Posted by Michelle Grenier on Wed, Sep 08, 2010 @ 11:10 AM
Entrepreneurs often do not seek professional advice until after they are struggling through the consequences of making mistakes, with regard to the legal aspects of their startups. Had they obtained competent professional advice before taking action, they could have avoided many of the pitfalls and corresponding consequences, by simply prioritizing key issues, with competent professional advice. Here are some helpful tips related to legal issues commonly faced by entrepreneurs and means for dealing with them through proper prioritization.
No. 1: Failing to properly prioritize intellectual property protection.
Intellectual property can be a company's most valuable asset and the acquisition, transfer, license or right to use such intellectual property is often an essential element in many business transactions. Recently, lenders, investors and financial institutions have considered and requested intellectual property assets as collateral to secure company obligations and financing.
Intellectual property assets may be protected as patents, copyrights, trademarks or trade secrets. In addition, intellectual property may be protected based on theories and principles of unfair competition. The applicability and availability of such protection depends upon the specifics of the intellectual property and the type of protection desired. Also, one or more than one form of protection may be applicable and available to certain intellectual property. For example, patent, copyright and trade secret protection is often applicable to software programs.
First come, first serve,is the policy with trademarks. Whoever registers or uses a protectable mark in commerce first, generally, has the exclusive rights to that mark for the applicable goods and/or services.
Startups often try to cut the budget on the legal end (researching availability of brand and registering the mark) and increase the budget on the marketing side. This often results in a loss of all marketing funds spent, when it is discovered thereafter, that the brand/mark was not available for the company’s use. Even worse, such use could amount to infringement, which causes a substantial increase in the startup’s exposure to liability for its use of the mark. If there is so much as a hint of infringement, the startup’s at risk of being sued increases. Any law suit at the startup phase, could bring the enterprise down, even if they win in court.
Another means of protecting IP is to establish a separate entity (corporation or LLC) and require that all founders execute an assignment of all IP created by them, in pursuit of the project.
When startups stumble out of the gate, through errors in prioritizing, their chances of succeeding are reduced drastically.
No. 2: Failing to properly prioritize the written agreement between founders.
Humans are well-known for changing their minds, especially when the path becomes uncomfortable or a new more appealing activity presents itself. That is one of many reasons why a well-drafted Joint Venture Agreement is key to successful multi-party projects. It is essential that all participants understand their rights and obligations and the rights, obligations and expectations of all other participants. If the key funding party or key operating party jumps ship, all the time and money invested by the other participants, is typically at a substantially greater risk.
When tension and stress levels rise, even well-intentioned participants often forget (sometimes innocently), what they promised at the beginning of the project. Joint Venture agreements considerably reduce the risk of "forgetfulness" and/or provide a clear, written reminder of important commitments.
Also, if no separate entity is established with clear ownership rights, an early partner who goes MIA (missing in action), may come back, after success is achieved, to claim what rights he/she believes he/she is entitled to. Sometimes such is based upon a bona fide belief that their prior contribution creates this entitlement.
Getting the agreement and commitments of the founders in writing through a Joint Venture Agreement early, considerably reduces these risks.
No. 3 Failing to prioritize establishment of a separate entity early.
As stated in No. 2 above, without separate entity and clear ownership rights established in writing, a prior participant, can return to haunt the venture. In addition to the Joint Venture Agreement, this risk can be reduced by incorporating or establishing a Limited Liability Company early and issuing shares to the founders. Establishing the separate entity, prior to the increase in value of the business could also render a tax benefit to the founders.
No. 4: Failing to properly prioritize the engagement of essential professional team members, including legal and tax professionals.
Simply stated, it's better to have team members, including tax and legal professionals, who are personally and professionally familiar and experienced in the startup arena, and who understand the unique needs of entrepreneurs. In addition, taking preventative measures now is almost always less expensive than taking remedial measures later.
Before “leaving the gate,” entrepreneurs should gather and engage their team of professionals and take the necessary measures to avoid pitfalls, that can prove to be the demise of the venture.
No. 5: Failing to prioritize proper policies concerning the disclosure of business plans, inventions and other Trade Secrets.
Prior to obtaining patent protection and where registration would not be available, the only protection available is trade secret protection. In order to maintain a trade secret, you will need to demonstrate that you have taken reasonable steps to keep it secret.
Entrepreneurs should implement a policy requiring the execution of a Confidentiality-Nondisclosure Agreement prior to disclosure of trade secrets. In addition, business plans and proposals should expressly set forth a notice on the cover page that they contain confidential and proprietary information and materials. Note, such notice is not as powerful as a nondisclosure agreement.
In sum, entrepreneurs should properly prioritize the protection of intellectual property, written agreements with founders, establishing a separate entity early, engaging team of professionals sooner rather than later and implementing proper policies concerning the disclosure of trade secrets.
Legal Traps for Startups to Avoid, Part Two, will appear in this blog next week.
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Posted by Michelle Grenier on Tue, Aug 10, 2010 @ 10:54 AM
Trademark law can be somewhat complicated. It is important that you do it right from the start, to avoid serious consequences later.
1. When selecting the term to use as a trademark and apply for trademark registration consider the following:
(a) The mark set forth on the USPTO Trademark Registration Application must be the mark exactly as you will use it in commerce.
(b) Eventually, you will need to submit a specimen (e.g., brochure, etc.) to the USPTO that will evince your use of the mark in commerce, in association with the goods and/or services set forth in the application. That specimen will need to reflect the mark exactly as set forth on the application (without any other terms immediately abutting the mark).
Thus, if you will use the mark "ABC XYZ Services Boston" and the specimen will reflect "ABC XYZ Services Boston", then the application should be for "ABC XYZ Services Boston" (i.e., a specimen reflecting "ABC XYZ Services Boston" will be unacceptable for an application for "ABC XYZ Services").
Note, for the services application, you may need to disclaim exclusive rights to "Boston" and "Services" because the former describes a geographical location and the latter is "merely descriptive."
2. With regard to the particular name you have selected, e.g., "ABC XYZ Services Boston," consider also the following:
(a) the applicable licensing division that regulates your business, if applicable, may not allow you to use the terms "ABC XYZ" in the name of your business and/or the name of services; and
(b) the USPTO may deem the terms "ABC XYZ " to be merely descriptive.
Trademark law is not as straight-forward as most business people think. If you don't get it right the first time, your application may be refused and that may result in someone else filing an application for the same mark, which may result in you being prohibited from using the mark in your industry. Obtain advice from an experienced trademark attorney as soon as possible, and secure trademark rights for your mark.
Want to discuss your issue with an experienced trademark attorney? Click here for a free telephone consultation.
Boston trademark lawyer, Maine trademark lawyer
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Posted by Michelle Grenier on Thu, Jul 22, 2010 @ 02:55 PM
Are you using your term as a trade name or trademark? The USPTO may find that the term for which you would like to obtain trademark registration, is used as a trade name and not a trademark. The Trademark Act does not provide for registration of trade names. For example, the name of a business or company is a trade name and the Trademark Act and the USPTO distinguishes trademarks from trade names. A trademark is used to identify and distinguish the trademark owner’s products/goods from those sold or manufactured by others and to indicate the source of the products/goods. As defined by the Trademark Act, the terms “trade name” and “commercial name” mean any name used by a person to identify its/her/his business or vocation.
Note, that use of the term in a stylized manner may help your argument that the term is used as a trademark (in addition to being used as a trade name).
In addition, you will need to submit a Specimen evincing use of the mark in commerce, in association with the goods applied for. With the specimen you will also be required to submit and certify the date of your first use in commerce of the mark and the Specimen.
Should you wish to discuss your business endeavor and corresponding legal issues with an experienced Business Lawyer, click here to schedule a free telephone consultation or contact Michelle L. Grenier, Esq. directly at 617-728-9800 or michelle@contactmylawyer.com
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Posted by Michelle Grenier on Thu, Apr 01, 2010 @ 04:43 PM
The following is a basic checklist concerning legal tasks related starting a service business:
- Establish a corporation or Limited Liability Company. Obtain Federal ID number and all Corporate and LLC documents necessary to comply with applicable laws.
- Apply for trademark registration.
- Obtain a license to operate the business, if applicable and research other requirments and limitations that may apply.
- Enter into commercial lease after having lease reviewed by an attorney.
- Enter into comprehensive Client/Customer Agreements for services.
You may also find the information on the following link helpful:
Protect your personal assets.
If you are ready to GET THE BALL ROLLING, schedule a Free Telephone Consultation with an Experienced Boston Business Lawyer / Maine Business Lawyer today.
(Misspellings: Boston Business Laywer , Maine Business Laywer)
If you are interested in posting this article on your site, please contact me to discuss at michelle@contactmylawyer.com . No portion of this article may be copied, retransmitted, reposted, duplicated or otherwise used without the express written approval of the author.
Posted by Michelle Grenier on Fri, Mar 19, 2010 @ 12:33 PM
Many business people do not understand the risk involved in licensing property. Both the licensor and the licensee each are at risk and that risk increases when the parties do not enter a well drafted license agreement.
Licensor's risk losing rights to their property and the goodwill and reputation that they have worked hard to associate to their product or service. There is also the risk that the license falls within the scope of a Franchise, which is highly regulated. In fact, if the license agreement or arrangement falls within the scope of Franchise law, and the franchise opportunity is not properly registered, the consequences are substantial.
If you are licensing intellectual property or other property, make sure your rights, title and interest in and to the property are protected by implementing comprehensive licensing agreements.
If you are licensing property from another party, make sure you and your business are protected with indemnity clauses and the like in your licensing agreement.
For more info on Licensing Agreements, review my License Agreement Checklist or schedule a Free Telephone Consultation with an Experienced Boston Business Lawyer or Maine Business Lawyer today.
If you are interested in posting this article on your site, please contact me to discuss at michelle@contactmylawyer.com . No portion of this article may be copied, retransmitted, reposted, duplicated or otherwise used without the express written approval of the author.