In this four-part series, writer Polly Brewster explores avoiding common legal mistakes.
You've carefully chosen the words, sights and sounds that will represent your company. Those assets are important parts of your company's intellectual property and need to be protected rigorously. While just how you protect your start-up's IP can be a complicated subject, there are some common mistakes of which savvy entrepreneurs can steer clear.
Mistake: Picking the wrong name. Before you think about putting any advertising or marketing dollars behind a business name, do some homework to make sure someone else hasn't snapped it up. "Run the perfunctory Google search, but also check the state registration database and look for similar names," says Praveen Kosuri, director of the Entrepreneurship Legal Clinic at University of Pennsylvania Law School. If you plan to go national, you can also do a trademark search on the United States Patent and Trademark Office website. Worst case scenario: You find out you're using a trademarked name and have to rebrand your company after you've already started selling products or services. "It's a costly mistake," Kosuri says. "You lose all the money you've spent on name recognition and might confuse (and lose) your current customers."
Mistake: Not being distinct. In trademark law, there's a spectrum of distinctiveness and not every name is approved. A merely descriptive name like "Book Seller" won't likely be associated with just your business and aren't generally favored by the trademark office, points out Signe Naeve, the supervising attorney for the USPTO Trademark Law Pilot Program at the University of Washington Entrepreneurial Law Clinic. A more "fanciful and arbitrary" like Amazon, on the other hand, lies at the other end of that spectrum, and holds a unique meaning in the marketplace. Naeve suggests hiring a lawyer to conduct a search for obvious name conflicts through a professional service.
Mistake: Assuming if the domain is mine, so the name is too. "A lot of start-ups think if there isn't a secured dot.com, that must mean no one else out there has the name," says Nathan Roach, a start-up specialist attorney at Ram Attorneys, which can lead to real legal trouble down the road if a larger business bears a similar name to yours. "The legal standard for trademark is 'likelihood of confusion'." So before you sink a lot of money into a website, make sure another company couldn't send out a cease and desist letter that says your website infringes on their trademark.
Mistake: Hiring your friend's buddy, the artist. You're a start-up with a tight budget, but you need a logo and your Facebook friend's sister knows just the designer. "A lot of start-ups do it quick and dirty instead of hiring an established vendor that has a written contract," Kosuri says. "I always tell clients to have a simple agreement written--even if it's only a $50 design fee--make sure you get the copyright for your logo." If your start-up does take off, you don't want a designer holding you financially hostage for a logo design.
Mistake: Assuming your brilliant idea must be patented. Governments have patents to ensure that inventors don't hide their ideas under a bushel. "For disclosing an invention to the public, the U.S. Government can grant the owner a limited 20-year monopoly through a patent," explains Jesse Kindra, the Supervising Attorney for the USPTO Patent Law Pilot Program of the University of Washington ELC. But Kindra also adds that obtaining a patent can take years and doesn't guarantee business success--plus it can be expensive to go after 3rd parties that infringe on your patent. Many entrepreneurs don't realize that trade secret law also protects classified business ideas. "It's the unsung hero of IP protection, no need for any filings--just keep something secret," Kosuri says. A quick rule of thumb for whether you want to patent or protect comes from Kindra: "If an invention has a short life such as software or is difficult to reverse engineer, like the famous Coca-Cola recipe, and can be maintained as a secret, it may be better not to disclose it via a patent application." If you still think a patent is the best route, he advises you to file a patent application with as broad claims as possible then adjust it when the USPTO either rejects or limits those claims.
Mistake: Forgetting copyrights. Copyrights are overlooked, says Naeve. "They're relatively easy to file and can provide additional IP protection." A basic copyright claim can be registered for $35 through the U.S. Copyright Office. "Most people think copyrights are for written work, but they also protect computer source code, drawings and designs," Roach says. As an example, he cites auto-body shops that specialize in tricked-out cars, "If their product shots show up in someone else's catalogue, a copyright is an easy remedy." Yet he also points out that a copyright demands a high-level of specificity. "It needs to be a literal copy of something. If someone starts ripping off writing from your website, it has to be a lot to take them to court."