Category Archives: IP Ownership

10 Legal Considerations for Entrepreneurs – Part 3

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business-plan-2061633_1920In Part 2, we discussed selecting a business entity, taking advantage of protections provided by an entity, and funding your business.  Now we’ll look at other licenses you may need to run your business, considerations when working with employees and contractors, and the importance of written agreements.

6. Obtain Licenses, Permits & Certifications.

There are numerous federal, state and local regulatory agencies that may govern everything from education to professional licenses and violations. Most businesses need licenses in order to begin operations. Licenses may be required for your city, your municipality, your county and/or your state. Some occupations and professions require a state license or permit as well. If you’ll be running a home-based business, then you’ll need to make sure you’re not violating any zoning restrictions or homeowner association rules.

The U.S. Small Business Administration provides information about industry-specific federal and state business licenses and permits, as well as links to the specific agencies that maintain such licenses and permits.  Many states provide state-specific information and links to helpful business-related registration, licensing, permit and related sites, such as the Missouri Business Portal and Texas Wide Open For Business.  USA.gov provides an A-Z list of all agencies as well as information regarding federal, state and local government.  A list of state regulatory agencies is available at All Things Political.

7. Employees and Independent Contractors.

If you intend to hire yourself or anyone else as a full or part-time employee of your company, then you may have to register with the appropriate state agencies, withhold and pay taxes, verify each employee’s eligibility to work in the United States, obtain workers compensation insurance or unemployment insurance (or both), create an employee handbook, and comply with other employment regulations. Hiring independent contractors instead of employees for your new business may be less burdensome, but working with independent contractors has its own set of risks. For example, if your independent contractor is discovered to meet the legal definition of an employee, you could face a number of costly legal consequences. Furthermore, unless an employee is performing services within the scope of his employment (work-for-hire), it is best (and often required) to have a signed, written agreement transferring rights in intellectual property created by an individual, independent contractor or entity to your business. For more information about hiring employees and working with independent contractors, visit the U.S. Small Business Administration and/or consult with an attorney.

8. Get it in Writing.

Relying on verbal or “handshake” deals may seem appealing, but it’s almost always advisable to have a written agreement in place. Whether it’s an office or equipment lease, an agreement with your business partners, a confidentiality agreement, a contract to provide services to a customer, or an agreement with someone providing services to your business, written contracts set out the details of the transaction, each party’s responsibilities and obligations, and often provide for procedures or remedies in the event something goes wrong. This last part is precisely why it’s advisable to negotiate a deal up front when the parties are happy with each other and excited about the transaction rather than waiting for an issue to arise and attempting to negotiate an agreement when at least one party is soured on the deal.

All contracts related to the business should be entered into in the name of the business and not by you personally. Know that it is rare for anyone to sign the first draft of an agreement.  It is always advisable to have an attorney review (and potentially negotiate) the agreement before it’s signed to ensure that you’re not missing something hidden (or not included) in the fine print.

In Part 4, the last installment in the series, we’ll talk about other issues you should consider to help your business grow.

New Trade Secrets Law – What it Means for Your Trade Secrets and Your Company

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On May 11, 2016, President Obama signed the Defend Trade Secrets Act (“DTSA”), which went into effect immediately. The DTSA will have a major impact on intellectual property law and also has implications related to employees and independent contractors. Although the DTSA contains elements similar to the Uniform Trade Secret Act adopted in some form by every state except for New York and Massachusetts, there are notable differences. For example, the DTSA creates a federal private/civil confidential-stamp_GyH5lHOdcause of action for trade secret misappropriation. Previously, federal law only provided for criminal actions brought by the government. Available remedies include injunctive relief, exemplary damages in addition to actual damages, and attorneys’ fees. The DTSA also allows for civil seizure of an opponent’s property in extraordinary circumstances. These remedies could provide powerful tools for trade secret protection.

The DTSA provision of most immediate concern is the required employee notice of civil and criminal immunity for whistleblowers who disclose trade secrets to government officials for the purpose of reporting a suspected violation of law. The immunity also protects disclosures to attorneys or in sealed court filings. In order to comply with the DTSA, all agreements with employees, independent contractors or consultants covering trade secrets or confidential information must include notice of the DTSA’s whistleblower safe harbors and immunity. Although the DTSA requires that an employer provide notice of the whistleblower immunity in any agreement with an employee that governs the use of a trade secret or other confidential information, the act defines “employee” to include any individual performing work as a contractor or consultant. Compliance can be achieved by including specific language in the agreement or providing a cross reference to an existing whistleblower policy document, such as an employee handbook. Failure to include the required notice in employment agreements results in the employer losing the right to recover attorneys’ fees or exemplary damages from the employee.

Employers should take the following steps to comply with the DTSA:

  • All agreements concerning trade secrets or confidential information should be revised. This likely includes employment agreements, non-disclosure and confidentiality agreements, contractor agreements, severance or separation agreements, and more. The DTSA notice provision applies to agreements entered into or updated after May 11, 2016.
  • Employers may want to consider changing forum selection clauses in any contract affected by the DTSA. Having federal and state court options could be beneficial in a trade secret or other employment dispute.
  • Contractor or consulting agreements should be amended so that the service provider is required to notify its employees of the DTSA’s whistleblower protections.

Additional compliance issues may arise as case law develops and companies adjust to the DTSA’s requirements.

Happy Birthday Copyright Ruled Invalid

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birthday-937520_1280You may be hearing “Happy Birthday” more often now that a federal judge in Los Angeles has ruled that the copyright Warner/Chappell Music claimed to own in the lyrics of the song is invalid.  According to the opinion issued on September 22, 2015, “Because Summy Co. never acquired the rights to the Happy Birthday lyrics, Defendants [Warner/Chappell], as Summy Co.’s purported successors-in-interest, do not own a valid copyright in the Happy Birthday lyrics.”

Unless the ruling is overturned or someone else comes forward with a valid ownership claim, third parties will no longer be required to pay licensing fees to use the song in movies, TV shows, greeting cards and the like…and Warner/Chappell will be out an estimated $2 million a year in royalties it collected from the song.

Click here for more on the story.

Copyright Protection Doesn’t Monkey Around

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The U.S. Copyright Office released an updated 1,222-page “Compendium of U.S. Copyright Office Practices, Third Edition” in 2014 clarifying its position that it “will register an original work of authorship, provided that the work was created by a human being.”  The report goes on to state that “[t]he Office will not register works produced by nature, animals, or plants.  Likewise, the Office cannot register a work purportedly created by divine or supernatural beings, although the Office may register a work where the application or the deposit copy(ies) state that the work was inspired by a divine spirit.”  The report provides examples of works that will not be protected by copyright, and the first example is “A photograph taken by a monkey.”

Macaca_nigra_self-portrait_(rotated_and_cropped)

The report was originally released weeks after wildlife and nature photographer David Slater claimed that Wikimedia was infringing his copyrights in the “selfies” taken by macaque monkeys in Indonesia by allowing the pictures to be posted in Wikimedia Commons, a library of public domain photos.  Wikimedia refused to remove the images because it believed the monkey was the photographer, and, therefore, the “author” of the photo…and, as non-humans can’t own copyrights, the photo was in the public domain.  Slater argued that he staged the shot and set up the selfie intentionally, so it’s irrelevant that the monkey pressed the shutter (likening the monkey to an assistant).

Although Slater is still claiming copyright ownership in the photos and could file a lawsuit against Wikimedia (as UK or European law may allow Slater to claim ownership if he employed “labour, skill and judgment” in connection with the photographs or they were part of his “intellectual creation”), he is currently offering free canvas prints of the monkey selfie and donating money to the Sulawesi Crested Black Macaques Conservation Programme for each print redeemed.

 

Controlling Your Domain (Name) to Avoid a Domain Name Fumble

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Next week’s NFL Draft brings to mind a cautionary tale…

It could happen to any of us, and it almost happened to the Dallas Cowboys at a crucial time.  In the middle of the 2010 NFL season, buzz surrounding whether Cowboys’ head coach Wade Phillips was going to be fired (which was ultimately the case) was at an all-time high.  No doubt, fans, rivals and press were all scouring the internet for updates on the situation, and the Cowboys’ website was probably the prime online destination of the day. Unfortunately, the team forgot to renew the dallascowboys.com domain, and many would-be site visitors got error screens instead of highlights and instant replays. Talk about a game-changing fumble! See related article here.Blue Url Words Shows Org Biz Com Edu

It’s worth noting that the dallascowboys.com domain name was originally purchased in 1995 and probably was reserved for the longest possible time allowed.  Although most domain name registrars timely send email renewal reminders to domain name owners, it’s likely that whomever was initially responsible for the domain name was long gone and the renewal information didn’t get forwarded to the proper person (and, although auto-renew is available, the credit card info on file with the domain name registrar was probably no longer valid as well). It’s lucky that the ‘Boys became aware of the problem (which you might call an incomplete pass) and quickly renewed the domain before someone else (perhaps a disgruntled, recently fired coach) grabbed it and tried to hold it hostage.

At least Dallas Cowboys Football Club, Ltd. was listed as the domain name owner.  Many times, the person who originally registers the domain name (whether an employee of the organization or someone with the company hired to design the website) is listed as the owner of the domain name and the domain name is never officially transferred to the organization and/or the information doesn’t get updated…which can cause a host of problems for the organization utilizing the domain name (especially if the employee is terminated or if the development company relationship dissolves).

Although the Cowboys had a close call and almost wound up on the disabled list, this is a great example of how easy it can be for an organization to neglect (and almost lose) one of its most important intellectual property assets. We all know how valuable your website is to your business, so here’s what you should do to prepare your domain name offensive strategy…

If you have a website: 

(1)   Determine who is listed as the owner of your domain name.

To find out who owns your domain name and when the registration expires, type in the domain name (e.g., dallascowboys.com) in a WHOIS search database, such as InterNIC, Network Solutions, or GoDaddy.

(2)   Check to ensure that this information is correct. 

If the Administrative and/or Technical Contact information is not in your company’s name, you’ll want to update this information as quickly as possible.

You may need a Domain Name Transfer Agreement to perfect the chain of title for the domain name ownership.  (While you’re at it, you may also want to make sure you have a Website Development Agreement in place with any third-party web developer for the website associated with the domain name so you own/have rights to your web content and design.)

If the domain name is registered to one of your company’s employees or officers, add this to your employee exit checklist to ensure that this information is updated should the employee/officer leave the company.

A disgruntled/terminated employee or website developer with sole control of a company domain name can easily redirect internet, e-mail and intranet traffic within a matter of moments and bring business to a standstill.

(3)   Calendar a reminder for the domain name renewal date.  

The expiration date for the domain name registration is listed in the WHOIS information (see #1 above).