Business Law Advisory

October 2006

“Payment in Full” Checks Can Resolve Disputes

A useful, and often overlooked, method of resolving disputes is the “payment in full” check.  Section 3-311 of the Uniform Commercial Code (O.R.C. §1303.40) provides for accord and satisfaction by use of an instrument, such as a check.  If your company has a bona fide dispute with another party over the amount owed, you can in good faith send a check with a conspicuous statement (either on the check or in an accompanying letter) that it is being offered in full satisfaction of the disputed amount.  If the other party cashes the check, an accord and satisfaction occurs and the dispute is resolved.

If your company receives a payment in full check, you generally have two options:  either cash the check and accept the settlement offer, or send the check back.  You can’t just scratch off or ignore the full payment language, cash the check, and then claim partial payment.

Payment in full checks can be an effective legal tool, but remember (1) there has to be a bona fide dispute, (2) you have to act in good faith, and (3) the check (or a letter sent with the check) must conspicuously state that it is offered as full payment of the disputed debt.  For further information, please contact Davis S. Bence at dbence@fbtlaw.com or 513.651.6428.


Proper Marking of Patented Inventions for Patents Having Both Method and Composition Claims

35 USC Sec. 287 is commonly referred to as the "marking statute" and outlines the obligations of patentees in notifying the public of patent rights such that the patentee can preserve a right to damages prior to filing suit against an infringer.  Absent proper marking, the patentee is entitled to damages accrued only after filing of an infringement suit. 

In a recent decision from the Southern District of New York, the owner of a patent having both method and composition claims asserted only the method claims against an infringer making a composition allegedly covered by the patent.  The patentee argued there was no duty to mark the composition because only the method claim was asserted.  Finding this unpersuasive, the court held that, where a patent has both method and composition claims, the patentee has a duty to mark tangible items, even if the patentee intends to enforce only the method claims against potential infringers.  The court further held that, with regard to pharmaceuticals, an Orange Book listing (a listing of pharmaceuticals required by the FDA) does not serve as adequate notice to potential infringers.  As a result, such a listing does not relieve the patentee of the burden to mark in order to preserve damages.  Merck v. Mediplan Health Consulting, Inc., 434 F.Supp. 2d 257 (S.D.N.Y. 2006).  For further information please contact Nicole Marie Tepe, Ph.D. at ntepe@fbtlaw.com or 513.651.6427.


Proposal to Eliminate Broker Discretionary Voting in Board Elections

The New York Stock Exchange has proposed to amend its Rule 452 to eliminate broker discretionary voting for the election of directors. The amended rule would add the election of directors to the list of “non-routine” items for which brokers may not give a proxy to vote without instructions from beneficial owners. Amended Rule 452 would apply to proxy voting for meetings held on or after January 1, 2008. The working group that recommended the amended rule recognized that broker discretionary voting makes it easier for issuers to obtain the necessary quorum to conduct business at a shareholder meeting. Despite this recognition, the working group concluded that the benefits of better corporate governance and transparency in the election process outweighed the difficulties of obtaining a quorum and the increased costs of contacting shareholders and convincing them to vote in uncontested elections. For further information about this proposed rule, please contact Karen M. McLaughlin at kmclaughlin@fbtlaw.com or 513.651.6199. 


Election of Directors – Changing the plurality vote standard

The first step to changing the voting standard for the election of directors of Ohio Corporations from a plurality standard to a standard set by shareholders has occurred.  Recently, the Corporation Law Committee of the Ohio State Bar Association recommended to the counsel of delegates that Section 1701.55 of the Ohio Revised Code be amended to explicitly permit a corporation’s articles to modify the plurality standard and election for directors.

The Committee is making the recommendation because of a growing movement nationwide among shareholders to allow shareholders to require that directors be elected by a majority vote of either the votes casts at a meeting at which a quorum is present or of the outstanding votes.  Presently, the Ohio statute provides that directors are elected by a plurality; that is, the directors who receive the most votes win the election.  Theoretically, a director who receives one vote could be elected under the present plurality standard.

The proposed amendment will clarify current law to make clear that the shareholders may set forth in the corporation’s articles of incorporation and alternative election standard.

A second reason for the amendment recommendation is that Ohio publicly-traded corporations have been receiving shareholder proposals to reincorporate other states that allow majority-vote standards for the election of directors.  To allow Ohio to remain competitive with other jurisdictions and not to lose Ohio-domicile companies, the Committee has recommended the amendment.  For further information, please contact Neil Ganulin at nganulin@fbtlaw.com or 513.651.6882. 

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