Intellectual Property – Copyright
So what is a copyright — once again I’m going back to the government who grants these rights: http://www.uspto.gov/web/offices/pac/doc/general/whatis.htm “Copyright is a form of protection provided to the authors of ‘original works of authorship’ including literary, dramatic, musical, artistic, and certain other intellectual works, both published and unpublished. The 1976 Copyright Act generally gives the owner of copyright the exclusive right to reproduce the copyrighted work, to prepare derivative works, to distribute copies or phonorecords of the copyrighted work, to perform the copyrighted work publicly, or to display the copyrighted work publicly. The copyright protects the form of expression rather than the subject matter of the writing. For example, a description of a machine could be copyrighted, but this would only prevent others from copying the description; it would not prevent others from writing a description of their own or from making and using the machine. Copyrights are registered by the Copyright Office of the Library of Congress.”
Yet another mouthful. But here the advice is much easier to give. You can copyright your website, your technology, your documentation, pretty much anything you develop which has a physical manifestation. So why not do it? “© year, [name of company]. All rights reserved” that’s all you need to put on your material. Now, of course, nothing is ever quite that simple so here are some things to think about: (i) copyright protects “expression” not “ideas” (the “idea” of a web site that allows users to use simple phrases to search the Internet (who could I be referring to) is not protectable; but the “expression” of that idea in the form of the software that drives the website, the way that website looks, feels and functions, these can all be protected under the law of copyright); (ii) you should formally register your copyright with the government for all your “important” copyrightable material (e.g. source code) – this will ensure you an easier time asserting ownership and entitles you to statutory damages if you win your case http://www.copyright.gov/eco/; (iii) your work must be “original” in order to be eligible for protection (you can’t just change a couple of things on someone else’s material and claim it as your own); and (iv) the work must be “creative” – by that I mean not solely utilitarian or functional (e.g. a handbag – but if the handbag looks like an alligator it may be copyrightable) by the way, if it turns out there is really only one logical way to accomplish a task, you can’t copyright that either.
Next installment, Intellectual Property – Trade Secret, and remember, ALWAYS CONSULT AN ATTORNEY FIRST.
Intellectual Property – Trade Secret
What is a trade secret? A trade secret is your “know-how”. Now you can always protect your know-how as “confidential information” (see my previous entry on Intellectual Property – Confidentiality), so why do we need a separate discussion? Because for information to qualify as a trade secret it has to meet certain criteria. Of course, these criteria vary from jurisdiction to jurisdiction – BUT, here are some common characteristics: (i) not generally known to the public (hence the parallel with confidential information); (ii) reasonable measures must be taken to protect its secrecy (leaving a copy on your desk won’t qualify – even if you do lock the offices at night); and (iii) it confers some sort of economic benefit on the holder by not being generally known (think of the formula for Coca-Cola). As a general rule, you should always rely on trade secret protection – unless, of course, you can’t. For example, while you can license and customers can enjoy your software product without access to the source code (No Reverse Engineering Allowed!), you might find your customers won’t license your proprietary stock index if they don’t understand how it works. Maybe more importantly, trade secret protection should be used to keep the special knowledge of your employees from getting into the hands of your competitors (e.g. client lists, marketing strategy, etc). This can be accomplished through non-disclosure agreements, non-compete clauses and similar protections – more to come on this topic.
Next installment, Intellectual Property – Trademark or Service Mark, and remember, ALWAYS CONSULT AN ATTORNEY FIRST.
Intellectual Property – Trademark or Service Mark
So what is a trademark or service mark — once again (and I promise – maybe – this is the last time) I’m going back to the government who grants these rights: http://www.uspto.gov/web/offices/pac/doc/general/whatis.htm. “A trademark is a word, name, symbol or device which is used in trade with goods to indicate the source of the goods and to distinguish them from the goods of others. A servicemark is the same as a trademark except that it identifies and distinguishes the source of a service rather than a product. Trademark rights may be used to prevent others from using a confusingly similar mark, but not to prevent others from making the same goods or from selling the same goods or services under a clearly different mark. Trademarks which are used in interstate or foreign commerce may be registered with the Patent and Trademark Office.” Some additional basics: (i) generic terms may not be registered as a trademark – try to think of something unique (e.g. EXXON for petroleum products) or a word that suggests a meaning but does not describe the product (e.g. APPLE for computers); (ii) in order for you to get trademark protection you will need to use the mark “in commerce” (e.g. make it available to the public), however, an “intent-to-use” application lets you protect the name from others for up to one year while you work on developing your product; (iii) trademarks are registered in classes ( depending on the type of goods which are being covered – e.g. goods/services and then subcategories under those headings) (iv) trademarks must be registered in each country in which you wish protection; and (v) a registration is not perpetual so it must continue to be used in commerce and must be renewed periodically (the time period is dependent on the jurisdiction in which the mark is filed).
OK, pretty simple – right? Well, not so fast, there are a lot of things to focus on here, your company name, logo, domain name(s), etc. So let’s look at these in a logical progression. You need a company name – your identity to the outside world. In an ideal world that name will serve as the initial branding for your company and hopefully, as the domain name for your company’s website. You’ll need to make sure that no one else has already taken that name so start by checking the government website at: http://tmsearch.uspto.gov/bin/gate.exe?f=tess&state=4810:8ee8td.1.1 ; then check and see if the name (or some reasonable facsimile) is available as a url. If both of these check out then you should make haste to file an intent-to-use application for the trademark with the USPTO and register the domain name. There are lots of ways to register the domain name so why don’t you go to http://www.thesitewizard.com/archive/registerdomain.shtml for a short tutorial. With respect to the intent to use for your trademark, while it may seem simple, the registration of a trademark has lots of pitfalls and it would be my advice to work with an attorney who specializes in this area. Notwithstanding, if you wish to try a standard service check out http://www.vcorpservices.com/. Well of course there are lots of other questions – but it’s time for a new topic.
Next installment, Contract, Contracts and More Contracts, and remember, ALWAYS CONSULT AN ATTORNEY FIRST.
An Introduction –
Need I say more?
Next installment, Contracts – Employee Agreements, and remember, ALWAYS CONSULT AN ATTORNEY FIRST.
Employee Agreements –
One of, if not the most, important asset of your new business are your employees. Without them you likely would not be able to be successful. And while you should “treat them right” https://www.youtube.com/watch?v=s0fhHLliKJI it is always important to protect your company. This means making sure they’ve signed a confidentiality agreement, they’ve agreed to assign all rights to the work they’re doing for you to the company (“work for hire” doctrine) and, to the extent appropriate, they’ve agreed to no-hire and non-compete obligations. You also need to be very clear that your employees are “employees at will”. That is there is no obligation to keep them on for any specified period of time. Your employees are the ambassadors for your company and it’s important that during the employment relationship and even after an employee has left you remain on good terms. The last thing you want is a disgruntled employee using social media to make his/her case on your employment relationship. Once of the best ways of doing this are to make sure that the terms of employment are clear from the beginning. That’s the function of a good employment agreement.
Next installment, Contracts – Executive Employment Agreements, and remember, ALWAYS CONSULT AN ATTORNEY FIRST.
Executive Employment Agreements
So, why a separate discussion for Executive Employment Agreements? Well, typically the agreements are very similar but….Executives tend to have the addition of stock ownership, benefit plans and defined termination rights. Some questions to think about include how much stock, is it outright stock ownership or in the form of options, how does it vest, what happens after the stock has vested but the Executive has been terminated – is there a buy-back provision; how much notice must be given for termination, do you need key man insurance, etc. In many ways, your Executive Employment Agreement is a “mini” partnership agreement and there should be lots of thought put into it so key resources (including time, money and equity interest) are not wasted.
Next installment, Contracts – Vendors/Supplier Agreements, and remember, ALWAYS CONSULT AN ATTORNEY FIRST.
Let me first refer you back to the first post on this topic (you remember that Dilbert cartoon) [See previous chapter on Contracts – Introduction]. So, let’s all be honest with ourselves. How many times have you been faced with the negotiation of a vendor agreement and thought to yourself – well if we have an issue “We Can Work it Out” http://www.youtube.com/watch?v=FVBnkOL-8Jw ? Well it makes a nice song, but when you’re in the middle of a dispute wouldn’t it be nice if the contract language was on your side. The reality of your vendor agreements is that they can represent the backbone of your business. What if your data server goes down, you can’t get the supplies you need, your developer doesn’t deliver or delivers a faulty product? A contract cannot guarantee performance but it can provide you with a proper allocation of risk and maybe some leverage to ensure performance. The thing you aim for in these agreements is not an airtight agreement (you’ll almost never get one – and especially as a start-up with no leverage) – but rather an appropriate balancing of risk and reward between you and the vendor to ensure that the vendor has the incentive to deliver the goods and you have an incentive to pay. At the very least, you should understand the risks and obligations of each contractual commitment and manage your business with those in mind. I could spend the next few weeks/months on the art of negotiating and understanding your contractual commitments but we’re going to save that for the next journal.
Next installment, Contracts – Client Agreements, and remember, ALWAYS CONSULT AN ATTORNEY FIRST.
So your development work is done, you’ve started marketing your product, everyone is waiting for the first nibble and then it comes: http://www.youtube.com/watch?v=xuVmJ8TPTNU. Well, hopefully you’ll be better prepared than these folks. So, when you’ve finally hooked your first clients, what type of contract are you going to provide them? Is this an internet based service where you can use on-line terms and conditions – if so will you require the client to affirmatively click acceptance? Maybe you will you require a “paper” agreement with a hard signature – this is likely the case if your contract needs to be personalized to the individual client. Will it be a single use contract or a master agreement with schedules? But let’s get to the heart of the issue. The purpose of your client agreement is to put on paper the expectations of the parties and most importantly to allocate risk between yourself and your client. Some things to think about in making these decisions: what are you trying to protect [e.g. your intellectual property (software firm, data firm, design firm), your employees (consulting firm)]; what is the cost of your product versus your potential liability exposure if something goes wrong; do you have insurance that provides protection in the event of a liability exposure; are there industry standards that you will need to adhere to in order to attract clients (e.g. most software firms will find that their clients demand an IP indemnity to protect them – should this indemnity be limited by geography, by amount, by potential fault of the client – what if you incorporate open source or other third party products within your product)? Reality is that this is one of the most important documents your company will deal with. You will need to balance the need for protecting your firm and its assets with your desire to sign on new customers – after all, no customers, no business. Remember, your client agreement is in your control. You can always amend it if your original format doesn’t work. The important thing is to think it through with someone who understands risk and the demands of your marketplace.
Next installment, Your Web Site, and remember, ALWAYS CONSULT AN ATTORNEY FIRST.
Your Web Site
Next installment, Privacy, and remember, ALWAYS CONSULT AN ATTORNEY FIRST.
A show of hands please – who really believes they have any privacy today? If you’ve raised that hand, I suggest you go to Google and put in your name. Chances are, there are pages of references to you and that’s only what you can see. Every time you use your computer to do a search, buy an item, research a topic, there are unseen eyes keeping track. Ever notice how those shoes you were looking at online during your lunch break appear in the ads of the next website you visit (really shook me up the first time I noticed that).
Well this is not a rant about privacy but a wake-up call for small businesses that privacy matters may, in fact, be one of the most difficult issues your business must deal with. The next few entries will talk about the structure and applicability of U.S. and foreign data privacy laws and regulations and why they are important to your business. But first I’d like to clear up some common misconceptions. Confidentiality and privacy are different concepts. Confidentiality refers to the contractual (or potentially common law) obligation that your business has or has created to protect its own information or the information of its vendors or clients. Privacy, in most cases, refers to an individual’s “personally identifiable information” (“PII”) – which could be as simple as an individual’s name and phone number (or zip code). While PII should be treated as confidential information, there are many statutory obligations that apply to PII as well and that is what we’ll be discussing next.
Next installment, Privacy – Structure of U.S. Data Privacy Legislation, and remember, ALWAYS CONSULT AN ATTORNEY FIRST.