Nasir and Matt kick things off by discussing the U.S. Patent and Trademark Office canceling the Washington Redskins' trademark registration. They then answer the following for a dentist from Napa, California, "We have a handfull of clients who owe us money. Some are a couple days late and some are months outstanding. At what point should we sue, or at least threaten suit?"
NASIR: Welcome to Legally Sound Smart Business!
This is Nasir Pasha.
MATT: And this is Matt Staub.
NASIR: And welcome to our podcast where we cover business news and put in our legal twist and also answer some of your business legal questions that you, the listener, can send to firstname.lastname@example.org. No other comment.
MATT: It sounds like you recorded this at a different time and we just throw this in every time because it always sounds the same. I need some variation for future episodes.
NASIR: Yeah, I know. I like to comment on the intro as well but I was trying not to this time but you brought it up.
MATT: Fair enough. We’re going to get into a topic that I know you love and that’s sports. I guess it deals with sports. So, this will be coming out on Monday. I’m sure people have heard this story by now. It’s not like it’s a new story because it’s been going on for years and years. but the Washington Redskins – professional football team, for your purposes, just to let you know – obviously, it’s the Redskins and that’s a term that a lot of people find offensive, especially nowadays, maybe not back in the 1930’s when they started, but they’ve taken a lot of heat over the last couple of decades and, you know, as of this past week, the US Patent Office cancelled all the Redskins trademark registrations saying the name is disparaging. Basically, what this means is anyone’s free to use “Redskins” in terms of memorabilia, what-have-you. But I think there’s greater ramifications than just that.
NASIR: Yeah, and this doesn’t apply to the logo itself – just the name. So, you could name your football team Redskins now. But they may appeal it, too. So, we’ll see.
What’s interesting about this, and this is more on the legal side of things to make it fun for us lawyers to look at, this was challenged back in 1999 or 1992 or something like that, and that was appealed. So, the USPTO, they rejected the trademark but it was appealed by the Redskins. The reason the Redskins won at that time was there was this legal theory called latches which basically just means you delayed your appeal. They’ve been using this for years. Therefore, you can no longer try to move to reject this trademark because it’s disparaging. But then, what happened is the latest iteration of this legal action involves an 18-year-old petitioner who wasn’t of age at the time so could not have brought an action in the first place. So, this whole latches theory no longer stands. It’s a very clever legal trick to get this going but, obviously, it worked so far.
Even though the title of all these news agencies say the USPTO cancelled Redskins’ trademark, that’s true, but it was not on their own accord. It was something that was moved by a third party.
MATT: Yeah. So, pretty crazy loophole. It’s kind of surprising nothing too series has happened between now and then. If you pay attention to sports at all, you should have seen, this has been going on for years. They just take heat constantly from people, especially the Native American community, that are just criticizing the use of Redskins because they find it offensive and there’s been other sports teams – maybe more collegiate and NCAA teams – that have ended up changing their names because it was offensive to certain people.
NASIR: I think people might be surprised to know that basically any trademark can be challenged because it’s disparaging. That definition of disparaging obviously can change over time as it has now – maybe, as you mentioned, before it may not have been an issue but, obviously, now, it is and the same standard of disparagement hasn’t really changed. It’s just the society and the cultural sensitivity to that has changed.
MATT: Yeah, and I think too, an important point that we made towards the beginning was, you know, this doesn’t mean that they have to change their name.
NASIR: Yeah, that’s true.
MATT: Cancellation of the trademark registration doesn’t mean the NFL is going to force them to change their name. I mean, they might want to for other reasons but this doesn’t affect that at all.
NASIR: Yeah, all the trademark does is it gives them exclusive right to use that name in the context of their sector of business which is, I guess, professional sports – or professional football if you want to narrow it down.
And so, if someone else uses the name and there’s some kind of confusion in the marketplace as to who’s who, then the Washington Redskins has a right to proceed with action against that other person or company. Trademark 101.
MATT: I guess we’ll see. I know they have a very long history and they’ve been around for a long time but I think we’ll see a name change or some sort of alteration in the next however many years.
MATT: We’re going to move on to the question of the day.
“We have a handful of clients who owe us money – some are a couple of days late, some are months outstanding. At what point should we sue or at least threaten suit?” This comes from a dentist in Napa, California.
NASIR: I have a specific opinion about this. I think it really depends upon your industry. Here, you’re a dentist, right? You’re going to have a lot of patients. If you have too much AR or past two AR, I think that’s a very bad sign that there’s something fundamentally wrong with your collections process and it may even seem like you may not even have a collections process. The collections process to me involves everything from the initial bill to how you encourage payment upfront or before they leave the office and then how often you send invoices, how clearly stated those invoices are, and whether you have a process on when you send those invoices automatically after X number of days that they may be late. Like, as soon as they’re late, maybe send another invoice and then another one at 20 days’ invoice. And then, also, if you want to include late fees in there as well.
I think, at the least, start with that perspective.
MATT: So, this isn’t the first time that someone’s written us a question and instead of answer, you just bashed their operations – their operational structure.
NASIR: Well, it’s true because you have to get back to the fundamental problem. You know, we do this all the time, Matt. We gave clients that have a problem and, yeah, as attorneys, we’ll deal with that problem but, especially when we work, we work more on a general counsel perspective looking on the long-term side of things for our clients. We’re not going to just solve this but we’re going to look at, okay, do we want to get in the business of filing lawsuits to collect from our clients? That’s not what you’re going to business in so there has to be ways to prevent this from escalating and I think that’s where it starts.
MATT: Yeah, I’m just giving you a hard time.
NASIR: This dentist is probably the worst business person I’ve ever met.
MATT: You’re an anti-dentite.
NASIR: Nice Seinfeld reference.
MATT: Yeah. Well, I guess the one thing I would say from a legal perspective too is depending on how big the varying bills are and how late they are, I mean, you can go to small claims court. I would assume that this dentist is not a sole proprietor in their corporation.
NASIR: Let’s get to the limits of a small claims action, particularly in California. It’s kind of interesting. All states have limits on their small claims action of how much you can sure for. In California, they make a differentiation as to whether or not you are an individual or a corporation, LLC, or partnership. If you’re an individual, you can sue for $10,000 limit. If it’s a corporation, LLC, other general partnership, $5,000 is the limit. There’s something unique in California, too. If you’re going to sue multiple claims in one year, only two of those claims can be for more than $2,500 which means basically, if you have a lot of people that owe you money, putting that all in one year is maybe difficult to actually do if there are more than $2,500 so you may have to spread them out and it’s obviously very limiting. Frankly, one of the reasons is because the small claims court just gets inundated and, if you have a lot of those cases, at least that’s one of the reasons it’s for a judicial economy.
MATT: Obviously, you can still go to normal civil court. You can do that as many times as you want.
NASIR: Yeah, these limits actually may sound low but the individual $10,000 was actually increased from $7,500 in early 2012 and that was a more recent change and it used to be so that corporations could only sue twice in one year and that’s it. At least, in this case, it’s a little bit more flexible. They still could only file lawsuits twice a year for more than $2,500 but basically unlimited for less than that so that gives a little leeway.
MATT: I guess they want to encourage businesses to not go to small claims court. I don’t really know the reasoning behind that.
NASIR: I haven’t looked into that but I would suspect it’s because they don’t want businesses to because it’s very easy in small claims court to just be brought it. It’s very low threshold so, if you have a business like this dentist just keeps bringing in all their patients to collect money, it may be construed as taking advantage of them because there’s so little risk in bringing them to court.
MATT: All right. Well, I think we ended up actually answering that question despite you criticizing them completely.
NASIR: I actually didn’t.
MATT: No, we did.
NASIR: At what point should we sue though? I would say this, what I didn’t add is that I think, after the point where the invoice is late, you still have to maybe put forth a demand letter and so forth, especially like Matt said, if you’re a corporation, you only have a certain number of shots per year to do this so you want to make sure that the times you go to court is worth the while and that you don’t end up shooting yourself in the foot because you want to sue in a year.
MATT: And obviously not the ones that are a couple of days late. You don’t wait for them to become one-day delinquent and then file a small claims action the next day.
NASIR: Actually, these small claims forms are literally just forms that you download and fill in. I would just have those forms printed out and have the patience to fill them in with their address as they’re walking out just to really run it home that, if they don’t pay, then that’s the next step. That’s what I would do.
MATT: Yeah, there we go. There’s your advice to walk away with.
NASIR: All right, well… I was going to say welcome to the podcast. Thank you for listening to us.
MATT: Ah, keep it sound and keep it smart.