Foundations of Business Law

- Resolve or reduce conflicts involving a foreign element, recognized by major legal systems of the world

- Principle of comity: one nation will defer to and give effect to laws and judicial decrees on another country, that are consistent with law and public policy of accommodating state

- judicial branch of one country will not examine the validity of public acts committed by recognized foreign government within own territory > Can have important consequences for individuals and firms doing business and investing in other countries (e.g.confication, expropriation)

Economic:

• (more or less extensive) monopoly right over the economic exploitation of ideas

• matter of protecting investment and creating incentive for future investment

Legal:

• defined set of the intangible products of human activity

• bundle of legally enforceable interests with respect to intellectual property

• trademark

• patent

• design

• copyright

•trade secret (undisclosed information)

- Sign used on a good or in connection with the marketing of a product/service

1. to distinguish the products/services of an enterprise from products of other enterprises or the same enterprise

2. in reference to a particular quality of products/services for which the trademark is used and stands for

3. to promote the marketing and sale of the products/services

-word marks (one or more distinctive words)

-word marks with special scripts

-designs (three dimensional trademarks)

-combination of any of the above

Federal Intellectual Property Office

-signs must not be «descriptive» or «generic»

-signs must not reflect the goods themselves, or be shapes of the product dictated by mere technical reasons

-signs must not be misleading

-signs must not be contrary to public order, good custom or applicable law

> absolute grounds for refusal

-signs must not be identical to an earlier mark used for identical goods or services

-signs must not be identical or similar to an earlier mark used for similar goods or services (likelihood of confusion)

> relative grounds for refusal

- national registration offices (Federal Intellectual Property Office in Switzerland)

- most important international registration: Madrid System for the international registration of trademarks (WIPO)

- registration for specific goods or classes of goods

- Exclusive right to use the trademark for the designated products/services:

• prohibit the application of the trademark to products, packages, etc

• prohibit that anyone stores, sells or brings into circulation products/services with the trademark

• prohibit the use of the trademark for advertising or other business purposes

• prevent the import/export of goods with the trademark

• civil claims for damages

• criminal remedies

• support by customs authorities

>legal protection in the countries where the trademark is registered

- Rights granted to the inventor of a technical product or process > Federal Patent Act

conditions regarding the invention:

• novelty

• usefulness (or capability of industrial application)

•involvement of an inventive step (or non-obviousness)

> most important are novelty and non-obviousness

• national registration (Federal Insitute of Intellectual Property)

• some regional patent applications (e.g. European Patent Office EPO, African Regional Intellectual Property Organization ARIPO)

•international patent application via the Patent Cooperation Treaty (PCT), administered by the WIPO

• recent development in Europe: Unified Patend System, administered by the EPO (signed in 2013, ratification process ongoing)

• prohibit imitation, reproduction or copying of the patented product/process

• prevention from technical measures with equal or similar elements

• civil claims for damages

• criminal remedies

> Legal protection in countries where patent is registered

•intellectual creation

- created by a human being

- not found before

•individual character

the level of individuality required varies

• expression of an idea

- exclusive commercial rights > right to exploit the copyrighted work

- Moral rights > cannot be waived or released

- protection period: life of the author + 70 years (computer programs + 50 years)

• undisclosed information

• any information that a business possesses

> confidential character

> commercial value (advantage over competitors)

> reasonable steps to keep the information secret

- Swiss Federal Act against Unfair Competition (UCA)

- if a person uses a work product...

...entrusted to him without authorization

...of a third party, even though knowing it was made available to him without authorization

...to technically reproduce the work without any own efforts

... in a business manner which is deceptive or violates the principles of good faith

• Check buyer’s standing

• Selling on cash terms

• Request secured forms of payment

• Use credit insurance

• Retain a collection agency

Prepaid / cash in advance: Shipment of the goods after payment > best arrangement for the seller/exporter

Open account: Payment after delivery of the goods > best arrangement for the buyer/importer

Payment upon delivery: best arrangement for both parties

Documentary payments: Issued by the carrier of the goods

• Acknowledgement of receipt of the goods

• Title to the goods/surrogate for the goods; transfer of ownership

• Carrier to deliver the goods to the owner of the Bill of Lading

• Goods can be sold or traded during transport

Written promise of advising bank to pay the seller the amount specified in the Letter of Credit.

• Issuing bank acts as intermediary (Vermittler) to collect the payment from the buyer in exchange for the transfer of documents as surrogate for the goods sold

• Seller: is sure that he will be paid

> Seller is paid before advising bank gets payment from buyer through issuing bank (credit funtion)

• Buyer: is sure that goods will be delivered

1. Irrevocable:

• Cannot be cancelled without the consent of the seller.
• Guarantee for the seller to get the payment under the condition that he provides all the documents

2. Confirmed irrevocable:

• Advising bank guarantees that the seller will be paid under the condition that he provides all the documents

3. Transferable:

• Beneficiary (= seller) may transfer the right to a third party
• Credit function

similar cycle: but no credit function, no surety of payment for the selle, no risk for the bank, cheaper than letter of credit

1. Goods from Seller to Buyer

2. Buyer received all Dokuments incl. Bill of Lading form Seller via Collecting Bank and via. Remitting Bank

3. Seller receives payment from buyer via Remitting Bank and via Collecting Bank

- Real Securities (Mortage, Pledge, Lien)

- Personal Securities (Guarantee, Surety, Standby letter of Credit)

- Quasi Securities (Titel Retention Agreements, Factoring, Leasing, Letter of Comfort)

• Debtor keeps ownership of assets.

• Creditor retains possession of assets.

• Transfer of surrogates of the assets (keys, bill of lading).

• Only tangible property. Letter of Pledge

• No formalities to be observed (apart from the transfer of possession).

• Usually Letter of Pledge. Rights of the creditor in case of non-payment Special debt enforcement procedure (Switzerland)

• Goods in possession of contractor

• Possession based on a contract/business relationship (Ex. Contractor (craftsmen) lien)

• “Self-help” remedy Types

• Consensual/non-consensual

• General lien/special lien (Civil law) Rights of the creditor in case of non-payment

• No right to sell the goods in possession

• Special debt enforcement procedure (Switzerland)

• Debtor retains possession of asset.

• Civil law countries: limited real property right instead of transfer of ownership.

• Common law countries: Transfer of ownership of asset under condition that ownership is transferred back upon payment of the loan.

• Usually to be registered; protection of third parties

• Right of foreclosure: leading to the sale of the real estate.

• Proceeds of the sale cover costs of sale and secured credit.

• Power of sale: to recoup credit.

• Rank in priority of the mortgage.

• Right to apply to court for order of sale or appointment of receiver (depending on jurisdiction)

Object of the guarantee:

• Payment
• Perfomance in general

Claims:

• Claim for payment
• Often presentation of the documents defined in the bank guarantee (e.g. Bill of Lading)

Types:

• Direct and indirect
• Performance and payment guarantee
• Bank guarantee

• Transfer of property

• Seller remains in possession of item sold

• Registration

• Compliance with formalities

- Contract between guarantor and obligee (= obligor of the principal obligation)

- Guarantor undertakes to answer for the obligation of the obligor

Accessory:

• Surety is in relation to the underlying transaction/contract accessory.
• Guarantor may make objections deriving from underlying transaction/contract (nullity of contract, non-performance etc.)

Claim:

• Obligee first to claim for the fulfillment of the obligation by the obligor
• Complicated prerequisites: formal requirements (may even include an enforceable judgment against the obligor) > only used in domestic transactions

General:

• Secures monetary or non-monetary obligations -> may be used to secure the performance of the seller or of the buyer
• Payment by the issuer if principal does not fulfill his obligation
• Parties to provide for the necessary terms (ex.: terms of ICC) unless statutory provision (U.C.C. for domestic transactions/no terms in CO)

Object:

• Monetary
• Non-monetary obligations

Similarities with guarantee:

• Independent from underlying transaction
• Payment upon presentation of the documents stipulated in the contract to evidence the non-performance of the principal (invoices, Bill of Lading etc.)

Differences with letter of credit:

• Standby LC is used to secure the obligation of the principal; only used in case of non-performance of the principal
• Often used for payments on open account terms

1. Standby LC between principal (e.g. Buyer) and principle's bank

2. Advising of Standby LC between principle's bank and advising bank

3. Advising of Standby LC between advising bank and beneficiary (e.g. Seller)

4. Non- Performance between principle and beneficiary (Buyer and Seller) > conflict

5. Documents go from beneficiary to principal via advising bank and via principle's bank

6. Principle bank makes payment to advising bank

7. Buyer makes payment to principles bank at the same time as advising bank pays beneficiary

- It's the reservation/retention of a title from the seller until payment effected by the buyer

- Sales agreement with payment by installments; formal requirements to be observed

> only in allowed in certain jurisdictions, not allowed in Swiss Finance Leasing, allowed for goods purchased by leasing company or goods used by lessee/purchser

Factoring is when company sells receivables to another company

three parties: seller, buyer, factor

1. Factor purchases accounts receivable ( claims for payment of price)

2. Factor assumes credit risk and additional services (invoicing, bookkeeping etc.)

3.  Products get dilivered form seller to buyer, factor gets payment from buyer