Why should I register my Trademark?

7 Benefits of Conducting a Trademark Search & Registering your Trademark

Get your business name, logo, or other relevant marketing material protected. Don't know why? Here are a few reasons.

1)  Value: Having your mark registered raises the value of your business. Using a trademark helps you brand your business and provides a means for you to create more potent name recognition. Further, a registered mark is an asset that adds tangible value to your business, likely increasing the purchase price if you ever were to sell it.

2) Notice: registering your mark (i.e. word, logo, sound, shape, color, scent, or taste) places your mark in a national database that is easily searchable and puts others on notice that your mark is protected.  This strongly discourages other individuals from attempting to use any mark that may be confusingly similar to your own.

3)  Nationwide Protection: as of the date of application your mark will be treated as if it is used nationwide.  This is important because priority is otherwise given to the first person to use the mark and limits your rights to a geographic area or reputation of the mark, potentially preventing you from expanding your business to other regions.  

4) Who Else: A trademark search provides you with a comprehensive understanding of any similar marks being used in both national and international venues.  This allows you to make an informed choice about branding or naming direction for your business and prevents you from the huge costs of rebranding.

5) Incontestability: after your mark has been registered for five years you are provided with a heightened protection possibly leading to your mark becoming “incontestable,” which can help not only in court proceedings but also provides the ability to more forcefully convince others to cease using your mark.   

6) That Little R: registration allows the right to use the ® symbol on goods and services listed in the registration (unregistered marks may be designated by a superscript “TM”), providing an additional boost to your branding and warning possible infringers that you take protecting your brand seriously.

7) Cash Money: Gives you the right to impose statutory damages in the instant where the services or goods listed under your mark are counterfeited, and that can mean significant money in your pocket. 

If you're interested in registering your mark, please reach out. 

 

 

 

 

Partnership Check-List

Are you thinking about forming a partnership?

It could be a great idea, but first check through this list to make sure you have the big and little items figured out first. Print out this list, read the questions, and write your answers. Having outlined your partnership agreement will really help when a partner is ready to exit, especially if there is conflict. 

1. What will you name your partnership? Make sure you get appropriate Trademark protection. 

2. What is your business purpose? Define it for strategic, and taxation purposes.

3. What kind of equipment do you need? Make sure you have a comparable business to look at. 

4. Think about capital questions like: (i) how much cash are you putting in; (ii) how much operation capital is needed; (iii) will additional contributions in future be needed?

5. What are the skills and experience of each partner, and what value does it bring?

6. Transfer of property - are you doing this by contract: (i) Existing business? Are these properties to be transferred; (ii) Bulk Sales Law--Notice necessary?

7. Assignment of Licenses: (i) Licenses; (ii) Insurance policies; (iii) Any new licenses required

8. Will partnership take title to real property (buildings or land)?

9. Will there be assumption of liabilities by new partnership?

10. Do you have any inventions or trade secrets: If so, you need appropriate assignment, or a licensing agreement.

11. Think about potential taxes and insurance costs: (a) Sales Tax Permit; (b) Unemployment Insurance; (c) Withholding tax?

12. If a leases or franchise is being transferred, have you reviewed the contract to determine if consent is needed to transfer be obtained?

13. Is there a Fictitious Name Statute [called an "assumed name" in NY]?

14. Where will your place of business be?

15. What is the term of the partnership, and will the partnership terminate at will?

16. Are any of the Partners involved in legal proceedings or domestic difficulties which would prejudice the Partnership relations?

17. What is each partners right to specific partnership properties. E.g. what is not community property: Will a spouse's consent to a specific transfer be necessary?

18. Think about Salaries--Expense; previous interest on advances or undrawn profits; minimum return; will profits and losses be according to capital contributions? Also, drawing accounts or salaries: How much; Payable when; Salaries allowed if a loss?

19. Management: (a) Who are managing partners and what are their duties; (b) How are changes in salaries or drawing accounts to be made; (c) How are checks to be signed?

20. What are the risks that should be covered by insurance:  Fire & theft; Life?

21. Will all the partners devote full time?

22. Settlement of disputes: By majority of partners? Each one vote?

23. What acts are prohibited without consent? (e.g., acting as accommodation parties, sureties, going into debt, lending firm money, selling, mortgaging or pledging firm property? Discharging employees, closing a firm transaction over a certain sum of money). Partners prohibited from encumbering or disposing of any of their interest in partnership property?

24. What if you need to expel of a partner:  Disability--How long;  Disabled partners have right to continue salary or drawing account; Insurance by firm on the financial drain covered by illness of a partner?

25. What happens upon withdrawal. Does a partner give notice? If partnership is at will, what advance notice required: Covenant against competing; or using firm secrets?

26. Definitely include: Valuation of interest. Partners jointly or as individuals have option to purchase interest of a deceased or retiring partner: (b) How will you determine value? (i) Book value; (ii) Formula--Capital account + or - his share of individual profits or losses at date of death or retirement; (iii) By appraisers; (iv) By C.P.A.; (v) Is goodwill to be considered? If so, on what basis; (vi) How paid? (Cash, installment payments, security, promissory note, life insurance on other partner?

27. How will the Retention of funds work: is interest of deceased partner to be purchased or retired; Is estate of deceased partner to continue to participate in profits? How long; Estate to bear equitable share of losses; In what proportion do remaining partners get to divide interest of a deceased or retiring partner;

28. What will happen if you engage new partners? Add Provision for admission of new partners?  If so, with consent of all partners, or upon what conditions?

29. How does Dissolution Happen:  (i) Death of partner; (ii) Bankruptcy of partner; (iii) Adjudication of incompetence; (iv) Incapacity or disability; (v) Withdrawal or expulsion of a partner?

30. Liquidation. Which partner acts as liquidator? Salary? Does any partner with the return of any specific partnership profits?

5 ways to not get sued in NY

Recently, we defended a client that was not from New York State. He was getting sued in NY, and the the plaintiff's attorney tried to bring our client, who lived thousands of miles away, into the state through NY's long-arm jurisdiction statute (CPLR 302(a)), which is legal parlance that means - if you hurt someone in NY, NY can get you. Here are a few tips to protect yourself:

(1) Don't do anything wrong.

Ha, but seriously, don't. The primary way long-arm jurisdiction can be engaged is when an individual commits a tortious act (a civil wrong), either inside the state, or outside by reaching in. A good rule to live by is: don't commit tortious acts, like punching strangers or breaching contracts. 

(2) Be a tourist. 

If you are in NY for vacation don't "do deals." That doesn't mean that you can't meet business people or connect with business friends. But as soon as you "transact" business, NY can get you.

(3) Use email to clarify your intentions.

If you are meeting people in NY memorialize what for and why. If for instance you are meeting a friend of a friend for lunch at Grand Central, and he sues you a couple of months later saying you were transacting business, use email to prove you were just in Grand Central to see the stars.

(4) Double check your contracts.

Many times individuals sign contracts without reading all the way through. Usually toward the bottom of the contract, often referred to as the boilerplate section, there is a "choice of law" and or "venue" provision that says where your contract can be adjudicated and under what law. Make sure your home state is the state of choice there. 

(5) Your phone is a hook

This is not really a way not to get sued, but you need to be aware of this. If you are from another state and you actually transact business with anyone in NY State, and they allege you committed (or are committing) a tortious act related to that transaction, you can be brought in. In short, if you are doing business with a New Yorker, you are availing yourself of NY law, which gives NY courts the right to call you in. 

We were able to get a big win for our client on a foreign jurisdiction issue at the beginning of this year. If you are interested in reading the decision you can see it here:

If you are getting sued in NY: we'd love to help.

KICK START YOUR START UP:

 Three Questions For Every Start Up

You like churros….we get it.  You also happen to own an oven and the internet.  Wait a second… why not start a churro business?  We’ve all been there, the moment of divine inspiration, a way to make money by doing something you love.  But how?  Who do I sell to?  Do I buy a storefront?  Where will I get my start up money? How do I protect my personal assets?  Should I take out a loan against my house? Do I need a business license or some sort of corporation? First of all, don’t start a churro business.  But if you do, you should start by considering the following three questions.

1.    What kind of business entity do I want be?

    Maybe you are thinking, what is a business entity?  Do I have to pick one?  The short answer is no, you don’t have to choose a business entity but you are going to be considered an entity by the law anyway, so why not choose for yourself and take advantage of the options?  There are several kinds of business entities, each with specific advantages and caveats.  While the process of becoming a business entity can be relatively simple, the choice is crucial.  The key things to think about when choosing an entity are liability, taxation, and ownership.  For example, a limited liability company (LLC) will typically protect you as an individual from contractual liability and certain tort liabilities incurred by your employees (but not torts committed by you personally even if in the course of business).  So, if you take out a loan in the business’ name and the business is unable to repay the loan, you will be protected from personally responsibility to repay the debt (as long as you did not sign a personal guarantee).  Or, if an employee accidentally makes a jalepeno churro too hot and you get sued for burning someone’s mouth, it’s likely that only the business will be liable.
     Probably the most important aspect of entity choice is taxation. With both an LLC and a Partnership, pass through taxation requires both the owners and/or shareholders to pay taxes on their portion of the profits, just like you would on a pay check from a company you worked for.  However, if you form what the IRS deems a C-Corp then you will not be taxed on the profits and the corporation will be treated as if it is it is a person. Finally, entities can control the issues of ownership and authority.  Do you want to be in complete control of your business?  Do you feel comfortable handing over some decision-making power to a board of directors?  Do you want others to have a fiscal stake in the entity? If you choose an LLC you have flexibility to decide if you want to have sole control or if you would like to invite other members or shareholders to have a say in matters.  If you form a C Corp, you need shareholders, directors and officers.  In limited situations the shareholders can also serve as both directors and officers and retain more control of the company but the general structure is mandatory.  
    Liability, taxation, and control are all things that add to the risk and decision making burdens in any start-up.  Understanding the differences between entity structures and choosing the one that best suits your business can minimize your risk and help you make efficient business decisions .

2.    Where will your financing come from?

    Common funding ideas for new businesses are personal finances, seed financing, crowd sourcing or investments from venture capitalists.  Personally financing your business is the least complex option, but requires careful planning as new businesses regularly incur unexpected expenses.  Seed investments typically involve family or friends financing the business in the form of a loan or in return for equity in the business. Often when a skilled investor (even if family or friends) engages a new business they seek a certain amount of control over the company in concert with a stake in the companies’ profits.  Sometimes investors may suggest convertible debt financing which essential gives the investor the option to turn the money you owe into equity once the business becomes profitable.  With seed financing, you want to protect the relationship you have with your investor as well as your business.  The best way to achieve both of these goals is to clearly lay out the nature of the relationship in an investor agreement.   
    Additionally, some unique businesses seek funding from venture capitalist firms.  The difference between venture capitalists (VC) and a single investor is that a VC firm’s entire business purpose is to fund new businesses in return for equity and control in the company.  Venture Capitalists are looking for huge profit margins and typically don’t invest in brand new ideas. Dealing with venture capitalists can be a highly structured process, including attorneys working on both sides of the deal.  Additionally, these investments often require the new business give up substantial control of the company. 
     Engaging investors and precisely defining their role is crucial. Unlike choosing an entity, creating agreements with investors requires a lot of time and can be very complicated.  Start-ups are typically short on both time and money, making superfluous disputes with your investors especially taxing and generally jeopardizing the entire endeavor.  If you want to avoid messy arguments with investors you need to clearly define the nature of the relationship between your business and the investor in the form of an investor contract.

3.    Do I have intellectual property and if so, why should I protect it?

    Why should you care about intellectual property as a start-up?  Intellectual property is your ideas, your inventions, and sometimes the creative processes that make your business unique and attract others to engage your idea. If you thought it into existence and want to use it in the world, the Federal Government is able to give you a property right to that idea or invention. There is a good reason large tech companies have entire departments devoted to collecting patents: they don’t want to waste time being dragged into court for every new line of code they write.  Intellectual property rights come in the form of patents, copyrights and trademarks.  Below is a list giving the legal definition and examples of each.

Trademark    

Word, phrase, symbol or design that identifies the source of a service rather than goods: logos, names, symbols catchphrases, mascots.


Copyright    

Works of literature, architectural design, software, graphic arts, motion pictures and sound recordings: books, building designs, photographs, computer games, drawings, any form of music


Patent    

Any person who invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent.
The invention also must have (1) some usefulness, no matter how trivial (2) be novel (3) be non-obvious to somebody who understands the technical field of the invention: apps, sporting goods, christmas lights, computer hardware, computer software, kitchen ware, make up, chemical compounds, prescription drugs.

    Your interest in Intellectual Property as a business owner is all about protection and investment. You want to protect your ideas and inventions from competitors by obtaining a patent or copyright.  Further, businesses often unknowingly use other entities patents in their business processes without permission, which can lead the way to patent infringement lawsuits.  There are companies–coined non-practicing entities or NPEs–out there whose sole purpose is to buy patents and engage in litigation against businesses infringing on those patents.  Being held hostage by NPE for patent infringement is a waste of time and money and can be prevented by having an attorney analyze your business practices and conduct a patent search.  Additionally, obtaining patents can make your business more attractive to investors as having secured rights to intellectual property provides an entry barrier to competitors attempting to enter your market space.
    Though intellectual property seems like a cumbersome idea and the last thing a busy start-up owner should be considering, including an IP strategy in your business plan is crucial to protecting your ideas and defending against frivolous law suits.  The first step is analyzing your business for any IP rights that your business is utilizing.  Once you understand the IP rights involved in your business you can search for any patents you may be infringing in addition to pursuing patents, copyrights or trademarks.

 

Got all that?


    Hopefully these three introductory questions will help you think through how to form and guide your start up.  Engelhart Law exists to protect your brand, protect your time, and protect your assets.  Our goal is to cut through a complex and confusing legal world to provide you with the ability to focus on managing your business.  If you have any questions feel free to contact us.  

App Appropriate

This is a question I received this week from a client: I have an App concept, should I form a corporation or should I just create the App?

Great question, you can always function as a sole proprietorship (SP). There are benefits with SPs, such as simplicity of set up and pass through taxation, but if you are going to Apple you should definitely create a business entity, aka: a legal vehicle for your business.

When deciding which entity to choose, it is best to consult an attorney, they will take your concept and future goals through a legal analysis to find the perfect fit. But if you don't want to see an attorney just bite the bullet and start a C-corp. 

Depending on the state you live in a corporation can be slightly more costly to set up and, and independent of the state your in, it will require more work to keep running. If you set up a corporation you will have to hold meetings, take corporate minutes, draft resolutions, and tackle other formalities. But, if you want capital injection, aka cash money from investors, you should definitely go corporation. A C-corp gives you the ability to issue different classes of stock to investors, where an LLC can not issue stock. A C-corp will set you up for real growth opportunity. 

I had another client recently with no growth plan, he just wanted a simple business vehicle to carry his online business concept. If you're in that situation you might go LLC first and then consider converting it to a corporation later. If you stay small and simple, you're happy. If you grow and want to scale you can convert the LLC to a corporation. 

So the short answer is: a business entity like an LLC or C-Corp can protect you if something goes terribly awry, and sets you up to communicate with real investors. Yes, definitely incorporate.