Eric Morton's Legal Blog

December 2011 Newsletter

2011-12-07T12:50:00.000-08:00

We just published a newsletter with articles on year end to do items, social media issues and estate planning.
December 2011 Morton Memo

New Services Offered

2011-10-25T22:29:00.000-07:00

My firm has expanded. I recently brought on board attorneys Kellie M. Delaney and Michael H. Ritter. Kellie is a relatively new attorney but has a great deal of experience in civil litigation, business and corporate governance. Mike is an experienced attorney in estate planning and telecommunications.

Mike and Kellie are not only fine attorneys but are very experienced in the business world. They bring a more practical business sensibility in their approach to our clients' issues.

Mike and Kellie will add considerable depth to the Law Offices of Eric D. Morton. We will provide greater services in the fields of real estate, litigation, estate planning and telecommunications. In addition, we are experimenting with ways to revolutionize the practice of law through technology and close collaboration with other attorneys and professionals.

Check out our website and our new practice fields.

Estate Planning

Litigation

Real Estate

Telecommunications

As always, we are dedicated to providing our clients with responsive, quality and cost-effective legal service.

True Stories: IP registrations work

2011-09-28T13:07:00.000-07:00

In the past week, I wrote demand letters for two clients whose intellectual property rights were being violated. We received instant and complete success in both cases.

In one instance, a former employee was using my client's copyright protected materials. I sent the former employee a demand letter to cease and desist, to destroy all materials in her possession and send us list of all such materials and a list of all persons to whom she distributed the materials. The former employee complied with our demands, completely, within two hours.

In the other case, I wrote a demand letter to a company that was offering a service that was identical to my client's service and was doing so under a brand name that was so close to my client's service name that it constituted infringement. The other company's CFO called me immediately after receiving my letter and told me that they would stop using the infringing name.

The key in both cases was registration. In the first instance, I trained my client to register its copyrights and the client did so. The former employee could have been sued for violating the Digital Millennium Copyright Act and faced enormous exposure to a court award of damages and attorneys fees.

In the second instance, my client had a Federal trademark registration for its name. The infringing company faced great exposure to a suit for bad faith infringement.

Over the years, I have urged my clients to register their copyrights and trademarks. Having such a registration gives a tremendous advantage to the owner of such intellectual property. These cases show the leverage that the owner of a copyright or a trademark can have.

Creative Commons - a good copyright resource for Internet publishers

2011-07-28T14:11:00.000-07:00

A difficulty for creative persons on the Internet is that they want their art/content to be widely distributed (go viral) but still want attribution. Traditional copyright law makes such distribution difficult since each person copying the such content would need to explicit permission of the owners.

A non-profit organization has started a web site called Creative Commons that provides the owners of copyright protected work (art, photos, articles, blogs, etc) with standard licenses that allow dissemination of the material on the Internet without the loss of attribution.

Owners of copyrights can select how much of their material can be used - with and without attribution. The owner can also select whether or not derivative works can be created from their work.
I recommend it to bloggers and anyone who would like their work to be re-distributed on the Internet.

Of course, if you did not want your work to be redistributed, then these licenses would not be appropriate.

Great Article on Importance of Boards of Directors

2011-07-27T20:49:00.000-07:00

R.J. Kelly of the Wealth Legacy Group wrote a great article on the importance of a good board of directors for privately held corporations. Click here for article

Indian Tribes are Immune from Lawsuits

2011-07-23T15:16:00.000-07:00

A little known fact is that American Indian Tribes (and their economic enterprises) can't be sued. The tribes enjoy sovereign immunity from lawsuits. Federal and state courts do not have jurisdiction over them. A definitive case was the Kiowa Tribe vs. Oklahoma Manufacturing Technologies. The Kiowa Tribe defaulted on a promissory note and was sued in state court. The lower courts found the tribe was within the jurisdiction of the state court for off-reservation economic activity. The U.S. Supreme Court reversed and held that the tribe was immune from suit.

In recent years, Indian tribes and their casinos, in particular, have become major economic forces. There are several Indian casinos in and around San Diego County. Anyone contracting with them cannot enforce those contracts normally. The tribes can sue however, just like a foreign entity not subject to U.S. jurisdiction can bring suit in U.S. courts against U.S. persons.

The exceptions are very explicit contract terms that waive sovereign immunity and/or arbitration clauses. Anyone contracting with an Indian tribe or any entity owned by a tribe must use particular care in forming the contract with that tribe.

Social Media Is Advertising

2011-06-14T13:43:00.000-07:00

Advertising laws are now being applied to social media. Any business with a Facebook account or is on Twitter must understand that those means of communication are legally considered advertising.

I attended a great telephone seminar today that was sponsored by the Intellectual Property Section of the California State Bar regarding advertising law. Among the many topics covered was social media as used by businesses.

The Federal Trade Commission and the courts have held that advertising and unfair competition laws apply to the use of social media by businesses. Furthermore, CAN-SPAM, the Federal anti-spam email law also applies.

Facebook has sued several business entities that spammed Facebook users. The courts held that Facebook had standing to use as an ISP under CAN-SPAM and that CAN-SPAM applied to communications on Facebook.

The FTC recently sued a plastic surgery clinic in Florida for unfair competition. The clinic used various types of social media, including blogs, to create an Internet buzz. Employees provided comments on Facebook and fake customers reviews, among other things.

The FTC sued on the basis that such practices were deceptive advertising. If an employee "Likes" his/her employer's Facebook page and provides favorable comments, and does not reveal that the he/she is an employee, then that is the same as writing a false customer testimonial. The business is liable under false advertising and unfair competition laws.

Any business that might get into any form of social media must have a social media policy that takes these legal issues into account.

Stolen notebooks = $23 million judgment

2011-06-01T14:15:00.000-07:00

An employee quit his job and took a couple of binders of documents with him to his new job at a competing company. This is a very common scenario; employees taking information or unique content with them when they leave a job. They think that no one will know or care.

However, the outcome proved disastrous for the employee and his new employer. More than 10 years later, the employee and his new employer were hit with a judgment of more than $23 million dollars for copyright infringement.

I tell my clients that copyright law is very strong and can provide powerful remedies for the owners of copyrights. A recently published Federal case illustrates the strength of the U.S. Copyright Act and why one shouldn't steal documents or use misappropriated documents from another company.

In William A. Graham Co. v. Haughy, a Federal appellate court upheld an award of damages of more than $19 million and more than $4.6 million in pre-judgment interest for copyright infringement. The infringement in this case was for the theft and use of two binders of documents that had been prepared by the plaintiff in the case - an insurance brokerage. The binders were used by the plaintiff's agents to sell insurance products.

An employee left the plaintiff's employment and took with him copies of the documents in the binders. He gave the documents to his new employer, a competing insurance brokerage. The new employer gave copies of the documents to its agents and used them for more than a decade before the plaintiff discovered the theft and use.

The plaintiff sued the competing company and its former employer. Although there is a statute of limitations for copyright infringement, it does start to run until the copyright owner discovers, or should have discovered, the infringement. The plaintiff sought profits earned by the defendants that were attributable to the use of the documents in selling insurance products. This is a form of infringement called indirect infringement. The plaintiff wasn't seeking damages for the value of the documents themselves but the profits that were attributable to their use.

A jury found that the documents helped the defendants to attain tens of millions of dollars in profits in selling insurance. The jury found that the portion of those profits attributable to the use of the documents was more than $19 million and added pre-judgment interest of $4.6 million.

The lessons: register your copyrights for all the documents, art and content that you create, and don't steal or use stolen property!

ISPs must respond to warrants to identify subscribers

2011-05-18T08:03:00.000-07:00

A California court ruled recently that an ISP must respond to warrants demanding the identification of its subscribers.

In criminal hacking case, the court held that the police could force an ISP (in that case, Time Warner) to give the identity and address of a Time Warner subscriber based on a IP (Internet Protocol) address.

The police subsequently searched the defendant's home and found evidence of the defendant hacking into a public school's computer network. The defendant claimed that he had a privacy expectation for his information with Time Warner.

"A subscriber has no expectation of privacy in the subscriber information he supplies to his Internet provider. Therefore, his challenge to a warrant requiring his Internet provider to identify him through his Internet Protocol (IP) number has no merit." wrote the court in People vs. Stipo. The appellate court found no expectation of privacy in the defendant's subscriber information.

This case has some interesting implications, not only for criminal cases, but civil cases as well since a civil subpoena could also be used to find out identifying information as well.

Employees can be criminally prosecuted for misuse of computers

2011-05-11T20:57:00.000-07:00

Employees can be criminally prosecuted for unauthorized and illegal use of computers and computer networks, but only if the employer has a strong and clear computer use policy. A Federal court recently held that an employee can be criminally prosecuted if the employee accessed the employer’s computer system in order to defraud the employer.

In U.S. v. Nosal, No. 10--10038 (9th Cir, April 28, 2011), the 9th Circuit Court of Appeals held that employees could be prosecuted under the Federal Computer Fraud and Abuse Act (the “CFAA”).
CFAA is a statute that was originally intended to allow for the criminal prosecution of hackers. In the Nosal case, three employees used their employer's computer and obtain trade secrets from the employer. The employees then quit and started their own business using the employer's information.

The employees were prosecuted under CFAA by the U.S. Government. Their defense was that CFAA was intended to prosecute hackers who did not have authorization to enter a computer or a computer network. They argued that they should not be criminally prosecuted because they had access to the system. (Of course, the employer could have sued but that is less serious than a criminal prosecution).

However, the government successfully argued when the employees used their user names and passwords to access the employer's trade secrets, they exceeded their authorization and broke the law.

The key to the case: The employer had strong computer use and confidentiality policies. All employees were required to sign agreements that explained what was the employer's confidential information, its sensitive nature, and clearly stated that such information was only to be used for the employer's purpose. All of the employer's computers were restricted access and protected by passwords and user names. So, despite their status as employees with access to the employer's computer system, the court determined that the employees were, legally, no better than hackers.

I have had several instances of business owners who have been ripped off by employees stealing confidential information. They now have a big stick to fight back with.

Businesses should develop clear computer use policies that forbid the use of their computers for anything other than company business, protect their computers with user names and passwords, and have their employees sign well written confidentiality agreements. The threat of criminal prosecution is much more weighty than the threat of a lawsuit and will go farther to keep this type of theft in check.

Copyright Trolls - Don't use stock pictures without a license

2011-05-07T14:14:00.000-07:00

Intellectual property has become a hardball arena in recent years. Small businesses steal trademarks and trade secrets from each other. Patent trolls file serial lawsuits extorting money from busineses. Now we have copyright trolls.

A client was recently threatened with legal action by a stock photo company. This stock photo company sells photographs on-line for use in websites. Typically, a website owner or developer can download and use a photo for a royalty of $5.00 to $10.00.

My client had a stock photo on his website.  He received a demand letter from a stock photo company that had the rights to sell licenses to use this photo.   My client's website developer had downloaded this photo from somewhere (the developer was a little vague).

The stock photo company initially demanded $1,500.00 and threatened to take legal action if not paid. My client discussed the matter with the stock photo company which progressively lowered its demand to around $900.00.

The threat of legal action was serious. If you use a computer to download copyright protected art from a website and use it on your website, you can be liable for up to $150,000 in statutory damages, plus statutory attorneys fees, per download.  So, the potential exposure was huge, even for a lousy stock photo.

The stock photo company had an entire division devoted to collecting large fees from companies that had used the stock photo company's photos without authorization. They searched the Internet with special software that looked for their photos and then checked to see if the use of the photos was authorized. If not, then they would aggressively demand outrageous fees and threaten legal action. Furthermore, the photos on the company's website were easily downloaded without payment of a royalty and watermarks were easy to crop out. The company essentially had a copyright troll division searching out the unwary using their cheap photos.

In my client's case, the photo on his website was not registered with the U.S. Copyright Office. Since it was not registered, the stock photo company could not collect the huge statutory damages but only actual damages, in this case about $5.00. My client removed the photo from his website and the stock photo company left him alone when we asked for registration information.

Lessons:
1.   Do not use someone else's photos, pictures, videos, etc. on your website.
2.   If you are a web developer, pay all royalties necessary for every bit of art on a website.
3.   Ask you website developer for proof of a license for all stock photos or other art on a website. You will have to pay the price if the developer stole them.

Court rules that use of competing brand as keyword is not infringement

2011-03-08T17:00:00.000-08:00

The courts are becoming more sophisticated in their application of trademark law to Internet. Today, the Federal 9th Circuit Court of Appeals issued a ruling in a keywords ad case. The defendant in the case bought a competitor's brand name as a keyword for ads on Google and Bing. A search for the competing brand would bring up a sponsored ad for the defendant. The competitor sued claiming that the use of its brand as a keyword was a violation of its trademark rights.

In Network Automation, Inc. v. Advance Systems Concepts, Inc.,court found that it was not since the search engine results showed the defendant's ad and name as a sponsored result. The court found that consumers are not likely to be confused by the sponsored ads since they can discern the difference between the companies' brand, plus the defendant's ad is obviously not the brand of the competitor.

This is a shift from earlier similar cases in which the same court held that the use of a competing brand could be considered trademark infringement if used as a keyword. The court's reasoning in this case was that the Internet was changing, the consumers are more sophisticated now than in the past, and the court's must be flexible in applying the law to Internet cases.

The full case opinion is here.

New Litigation Page on Website

2011-02-10T00:14:00.000-08:00

I just developed and published on my website a page devoted to litigation. I explain my new revolutionary system of project management for business litigation. Click on this link: Litigation Page on Eric's website

Newsletters for February 2011

2011-02-03T10:47:00.001-08:00

I just published a newsletter. Some good news for small businesses.

The Morton Memo February 2011

New model for business litigation.

2011-01-03T22:08:00.000-08:00

I am thinking of an experiment in business litigation that could save considerable attorneys fees for business owners. Essentially, teams of contract attorneys would handle cases on an as needed basis. The client's documents and all documents generated by attorneys would be digitally stored and shared. The attorneys would be billed at considerably lower rate than prevailing rates. The teams would be managed on a project management basis by the lead attorney. The client would save considerable monies in attorneys fees.

My idea comes from a few sources. One is the fact that there is a lot of legal talent available that is unemployed or underemployed. My wife has been an attorney for a little more than a year and she knows a lot of attorneys who aren't working or working as contract attorneys.

The other inspiration is technology. The use of the Internet, including cloud computing and digital vaults make it possible for professionals, especially attorneys, to collaborate on projects without the need to be collocated.

The idea is to assemble a team of contract attorneys for each lawsuit. Each attorney would work on a particular project, such as research, drafting a pleading, discovery response, etc. as needed. Each project would have a deadline and a number of hours allotted to it. The case would be handled on a project management basis so that the client knows the cost in advance. The contract attorneys would be billed at a going contract rate plus overhead and a small profit. The lead attorney would bill at a higher rate. I am also considering billing the contract attorneys for cost during the course of the case with the client owing the remainder at the end of the case.

The key to the model is payment by the client. The client would need to make a commitment to pay a certain amount each month since the contract attorneys and the costs of the suit would have to be paid each month. This amount would be considerably less than the retainers paid monthly to dedicated litigation firms, particularly large firms. But, the client would need to understand and commit to pay.

Another key is that the contract attorneys would need to have to have strong writing and research skills. And, they would need to be able to work on a project/limited hours basis with little direct supervision. They would have to understand that they can't milk the file and, if a project was more difficult and might take longer, they would have to immediately communicate that fact to the lead attorney/project manager.

Documents, including client documents, would be cloud stored or stored in digital vaults. There is no need a lot of paper or attorneys collocated in a firm. Everything would be digital. Obviously, the lead attorney/project manager would have to have excellent communication and management skills. And, frankly, that attorney would have to be ruthless about contract attorneys who couldn't do quality work within a reasonable amount of time. Those attorneys would have to be cut out or, preferably, not hired in the first place.

I calculate that in a business litigation case, the project management model might reduce the attorneys fees by as much as 70% over dedicated litigation firms, particularly larger firms. That is a huge savings. I have discussed it with a few attorneys and they think it is a great idea. One even said that he didn't understand why someone wasn't doing it already.

Change in California Business Entity Reporting

2011-01-01T18:30:00.000-08:00

The California Secretary of State reminds California business entities to file their annual Statements of Information.

Statements of Information are filed with the Secretary of State annually by entities such as corporations and limited liability companies. The statements are the public records of those entities. An entity that does not file a statement can be suspended and/or fined $250.00.

In the past, the Secretary of State would, every year, send a Statement of Information and a self-addressed envelope to each entity 90 days before the statement was due. Starting earlier this year, the Secretary of State only sends a postcard reminder to each entity. This is a cost cutting measure.

A corporation or a limited liability company must now either download the Statement of Information from the Secretary of State's website, fill it out and mail it to the Secretary of State, or a corporation can file one electronically through the Secretary of State's website.

I have a few clients who did not timely file their Statements of Information this year because they were waiting for their Statement of Information forms in the mail. They failed to take note of the postcard informing them of the new policy. They were quickly fined $250.00 - much faster than in the past. Since the state is hurting for money, it is cutting costs and enforcing penalties more harshly.

The following is a link to the Secretary of State's website explaining the policy. http://www.sos.ca.gov/business/be/forms/si-mailer-format-change.pdf

If you own a corporation, a limited partnership or a limited liability company, please ensure that your entity's Statement of Information is timely filed. It is a mundane but important chore in keeping your entity in good standing.

If you have any questions about Statements of Information, or anything else, please contact us. Remember, we do not charge for initial consultations.

Please also visit our website.

Happy New Year! 2010 was a difficult year for almost every business owner and professional that I know. I hope that everyone enjoys a more prosperous 2011.

Sometimes the solution is not legal at all

2010-12-20T23:04:00.000-08:00

I had a meeting with the principals of a new client today. The company had former employees who stole customer lists and had just started to contact those customers for a new competing business.
After much discussion about what would be the best course of action, cease and desist letter, the course and cost of potential litigation, I asked how much business the company had lost. I asked since they were wondering what would be the best thing to do.

The principals told me that they had not lost any yet. I agree with one of the principals who asked if maybe the best course would be to do nothing. They then came up with a new idea. Send out an offer to the customers that they think have been contacted by the former employees and give them an incentive offer. If they have been contacted by a competitor, they would get two weeks free service on showing proof of the contact with the competitor. The idea being the company keeps its customers and gathers further evidence against the former employees.

The principals were delighted with this idea and I heartily agreed. I told them that the best outcome would be to beat the old employees in the marketplace.

Authorities Regarding Vicarious Liability in eCommerce

2010-11-15T16:09:00.000-08:00

On November 4, 2010, I gave a presentation entitled "Vicarious Liability in eCommerce: The Legal Exposure of Internet Businesses for the Wrongdoing of Others" for the San Diego County Bar Association.

A few attorneys who could not attend asked if I could share the authorities on which I based my presentation. I gave them the authorities and I thought I would share them here also.

Statutes

California Unfair Competition Act, Business and Professions Code 17200, et seq.

Federal Trade Commission Act, 15 U.S.C. 41, et seq.

U.S. Copyright Act , 17 U.S.C. 101, et seq.

Cases

A & M Records, inc. v. Napster, Inc. (2001, 9th Cir.) 239 F.3rd 1004.

Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd. (2005) 545 U.S. 913, 125 S.Ct. 2764, 162 L.Ed.2nd 781.

Emery v. Visa International Service Assoc. (2002) 95 Cal.App.4th 952, 116 Cal.Rptr.2nd 25.

Schulz v. Neovi Data Corporation, et al. (2007, 4th Dist.) 152 Cal.App.4th 74, 60 Cal.Rptr.3d 810.

Perfect 10, Inc. v. Visa International Service Assoc. (2007, 9th Cir.) 494 F.3rd 788.

Perfect 10, Inc. v. Amazon.com, Inc., et al. (2007, 9th Cir.) 487 F.3rd 701.

Federal Trade Commission v. Neovi, Inc., et al. (2008, S.D.Cal) 598 Fed.Supp.2d 1104.

Federal Trade Commission v. Neovi, Inc., et al. (2010, 9th Cir.) 604 F.3rd 1150.

Why Hire an Attorney to Incorporate

2010-11-11T15:14:00.000-08:00

Given the rise of the use of online companies to form corporations, many people ask why they should use an attorney to form a business entity such as a corporation. The reason is because online companies do not do three important things that business owners must address when they incorporate.

What online companies do:

They do what you tell them to do.
They file articles of incorporation.
They obtain Federal Employment Identification Number (FEIN).
They appoint the initial director(s) of the corporation.
Send the customer a notebook with a bunch of forms.
They might draft organizational minutes and bylaws and file SOI with state.

What online companies don't do:

Do not finish organizing the corporation.

Do not issue stock.
Do not file necessary notices to make stock issuances lawful.

Most importantly they don’t address the Three Crucial Questions business owners miss.

The Three Crucial Questions are:

What type of entity, where, and why?
What is the entity’s capitalization?
What happens if: a partners dies, becomes disabled or says “I’m out of here”

These issues are vital. Why do you want a LLC in Delaware? What are you paying for your stock; what are you putting into your corporation? What happens if you die or just quit working in the business?

The online companies won't help with these issues and others. An attorney can help business owners to work them out. Business owners who don't work through these issues are asking for serious trouble.

San Diego Connect's Springboard Program

2010-10-03T15:14:00.000-07:00

On Monday, September 27, I attended an orientation for San Diego Connect's Springboard program. Great program for entreprenuers. I would recommend Springboard to anyone with a new business with a new idea/product. It is designed to help such companies to obtain funding. Check out the program's website at http://www.connect.org/programs/springboard/

Works Made for Hire - Independent Contractors Own their Copyrights

2010-08-31T16:50:00.000-07:00

We train our clients in how to register their copyrights with the U.S. Copyright Office.
Something that came up in such a training session the other day is worth repeating here.
Employees that create original works for their employers (articles, artwork, designs, etc.) do not own the copyrights to those works. Their employers own the copyrights under the Works Made for Hire or (Work for Hire) rule.
However, independent contractors do not follow under the Work for Hire rule unless the contractor and the company that the contractor is working for have an agreement that the contractor's work is for hire.
In this day and age, companies are hiring more and more independent contractors on a project by project basis. Sometimes the projects can the creation of critical property for the company, such as source code for software or web designs.
The independent contractor owns the copyrights to that work unless the company that hire the contractor obtains an work for hire agreement to the contrary.
Get those contractors to sign work for hire agreements!

Unfair Trademark Dilution Laws Explained

2010-08-27T19:29:00.000-07:00

I was asked to comment on the lawsuit filed by Facebook against Teachbook.

Facebook sues Teachbook.com for using 'book' in its name - latimes.com

Facebook is suing under Federal trademark law including, in particular, the trademark dilution statutes found in Federal trademark law.

According to the LA Times article about the case, Facebook initally objected to Teachbook's application for a trademark registration. Such objections are handled by the Trial and Appeals Board of the US Patent and Trademark Office. That should be good enough but the TTAB will only decide if Teachbook is confusing similar with Facebook - which it probably is not.

Facebook's lawsuit, on the other hand, is based on Federal trademark dilutions law. To understand that, you must understand that traditional trademark law protects against infringement.

Infringement is (very generally) when a trademark that is confusingly similar to another, older trademark. The infringing trademark must be used in the same class of goods or services, or close to the same class of goods or services, and must be so similar as to create the likelihood of consumer confusion.

So, infringement is very specific to the use of the trademarks involved, the class, the markets, etc.

In 1995, in an apparent reaction to the rise of the Internet, Congress enacted the Trademark Dilution Act which amended the U.S. trademark laws. The law was backed by large established companies.

Under the dilution laws, the owner of a trademark can stop the use of a similar trademark even though the other trademark does not create even a likelihood of confusion. In other words the defendant's trademark does not need to legally infringe.

Under the dilution laws, the owner of a trademark (the plaintiff in a lawsuit) can stop the use of a similar trademark if 1) the plaintiff's trademark is famous, and 2) the defendant's trademark is will cause tarnishment or is exploiting the famous trademark's goodwill.

The language of the statues is rather vague as to what is a "famous" mark, etc.

The most famous case regarding dilution was the Victoria's Secret case. Victoria's Secret (VS) sued the owners of a small lingerie shop in Kentucky for dilution. The name of the shop was Victor's Little Secret. Eventually, the U.S. Supreme Court heard the case and decided that the Victor's Little Secret trademark did indeed dilute the VS trademark but VS had no case since it hadn't been damaged.

The U.S. Congress immediately amended the dilution laws to provide that the owner of the famous mark did not need to prove damage. Congress has since further strengthened the law to give a greater edge to the owners of famous marks.

Today, the shop is not called Victor's Little Secret. After many years of litigation, VS and Congress bludgeonded the shop's owners into submission even though VS never proved that it had been harmed.

I strongly dislike dilution law. I represent entrepreneurs and small business owners - the people who own companies like Victor's Little Secret and Teachbook. I have had small business owners see me about cease and desist letters from major law firms that represent large corporations. I have told my clients that the other side has a weak case, even for dilution, but other side can sue and take the case to trial. The problem is that my client's can't possibly afford to litigate a trademark case in Federal court.

And that is what the dilution law is designed to do: to allow the owner of a "famous" trademark to force the small business into court and stay there.

I have litigated hundreds of business litigation cases and tried dozens. It is an expensive process. If a case had no legal merit, then it can be thrown out on a Motion to Dismiss (in Federal court). If a case has no factual basis, it can be disposed of with a Motion for Summary Judgment. Both of those motions can be made long before trial.

The problem with a dilution case is that a large corporation can easily claim it has a famous trademark and that a similar trademark is diluting it. Since it is an issue of fact whether or not the large corporation's trademark is famous and whether or not the other trademark is diluting it, the case not be thrown out on a motion to dismiss or summary judgment. The parties must engage in expensive discovery and hire expensive experts to testify about how famous is the plaintiff's trademark and about dilution, and go to trial - and the small guys can't afford it.

I explained this to an entrepreneur one time after he received a nastygram from a major law firm claiming that his trademark diluted a so-called famous trademark. I told him he could win against the other side but he would have to hire a trademark litigation firm and pay them huge sums of money. He said, "Forget it. I'll just change my company's name." And the other side was a company we had never heard of until my client received the cease and desist letter.

The ultimate problem is that the law is not only completely unfair but it creates uncertainty. As an attorney, if someone comes into see me about starting a company called Teachbook and whether they would get in trouble with Facebook, I have say, "Well, it's not infringement, but they might sue for dilution."

The client, of course, will want to know whether or not that is likely to happen, and I have to reply that I simply don't know - but I do know that they can't afford it.

The result is that the Victor's Little Secrets and Teachbooks of America are at the mercy of large corporations and a Congress that facilitates them.

The only thing that they can do is stay as far away from famous trademarks as possible and consult with an attorney before launching new brand.

So, there is my populist rant about dilution law.

You can check an attorney's discipline history

2010-08-20T21:01:00.000-07:00

Before you retain an attorney, you can check the attorney's discipline record on the State Bar's website. This can be important. My wife is working on a case in which the client's previous attorney did a very poor job representing the client. She is now trying to salvage the case.

The previous attorney had a history of discipline by the California State Bar and was disbarred in Nevada at the time he was filing this case in California. He is now being prosecuted by California State Bar.

Don't let your employees sign contracts.

2010-07-29T13:10:00.000-07:00

I recently settled a lawsuit in which my client was sued because an employee of my client, a small business, signed a contract. The contract was a services contract that my client thought could be terminated at will.

After my client terminated the service, the service company produced a contract that had been signed by an employee of my client. The employee was an administrative assistant who was little more than a glorified receptionist. The employee signed the contract in the name of the President of the company - which was a corporation. The employee had no authority to sign the contract. The contract was for five years and my client's President would never have agreed to that term.

After brief litigation. we settled the case for the price of continuing to litigate the case to trial. We had an excellent defense to the lawsuit but it was better to settle than continue to spend time and money on the matter.

This was a very unhappy experience for my client to say the least. We are not sure why the employee signed the agreement since the employee left the state over a year ago. We think that the customer service representative for the other party lied as about the meaning of the document.

A few lessons from the case:

1. Instruct all employees that they are not authorized to promise anything on behalf of the company. Even if they are directed to negotiate a deal, they should be clear that they final approval for anything binding the company must come from its officers/owners.

2. Instruct your employees that they are not to sign anything on behalf of the company. Tell them that they should not sign any document other than receipts for deliveries. Tell them to be careful of sales persons or customer representatives who want them to sign something. Ofter those persons will say that the document is just to finish up the paperwork. Employees must be firmly instructed to not any such document.

3. Employees should inform representatives of vendors and customers that the only authority to make a decision for the company is with the officers/owners of the company. They should be trained to make that clear up front in any negotiations with outside parties.

A little training and instruction of your employees can save your company a lot of grief.

Branding vs. designs in the clothing business

2010-06-07T15:31:00.000-07:00

I have represented several clients in the apparel industry. I recently had a consultation with a client that was planning to start a business that sold clothing. Several issues came up during that consultation that are common issues among businesses selling clothing. One of those issues was branding vs. designs.

Often entrepreneurs will often say that they have a great idea for a name or design for their brand which they will put on the clothing they sell. They have a great tag line or design and want put it on t-shirts or some other article of clothing and they will want to protect that tag line or design from being taken by a competitor.

However, they are confusing branding with clothing designs. Branding is the establishing of a trademark or trade name under which a product is sold. The trademark or name identifies the source of the product. Victoria's Secret is the trade name (the brand) for a company that sells women's lingerie. It is the name on the tags on the clothing sold.

On the other hand, the designs, including words, that are placed on clothing are not legally considered trademarks or trade names. Designs are ornamental and not trademarks in that they do not designate the source of the clothing.

Trademarks and trade names are legally protected and can be registered. Designs can not be legally protected in the same way. Unique designs on clothing can be protected under copyright law as long as the design is not part of the clothing design. Clothing designs can not be protected under copyright law.

The bottom line for entrepreneurs in the apparel industry is that they must make a distinction between their brand (that is the trade name of their clothing line) and the designs that they put on their clothing. Of course, sometimes brands will be placed directly on clothing. "Guess" puts its brand directly on its jeans but that brand is also on the clothing tag. Designs without a brand attached to them do not build goodwill.

The distinction is important because designs come and go but brands can be established and remain. For that reason, I advise apparel industry entrepreneurs to focus on their brand and think more in terms of how their designs will promote the brand. This makes for a stronger, legally protectable brand and is good marketing as well.

Three Principles of eCommerce

2010-04-12T21:33:00.000-07:00

The Federal Trade Commission has recent begun cracking down on on-line businesses for consumer fraud and unfair business practice. The FTC is suing businesses for using pre-populated ordering forms in which a consumer will order one thing and might not be aware that he or she is also ordering something else in a pre-checked box on the bottom of the order form - and out of sight on the web page.

The FTC is also also suing to stop false advertising of websites. Often an advertisement, such as a banner ad on a web page, will seem to advertise one thing but, when the consumer clicks the ad, the consumer is directed to a web page selling something else.

I am frequently asked by clients to give an opinion or advice as to whether or not a particular procedure or advertisement is unlawful.

Due to increased enforcement in these areas of ecommerce, I have formulated three principles which will keep most ecommerce business owners out of trouble.

When advertising or doing business on-line, a business owner should consider the viewpoint of the consumer (since this is the standard that will be used by the FTC and other regulatory agencies) and consider the following:

1. Landing Page Expectations. If a consumer clicks on an advertisement, will the consumer land on a page which the consumer would reasonably expect to land on? If the consumer is misled, even a little bit, then the advertisement will be considered false advertising. False pricing information an advertisement is a classic example. If an ad shows picture of a bottle of shampoo and $7.99, but on the landing page for the ad, the consumer discovers that the bottle of that brand of shampoo is actually $13.99, then the advertiser is guilty of false advertising.

2. Purchase Expectations. Is the consumer only buying what the consumer would reasonably believe to be buying? For instance, a company might advertise the sale of a product with a free 60 day subscription to a magazine. But, buried in terms and conditions is a clause that states that after 60 days, the consumer's credit charge will be charged for the subscription unless the consumer cancels first. The FTC, and the courts, have determined that this is an unfair business practice. Everything that the consumer is buying or might buy must be obvious on the online order form. Nothing buried, no pre-populated forms, no email notifications after the fact.

3. Knowledge of Wrongdoing. If you know that someone is doing something illegal or legally shady on-line, do not do business with them in any way. No even passively. For instance, if a website is running an illegal lottery, or some other illegal activity, do not provide links to the site. You can be held to be an aider and abettor of the illegal activity. Also, do not provide links on your website to an unknown business, and periodically check the links that you do provide on your website.

Adding value to your business through good legal processes

2010-03-05T21:39:00.001-08:00

Last month, I was again on the radio with the Smarter Small Business radio show.

Colm Kelly, the host, and I discussed adding value to your business through good legal processes.

I came on about 30 minutes into the show.

The Branding Process

2010-01-16T11:28:00.000-08:00

In December 2009, I appeared on the Smarter Small Business radio show with the host Colm Kelly. Also appearing was Colleen Connery of CoCo & Associates.
Colm is the owner of Smarter Small Business and a business consultant. Colleen is the owner of Coco & Associates and a marketing expert.
For the first 30 minutes of the show, Colm and Colleen discuss the process of developing a brand. I join them and we discuss protecting brands.
This is an excellent discussion of how to approach branding
Below is the video the show.

Non-Competition Clauses are Illegal

2009-12-16T20:27:00.000-08:00

It is seems simple. You own a business that provides a service to customers. You have employees that provide that service. You don’t want your employees to steal your customers. So, you have your employees sign a non-competition agreement when they come to work for you. Your employees agree not to do any work for your customers for a year after they leave your employ.

Or, you are in a fiercely competitive industry. You don’t want your employees to take your business methods, customer lists and knowledge of your business practices and go to work with a competitor. So, you have your employees sign a non-competition agreement in which they agree not to work for your competitors for a year after they leave your employment - and, just to be reasonable, you limit this restriction just to the county in which you are located.

These agreements seem reasonable to you the business owner. You found the form for the agreement you have your employees sign on the Internet or on CD of business forms you bought at an office supply store. You signed such agreements yourself in the past when you worked for others. You know they are commonplace in the business world.

Those agreements are illegal in California. Years ago, the State of California adopted a very strong policy against non-competition agreements for individuals. The California Business and Professions Code states that agreements that restrict the ability of an individual earn a living by lawful means are void. That means that the agreements in the examples I wrote above were void as soon as the employees signed them.

California courts and Federal courts in California have strongly upheld this policy. Whether the employer is a sole proprietor or a Fortune 100 corporation, the courts have consistently refused uphold or enforce non-competition agreements. Even when the employer and the employee were out of state when the agreement was signed, and the agreement was legal in the state in which it was signed, the agreement could not be enforced once the employee entered California.

A non-compete agreement, or a clause in an employment agreement, could also be construed as unfair labor practice or an unfair business practice.

What can you do then about employees either taking customers away from you or using your business practices against you? In California, you can not restrict the ability of someone to make a living but you can protect your trade secrets.

Trade secrets include business practices and methods, formulas, manufacturing processes, business plans and strategies, computer programs and customer lists. It is illegal to use a business’ trade secrets that were improperly acquired. An employer can prevent an employee from using trade secrets after an employee stops working for the employer. In that context, the law recognizes that customer lists are trade secrets and that an employee can take steps to protect its customers and its other trade secrets.

California has made a narrow exception to its anti-non-competition policy for trade secrets. In order to protect its customer lists, an employer can require an employee to agree to not solicit the employer’s customers for a reasonable time after leaving the employment of the employer. (Reasonable time should be read to mean short such as a year or less).

An employer can have an employee sign a non-disclosure agreement (NDA). NDAs are agreements in which a person, either an individual or a company, agrees to not disclose confidential information, including trade secrets, of a business. NDAs are used in a variety of occasions, such as when one business in negotiating the purchase of another business.

I often recommend to my clients that they have their employees sign NDAs that list those areas of their business practices that are sensitive and are considered trade secrets.

Another exception to the anti-non-competition policy is the sale of a business ownership interest. If an individual is a principal in a business (e.g. an owner, partner, or major shareholder) and that individual sells his or her interest in the business, then, as a part of that sale, the selling individual can agree to not compete in the same industry for a reasonable time within a reasonable geographic distance. (For example, one year in the same county).

Other than the trade secret and the ownership sale exceptions, non-competition agreements are illegal in California. However, employers can take steps to protect their customer lists and business methods if they are wise about how they approach them.

Legal Boiler Plate Is Important

2009-11-16T16:16:00.000-08:00

Commercial contracts have standard clauses regarding such matters as venue for legal disputes, the state law governing the contract, and odd clauses such as integration clauses that do not seem important at the time that the contract is being signed.

For consumers, such standard clauses are often unenforceable since the parties don't have equal bargaining power.

Not so in commercial contracts. The courts will enforce them even if they seem very unfair. Many business owners have contempt for such clauses and refer to them as boiler plate. However, such standard clauses can be critical.

If you get into a dispute with the other party, you may have to litigate that dispute in a county or state that may make it difficult or even impossible to successfully resolve the dispute. Many standard clauses are also are critical in interpreting the relationships between the parties.

The clause that states that the contract contains the entire agreement between the parties means that no other agreements or negotiations between the parties can be introduced to show the parties' intentions. That can be very harmful if two companies enter into a series of related transactions. The point is that business owners must pay attention to these clauses when they enter into commercial contracts.

The courts hold businesses to these clauses in commercial contracts and they can be very destructive. They can also be very helpful. In the video portion of this blog entry, I mention the case of City of Hope vs. Genetech. This was a very complex case in which the defendant Genetech was sued for several things having to do with patent licenses and contracts between the parties. The City of Hope obtained a huge damage award at trial including punitive damages for breach of fiduciary duty.

On appeal, the punitive damages were struck down on the grounds that the standard clause of the parties contract contained a clause that stated that the parties did not intend to create a joint venture, partnership or similar relationship between them. The court held that that clause showed that the parties did not intend to create a fiduciary relationship between them. Genetech was saved by boiler plate from having to pay millions in damages.

Don't say boiler plate isn't important.

Desperate Times Means Beware of Desperate Lawyers

2009-11-06T14:23:00.000-08:00

The old saying goes "Desperate Times Means Desperate Measures". Unfortunately, many people are currently desperate, for work, for cash flow, etc.

I have increasingly heard more and more stories of individuals who have been victimized by desperate professionals or trades people. Auto owners are sold service that they don't need. Contractors under-bid projects and leave them unfinished. Mortgage lenders and real estate agents outright lying to homeowners.

And attorneys. Attorneys who take on cases that they can't handle, or should not take. Attorneys who over bill their clients, or over-promise what the attorney can deliver.

I hate to say it but individual consumers and business owners must be careful these days when they retain an attorney. I saw an excellent article today that can help in this matter. The article urged attorneys to provide a Risk Benefit Analysis prior to any litigation matter. Such an analysis weighs the benefits of the litigation with the risks and costs. I thought this was an excellent idea and it got me thinking about what consumers and business owners should look for in an attorney in these days.

I suggest the following in evaluating an attorney:

1. Expertise. This includes experience but also how much of the attorney's practice is devoted this type of matter. Is the attorney well versed in this area of law or just taking on your matter to make some fees.

2. Compare. Independently review the qualifications of a few attorneys.

3. Risk/Cost - Benefit. Prior to any litigation ask the attorney to give you an analysis, in writing, of the benefits, risks and costs of the matter. They should be very frank and you should not be too happy with the attorney's assessment if the attorney is honest with you.

4. No flattery. Do not retain an attorney who continually tells you what you want to hear. Attorneys are in the business of bringing their clients down to earth as to what can and not be accomplished. No attorney should continually tell you that are completely right, that you can get everything you want, etc. If that is the case, do not hire that lawyer.

5. Insist on communication. Insist that the attorney communicate with you about every step of the legal process, particularly for litigation matters. Insist that the attorney inform you of approximately how much you will be billed as the matter progesses.

6. Get a budget. Ask for a budget from the attorney. Insist that if it appears that something might cost more than the budgeted amount that you be contacted first and give your authorization. Get that in writing.

Generally, speaking be careful about the attorneys you retain and insist that you be kept informed about risks, benefits and fees throughout the time that they work for you.

Follow Up!

2009-10-25T19:15:00.000-07:00

A consistent problem that I have seen in my career is the classic "failure to communicate". Two parties will negotiate by phone or in person the deal points of a transaction, but never follow up that conversation with a written communication as to what was discussed.

I most often see this in litigation after two parties think that they have agreed to something and, later, discover that their understanding of what was agreed to was completely different. A salesperson and a customer will discuss pricing and timing of a sale and later discover that they are incomplete disagreement over the terms. This is a prime cause of lawsuits.

To avoid these problems, always follow up any business conversation with a written message that completely states the deal terms discussed. In this way, a permanent record is made of the things discussed and the parties avoid disagreements. Business owners and their employees and sales representatives that routinely send written follow up communications have a huge advantage in negotiations and dispute resolution.

Here are a few hints.

1. Write the message as soon as possible after the conversation. The sooner you write about a discussion, the more accurate you will be.

2. Use plain English. Write simply and clearly. Do not use slang, trade terms (unless necessary), acronyms and other terms that everyone might not understand.

3. Be complete. Write out all the terms that you discussed. Avoid using "etc." or referencing the conversation that you had without writing out the things you discussed. This may seem like a pain, but it is important to be complete.

4. Use email or a letter. The more permanent the method of communication, the better. Email is good, but make sure that it can be found. Save the emails in a place that can be recovered easily later. The good thing about emails is that the several replies between two parties can create a good record. The best method is a letter sent by fax. A fax machine can give an immediate confirmation of receipt. Plus a written letter has a greater impact. Avoid text messaging. Text messages are easy to delete and are more difficult to download into a format reviewed. There is also a greater tendency towards using shortened terms and to be incomplete in text messages.

5. Leave open the possibility for disagreement. End the communication with a phrase that states something like "If you disagree with what I have written here, please inform me." If the other side does not reply, then you can assume that they agree. They will be more likely to reply if they disagree and it is important that they communicate any disagreements.

I have seen many instances when one party to a lawsuit had consistently followed up in writing as the parties negotiated the transaction in dispute. The side that followed up consistently, clearly and completely was in a much stronger position. More importantly, companies that consistently send written follow up communications do not have disputes with their customers and vendors. They stay out of court which is the best position to be in.

Protect Against Hardball Trademark Tactics

2009-10-07T00:01:00.000-07:00

I have noticed in recent years that business are increasingly unscrupulous about stealing the ideas of other businesses. This is particularly true in the area of trademarks and trade names. I have seen increasing cases in which rival business owners will file domain name registrations and trademark applications in an attempt to steal or preempt the legitimate use of a name by other business owners in the same industry.

I had case in which my client started a small recording company. My client incorporated the business and launched a website. After a few years and a producing a few CDs, she found out that someone had filed a trademark application for the same name. The person filing the trademark application was not using the name and apparently only filed the application to hold the name hostage. When I contacted the attorney for the person filing the application, his attorney informed me that his client would give up his application for money.

Another form of hardball tactics is filing domain name registrations that are similar to one already in use. This is done by registering the same name as .org, .net, or .biz, or using a hyphen in the name.

Of course, one can file lawsuits to remedy these situations but that is very expensive.

I encourage my clients to protect their business names and logos as quickly as possible. File fictitious business names for business names in use. State and Federal trademark applications are the best deterrents. We can even file what are called "Intent to Use" applications if the name is not yet in use but the owner intends to use it within the next one to two years. That application protects the name until the owner is ready to actually use - and it prevents someone from tying up that name by filing the same type of application in bad faith. The time and money needed to take these protective measures is well spent.

Think Through Marketing Campaigns

2009-10-03T15:38:00.000-07:00

I have dealt with several disputes in the past few years involving advertising services. The usual scenario is that an advertising company, often a search engine optimization (SEO) firm, will sell my client on a lot of expensive services. Those services don't result in new leads for my client. But, my client will have a large bill to pay.

For instance, a company that is a business to business service provider buys an expensive package of services from an SEO firm. The company's website has very high rankings on Google searches for its area of expertise, but no new business comes in. The problem is that the company's potential customers are not looking for that kind of service provider on the Internet.

So, the SEO campaign was a waste of time and money. And, the disappointment leads to a dispute over money since the company has expended considerable monies and time in the SEO campaign.

Legally, the SEO firm did everything that it said it would do even if it didn't generate any leads. So, the company buying the campaign owe the money even if it didn't generate any new revenue. I have to tell my clients that if they hired someone to dig a hole in their yard, they would have to pay the hole digger, even if the hole had no purpose.

My recommendation to my clients is that they do some serious marketing research and hire an independent marketing consultant or business coach before investing in any expensive marketing services.

This is not legal advice. But it is a common ground for disputes, so I thought I would comment on it.

Think through what you sign

2009-09-28T23:33:00.000-07:00

I have been dealing with several matters in the past year that have dealt with business persons signing contracts without clearly thinking them through.

Usually, the individual involved signs the contract order to get money or close a deal that he or she thinks must be done or that is absolutely necessary. In a sense it is a sign of the times that business persons are thinking along those desperate lines.

The problems that arise are many. It is not a good deal. The terms are vague and contradictory. Some times, a business owner will fail to sign as an officer of the business entity (such as a corporation), so that the business owner is personally liable.

Haste makes waste and, in this case, the waste of time and money in legal disputes. People are in such a hurry and blinded by need that they stop thinking.

If it is a deal that must be done, particularly if it has to be done soon, then it is trouble.

My suggestion is that business owners slow down. Nothing has to be signed today. Put the agreement aside and read it again tomorrow. Have someone else read it through - particularly an attorney. It can save you an enormous amount of grief and money.

Partnership Agreements Make A Difference

2009-08-17T15:40:00.000-07:00

I have working on several partnership dissolutions this year. Perhaps it is a sign of the times.

Once again, the amount of anger, pain, time and money spent on these dissolutions is in direct proportion to the involvement of attorneys in the beginning of these businesses.

When an attorney is deeply involved in the formation of a business entitys, such as a partnership, corporation or limited liability company, then the dissolution is relatively fast and inexpensive. The owners have the procedures in place to buy out an owner who is leaving or isn't performing.

On the other hand, when an attorney is not involved, the dissolution can turn ugly and end a lawsuit. This can result in legal fees of tens of thousands of dollars.

The real difference isn't the documents and agreements that I or an other attorney provides. The difference is that the owners are directed to think of issues and problems that they will otherwise over look. Things such as: what happens if one person stops working the business, what happens if we want to bring in someone else, who will be performing what role in the business, etc.

Addressing those issues also means that the business is more likely to be successful.

Create an Intellectual Property Portfolio

2009-05-17T20:33:00.000-07:00

All business have intagible assets that need to be protected. In particular, business have intellectual property assets that need protection. Things such a trademarks, copyrights, trade secrets, etc. A method of doing systematically is called an intellectual property portfolio.

An IP portfolio is a systematic method of protecting the IP of a business by inventorying, cataloging and periodically reviewing the business' IP. The reason for doing is to prevent the loss of IP through the lapse of registrations from lapsing or licenses and to prevent the misuse a company's IP assets.

For instance, Federal trademark registrations lapse after 10 years. Furthermore, a new trademark registration has certain filing requirements six years after registration or the registration will be cancelled. Unless a company has a systematic method of reviewing its IP assets, it may let the registration lapse. I have personally seen this happen several times.

Another advantage of creating an IP portfolio is that it reminds business owners of their IP assets and gets them thinking about their use and what else needs to be protected.

The final and biggest reason for creating an IP portfolio is that it increases the marketability and value of a business. A company that does not have registrations for its trademarks or does not protect its copyrights is almost unmarketable. A company that not only protects its IP assets but has a standard system for reviewing and protecting all of its IP is much more valuable and attractive.

Large corporations have in-house attorneys, or hire big law firms, to manage their IP portfolios. Companies that own large amounts of copyright protected material, or own many patents, or have several brands, may have several attorneys dedicated to managing their IP portfolios. Those companies are very serious about protecting their IP. The small and medium sized business owner should be also.

How does one create a IP portfolio?

1. Take an inventory. Review all of the IP of the company including its copyrighted materials, trade secrets, trademarks, licenses, etc.

2. Take steps to ensure that the company's IP is protected. Often the inventory will reveal IP that a company wasn't aware of and that needs protection. Register copyrights, trademarks, create non-disclosure agreements, etc. Also educate employees of the use of trademarks, copyright protected materials and trade secrets.

3. Create an easy to use and understandable series of files or notebooks that have summaries of all of the company's IP. For instance, a file regarding a trademark might have a copy of the registration and a page with the dates that the registration must be renewed and what goods or services it can be used with.

The idea is to have in one place a summary of all of the IP of the company that can be easily reviewed and understood.

4. Periodically review. Assign someone the job of reviewing the portfolio. I recommend not less than every six months. In this way, nothing lapses.

As a part of that review, the business owner should also think about what other IP assets that the company has that need to be protected. For instance, a company might start using a trademark for goods that were not listed in its original registration. A new registration should be filed to list those goods.

A well managed IP portfolio can be invaluable to a business. It increases the value of a company and prevent the loss of important IP.

For a modest fee, I help small and medium sized business develop their own IP portfolios. We review a company's IP assets and help organize an easy to use portfolio that the business can manage. I then send periodic reminders to my clients for them to review their portfolios. In this way, small and medium size businesses can have the same level of professional IP management as large corporations, even if they don't have their own in-house legal departments.

Protect Your Brand

2009-05-10T17:45:00.000-07:00

Branding is the development of a company's name, trademarks, domains, and other intellectual property such that the company has a unique and recognizable identity. A company's brand can be closely tied to a company's goodwill. Goodwill is the reputation of a company for the goods or services that it provides. A company that has strong goodwill and a recognizable brand will be very valuable.

Protecting that brand can be critical to safeguarding the value of a company. A company can work hard at its services or in providing excellent products, only to have that goodwill undermined if it could suddenly no longer use the name with which it has done business. Imagine building a business for two or three years and building your company's goodwill and then getting a cease and desist letter to stop using your company's name and website domain, because you infringe on a Federally registered trademark. That happens frequently and it is devastating.

The best way to protect your brand is to do so from the beginning. Consulting with an attorney as to how to protect your domains and trademarks is a crucial and basic step in creating a brand. Large corporations will spend a considerable amount of time developing brands in secret. When they are nearly ready to use they brand, they will file multiple trademark registration applications to ensure that they have the rights to that brand. Small business owners won't be able to spend that much money but they can take similar steps in ensuring that their domains and trademarks are protected.