Law Office of Henry B. LaTorraca Civil Trial Attorney

Long Beach Business & Commercial Law Blog

Aircraft company sues for theft of trade secrets

A lawsuit has been filed by an aircraft manufacturer alleging that former employees illegally sent trade secrets to a competitor. Business owners and entrepreneurs in California might be interested in the specifics of the case, which raises issues of intellectual property policing and protection. Prior to the filing of the lawsuit, the CEO of the plaintiff company attempted to resolve the dispute twice by sending letters to officials at one of the defendant companies.

The plaintiff in the case is Bombardier, an aircraft manufacturing company based in Quebec. Among the defendants are Mitsubishi Aircraft and Aerospace Testing Engineering & Certification. Bombardier claims these companies recruited and hired 92 of its workers and that some of the workers sent documents that contained trade secrets to Mitsubishi prior to leaving Bombardier. The CEO of Bombardier has said he is afraid the intellectual property will be used to further the development of an aircraft that competes with Bombardier airplanes.

Proptech and commercial real estate

Commercial real estate in California and the rest of the country has been resistant to incorporating change in how it does business. However, proptech, or real estate technology, is beginning to transform the industry.

In 2017, venture capitalists devoted $12.6 billion to proptech, an investment amount that was three times what was invested in 2015. There is also a number of proptech firms that are developing applications that are changing the way building management is handled. All of the stakeholders in the real estate industry, including tenants, landlords and management, will be impacted in the next few years by how proptech will become a necessity.

Tips for negotiating commercial leases

It isn't uncommon for a business owner to have some leeway in negotiating the terms of a commercial real estate lease. However, how much leeway it will have depends on market conditions. For instance, if most buildings in California are occupied, the landlord will likely be less willing to make concessions. On the other hand, if a landlord has many vacancies, it may be easier to get favorable terms.

Some of the most important clauses in the lease include the rental rate and the term. Depending on the terms of the contract, a business owner may be on the hook for rent plus the cost of taxes and repairs. It may also be a good idea to negotiate a cap on rate increases in future years. If possible, tenants should negotiate a long-term lease as a landlord may be more willing to work with those who are staying for several years.

Issues to consider when buying real estate

California business owners often strive to expand their commercial spaces. This may be office space, a warehouse or whatever else fits their needs. Prior to doing so, it is a good idea to locate an area in which to start looking for a property. Ideally, it will be in an area that is close to major highways and otherwise convenient for people to get to.

There are many different costs that may come with owning a commercial space. For instance, it may need to be retrofitted or otherwise maintained for however long the company owns it. A banker or similar professional could help determine what those costs are and how to possibly reduce them. In some cases, buying a smaller building and renovating it makes more sense from a value perspective.

Tech companies and real estate markets

Tech startups are taking up increasing numbers of office spaces in California. Since 2017, tech companies have accounted for 42 percent of the square footage in leased commercial spaces in North America. That amount is double the percentage of the financial industry.

This trend has caused an increase in rent prices for commercial spaces. In the top 25 cities for tech business, rent for office spaces rose 59 percent between 2000 and 2018, from an average of $199 per square foot to $316. Of the top markets for construction for new office space, 15 out of 20 were for tech markets.

What to know about breaking a commercial lease

Those who start businesses in California do so with the hope that their organizations will grow. One consequence of a growing business may be the need for a larger office, warehouse or retail space. Ideally, business owners who negotiate commercial leases will negotiate clauses that make it easier to get out of them before they expire. It may also be a good idea to ask for a short-term lease if a landlord doesn't want to negotiate an early out provision.

There is no harm in asking if it is possible to break the lease early even if there is no exit clause. In some cases, the landlord benefits from being able to find a new tenant as it may be possible to charge a higher monthly rent. If the landlord denies the request, the lessee should consider leaving anyway. Generally speaking, whoever owns the property will have to make an effort to rent it again regardless of why a tenant stops paying rent.

Contract terms to control building costs and add accountability

Carefully designed contracts for construction projects in California could prevent or limit disputes among owners, developers and contractors. Clear terms that require documentation of all costs and set procedures for changes have the potential to protect a building project from cost overruns or expensive delays.

A contract should require that contractors provide three competitive bids for all subcontracted work. This clause informs an owner or developer about competitive rates. The stakeholders also need to define allowable and unallowable labor. Specific rules about how labor costs will be calculated could eliminate gray areas that leave parties exposed to unexpected costs.

The potential of blockchain in real estate investment

Just as Bitcoin and other cryptocurrencies are sparking interest among many entrepreneurs in Southern California, the potential of blockchain technology could also be a boon to commercial real estate investors. Blockchain allows information to be distributed through a digital ledger and shared widely. This decentralized system allows transactions to be completed and recorded reliably. While a blockchain technology underlies Bitcoin, Ethereum and other cryptocurrencies, it offers a wide range of potential future applications, including the ability to be exploited as a digital contract mechanism for real estate transactions.

Everything from property to shares in a fund to currency can be exchanged in a blockchain transaction. The results of the transaction will be recorded in the encrypted, shared ledger. Theoretically, this could remove written contracts from some types of real estate transactions. However, there are a number of reasons why blockchain may take some time for real implementation in the market, including the need for just the kinds of assurances and guarantees that are represented in a real estate contract. Even when contracts are involved, however, blockchain technologies can be used to store and manage records and handle property transfers in a secure, verified manner.

Commercial property prices stabilize as supply meets demand

Many commercial properties in California come with high price tags, but prices have begun to stabilize after years of growth. Price tracking at one online real estate marketplace indicated a small 0.2 percent rise in the August 2018 price index. Looking back at a full year, the marketplace calculated year-over-year growth at a modest 0.4 percent.

Price tracking from Real Capital Analytics produced a 7 percent increase in prices from July 2017 to July 2018, but the majority of that growth appeared in the early months of the 12-month period. By comparison, this level of growth represents only 50 percent of the price increases experienced across commercial real estate sectors in early 2015.

What to consider before acquiring commercial property

As California companies get bigger, they generally need more space to function in an efficient manner. In some cases, this means buying a warehouse or a larger manufacturing space. In others, it could mean buying a larger office to accommodate more workers joining the company. When purchasing commercial real estate, it is important to consider how it helps the business both today and in the long-term.

Buyers should determine if the space will still be useful several months or years into the future. It's also important to consider whether the space could be rented or sold once it's no longer useful to the company. Business owners should also calculate the cost of owning a commercial space as opposed to renting it. Furthermore, those who want to own a space should contemplate whether it makes more sense to buy an existing property as opposed to new construction.

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