Intellectual properties have been the reason for a lot of lawsuits in and out of the corporate world. To discuss how you should be protecting your brand is Maria Crimi Speth, a Shareholder at Jaburg Wilk who practices in the areas of intellectual property, internet law, and commercial litigation. She shares her immense knowledge and expertise when dealing with trademark and copyright protection by talking about her experiences in the field. Learn all about the five pillars and four categories of intellectual properties as she explains the differences of each. Also, if you’re thinking of manufacturing in another country, know the steps and preparation that you need to do in order to make sure you protect your product and investment.
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Protect Your Intellectual Property, Protect Your Investment with Maria Crimi Speth
I am excited to welcome a true professional, Maria Crimi Speth. She has been practicing in the area of intellectual property, internet law, and commercial litigation representing clients throughout the United States litigating for many years. She practices in the state and federal courts of Arizona and New York, as well as the United States Courts of Appeal for six different circuits and the Supreme Court. She is the author of two published books, Protect Your Writings: A Legal Guide for Authors and Apple v. Samsung, The Balance Between Patent Rights and a Free Market. That should be an interesting read. She’s been named Best Lawyer in America for Copyright and Trademark Law since 2015 and was selected by Super Lawyers from 2016 to 2019. Best Lawyers named her 2019 Technology Lawyer of the Year. Maria has numerous published and precedent-setting cases. Maria, welcome to the show.
Welcome to the show, Maria. It’s an absolute pleasure to have you on. You have quite the credentials practicing law for many years and being named Top Best Attorney. How did you get started?
Thanks, Michelle. I’m so happy to be here. I’ve always had an interest in Intellectual Property Law ever since I was in law school. It’s been a fascinating topic for me. It’s one of those areas of the law that is ever-changing, and always keeping me interested so I love it. It’s great.
You’ve done quite well on it because the most important thing to business owners is protecting their IP, their Intellectual Property. I specialize in doing mergers and acquisitions, buying, selling, fixing growing businesses. I can sell a company for 2, 3, 4 more times EBITDA even if they have IP and are well branded. We talked about this before, but the Coca-Cola brand alone is worth $89 billion. The Apple brand alone is worth over $100 billion. I call it five pillars of IP. The first pillar of IP is branding. How do clients go about protecting their intellectual property, their company name, slogan, logo or everything that goes into that branding and that brand messaging?
It’s not only a brand, as you said, but it’s also more than that. Intellectual property is broken down into four categories. It’s trademarks, copyrights, trade secrets and patents. For each one let’s quickly go over what they are. Your trademark is your branding. That’s going to be your slogans, brands and what the customer identifies as you, as the source. Your copyrights are your underlying content and not all businesses have copyright. Some are more traditional businesses that have traditional services. A lot of companies have a lot of copyrights like any software-based company that has copyrights.
There are trademarks, copyrights, and trade secrets, that’s going to be your proprietary information that you keep secret. It’s the backend stuff that the world doesn’t see. For patents, which is if you’ve got an invention that is so unique and so novel, that you can protect and get a monopoly on it. Those are going to be your four areas. This is important. The value of a business is tied to the intellectual property that it has. If you think about if we added up all of the assets of the business and we put a number on that and we look at the value of the business itself, there’s always this large gap between what the assets, the tangible assets, and what the business is worth. A great deal of that gap is the intangible property.
The more well-branded a company is as long as they’re still doing well, the higher price they are going to be able to dictate. Let’s take your four and break it down. I said five because I also add to IP databases. Databases are huge like WhatsApp. Facebook paid $19 billion for WhatsApp. WhatsApp was hemorrhaging money without a billion users so Facebook knew they could all align.
They knew they could monetize on the sale of that business. The other thing I put into my IP is contracts. Anytime you have contracts with your clients, manufacturers, vendors, maybe contracts that somebody else can’t get, as somebody who’s doing business with shale oil and those contracts, there’s a moratorium on those contracts. That has huge value. Buyers are willing to pay more money for that as long as those contracts are transferable. That’s why I said the five pillars.
Your pillars are correct. The only reason I say four is because the database is going to be part of copyrights. From a legal perspective, it’s not separate from a financial perspective. It’s its own pillar. Contracts are on their own, aren’t they?
They’re valuable and important.
I’ve done thousands of transactions over many years and maybe only 1% have that language transferable in your contracts. Most business owners never have a transferable clause in their contracts. It can kill a deal because 99.9% of all sales are asset sales, not stock sales. It’s a big issue when those contracts are not transferable.
Even if there’s a no assignment clause, there should be an exception to the no assignment clause in the case where most of the assets of the company are being sold.
Let’s take your four and break that down. Tell our readers how they can protect each one.
Let’s start with brands and trademarks. There are several steps in the trademark process. The first step is going to be to pick an unusual trademark. There’s this temptation to pick a trademark that purely describes what you do and those trademarks are from a legal perspective, not the strongest trademarks. I don’t know from a marketing perspective, I’m not a marketing person. From a legal perspective, they don’t have the same level of strength. I like to use eBay as an example. If eBay had decided to call its company, Online Auction, that would not have been as strong of a brand as eBay was.
When they first called themselves eBay, people didn’t know what eBay was. We learned it and they created that connection in the minds of the customer between eBay and an online marketplace. In the beginning, we’ll use a tagline to bridge that gap between what’s eBay. It’s an online marketplace so that tagline would help people to know what it is. Number one is, pick an unusual brand, the more unusual the brand, the higher level of protection you will get.
Let me ask you one quick question. What about Amazon? Amazon is not unusual?
It is. We break trademarks down into four different categories. It falls into an arbitrary category. The highest level of protection is fanciful, which is your made-up words like, eBay, Exxon and Xerox. An arbitrary trademark is like Apple in connection with computers, or Amazon in connection with a marketplace. In Amazon’s case, it’s a geographic region, but it wasn’t otherwise associated with a marketplace so they created that connection. The next category after arbitrary and fanciful is suggestive.
A suggestive trademark tells us something about the brand, underlying products and services, but it doesn’t come out and describe it. I like to use the example Greyhound in connection with buses. If you think of Greyhound, you’ll think it’s fast, sleek and graceful. Those are suggestions that Greyhound likes to correlate to their brand. There are some correlations. If you didn’t already know it, and I said to you that my brand was Greyhound, you wouldn’t know that I had a bus company. That’s a suggestive trademark. A descriptive trademark is the one that I’m telling you to avoid. That’s something that describes your goods and services. The fourth category is not a trademark at all. It’s generic. I’ve created a new hair wash, and I want to call it The Shampoo. I can do that, but I can’t stop you from calling your shampoo. It’s what everybody calls hair wash so that’s generic.
I’m good because I’m Seiler Tucker Inc., which is my name so I’m not going to have any issue or trademark at all. In my slogan, we say, “The business authorities on buying, selling, fixing growing businesses.”
Your slogan helps people to understand what you do, which is a great way to use a slogan, and your brand is unusual. It’s good.
Like many business owners, I made a mistake too. I had a name called Capital, and everybody thought I was a bank plus. We were spammed all the time. It’s important to hire an expert or an attorney to make sure you sort all this out and make sure you get not a local trademark, but a federal trademark as well.
Once you pick the name, the next thing you want to do is search it to make sure that it’s available and to make sure that you’re not infringing on somebody else’s trademark. I recommend that people do the search themselves, to begin with. They hire a professional to do a professional search assuming it’s available and you want to grab up the domain name if it’s available and that’s important to your business model. Finally, your last step is going to be to register the trademark with the United States Patent and Trademark Office.
I don’t recommend that you try to do that yourself. That can be a tricky process. I would have to hire somebody for that. It’s something I do but anybody who knows how to do that is fine. It’s important because it gives you rights throughout the United States. You’re acquiring trademark rights in your own region geographically as you’re using it, but those rights then get expanded throughout the entire United States once you file a federal registration.
How long does that trademark last?
Forever as long as you renew it. Coca-Cola has had the Coca-Cola trademark for close to 100 years. Between the 5th and 6th year of registration, you have to file something called a Statement of Use, and the tenth year you have to file a renewal and every ten years after you file a renewal. As long as you do that, it lasts forever.
Have you seen where companies will get in trouble years later because their brand name is too generic? For instance, do you remember Cookie Bouquet? Cookie Bouquet had to drop the name Cookie Bouquet because it was too common. I forget the name that they changed to but why was that? Is that because it was too of a generic name and somebody was fighting them about that?
It’s going to be much harder to protect your trade secrets if you didn’t have a written agreement that said it was confidential.
On that one, it had to do with a dispute. I’m not particularly familiar with that one. I know many others where companies were in business 3, 4, 5 years. They put a lot of marketing dollars into it and suddenly they’ll get a cease and desist letter that says, “This is a federally registered trademark. You can’t be using it.” It is not a good thing to have to go back to the drawing board after you’ve already started to create a brand and you’ve already gotten traction so do it early. Check it early.
Check it often. The other thing too, is when you start searching for names for other products, for instance, we started a membership called Club CEOs. I was on the phone with somebody and they said, “Did you trademark that?” I’m like, “I forgot. I’m the expert in this stuff and I forgot.” My attorney is working on trademarking that now. It’s important if you’re going to take anything like Club CEOs, or any type of membership, a course or something and get that trademarks because you can spend all that money in marketing Club CEOs, and have to take it down.
From a sequencing point of view, before you put any substantial or significant dollars into marketing a brand, you should search it first and register it first. That’s the order that you go in.
Do you have to do that with a book unless it’s a series? You can’t trademark the name of the book. However, you should do your research because you want to make sure you’re not infringing on somebody else’s trademark. You can’t go on and call it Rich Dad. You don’t want to name something Rich Dad or Chicken Soup for the Soul. You’ve got to be careful.
Book titles, as you said, cannot be protected but they can’t infringe other trademarks. You should not call your book, something that is already taken as a brand, especially if that brand is related in some way to book series.
Initially, before we named my book Exit Rich with Sharon Lechter who wrote Rich Dad, Poor Dad, we were going to name it The Prophet Speak and I go, “The Prophet? The Prophet is Marcus Lemonis on CNBC.” The people I was working with at the time were like, “It’s fine.” I guarantee you that is not fine. Speak to an attorney. I did and my attorney was like, “No, and CNBC has a lot of money so you need to change that.”
Do you know what’s a good test like a gut check test? It’s to say, “If it was flipped, if that was my brand, and somebody else started using this brand, would it bother me?” If the answer is yes, it’s probably true the other way around. If you’re not sure that the other side or other party is going to care if you start using that trademark, try to put yourself in their shoes and wonder what you would feel if it were you? Would you be like, “That doesn’t matter. It’s pretty different,” or would you think, “No, that’s similar and that bothers me?”
It’s important to slow down because as entrepreneurs, we come up with an idea at 3:00 AM. We want to get up at 3:00 AM, go get that domain and act on it. Some of us have 150 to 300 domains, I do. I always come up with different domains. I’m like, “Slow down. See and look to make sure it’s available.” We have to slow down as entrepreneurs sometimes. We talked about your four pillars. We talked about one, branding, and how to protect that. Any other tips as far as that one goes?
We talked about what we need to talk about, I know what we didn’t talk about on trademarks. A common question I get on trademarks is, “Should I register only the words or should I register a stylized or a logo version of the words?” If we use Coca-Cola as an example, should I register Coca-Cola and type format or standard or should I register in that script that we all can see in our minds? My answer is to do both. If your budget does not allow you to do both, do the word because your stylization, font, and color scheme may change over the years. They get freshened and renewed. That is probably not the one that’s going to last a long time. It’s going to be the words that are going to last a long time and when that 5-year and 10-year renewal comes, and you’re not using it in exactly the same form anymore, you won’t be able to renew it. By all means, register your stylization if you have it but don’t fail to register the standard character mark.
The name and the slogan is important to register. What about if you have different slogans or sayings that you use for processes? I have the 6 P’s, the Seiler Tucker 6 P’s. We are getting that trademark now and we use a TM after that. Is that correct protocol?
Yes. It’s always the correct protocol to use the TM anytime you claim something as a trademark. You don’t have to have something filed to use the TM. You have to claim a trademark. You should not use the R in the circle until you have a registered trademark back. It’s not enough that it’s in process, it’s you’ve gotten it back, then you should change it to the R in the circle. The other thing that you’ll want to be careful about with what you described is, you can’t register as a trademark the name of a process. It has to still be a brand. As you’re presenting it to the trademark office, you want to be clear in both your proof of use and in your wording that this is a source identifier and brand identifier and not the name of a process.
When I said process, what I meant was brand because the 6 P’s is a brand. Seiler Tucker GPS Exit Model is a brand and we’re trademarking that as well. For everybody reading, you could put that TM and that helps protect that you’re claiming that. We’re good with number one. What’s number two for you?
It’s copyrights. Your copyrights are going to protect your content and your databases. We’ll talk about databases along with content. Any content that you create or that is created for you is copy protected. Some examples would be the interior of a book, the wording of the book. Maybe your business models, your marketing pieces, the content that’s on your website. If you’re in the photography world, your photographs. If you’re in the graphics world, your graphic design. All of that is protected by copyright. The copyrights are automatic.
As soon as you create it, it’s owned, and you have copy protection. In order to get an additional level of protection, you’ll want to register it with the copyright office and that’s Copyright.gov. By doing that, you’re getting additional remedies that are available to you that you would not otherwise have. That’s important because if someone infringes your copyright, you don’t want to have to file a lawsuit and you don’t want it to be difficult to stop them. If you have a registration, it’s much easier to stop them. I highly recommend that.
The copyright in your book, you registered that, but what about the copy that’s on your website, do you have to register that as well?
You don’t have to register it. The Copyright Office is about to change their rules in a good way and that is for blogs. For your website, it depends on the industry you’re in whether you think it’s worth registering. If you’re doing a blog, it is a good idea to register the copyright. The dilemma used to be that you’re always adding to it and you’re always changing it. Copyrights are not expensive to register. It’s only a $70 filing fee and that one you can do yourself, but you don’t want to have to constantly do it every time you write a new blog. They change the law and it’s going to go into effect. You can register your blog for the whole year and it covers all of the additions to it. Once a year, it’s going to cover everything that you added to your blog. I do recommend using that and getting your blog protected if you have a blog.
I love that because we write probably about twelve blogs a week. If we register for one time, it will cover all of our blogs for the whole year and that’s going to be a $70 registration fee.
I don’t know if they’re going to keep it the same price or if they’re going to up the price a little bit, but it won’t be much more than that.
That we can do on our own?
That’s great advice that most people don’t realize. What else should we get copyright? The content on our website, blogs, books, what else?
You mentioned the database. We do not want to forget about databases. A compilation is protected by copyright and a lot of people don’t realize that. They know their database is valuable. Everybody knows their database is valuable. They think it’s valuable in part because it’s a trade secret and it is. You’re not going to let anybody have that database. It’s also considered to be a compilation so you’ve got two overlapping coverages on your database. As you pointed out, that database can be incredibly valuable.
The more users you have, as long as they’re active, then the more valuable it is, which is why Facebook was willing to pay so much for WhatsApp.
You don’t want to put it out there. You want to keep it a trade secret, but know that there are some protections on copyright. If somebody did get their hands on it and used it in addition to your violation of trade secrets, you would also have a violation of your copyrights.
How would they register the copyright of their database?
You won’t want to register the copyright on that one because by registering it, you would make it public and you probably don’t want to make it public.
I don’t think the clients would want that.
That’s going to be a copyright that you’re going to keep without registration.
You created it so you own that copyright.
Let’s talk about ownership because I don’t want to skip this.
I was going to ask you about blogs. If I have employees or interns writing blogs who worked for me, who owns that blog?
Copyrights are funny. I’m going to use the tangible world example as the difference. Michelle, if I hired you to create and build a cabinet for me, and you say, “I want $200 for the cabinet.” You go into your woodworking workshop. You build the cabinet. I pay you the $200 and you give me the cabinet. There’s no doubt that I own that cabinet. I paid for it, I bought it, so it’s mine. On the other hand, if I hire you to create, let’s say, some content, a blog. You’re not my employee. You’re an independent contractor. I pay you the same $250 and you give me the content, I do not own it. You own it.
If you’re in an independent contractor situation, you’re hiring independent contractors to create anything for you like develop software, create content, write blogs, take photographs, create logos, in all of those situations, the independent contractor owns the copyright. Unless you have a written agreement that says it specifically that they are transferring the copyright to you. You mentioned employees. When you’re the person doing the writing as an actual employee, you’re paying them a paycheck, your whole withholding taxes, it’s a classic employment relationship. In that case, you own what your employees create. In the independent contractor situation, you do not and it is critical for you to have a written contract.
Where can we get that contract? Where is the easiest place to get that contract? I guarantee you that most business owners have independent contractors and interns that write stuff, create stuff, create logos, create copy, etc.
I’m going to call it a clause rather than calling it a contract because you should have a robust contract with them that talks about what are the deliverables? What are you paying them? Also, there is a standard contract for all that. Within that contract, there should be a clause and that’s quite standard. It should be a work for hire/assignment clause. Work for hire means from the moment that they created, it becomes yours. If it doesn’t fall into a classic work for hire situation, you’re also having an assignment. Where could you get that? I would look online for work for hire/assignment contract or template.
If somebody wants to email me, I can get you a basic standard form. My disclaimer is that shouldn’t be all the only contract you have with them. It should be part of the contract you have with them. It’s the language that’s important to have in it. If the service provider is giving you a contract, look for that language, because here’s what happens. I hire a software developer. They give me a software development agreement. If that agreement is silent on ownership, they own it. I’m looking in that contract for language that specifically says that they are transferring or assigning to me the copyright in what they create for me.
As content and brand creators, we want to be protected in what we create. The flip side of that is we also want a free market.
I hired a developer to develop some of our courses on Build to Sell. I’m going to go back and look at the agreement to make sure I own it before I pay the final balance. I’m going to send it to you and have you look at it.
That’s the time to negotiate. It is before you pay the final balance.
You don’t know what you don’t know. These are great tips. Anything else on ownership or copyright?
That’s about it on the copyright side.
What’s number three?
Trade secrets or proprietary information and that’s simple. From a legal perspective, that’s a matter of sharing information that you consider to be proprietary on a need to know basis, and getting non-disclosure agreements from people when you do share it. If you follow those two rules, you’re fine, there’s nothing to register, there’s nothing to do other than don’t share it with people who don’t need to have it. When you do have to share it with them, get them to sign agreements that say that they’re going to keep it confidential.
What about employees or independent contractors who work with you? Maybe you have those trade secrets in your business, do they have to sign that disclosure agreement? Is that part of their employment agreement or independent contractor agreement?
I don’t want to say have to, but it’s going to be much harder to protect your trade secrets if you didn’t have a written agreement that said it was confidential. If you verbally express to your employees and your independent contractors that the information is confidential, I have successfully litigated that issue but it’s going to make it so much harder to win than if you have it in writing. I would highly recommend that you have it in writing with anyone, whether even employees, but independent contractors, that says that they will keep confidential information confidential. Also, identify what’s confidential.
The other thing I do is I’ve spent years litigating over the issue of what’s confidential and what isn’t. People put in place non-disclosure agreements, and never identify what’s confidential so their employees or their independent contractors don’t know whether they’re supposed to keep something confidential. You always want to market being confidential. You always want to let people know, “This is proprietary. Don’t share this.”
In what we do selling companies, everything’s confidential. We have the business owners’ financials and have all their information. It’s all confidential.
Michelle, I want to address something about what you do. I have worked with quite a few merger and acquisition attorneys, who are competent at what they do, but don’t know a thing about intellectual property. One thing I would caution people is if you’re selling a company, especially if you’re purchasing a company, it is a good idea to have an intellectual property attorney involved to be looking at those paper works and contracts. I litigated them after the fact. I’ve seen cases where high-level attorneys in good firms were involved and the paperwork didn’t properly transfer or didn’t properly trace the chain of title of intellectual property. Somebody who purchased something from the company didn’t get what they thought they got.
I’ll go back to the example of the ownership that we were talking about. I once had a company where the sale was a multimillion-dollar sale and what the buyer was buying, amongst other things, was a series of valuable audio recordings. They were trainings that were doing well and were marketed well. What nobody paid attention to is who owned the audio recordings. The company that sold the assets said that they own them, but it turns out that they never had the proper work for hire agreement from the person who created the recordings. They sold something they didn’t own, the buyer bought something they didn’t own, and the real owner surfaced later. It was honestly a dream for somebody like me, but terrible for the people involved. Be careful about that. I said, “If somebody had called the IP attorney during this significant transaction, this would have never happened.”
All the transactions that we’ve done for many years, we’ve never had an issue like that. Knock on wood. We do work with firms who do nothing else but M&A transactions all over the country. They have an IP department, an accounting department, and a legal department all under one roof. We, as M&A advisors, have been through enough transactions. I know what to ask and look for. I would ask, “Where’s the paperwork showing that you own this?” As I ask where are the contracts and the transferability? Where’s all of this information? That’s good advice for anybody who’s not working with me, you should be. If you’re not, make sure you hire an IP attorney because you don’t know what you don’t know. What ended up happening in that, just by synopsis?
Two or three years of litigation and finally a settlement, a lot of money spent.
You’ve got to be careful with all of that. It could be a disaster, a mess. There are reps and warranties so I would have thought that the seller would have had to give some of that money back.
That was part of the issue.
A clawback because the reps and warranties that they own everything they say they own.
One of the issues was that the seller had unwittingly breached their own reps and warranties, but they didn’t know it. They thought they owned it.
You’ve got to hire the experts. You’ve got to have people with the core competencies that you don’t have.
Number four is patent. If you’ve got a business that has inventions, you want to be talking to a patent attorney. Don’t even try to mess with that yourself. I don’t even do patent filings. I only do patent litigation. I do licensing but I won’t do the filings. You want somebody who’s had a lot of experience doing them. Identify it in your business. Does your business do something and has it created either in a device or possibly a process, although that can be more difficult, that is so novel so unique, that it’s entitled to patent protection? That can increase the value of your business.
You’ve got to follow that along and make sure who owns the patents because it’s not in that corporation’s name. It’s at another corporation’s name, or a person’s name, which is not a good idea. We sold a company that had eighteen patents. It’s a huge value driver. Talk to us about patents and processes because you can’t patent a process.
I wouldn’t say you can’t. It’s gotten much more difficult to do. The business process is one of the areas of patents. There was a Supreme Court case called Alice. The Supreme Court narrowed. It’s difficult to get. I would leave it as if you think that you have a process that’s unique enough to patent, I would recommend that you not only hire a patent attorney but hire the one that has dealt with process patents before. Also, one that knows how to deal with process patterns and is going to be straight with you because the best patent attorneys will tell you, “You’re not going to get a patent on this.” If you do, “It’s going to be so narrow. It’s not going to be worth it.” You want somebody who’s going to be straight with you about that.
I thought that there was some glimmer of hope, but I heard it is difficult to do and extremely expensive.
That is true.
What about McDonald’s, patent or process?
I don’t know of any that they have. Certainly not any main processes. They might have some minor ones that we don’t know about.
When I think of the process, I think of McDonald’s because you can go to China or Russia, you’re going to get the same experience. It might look a little different in China than it does in the US, but you’re going to get the same level of quality, the same level of experience because the process is the same.
That overall broad process is not going to be patentable. It would have to be something narrow.
Anything that we’ve left out as far as processes, trademarks, copyrights, databases that you can think of?
Nothing that I can think of.
I love the story that you gave us. What are some of the biggest mistakes you’ve seen business owners make on not protecting their IP?
I see so many. Maybe because I’ve got the merger and acquisition topic on my mind.
Did you see Exit Rich?
That’s the topic of the show so I’ll go with this. You alluded to it. It’s not a huge mistake, but it could end up being a problem. A lot of times, people will put some intellectual property in their own personal name, whether it’s a patent or the trademark, and they’ll not have a license agreement or anything in writing between themselves and their company. The company is going along, using the trademark and the patent but the patent and the trademark are owned by the individual. A lot of times the individual says, “I love that because I can sell the company and I still own the trademark or the patent.”
The mistake that they make is any savvy buyer is going to be like, “No, you’ve got to put those together,” or they’ve got a holding company and it’s not a mistake to have a holding company so don’t get me wrong. They’ve got a holding company that holds all the intellectual property, and they’ve got an operating company that operates that is a fantastic way to do it. When you sell it, you need to sell both, you need to sell the assets from both. Nobody who knows what they’re doing is going to buy the operating company if it doesn’t own the asset.
In my firm, we won’t even take a client on to sell their business. We won’t enter into the engagement unless we get all the IP and the seller is willing to turn over all that. If they’re not, that’s a big huge red flag because the seller is going to go out and compete. I’ve seen it happen, not with us because we protect our buyers. I’ve seen it happen time and time again, where the sellers kept the domain name, the phone number, kept a trademark, or they kept something because their whole intention was to go out and compete. We don’t do that. We make sure that all IP is included in the beginning of our engagement. If it’s not, we move on and we won’t work with that client, because we’re not going to send a buyer up for failure.
There’s this temptation to pick a trademark that purely describes what you do and those trademarks are, from a legal perspective, not the strongest trademarks.
That’s important. The other mistake we already talked about is by far the biggest mistake that I see people make even in sophisticated companies is assuming that they own all of the intellectual property that they paid for and without having work for hire agreement. Even when you have employees, it is true that you own what your employee creates, but I would still have the belt and suspenders and I would have that employee sign an agreement. What if it’s outside the scope of their employment? What if they argue that it’s outside the scope of their employment? I own everything my employees do within the course and scope of their employment but I don’t need them arguing that, “I did this on the side and it’s not yours.” I want a good strong contract that covers everything they do. That would be another mistake I see all the time. People don’t put contracts in place and in the IP world, they’re critical.
You need an absolute paper trail and spend the money once you’re not spending more money later.
Isn’t that the key mistake? An ounce of prevention is worth a pound of cure. We pay for the ounce of prevention. Some other mistakes that I see often are people thinking that it’s super expensive to protect their intellectual property so they don’t do it or they don’t think about it. They get busy in their business and their business goes fast, and our business is rocking and rolling, and everything’s grown quickly. A lot of times, I’ll have to go back and rebuild the foundation afterward and it’s a little bit more difficult to do. To not do it early would be a mistake.
What happens when they put a trademark or the patent or something like that in their personal name versus a corporation name? Let’s say there’s a lawsuit that happens. Doesn’t that pierce the corporate veil and go after the personal assets now?
If you don’t do it right, you are correct. If you wanted to own the trademark and license it to the company, you can do that without subjecting yourself to any liability. You need to have a written license agreement between you and the company that says that you’re licensing it to the company. You’re still going to have some liability from the perspective of let’s say, the trademark infringes somebody’s trademark and I’m going to sue the trademark owner. If somebody says, “I want to keep the trademark in my name.” I’m like, “That’s great. That’s what the litigators are going to go after if they have a problem with the trademark.”
It defeats the purpose of having a corporate entity to protect your personal assets.
It’s not the best idea. A holding company is a good idea, but keeping it in your personal name is not a good idea.
What about in a trust? What are your thoughts about that?
I would have the trust to have an LLC. I wouldn’t use the trust as a barrier. I would have the trust of an LLC and the LLC be the holding company, and the holding company licenses it to the operating company. I would only recommend that structure if the operating company is in a field that is more of a risky field. It is not necessary. If you’re not in a risky field, it gets an overly complicated arrangement in many cases. In some cases, it’s a good idea. It depends on what your business model is.
Do you represent specific industries or are you industry-agnostic?
I represent a lot of different industries. The one thing that almost all of my clients have in common is that their assets are heavily intellectual property but in lots of different industries.
I heard you talk at CEO Space about being in a meeting, getting concepts and ideas, and making sure you protect stuff. What exactly were you talking about there? It was like drinking from a firehose when you were talking. Do you know what I’m talking about?
I know what you’re talking about. We were talking about virtual meetings and unusual situations that we have. I’m going to use this as an example. If I were talking to you, and nobody was recording anything, as soon as I spoke the words, they’d be gone in the sense of they’re not fixed in a tangible form so there’s no copyright on them. Because you’re recording this, there is now a copy on this particular podcast and you own it. I didn’t do what I told my clients to do. I didn’t get a written agreement that said that I would own whatever I created during this podcast so it’s yours now.
Virtual meetings are interesting if you’re putting content out there that you care about, in a sense that you don’t want somebody else to own it, what you’re going to want to do is to get a written agreement. An agreement that says, “Let’s be clear that I was a guest on your podcast, but I want to own the content,” if that were the case. I didn’t care here. This content, I’ll recreate it over and over again so I don’t need to own this particular podcast and I’m happy for you to own it. Sometimes people do care about that and if they care about that, they’re going to want to get an agreement.
Give us an example where that would apply if you can.
I don’t know, it depends on the industry.
Everything is virtual now and most of it is being recorded. I don’t think I ever have a call that’s not recorded anymore.
Here’s where it might matter. I don’t make a living speaking on this topic. I speak on this topic to get clients, as business development. I make a living being a lawyer. I probably would care a lot more about ownership of this podcast. I wouldn’t want you having my own content competing against my own content on the internet. If I was selling a podcast that had this content, I would want to have an arrangement with you that said, “You’re not going to take the podcast and compete with me.” That’s not my business model so it doesn’t matter to me, but it might matter to some people.
That might matter to me when I’m giving some trade secrets away on other people’s podcasts.
Don’t give trade secrets away on podcasts. That’s the number one rule.
You were also voted as Technology Lawyer of the Year in 2019. Tell us about that.
That is a peer to peer review and a peer to peer voting system where you have to get nominated by someone else who’s not in your law firm, who’s an attorney, and there’s a voting process. It was a vote. It’s a result of me doing a lot of work for tech companies. A lot of my clients are software developers and tech companies.
Any other tips that you have for our readers on how to protect their intellectual property and not end up with blunders that I like to call them?
You do such a nice job, Michelle, with your questions. I feel like you covered everything. I can’t think of anything we didn’t cover that’s important for your readers to know.
Early on, get advice, seek expert opinion or advice in putting your foundation ahead of time. What were you like as a little girl? Did you always want to be an attorney?
No, I wanted to be a spy. That was my thing for a long time. It’s funny that you asked that question because it was what I thought you were going to say. On my Facebook group, somebody posted about how many of us women when we were young, and we were in school got bad grades and conduct because we didn’t stop talking in the class and I was like that. That was me. The lesson was young ladies who get bad grades and conduct often end up being powerful in business. I’m going to bet Michelle, you probably got bad grades and conduct too.
I did. How did you know that?
You’re a powerful businesswoman now.
I was a unique child. I didn’t play with toys at all. I never played with dolls. I always walked around with a notebook and a pen and asked everybody I came in contact with a million questions.
That’s still what you’re doing.
I thought I was going to be Barbara Walters. When I started working with Tracy to do my podcast, I’m like, “I don’t know, Tracy. I don’t know if I could ask questions.” She goes, “Michelle, trust me, you can ask questions.” That’s what I do with my clients all day long. I ask them questions about their business. How can our readers get ahold of you? How can they find you?
Email address or website, which one’s better?
It’s probably a website.
Our website is JaburgWilk.com. The website is filled with articles and content about lots of subjects but definitely a lot of intellectual property. If you go to the intellectual property section of our website, you’ll find all kinds of articles about some of the topics that we talked about.
You own it?
Not me personally, my firm but that’s okay because I own the firm, so that works.
Any big plans? What’s next for Maria?
Intellectual property is broken down into four categories. Trademarks, copyrights, trade secrets, and patents.
I’ve written a book called Protect Your Writings: A Legal Guide for Authors. I am almost done with the second book in the series, which will be Protect Your Photographs: A Legal Guide for Photographers. My goal is to have about six books in that series that will cover each area or each niche of intellectual property. For architects, for software developers, for musicians, and one for each type of creative work.
We didn’t talk about the book that you wrote, Apple v. Samsung.
That was an ePub. It was an eBook and that was a fascinating lawsuit between Apple and Samsung and all of the IP that we talked about was all covered in that case. There were trademark issues, trade dress issues, patent issues, and copyright issues. There were all kinds of IP covered in that. It was a fascinating case but for me, it brought up the issue of how important is the free market compared to patent rights. We have this tension between as creators of content or creators of brands, we want to be protected in what we create.
The flip side of that is we also want a free market, and we want people to be able to fairly compete and to be able to do their own thing. We don’t want to quash competition. It’s a delicate balance and I can see what that tension is and that line is not always completely clear. In the way that Apple was enforcing its intellectual property rights, the argument was that they were trying to quash the competition. I’m not saying that that’s an accurate argument but it was certainly an argument that was made and I can see the points, but I also could see the importance of Apple having the protection over its intellectual property. We think about Tesla, for instance, he says, “I’m going to create all this stuff, and I’m going to put it out to the world. Elon Musk said, “I’m going to contribute my patents to the world and let everybody use them.” He’s a completely free market guy, as opposed to others that say, “Nope. That’s mine. I created it and I need to keep it.” It’s an interesting debate
How do business owners protect their patents when they go to China to manufacture because China’s been known to rip off patents before?
One thing I would recommend is if you do have a product that is patented here, and if you are manufacturing it in China, or if you plan to manufacture it in China, you should strongly consider getting a patent in China as well. That will give you some extra protection. There was a time when the Chinese government did not do anything to protect intellectual property but they have stepped up their efforts in that regard. It’s because they recognize that it’s hurting their ability to be a leader in manufacturing because people get worried about them having their manufacturing done there.
Registering the patent in China is helpful but most importantly, is due diligence. Is using a company that you know you can trust that you can get, you’ve gotten referrals on and you’ve checked out carefully because there are so many manufacturers in China that are making the extra overruns and selling them on the side. You want to make sure that the one you’re dealing with is not one of those. No matter how good your contract is, your contract is only as good as the person that you’re contracting with. Do your due diligence and check them out as well as you possibly can.
Here’s another tip. Don’t do business with a ghost. I can’t tell you how many times I have had litigation, where the client comes to me and the person that they had the contract with, the entity that they had the contract with, either isn’t a real entity at all. They didn’t check to make sure it was an actual entity or it’s an actual entity, but the entity has no physical address. If they have no physical address, I can’t enforce your contract. I can’t find them. I’m trying to chase a ghost. You want to make sure that when you get the address, your contract should have an address in it and you should check that address to make sure it’s a real address. It’s not a PO Box or a mailbox store, or she had a completely fictitious address. Make sure your contract is with a real entity. I hate to say it but if it’s a foreign entity, that’s even more important to check.
Buyers give us offers on businesses. The first thing we do is Google Map their address, and I can’t even begin to tell you how many times it was a shot. It wasn’t even a business, it was a shot and this happened a couple of times to a multimillion-dollar company. I’m like, “No, I’m not going to tell my client to sign your LOI. Show me a real business. I’d love to get a real phone number too.” Some corporations don’t have phone numbers. I can’t find a phone number or Facebook. You’ve been a wealth of information. Any last thoughts?
No. Thank you for having me. This has been fun. Your questions are fantastic.
Let’s give your website one more time.
Thank you, Maria. It’s been an absolute pleasure. You dropped so many golden nuggets. Thank you so much to all the readers for joining us on another episode of the show.
Thank you, Michelle.