This blog section was established to give you food for thought -- sometimes it's pending legislation, an interesting court decision or law suit, or advice about how to help your business thrive. Today's article, from the New York Times Small Business Guide, is a thorough primer on when to sell your business. There are a variety of issues about valuing and relinquishing control of your business you must consider, including preparing all the required documentation (and the "want-to-have" documentation) BEFORE advertizing. Speed is key, and selling a going concern is more like selling a house in a hot market than it is selling something on Craigslist. Be prepared to vet your buyers and have them vet you in a very short amount of time.
At HLR, we help "idea people" become "business people." Whether it's navigating the export laws so that you can source a manufacturer in China, locking down your non-disclosure agreements for employees, or helping you prepare a pitch to venture capitalists, we specialize in covering the legal stuff you don't know you don't know.
This blog section was established to give you food for thought -- sometimes it's pending legislation, an interesting court decision or law suit, or advice about how to help your business thrive. Today's article, from the New York Times Small Business Guide, is a thorough primer on when to sell your business. There are a variety of issues about valuing and relinquishing control of your business you must consider, including preparing all the required documentation (and the "want-to-have" documentation) BEFORE advertizing. Speed is key, and selling a going concern is more like selling a house in a hot market than it is selling something on Craigslist. Be prepared to vet your buyers and have them vet you in a very short amount of time.
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To contrast the story of the fashion student whose image was commandeered by Tesco in the UK, in the United States, a former employee is suing the producer of online game World of Warcraft for using her voice and original composition song without permission or royalty.
Ms. Lewis was an employee at the time the work was created, whereas Ms. Kirkbride was a stranger to Tesco. There is always an argument that work related to her job created by Ms. Lewis while she was a salaried employee could be assigned to the employer. (This is why lawyers are helpful if you find yourself in a pickle like this, even for a consult.) As far as the employer is concerned, Ms. Lewis created something for her job, and they own it. This is called a "work made for hire," typically owned by the employer alone. However, it is not always clear who the copyright holder is. From Ms. Lewis' perspective, of course, she created something on her own time related to a part of the game that was not her professional purview. She clearly thinks this is hers alone, and is demanding royalties. Whether you are an employer or an employee, works made for hire are like quicksand. In this age of immediate, widespread dissemination of content, you must protect yourself with empoyment or independent contractor agreements that spell out very clearly which creative works are owned by the creator and what are owned by the employer. This can cut both ways, and is not just a problem for starving artists. Engineers, computer programmers, singers, and even bookkeepers and consultants need to have clarity before taking on creative projects. Robust non-disclosure and non-compete agreements can protect both the employer and the employee. It's also important to discuss who has the right to create derivative works based on the product of a particular project. These boring, boilerplate details can become crucial when a product is successful, because they leave a lot of money on the table. Get ready: the newest scam is aimed at your trademark!
Apparently, it's totally legal for "businesses" like the United States Trademark Registration Office to send you letters threatening to cancel your trademark unless you pay up. The fine print says it's not a bill, disclaims being a government agency, and essentially lets the scammers escape any legal liability. But don't pay them. You may have a keen sense of whether or not you won a Nigerian lottery or, the latest phishing scam, that your loved one got mugged in a third world country and needs a wire transfer post haste. But don't think your business is immune to these scams! It may seem like a rounding error to your business' bottom line, but every penny saved is a penny earned. When in doubt, contact an attorney or financial professional. We're here to help. Don't let this happen to you: Nicola Kirkbride, a fashion management student in the UK, blogged about an outfit she was wearing. She set the timer on her own camera and snapped a picture of herself wearing a daisy-print blouse in her own backyard to use for the blog. Somehow, a designer employed by Tesco, a FTSE-100 retailer and the 2nd-largest retailer on earth (behind Wal-Mart), found the etheral image and put it, unchanged, on a sweatshirt for kids.
The article is here. It's important to appreciate that the UK has a very different court system than the US, designed to discourage lawsuits or even the "threat" of a lawsuit in demand letters, so it's not unusual that Ms. Kirkbride's first move was something other than suing the pants off of Tesco. However, it's jarring to realize that her intended profession is "fashion management" and she doesn't appear to think that she's owed compensation for the use of her image. Even if she's delighted to lend her image and chooses not to exercise her right to forbid Tesco from profiting off of derivative works based on her photo, she is still owed a reasonable royalty. There are two lessons for us US-based artists and inventors here. First, keep your eyes peeled. Ms. Kirkbride was alerted by a fan that her image was on the shirt. Remember that having a network of people who like and/or want something from you in the industry in which you work can be priceless. Even your competitors can ultimately be allies, and it's always wise to resist burning bridges where possible. Second, value yourself. You are on this blog because you think your ideas are worth "something." In the event that you are the unfortunate victim of copyright or trademark theft, you may be entitled to a "reasonable royalty," or actual damages. Actual damages are hard to prove after the fact, but if you are proactive and take excellent records as soon as you are alerted to the infringement, you can increase the royalty owed to you. For example, perhaps don't encourage your friends to purchase the infringing item because you think it's "cool." As HLR follows this case, we will keep you updated as far as we can just how much a stolen image is worth when it becomes wildly popular. Tesco may end up selling hundreds of thousands of these shirts, not just because they are a global retailer, but now this story has made the shirt a hot commodity. It may be pulled from the market -- buy now, then sell on eBay! This snafu might create artificial demand. And each one of those hundreds of thousands of shirts should generate a royalty for Ms. Kirkbride. Stay vigilant! Running internet searches on your products is the first step in finding potential infringers, but it's also important to cultivate your professional network for intel. The United States Patent & Trademark Office website has a substantial amount of free information, geared towards non-lawyers. For example, view the concise explanation of trademark similarity here.
Take heart however, all is not lost if your business name is already taken. At HLR, we pride ourselves on not only providing you sound legal services, we also care about helping your business succeed. We're happy to brainstorm alternatives with you if you come up against a roadblock. Some things just can't be protected by IP laws. For example, copyrights don't protect recipes, no matter how unique. Likewise, many catchy slogans are not protectable by trademark laws because they are too descriptive. Patents are notoriously challenging and expensive to get. We're happy to give you a free initial consultation to answer questions about your business. Don't forget! No matter what state you have incorporated in, there are probably incentives for hiring, employee training, loans, and expansion. For example, in Connecticut, the Department of Revenue Services has released their 2012 guidlines.
If you're just starting out in a small business, it may be tempting to think that the liability sheild of a corporation or company is akin to free money. It's definitely not! And if you want to grow a successful business, you need to start from the very beginning keeping careful records and making responsible purchases.
The FDIC offers some good guidelines here. Remember, many of the "consumer protections" of recent legislation do not apply to business plastic. A "patent troll" is a derogatory term for a party who owns a patent, does not use it, but sues the heck out of anyone who tries to use anything like what the patent protects. It can be lucrative: no innovation, manufacturing, or marketing! Just pay your attorneys, and they come back with huge settlement checks.
Recently, federal courts have reined in the counterpart "copyright trolls" like Righthaven LLC, who purchased copyrights to (usually) news articles and sued the nonprofits and organizers of internet message boards for settlements that often drained the coffers of these organizations. It was recently found that several of Righthaven's cases were wrongly decided, and they should return the monies extorted, but of course they are already bankrupt. With patents, it's slightly trickier. A non-practicing entity (the polite term for patent troll) may be non-practicing as to a particular patent, but it could still be in the R&D phase (think clinical trials for pharmaceuticals) or a patent on a product that is not sold because it's proprietary in-house software (Skype's encryption software). This article gives a solid outline of the legislation that has been taking shape to combat patent trolling and makes some very interesting suggestions. Remember, if a patent troll (or anyone) sends you an angry letter, don't just send a check! Always have legal counsel reveiw both the entity and the underlying validity of the claims before making settlement offers. Some of these may be legitimate patent owners with a grievance or good-faith beleif you infringe, and some of them could be as This is a fairly complex article for legal practitioners, detailing why it's so important for licensees to have an "exclusive" or "controlling" right to use a patent. If you are simply granted a right to use someone else's patent, you are given no rights to defend yourself or your use of it if that patent ends up infringing on someone else's property.
Yes, we all hope that after several long years with the patent examiners of the USPTO, every patent has been thoroughly vetted and compared with everything else under the sun. But it's not always the case -- sometimes patent examiners miss something, or other technology not yet in the market jumps ahead in line of your patent. Sometimes patent owners wait on purpose until you use infringing technology so they can sue for damages. It's a tough world out there. The point of sharing this more complex article springs from an article I'm working on for a magazine about common pratfalls that licensing professionals make when negotiating big deals. Don't think that the "boring" part of a contract is not important because it's basically the same for every deal. We sign so many contracts in our daily lives -- from cell phone services to Netflix user agreements to privacy policies at the doctor's office -- that we run the risk of getting numb to the value of the words therein. Think of it this way: every contract has "boring stuff" like indemnities and warranty clauses, choice of laws, termination, and scope of rights BECAUSE IT'S SO IMPORTANT. It's not a rug or floor covering, it is the floor. Without understanding these parameters of the agreement, you don't have a complete agreement. If you are considering granting a license or getting one for your business, call us. The first 30 minute consultation is free and we can help you demystify some of the "boring" parts of any agreement you are being asked to sign. HLR specializes in empowering small business owners to help themselves: we will explain anything we draft for you to you so that you can negotiate it yourself. You will understand what you are asking for and why, what you are giving away and what it's worth to you, and what the counterpart is asking for and why. Some larger law firms pat you on the head and take care of these "details" for you. That's great if you have deep pockets or little time to build your own alliances. But for those of you who are hands-on, it's crucial that you understand the mechanisms by which your products and services are shared and controlled. Imagine pitching a great idea to a person you are sharing an elevator with. Now imagine them offering to fund your prototype in exchange for a share of the profits.
You might be thinking this would solve all your funding problems! You might be right. It's not crazy -- some high-net-worth individuals really do want to help your ideas succeed. Maybe they aren't "idea people" but they care about improving technology in a certain field. Maybe they are experienced developers who want to share expertise and funds without a cumbersome employment agreement and its obligations. Maybe they simply think the best way to make the most money on a new idea is to get in on the ground floor. These are "angel investors," and it could happen to you. INC. Magazine has a handy guide to start your search to see if bringing in angel seed money is right for you, and where to find it. Contrast that with this recent Wall Street Journal article outlining changes in some states' tax incentives for angel investments. While you are pitching, consider legal advice to ensure that you are protecting your confidential information in an intelligent and serious way. Once you have found someone willing to invest, structuring the arrangement definitely requires the assistance of legal counsel. You didn't think it was going to be easy, did you? |
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