehicles, eliminating the need for consumers tospend time at gas stations. While there are a number of competitors in the mobile fuel deliveryindustry, Instafuel has successfully differentiated themselves by taking several measures to createa unique business model.

Similarly, Booster Fuels is a mobile fueling company that began with an initial business model ofdelivering fuel to single customers. However, recently, Booster Fuels pivoted its business modelto more closely mirror Instafuel’s practices of delivering fuel to commercial fleets.

In 2015, Instafuel engaged with an investment entity interested in a potential businesspartnership. This partnership included the disclosure of trade secrets and confidential informationpertaining to Instafuel’s business model and company practices. In 2019, it was later discoveredthat these investors were strategic investors with Booster Fuels.

After further review, an internal audit and competitive analysis of Booster Fuels’ business modelwas conducted by Instafuel, only to discover that Booster Fuels implemented Instafuel’s sensitiveand confidential information directly into their own business model. This would allow BoosterFuels to secure funding faster and expand into competitive markets ahead of Instafuel.

Shortly after Instafuel filed suit against Booster Fuels in late 2019, Booster Fuels moved to dismiss the claims based on Texas’s Anti-SLAPP statute. In motions filed with the trial court, Booster Fuelsclaimed Instafuel’s suit should be dismissed because it was filed “with the intent to impedeBooster Fuels’ exercise of its First Amendment rights, specifically its rights to freely associate andfreely speak with whomever it so chooses...”

In responding to Booster Fuels motion to dismiss, Instafuel asserted that communicationsbetween co-conspirators to steal confidential and proprietary information was not the kind ofspeech protected by the First Amendment.

The trial court found in favor of Instafuel and denied Booster Fuels’ motion to dismiss. BoosterFuels then immediately filed an interlocutory appeal, effectively staying the entire case. After twoyears, on January 11, 2022, the Fourteenth Court of Appeals issued a decision affirming the trialcourt’s denial of Booster Fuels’ motion to dismiss.

Discontent with the appellate court’s ruling against it, Booster Fuels appealed the appellatecourt’s decision to the Supreme Court of Texas on March 28, 2022.

The latest ruling from the Texas Supreme Court on August 2, 2022 comes as a huge relief toInstafuel’s Co-Founder, Wisam Nahhas. “This has been a very long process and Booster Fuels hastried their best to constantly delay our lawsuit. We hope to see an end to their delay tactics andhope we can get the justice Instafuel deserves.”

Litigation Partner, Lema Barazi, serves as lead counsel in this matter with Feras Mousilli serving as strategic counsel. Llyod & Mousilli is proud to serve as counsel for companies like Instafuel to prevail against egregious and predatory business practices.

Lloyd & Mousilli is a boutique firm specializing in trademark, copyright, trade secret, and patentlitigation and transactional matters and represents numerous startups around the world.

“We are proud to be the law firm clients call on when David is bullied by Goliath-sized companies.Our expertise in intellectual property matters rivals the best in the nation and we arestaunch advocates of protecting small businesses,” said Feras Mousilli, managing partner atLloyd & Mousilli.

Is this photo really free?

School children, college students, and professionals alike have all turned to the internet to find “just the right image” for a project or presentation at one time or another. With tens of thousands of options to choose from, it can be tempting to simply screenshot the one that stands out the most and be on our way…however as one of our recent clients discovered – that can have pretty stressful consequences.

Legitimate Claims

A recent client of Lloyd & Mousilli’s contacted our firm after receiving what at first, she thought was scam correspondence from a copyright enforcement company. The correspondence related to her use of a “stock” image as part of a senior project from her university days…it appeared the owner of the photography she captured from an internet search had hired an enforcement agency to make demand and collect for the unlicensed use of his work. After receiving multiple communications from them, she sought out our counsel for peace of mind that “this was really nothing to worry about.”

Unfortunately for her, after a review, we determined that these were valid infringement claims on behalf of the original photographer. The images had been taken from an internet search and were clearly marked as registered copyrights. Just because an image can be found, does not mean it should be reproduced, even for non-commercial use, such as a school project.

What is a stock photo?

Stock photos, while generally available on the internet, are still pay to use creative works. The fees are typically determined based on type and duration of the intended use. For example, you might wish to run an artist’s photo as the heading on a particular issue of your newsletter and that would come with a fixed cost. If you then decided you also wanted to use the image on your website, it would require another negotiation and payment. All use is considered different and must be contemplated for and agreed to avoid infringement allegations.

What is a royalty free photo?

Royalty free photos typically come from a specific database where a one-time price is paid, and the image is then yours to use however you would like for as long as you would like. When using a royalty free image, there is no residual cost if you decide to increase or vary the way you are utilizing the photo in your projects or presentations.

Exclusivity

The upside to using stock photography lies in the restrictions on their use. If you are planning a marketing campaign and wish to use a specific image – you can negotiate different rates to exclusive use of that image within your geographic area or industry. Before purchasing, you can often ask the agency who else is using the image and for what duration and purpose. This can help avoid duplicative branding, which can hurt the campaign due to confusion even if it’s lawful.

Understanding Photograph Ownership

Before clicking, screenshotting, editing, copying or in any way using a photograph on the internet it is a worthwhile endeavor to figure out who it belongs to. The internet and social media have made circulation and virality of creative work easier than ever before – but with that comes risk. Creators want to maintain control of the work and often may not seek enforcement until much later when potential infringement comes to their attention. This means that just because you may have escaped detection for now, doesn’t mean their may not be artists out their with legitimate claims against you, such as our recent client described above.

Intellectual Property as a Strategy

No matter which side of a copyright controversy you may find yourself, Lloyd & Mousilli prides itself in finding the best resolution possible. It is much easier to proactively make sound decisions such as verifying the owners of creative work before putting it into use or procuring the proper licenses to images.

Already accused of infringement?

If you have already received a cease and desist and demand for damages related to improper use of images– do not delay in reaching out to an intellectual property attorney. The potential damages continue to increase in connection with the length of improper use. In the event you have been wrongfully accused, you will need representation to defend the claims as well. As stated above, these are often legitimate claims and they will not go away on their own.

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Texas has seen an influx of tech giants moving in from outside states, especially over the past year. With affordable real estate and business-friendly tax laws, the Lone Star State, already home to major corporations such as Dell, has become an attractive and lucrative place for HP, Oracle, and Tesla – and new technology startups – to now call home.

Houston, frequently named a top metropolitan area in the country for cultural diversity (by its own Rice University), is itself rich with opportunity for technology companies. Naturally, every business attracts customers with a product or service that provides a distinct benefit or feature – often legally protected from competition by patenting a design or unique mechanism.

Creating and registering a patent is a skill in and of itself. Without the proper knowledge, it can be costly. The U.S. Patent and Trademark Office receives over 650,000 patent applications every year, only 300,000+ of which are granted registration. To stand out from the more than 50% that are rejected, the most effective way is to have business-oriented legal counsel at your service.

Lloyd & Mousilli’s patent lawyers in Houston are the attorneys of choice for early-stage startups and technology companies. They have served as mentors and advisors to startups from Rice Ventures, one of Rice University’s incubators.

Lloyd & Mousilli’s legal services, drawing from their wealth of international Fortune 500 business law experience, help clients to efficiently develop a patent strategy that not only results in successful registration but also gives them a competitive IP portfolio that places their products ahead in the marketplace.

The firm’s Managing Partner, Feras Mousilli, has previously served as in-house counsel at Apple & Dell. His expertise is in product development and intellectual property matters – with a commitment to putting the business’s success first, a guiding principle of the firm’s work.

Assisting startups in every stage of the process, from conception to enforcement (and also preparing for litigation), Lloyd & Mousilli patent lawyers emphasize looking at all of the following aspects:

What is a provisional patent application filing?

A provisional patent application establishes an early filing date with the USPTO for your invention. While a provisional patent application alone is not a registered patent, it allows you to start marketing your invention as “Patent Pending” right away. (In the United States, commercially-sold products are legally required to denote their associated registered patents.)

After a provisional application, a regular (non-provisional) patent application must be filed within 12 months – a period which cannot be extended.

What is a design patent?

A design patent protects the unique shape, look and form of a product. If this ornamental design is distinct enough, it is eligible for design patent protection. Design patents are often used in consumer electronic products.

Currently, design patents are granted for 15 years from the date of issuance, and are not subject to maintenance fees.

What is a utility patent?

A utility patent protects the functionality of a product. Eligible inventions solve a common consumer problem in a unique, novel way, and in a manner that is practically useful.

Utility patents tend to provide a broader scope of protection. Unique mechanisms and functions are the fields of technology IP where protection is in the most demand.

Currently, utility patents are granted for 20 years from the date of issuance, and are subject to periodic maintenance fees.

“Intellectual Property is a complex, and frankly intimidating area of law. It is our privilege to assist our clients in navigating legitimate claims from fraud, and creating a strategy to move forward with,” says Managing Partner Feras Mousilli. Dr. Mousilli is a recipient of the Fulbright Scholar award, and is a visiting professor of law in Europe teaching intellectual property and technology law.

Whether you’re just considering patent registration, or you are looking to optimize your existing patent portfolio, it is a must to get the right legal partner for your team before you make any mistakes. Lloyd & Mousilli is known for securing favorable terms for its clients in an efficient manner, and at rates that are sensible for startups and small-medium businesses – “without Big Law fees.”

Contact Lloyd & Mousilli

For entrepreneurs who want to grow their business using patents, Lloyd & Mousilli Houston patent lawyers offer free consultations. Clients can book an appointment online at lloydmousilli.com, or by calling (512) 609-0059.

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New Options for Holding Copyright Infringers Accountable

Creatives of all kinds whether they are photographers, authors, designers, or even software developers have most likely all felt the sting of seeing their content copied without permission. The years of work and capital investment that goes into developing creative works often carries both a professional and personal investment for creators which makes the notion of having that investment wrongly copied incredibly stressful. Historically, the path to holding copyright infringers accountable in the United States has been out of reach for most creators, especially those just starting out. Luckily, the US has recently made changes to bring about a more accessible means of copyright enforcement.

The Copyright Alternative in Small-Claims Enforcement (CASE) Act

As part of the Consolidated Appropriations Act 2021 signed into law on December 27, 2020 – a much needed reform was implemented in the United States Copyright system. The Copyright Alternative in Small-Claims Enforcement (CASE) Act establishes a copyright small claims system that allows copyright creators to take action against infringers that arises out of Section 106 of the Copyright Act on a smaller scale than filing lawsuits in federal court.

Traditionally, all copyright enforcement actions have needed to be in the form of lawsuits in federal court. Federal litigation is a lengthy and expensive process – which for many smaller scale creators is simply out of reach. The vast majority of copyright infringement cases in the United States are of relatively low monetary value – which sadly means that many copyright creators have been left without a realistic enforcement remedy.

Copyright infringement remains a federal cause of action and copyright owners will still be able to pursue cases in the federal court system, but the tribunal established by the CASE act is intended for those that cannot take on that expense. For instance, it may be an avenue when seeking relatively small licensing fees regarding creative work for photographers, graphic designers, and the like.

The New Copyright Claims Board

Creators will now be able to bring their infringement claims before a Copyright Claims Board within the US Copyright Office – a three-member panel of experts in copyright law. The Copyright Claims Board has similar authority to a traditional small claims court in that they may oversee a discovery process, conduct hearings, and award monetary and non-monetary relief as appropriate. This panel would be able to award creators up to $15,000 per work and $30,000 per claim, assuming the creators had registered their work with the office. In the event their work had not been registered, the recovery limits are cut in half at $7,500 and $15,000 respectively. With a copyright registration being a relatively inexpensive and quick process – it is a no brainer that creators should be seeking official registration of all their work. You can learn more about the Copyright Registration process here.

For Legal Professsionals

For legal professionals, it is important to note that while the Copyright Claims Board will be based in the Washington DC, the CASE act dictates that the governing law for each dispute shall be the federal jurisdiction under which the claim would usually have been brought. Secondly, board decisions will not be precedential. The board is also not allowed to consider whether the infringement was willful as a federal court usually would. Additionally, while attorneys’ fees are recoverable under the Copyright Act, the Board may not award attorneys’ fees except in the case of bad faith conduct—in which case, any fee award may not exceed $5,000, absent extraordinary circumstances, such as where a party has engaged in a pattern of bad faith conduct. For these reasons, each copyright claim will still need to be evaluated individually to determine whether the new small claims process or a traditional federal action is best suited for a creators situation.

Beyond the monetary penalties, the board will also be able to send the infringing party a notice to cease the infringing activity.

Potential Risks of the New Small Claims Process

It is important to recognize that parties can opt-out of this new small claims process—once a claim is filed, the accused has 60 days to reject the small claims process, which would force the action to be heard in federal court instead. Decisions of the Claims Board may also be appealed on a limited basis to federal court.

The CASE act also touches on the reality that copyright trolls will likely attempt to take advantage of the new lower cost bar by filing frivolous claims. In an effort to limit this, if a party is found to have brought a claim to the Copyright Claims Board in bad faith more than once in a 12-month period, they will be barred from bringing another claim before the board for an additional 12 months.

While the new small claims process is intended to be an easier bar to entry there is still legal strategy involved to determine whether it is the best route for you, navigating the claim process, and understanding the risk that it may ultimately end up in federal court based on removal by the other party.

Next Steps

Intellectual property rights are only as valuable as owner’s efforts to enforce them. While copyright protection is established upon creation – the remedies to infringement increase significantly, including those mentioned here if a creator’s copyright is registered. If you have reason to believe that your creative work is being copied by an unauthorized party – you can schedule a consultation here to begin the process of having your claim evaluated to see if this new process is a suitable option in our situation.

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Most business owners’ heart sink when they stumble upon a competitor shamelessly copying their hard work. Understandably so, in a culture where attention is scarce the likelihood of confusion in the market when scrolling on social media can add up to a noticeable loss in profits depending on the size of the competitor.

Proactive Intellectual Property

The situation described above is a very different conversation for business owners that have proactively sought to register the intellectual property that creates the foundation of their business. The often-overlooked reality about intellectual property is that registering your work does not stop others from trying to imitate you – it increases your ability to be made whole when they do.

Like all business decisions, a well-formulated intellectual property strategy requires a cost-benefit analysis. There is no “one size fits all” strategy to building out the IP registrations in an early-stage companies and each should be carefully weighed based on several factors including but certainly not limited to:

• Protectable content that is mission-critical to business operations
• Target markets
• Number and type of direct competitors
• Timeline for business growth and development
• Available capital to deploy towards intellectual property.

Costs and Potential Award

Type of RegistrationInitial InvestmentPotential RecoveryCopyrights$600.00actual damages suffered as a result of the infringement, any profits of the infringer that are attributable to the infringement and are not taken into account in computing the actual damages.
or Statutory damages between $750 - $30,000
or In the event of willful infringement, statutory damages of up to $150,000Patents$10,000-$15,000*
(on average)Damages adequate to compensate for the infringement but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court. The court may award up to three times the actual damages.
In exceptional cases, the court may award attorney fees to the prevailing party.Trademarks$1500-$2500* (on average)Infringer’s profits, any damages sustained by the registered owner, and the costs of the action, in the event of willful infringement on a registered trademark, mark’s owners are entitled to treble (3x) damages or profits, whichever is greater AND reasonable attorney fees.
OR
statutory damages not less than $1,000 or more than $200,000 per counterfeit mark per type of goods or services sold, offered for sale, or distributed, as the court considers just; or if the court finds that the use of the counterfeit mark was willful, not more than $2,000,000 per counterfeit mark per type of goods or services sold, offered for sale, or distributed, as the court considers just.Showing 1 to 3 of 3 entries

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[1] The potential recovery and remedies summarized here are for educational purposes only and in no way guarantee or represent to guarantee actual recovery in any infringement action. The summary provided is indeed a summary and is in no way exhaustive of potential remedies available.

*Prosecuting trademarks and patents often requires hourly work on office action responses that cannot be given a guaranteed price estimate in advance.

The best kind of infringement is willful

As you can see above, the potential recovery in most infringement actions increases significantly in the event that the infringing party is found to have been doing so willfully, or on purpose. This is why policing your intellectual property registrations is so important. Sending cease and desist letters and notice of claims letters to intellectual property infringers is a crucial step in this process. The best method of notice is to have an experienced law firm send formal correspondence through certified mail so that there is clear evidence that the other party was made aware and continued with their infringing behavior.

Contracts are key

Former consultants, advisors, contractors, employees or anyone otherwise associated with your business should have express contractual terms regarding how and when to use your company’s intellectual property. In the event of a separation, if they go on to work for competitors – it will be incredibly beneficial to have clear contractual obligations for them to proceed under. If not, the road to recovery in those situations is made more difficult.

You cannot enforce rights you do not have

The full rights and protections that are associated with intellectual property registrations are only as available to those with the prudence to seek out registration before infringement takes place. With the relatively low cost up front compared to the potential recovery, strategic registrations need to be implemented early on in the business plan.

Is it too late?

There are avenues of relief for unregistered intellectual property, but it is a more difficult burden of proof and the potential recovery is less. Nevertheless, if you believe your intellectual property is being wrongfully used by another party, consulting with experienced attorneys is a must so that you can make informed decisions regarding any and all potential avenues for recovery and not leave any money on the table.

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Texas

• Price: The cost of registering an LLC in Texas is more than three times the cost of registering an LLC in California. Texas LLC Certificate of Formation has a one-time cost of $300 for filing through mail or $308 for online filing. Texas also requires the designation of a Registered Agent, with a Texas address, to receive legal documents for the LLC. California residents planning on registering an LLC in Texas should expect to pay about $125 per year for a Commercial Registered Agent.
• Ease of Registration: Like most states, Texas allows online filing and filing through the mail.
• Privacy: Texas does not maintain any information on the ownership of a LLC, except records of the LLC’s registered agent and registered office address.
• Asset Protection: Texas is an exception to the traditional corporate veil rules, and instead follows the ‘actual fraud rule’. Under this rule, owners or members of the LLC cannot be held liable for corporate obligations unless they used the LLC to commit actual fraud.

Delaware

• Price: Between Texas, California and Delaware, Delaware is the most expensive state to register an LLC. The costs of registering an LLC in Delaware often outweigh the benefits a smaller business can expect to receive. The initial one-time filing fee is $90 ($99 for a 24-hour turnaround). Like Texas, California residents can expect to pay up to an additional $100/year for a Commercial Registered Agent. Delaware also requires all Delaware LLCs, regardless of their principal place of business or size, to pay an additional $300/year for the Delaware Franchise Tax.
• Ease of Registration: Like most states, Delaware allows online filing and filing through
  mail.
• Privacy: Delaware allows anonymity and nominee officers.
• Asset Protection: Delaware companies offer the same corporate veil as other states.

The high costs associated with registering and maintaining a Delaware LLC often make it a less than ideal choice for new entrepreneurs. Find out more on Delaware Post Incorporation and Checklist here.

California

• Price: The cost of filing articles of organization in California is $70. There is an additional $20 fee to file a Statement of Information, which needs to be filed every two years. California residents can appoint themselves as registered agents for the LLC instead of paying for Commercial Registered Agents.
• Ease of Registration: Like most states, California allows online filing and filing through
  the mail.
• Privacy: California allows anonymity and nominee officers.
• Asset Protection: California companies offer the same corporate veil as other states.

Will an LLC registered in Texas/Delaware still need a foreign qualification in California if most of the staff and customer meetings will be in California?

Any LLC registered in a state other than California is a foreign LLC and would need a foreign qualification in California in order to transact intrastate business in California. California law classifies transacting intrastate business as the physical presence of company officers, employees, offices, or other facilities within California or if the business plans to develop extensive commercial relations within the state over a long period of time. However, your business does not need to be registered in California if your only connection to California is hiring independent contractors located in California.

You may not have any option other than registering your LLC in California or registering it as a foreign LLC in California if your online business hopes to solicit customers in the state. Failure to register in California can bar businesses from bringing lawsuits in the state. The inability to utilize California’s court system can be particularly detrimental to online businesses with valuable intellectual property prone to infringement. If you wish to register as a foreign LLC in California, then you must provide the same information needed to create an LLC in your state of incorporation and pay all the fees required to register and maintain an LLC in California.

Prejudice occurs when you gain an advantage over the other party during the litigation process such that removing the case to arbitration would cause the other party to suffer a disadvantage.

However, it is hard to demonstrate that someone has waived the right to arbitration since there is a strong presumption in favor of it when an arbitration clause is present in an agreement. Id. at 590. The court will usually order the case to arbitration when it is not clear if the opposing party has suffered prejudice. Id. at 593.

Under Texas law, a court will consider who is making the request for arbitration, how much time has passed since the litigation was initiated, the mental state of the party requesting arbitration, and what type of litigation has occurred. We will first discuss the Texas standard before reviewing federal considerations.

Who is Making the Request for Arbitration?

To determine whether the judicial process has been invoked to the point of prejudicing the opposing party, the court will consider many different factors. Id. at 590-91. One consideration is if the person requesting arbitration is a defendant or plaintiff. Id. at 591. If the plaintiff moved for arbitration, the court may be less likely to grant it since the plaintiff invoked the judicial process by filling the case with the court.

For example, there was a case where a family filed suit against Comerica Securities for allegedly selling the family’s stock without authorization. Grumhaus v. Comerica Sec., Inc., 223 F.3d 648, 649 (7th Cir. 2000). The family requested arbitration after the state court dismissed their complaint. Id. at 651. However, the Seventh Circuit United States Court of Appeals found the family had waived their right to arbitrate because they filed the case in court rather than initiating an arbitration proceeding. Id. at 653.

How Much Time Has Gone By?

Another consideration is the length of time the party requesting arbitration waited before making the request. Id. However, delay alone does not establish waiver. In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 763-64 (Tex. 2006). For example, in one particular case, a two-year delay before requesting arbitration did not take away the parties’ right to arbitrate. Id.

What is the Mental State of the Party Requesting Arbitration?

Although not common, it is possible that one party to a case may not have been aware of an arbitration clause within their agreement. In such situations, the court will consider when the party making the request for arbitration became aware of the arbitration clause. Perry Homes, 258 S.W.3d at 591.

In one particular case, a company argued it had not waived its right to arbitrate by engaging in the litigation process since it was a successor to the original contractor containing the arbitration clause and, as a result, had not been aware of the option to arbitrate. Patten Grading & Paving, Inc. v. Skanska USA Bldg., Inc., 380 F.3d 200, 205 (4th Cir. 2004). The court granted it leniency due to this unique situation and held the company still could exercise its arbitration rights. Id. at 205-06.

Another consideration is if the party requesting arbitration opposed it earlier in the case. Perry Homes, 258 S.W.3d at 591. If the party opposed arbitration earlier in the case, the court may see its request as more evidence that the party invoked the judicial litigation system. Id. at 600. The reason for this is because switching positions part of the way through the litigation process can appear to be an attempt to gain the system and prejudice the opposing party.

Just How Much Litigation Has Occurred?

Another consideration is how much and what kind of litigation procedures have happened prior to requesting arbitration. For example, if the pretrial activity related to the actual claims made in the case or if it was expensive and took up a lot of time, the court may view this as evidence against the request for arbitration. Id. The court will also consider if the party opposing arbitration was the primary cause for incurring litigation expenses. In re Vesta Ins. Group, Inc., 192 S.W.3d at 763. If the party requesting arbitration was not the main reason for incurring costs, the court probably will not be concerned over the expenses.

Yet another consideration is whether the request for arbitration appears more like a “late-game tactical decision” than preserving the right to arbitrate. Tuscan Builders, LP v. 1437 SH6 L.L.C., 438 S.W.3d 717, 722 (Tex. App.—Houston [1st Dist.] 2014, pet. denied). This means that you should not proceed with litigation under the assumption that you can later switch to arbitration if it looks like it will provide a better outcome.

If the trial date is approaching, you should keep in mind that it may become harder to enforce arbitration. The judicial system does not look favorably on a request for arbitration on the eve of the trial after full discovery has occurred. In re Vesta Ins. Group, Inc., 192 S.W.3d at 764.

However, some litigation activity will not waive your right to arbitration. Small v. Specialty Contractors, Inc., 310 S.W.3d 639, 646 (Tex. App.—Dallas 2010, no pet.). For example, sending and responding to the first set of discoveries is usually acceptable. Id. In fact, one case states that even a substantial invocation of the judicial process does not rule out arbitration as long as the party opposing arbitration did not suffer prejudice. In re Bruce Terminix Co., 988 S.W.2d 702, 704 (Tex. 1998).

Federal Considerations

The Federal Arbitration Act states that the court should defer to arbitration if there is an agreement to do so and if the party requesting it is not “in default in proceeding with such arbitration.” 9 U.S.C. § 3. To determine if the moving party is in default, a federal court will typically consider the same factors listed above that a Texas court will examine.

Under federal law, there is also a strong presumption in favor of arbitration. For example, the Sixth Circuit described the high standard that must be met to waive arbitration by stating that a party “waives arbitration if it acts in a manner completely inconsistent with any reliance on an arbitration agreement or delays asserting arbitration to such an extent that the opposing party incurred actual prejudice.” Shy v. Navistar International Corp, 781 F. 3d 820 (6th Cir. 2015), 827-28.

Although the considered factors are the same, the Fifth Circuit and the Texas Supreme Court came to different conclusions in two similar cases. The cases dealt with class action lawsuits initiated against payday loan companies. The Fifth Circuit concluded that arbitration had been waived by the companies because the companies initiated criminal charges against the plaintiffs. Vine v. PLS Fin. Servs., Inc., 689 Fed. Appx. 800, 805-06 (5th Cir. 2017). On the other hand, the Texas Supreme Court held that a payday loan company did not waive the right to arbitrate by initiating criminal proceedings. Henry v. Cash Biz, LP, 551 S.W.3d 111, 118-19 (Tex. 2018). While the factors examined to determine if a party waived the right to arbitrate are the same, the final conclusions of the federal and state courts can vary.

‍Conclusion

‍The law surrounding when someone waives the right to arbitrate is complex. While the presumption is in favor of arbitration, a combination of certain factors can cause you to waive your right. It is clear however that the sooner you request arbitration, the better your chances will be of enforcing it. Please do not hesitate to contact us with questions you have about the arbitration process and how to enforce your rights.

Introduction

Founders are realizing the value of the underlying AI within their core product or know that their product will eventually need AI to grow further. This realization is reflected in the steady uptick in the number of AI patent applications since 2002. The passage of the American Inventors Protection Act (AIPA) has also undoubtedly help this trend. There has been a subsequent and more drastic bump in the number of AI patent applications since 2012 as well. The latter of the two bumps is of particular interest to founders and businesses planning on patenting their technological inventions since it represents a broader adoption and diffusion of AI across several different technologies. The United States Patent and Trademark Officer (USPTO) recently created their own AI algorithm to identify the extent of growth in the number of AI patent applications and whether they are diffusing across technical areas, inventors, companies and geographies. This article will provide a brief summary of the findings of the USPTO’s AI algorithm and explain its potential impact on future patent applications.^[1]

Scale of AI Diffusion

The AI algorithm’s finding backs the general hypothesis that inventors in various technological fields are increasingly filling AI patent applications along with patent applications for their broader invention. The sophisticated and complex hardware needed to support the growing integration of AI in different areas is the direct contributor in the increase of applications for AI hardware patents. However, AI patents within the area of planning and knowledge processing still continue to constitute a majority of the new applications, AI hardware, vision, machine learning, natural language processing, speech and evolutionary computation are also on the rise. AI patents within these areas are increasing in number and as a percentage of the total patents filed each year. As of 2020, 25% of all current patent owners in the US had at least one AI patent under their name, compared to just 5% in 1990.

The integration of AI within different areas of technology is not limited to individual innovators or startups but has diffused within the patent strategy of larger corporations as well. IBM (46,752), Microsoft (22,067) and Google (10,928) in that order own the most AI patents currently in the US. This is a clear indication of the growing significance of AI for most company’s business models. Another evidence of AI’s significance growing beyond its initial niche users is the geographical diversity in the patent applications. For example, several states in the Midwest have AI patent applications as a part of larger image recognition and data processing technologies created to provide medical care in rural areas.

Impact on Founders & Inventors

Inventors and founders should be mindful of the large-scale and rapid diffusion of AI in various industries. In order to secure early stage funding, build a successful product and eventually exit the startup, founders must develop a clear understanding and strategy for any AI patents that are essential for the product presently or maybe in the future. Even  founders with products that do not rely on AI currently must consider the future impact of AI technology on their products and industry. The amount of AI patents held by the traditional technology giants is an indication of their enthusiasm for investing in AI technology.

Startups innovating and creating valuable patents without any ready buyer but instead for sale at a later date often underestimate the complexity and the effort required to find such a buyer. Several startups retain specialized patent brokers to sell their innovations, and this requires the startups in return to share all their confidential information to determine the scope of the broker’s duties. While non-disclosure agreements are effective tools at protecting trade secrets, they are not nearly as effective as the protection provided by the US legal system. Founders should be advised to always secure or at least apply for the maximum patent protection they are eligible at any given time, prior to attempting to commercializing their innovations in order to protect its value. Furthermore larger companies looking to acquire or contract with newer startups often require that the startup secures appropriate protection for all it’s intellectual property but especially their patents. Startups can streamline any future acquisition or licensing of their products by filing for patent protection for each novel component of their product as soon as it is reduced to practice.

Filing for patents is a highly complex process that requires attorneys with a thorough understanding of the product to be patented in addition to resources and ability to conduct patent search, draft and amend patent applications, and respond to any issues raised by the patent examiner. AI patents, even more so than other process patents, are extremely complicated, and require seasoned attorneys that can efficiently articulate the underlying algorithm, and technology in a manner that satisfies the USPTO’s requirements.

Lloyd & Mousilli boasts a team of experts in the area of AI patents with extensive experience helping early stage innovators receive patent protection for each of their novel components at the earliest date and overseeing patent strategies for consumer products at some of the biggest technology companies. The different teams at our firm, led by seasoned attorneys work in synergy to help founders seamlessly weave their AI and other patents, within their broader business strategy. We make sure that equity agreements, assignment rights, employment agreements, non-disclosures and all other relevant documents accurately reflect the scope and rights regarding the company’s patents. Our goal at the firm is to help clients meet their long-term goals by working closely with them at each stage and tailoring our advice in accordance with the client’s aspirations.

As always, you should consult with your Lloyd & Mousilli startup legal team or set-up a free consultation through our website for questions about AI patents.

HOUSTON, TX, UNITED STATES, September 11, 2021 — Claims of trade secret theft made by a Houston-based fuel delivery startup against a Total SA subsidiary were referred to arbitration on Wednesday. Senior U.S. District Judge Gray H. Miller issued an order compelling arbitration in Fuel Husky, LLC D/B/A Instafuel’s (“Instafuel”) case against Total Energy Ventures International, S.A.S., N/K/A Total Carbon Neutrality Ventures (“TEVI”).

Started by two young entrepreneurs in Houston, Texas, Instafuel is a mobile-fueling startup that delivers gas directly to customer vehicles, thereby eliminating the need for customers to spend time at gas stations. Instafuel was recently ranked the fastest growing company in Houston by Inc. 5000 thanks to its unique approach of targeting commercial fleets as its customer base, innovative business model, and highly researched pricing strategy, client lists, and fueling
techniques.

Instafuel’s rapid growth unsurprisingly caught the attention of competitors and investors, as Total S.A. (“Total”), the French multinational oil and gas conglomerate, repeatedly expressed interest in becoming an investor in Instafuel. During these discussions, mutual non-disclosure agreements were signed by Instafuel and Total, but after receiving Instafuel’s trade secrets under these agreements, Total turned around and invested in Instafuel’s direct competitor, Booster Fuels, Inc. (“Booster Fuels”).

In 2019 Instafuel discovered that TEVI, a subsidiary of Total, misappropriated Instafuel’s trade secrets and shared them with Booster Fuels. Shortly after this blatant breach of the mutual non disclosure agreements and wrongful divulging of Instafuel’s proprietary information to their direct competitor, Booster Fuels changed significant aspects of their business model to copy the successful strategies found in Instafuel’s stolen trade secrets, down to copying Instafuel’s truck design and addressable market.

After discovering this unlawful conduct, Instafuel promptly retained thelaw firm and filed lawsuits against Total and Booster Fuels for misappropriation of trade secrets. In their case against Total, Instafuel has awaited the court’s ruling on arbitration since 2019 after Lema Barazi, the lead attorney representing Instafuel in these matters, argued that Total’s unlawful acts should not be subject to arbitration, especially considering the fraud involved.

“While we disagree that Total’s unlawful acts should be subject to arbitration, considering the fraud involved, we respect the court’s ruling and intend to aggressively prosecute Instafuel’s claims,” Barazi said.

Total is represented by William R. Taylor, Joseph M. Beauchamp and Alexander G. Hughes of Jones Day.

The case is Fuel Husky LLC v. Total Energy Ventures International SAS, case number 4:19-cv04277, in the U.S. District Court for the Southern District of Texas.

Any other requests for comments may be directed to info@lloydmousilli.com.

Registered Agent

What does a Registered Agent Do?

The Registered Agent is a business or individual that the company must designate to accept service of process documents, in case of a lawsuit, on behalf of the company. The Registered Agent acts as the liaison between the Company and the Secretary of State, which means they can receive official government notifications, including tax forms and compliance information, on behalf of the company.

Appointing and maintaining a Registered Agent is a state law requirement in all 50 states. The consequences for failure to update the Registered Agent vary depending on the state but can lead to additional fees due and in some instances, suspension of the company’s right to transact business.

Why is a Registered Agent Service Recommended?

As outlined above, your company will need to appoint a Registered Agent. In some states, a principal of the company may serve as the Registered Agent, if they physically reside in the state that the company is registered in. However, in most instances the better solution is to appoint a Registered Agent Service to handle this important administrative function for the business. In addition to being easier from a management standpoint, it also creates an additional layer of privacy by not disclosing physical addresses of those associated with the company in public records.

Business Address

What is a Business Address?

A business address is the place where the company primarily operates business from. In some instances, this is a home office of one of the principals of the company.

Why Do You Need a Business Address?

The Company needs to use this address for opening business bank accounts or merchant accounts, opening accounts with its suppliers and vendors, receiving statements, invoices, payments, and bills, filing for legal contracts, licenses, and permits and communicating with its customers.

As our world moves more and more online, many companies may believe they simply do not have a physical business address. However, there are several practical matters as listed above that necessitate designating a physical business address.

If you would like to consult with Lloyd & Mousilli regarding taking on your company as a client to help ensure all of these compliance matters are adhered to, you can do so here.

HOUSTON, TX – PIXI Universal, LLC (“PIXI”) was recently informed by TMZ reporters that Viacom International Inc. (“Viacom”), owner of the SpongeBob SquarePants franchise (“SpongeBob”), filed a lawsuit against PIXI for operating the whimsical, pop-up restaurant known as The Rusty Krab in Houston, Texas.

“The Rusty Krab is a parody restaurant concept inspired by SpongeBob giving it a new comedic purpose within the context of a restaurant. While Intellectual property law is complex, it is not a “secret formula.” Per U.S. copyright and trademark law, parody squarely fits into the fair use doctrine, which provides for the legal, unlicensed use of copyrighted material,” said Feras Mousilli, managing partner of Lloyd & Mousilli, the law firm defending PIXI against Viacom’s allegations.

“We have extensive experience prosecuting and defending against intellectual property infringement claims. It’s our bread and butter, so to speak. As with all of our cases, we intend on advocating zealously for PIXI,” added Lloyd & Mousilli’s litigation partner, Lema Barazi, who will serve as the lead attorney representing PIXI in court.

Unfortunately, Viacom asserts rather porous claims that The Rusty Krab misleads consumers to believe the restaurant is affiliated with Viacom’s SpongeBob franchise.

“Ever since Pop-Ups by PIXI started, we have clearly stated that we have no affiliation with the brands we are parodying.  As with our prior well-known pop-ups, and with the Rusty Krab, potential customers are made aware prior to purchasing tickets that there is no affiliation to the brand itself,” said Sanju Chand, President of PIXI Universal, LLC.

The Rusty Krab is a place for fans of all ages to indulge in a paradoxical world reminiscent of SpongeBob SquarePants, as told through the eyes of PIXI.

All requests for comments may be directed to info@lloydmousilli.com.

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