"More often than not, your idea is likely not original. In fact, there's a very high chance that someone is either already monetizing your exact idea or already has earned a patent. To avoid wasting your time and money, conduct thorough research to see if you in fact invented something that doesn't already exist."
"You'll regret it if you rush to get protection for an underdeveloped product. If your idea, concept or invention is at an early stage of development, your protection won't extend to further development that renders your product more useful -- and you'll have to shell out the cash for another round of patents again. Wait for product-market fit, and then file."
"It is important to ensure that your idea is commercially viable and likely to sell before you go through the process of getting a patent. There have been countless numbers of ideas that have failed in the marketplace, leading the creator to spend thousands of dollars and time for no reason. Make sure the idea will be a success before protecting it!"
"Only patent things that have the potential to be easily duplicated and are not likely to change. Patents for things like software aren't worth your time or money because the industry moves fast, and it's likely that your patent will be outdated by the time it's done."
"1. Is my product truly one of a kind? 2. Will I change the design in the next three to five years? 3. Will my product life cycle last more than five years? A patent will cost at least $10,000, so look at the ROI before moving forward, especially if the design or market may change."
"Who doesn't want to be a patent holder? As with many things in legal, you will get more protection the more you spend, which of course will add up. If you're in a land grab and absolutely need to acquire users before competitors do, your time and money are probably better spent on product and marketing. Know your limited resources, and look at the ROI."
"Keep in mind that a provisional patent application can only be filed up to one year following the date of the first sale, offer for sale, public use or publication of the invention. As a result, be strategic when you hit any of those four triggers as the one-year countdown will start ticking as soon as you hit any of them."
"Generally speaking, I feel that intellectual property protection is grossly overrated by entrepreneurs. It tends to be much more distracting and costly than the true value of having a patent. Therefore, unless you are ready to defend your patent with a war chest of money (patent litigation is extremely expensive), I would instead focus on executing your business plan and making customers happy."
I didn’t keep an exact count, but I knew when I’d arrived at my breaking point. The costs and headaches associated with working with firms, which were both disconnected from one another and from the daily operations of my company, were rising. We needed help with matters such as establishing trademarks and drafting and editing partnership contracts (at least four to five per day). Understandably, our legal matters were just one of many to-dos on an outside counsel’s list, which meant that our priority levels and timelines had to be balanced against their other clients’. It seemed clear that an investment in hiring a lawyer in-house would be the most economical and efficient decision.
But before I created an entirely new department, I wanted to check my thinking. My team and I evaluated our legal expectations and gaps and came up with five specific indicators that made the final decision to hire seem like a no-brainer.
If these problems sound familiar to you, then establishing a legal department may be a valuable next step for your business too.
We were dealing with a significant number of contracts, and the amount of time it took to work and return markups from outside counsel was becoming excessive. Efficiency is critical when it comes to finalizing legal agreements with business partners, and any delay put valuable relationships at risk. A general counsel could exponentially speed up our turnarounds — moving from a phone tag process that could take a few hours to a one-minute casual conversation — and keep our promise of great support and service to our partners.
Our employees were putting too much effort into managing legal considerations. It was beginning to detract from their primary responsibilities. We needed someone new to help manage legal operations so that non-legal staff could fully commit to their designated obligations again.
Because we were so busy getting involved in the fine print of our company’s legal matters, it was becoming easier and easier to write off certain precautions as being unnecessary. Spending valuable time and energy planning for speculated risks didn’t seem to be as important as dealing with the palpable concerns of the present. We needed a more integrated method to streamline our risk analysis and avoid careless mistakes.
We did not have a definitive legal strategy that was in line with our overarching goals as a company. This was mainly because we were working with third-party sources, who, despite their expertise, weren’t familiar enough with our business to provide the goal-oriented support we needed. Someone integrated with the day-to-day operations and even the company’s in-office personality would be better equipped to give us the counsel we needed.
We were faced with an incrementally rising cost of legal assistance from a variety of outside counsels. For the amount of money we were spending on legal advice, we could afford a better return on investment and more specialized support by hiring for an internal role. Bottom line: we did the math. Beyond actual monetary costs, the extras we would get from someone in house — tailored advice, speed and operational improvements — added even more to a general counsel’s worth.
Adding a legal department can be a daunting decision when you’ve been getting by with without one for so long, but if you’re experiencing the perfect storm of challenges like we were, an outside counsel may be the perfect way to clear the air.
Several months after our hiring decision, we’ve seen a noted improvement in the challenges we faced. We’ve become more agile, resourceful and efficient due to the hard work and tenacity of our general counsel. Our turnaround times are faster than ever, our plans are proactively vetted for risks, and we have the opportunity to run our ideas (and our lawyer jokes) by an expert who is just a few steps away.
]]>"A patent is only as valuable as the money you are willing to spend to defend it. If someone wants to infringe, they can, and you are on the hook to spend the money to fight them. If they have resources to outlast you, your patent is virtually worthless. It is better to market and corner the core customers first and consider a patent second, rather than doing it the other way around."
"Is my product truly unique? Will I change the design in the next three to five years? Will my product life cycle last more than five years? If the answer is no to any these, think hard before moving forward. The time and monetary cost of filing and receiving a patent can cost you more than it's worth, especially if the design or market may change."
"Do a thorough prior art search to find related or similar inventions. You need to understand what is already patented and how your invention differs. Pay particular attention to the “claims” section of each patent. This explains the bounds of each patent. Reviewing existing patents also will help you understand more about the components of a patent and what you need for your own."
"A provisional patent application provides a chance to refine your patent in the 12 months following the filing date. The process is relatively cheap and quick, and allows you to legally use the term "patent-pending." Once the application is complete, you can conduct more research into a regular patent. It is best to work with a trusted legal team from the start, even in the provisional stage."
"Like any other adventure in life, you have to be prepared. Ask people who have done it what they learned about the process. Conduct interviews with them and be sure to ask what they learned and what mistakes they made in the process, as well as what they would do it again or change next time. Pay for advice if you need to, too."
"This is by far one of the most important rules in filing for a patent. Many people operate on the previous method of being the "first to invent," however that has recently changed to "first to file." The patent will go to whoever files the patent first, so it's important that you get your documentation in order and file quickly."
"Even a solid U.S. patent might not always protect you. Often people forget that patents are territorial and it's imperative to consider which regions and markets you will be working in. You don't always need to secure patents in countries that should not affect you, however if you have the budget and resources, it's something every startup with a unique invention or concept should consider."
"Start the process right away. Acquiring a patent is a long and rigorous process that should not be put off. It is very important to start as soon as you can because there is so much information you will need to supply that it will take you time to gather that information. It is not unusual either to be asked more questions or have to resubmit later when you have more details."
This scenario seems all too common for a busy startup founder. While many universities provide classes on negotiations or sales, often an entrepreneur is left without training on the actual legalities of running a company. I know I felt that way as we got off the ground. But this lack of education can lead to unintentional — and costly –mistakes.
Last year, a former ZocDoc employee sued the company for a culture they believed replicated a college frat house. But why didn’t the employee speak up sooner? Many startups don’t have the right infrastructure to deal with HR infractions and collecting feedback from employees isn’t a priority. Offering employees an open door policy with management and a forum to voice grievances can make all the difference.
Having company policies outlined can prevent confusion and avoid preventable litigation. For instance, as BoardVitals grew, it was important for all members of the team to be on the same page about company policies. In our onboarding guide, we created a central document where employees can learn about sick days, vacation time and company procedures. This sort of guide helps employees get up to speed on company policies and inner workings. From harassment to vacation policies, having pertinent information outlined ensures that both management and staff are on the same page. And in the unfortunate case of workplace malice, an onboarding guide can point everyone in the right direction of where to get help.
Whether you’re conducting an interview or having lunch with a colleague, it’s important to note what constitutes a legitimate question and what’s unacceptable per U.S. law. While many know that it’s illegal to discriminate against age, sex and nationality, it’s not as well-known that it’s also illegal to discriminate against smokers and those who speak English as a second language. You can read up on unintentionally illegal interview questions here.
Each city and state have their own set of labor laws. For instance, each state directs employers exactly when to pay employees. As a company with employees and partners around the U.S., it was crucial for us to ensure compliance right from the beginning. From lunchtime mandates to required medical leave, becoming well-versed in these laws helped keep my business out of trouble with the law, as well as my employees happy.
To avoid paying exorbitant fees and backpay, it’s also important for a founder to get up to speed on payroll withholding for each of their employees. Most states require employers to pay state unemployment, workers compensation, payroll taxes and medicare. The Department of Labor offers a wide range of valuable information on their website. Keep in mind that healthcare mandates kick in at different stages of company growth as well.
Farmers and merchants alike must abide by regulatory statutes applicable to their trades. In the healthcare industry, HIPAA (Health Insurance Portability and Accountability Act) set the precedent for healthcare startups working with secure patient data. Any company now working with protected health information must abide by a set of standards to prevent against fraud and data loss.
As a company in this space, I’ve worked with others struggling with HIPAA compliance. In part, HIPAA is a moving target because you define your policies and procedures, and then implement based on a rubric you’ve developed. It’s not an easy process and can require specific hosting companies and consultants.
In our case, compliance with the ACCME guidelines for offering continuing medical education credits has been a lengthy process. Frequently, we require two independent physicians to audit our content and establish that it’s not influenced by commercial entities.
Whether you’re in healthcare and mandated to provide CME Credits, or in hospitality and need a food handler’s permit, it’s worth looking into your industry’s laws and regulations.
Although you may offer employees three weeks of vacation and health insurance, you might not be giving them their state-mandated benefits. Some of these include sick days, disability insurance and medical leave. Sometimes cities are also involved — we learned that New York City has a form that must be individualized to the employee and sent out. So for us, when a new employee joins we ensure they’re given all New York City-specific paperwork in an initial orientation.
If you have over 50 employees you’re also required to give up to 12 weeks of unpaid, job-protected leave to employees for illnesses and childbirths. For a full overview, I suggest the SBA’s website.
A San Francisco-based cleaning company was recently forced to cease operations after a series of allegations about the manner in which they classified contractors. While many employers can benefit from contractors, it’s important to note the requirements of the arrangement. This can kill your company, as penalties can be several times annual wages depending on the infraction. If you’re unsure about classification, the IRS has established a set of guidelines to help employers learn the difference between contractors and employees.
From initial entity incorporation to managing payroll, a founder is responsible for every aspect of the company — including compliance with all local, state and national laws. While these tips provide a baseline of advice, you may also want to consult a startup lawyer who can help you audit.
]]>"You're presumed to be aware of every federally registered trademark, so if you start using a name and later find out that it was registered to someone else, then, at worst, you could be liable for trademark infringement. Even at best, you could still be forced to shut down your website and change the name/brand of your company. So always conduct a comprehensive trademark search before you commit to a name."
"If you're truly ambitious, don't just settle for a U.S. trademark. Go and register it in the European Union, Australia, etc. to avoid buying from squatters later on."
"Trademarks, patents and copyrights are all different. Each protects a different type of property. Make sure that you understand what a trademark is and isn't and what it does and doesn't protect prior to filing."
"The things brands have trademarked may surprise you. So if you have something you'd like to have legal rights to over the long-term, make an attempt to trademark it. Hiring a lawyer to manage the process is a small cost relative to the potential gains if you successfully acquire those trademarks. "
"So you've come up with an incredibly clever and catchy brand for your new product or service. You've run it by a few people and they say they love it. Great, but how will your target market respond? Can they pronounce it? Can they spell it? Do they get it (if there's anything to get)? In short, does it resonate, stick and work with the people that really matter which are your customers?"
"If you want to claim your right to a trademark, the first thing you should do is start associating your brand with a "TM" symbol. This will put others on notice that you intend to file for a formal registered trademark. Then, file the formal paperwork online through USPTO."
"You should make sure that you are using the term you want to trademark. It’s tough to get a trademark for something you aren’t actively promoting."
"You are making an investment. Strategize to ensure you get a return. Don't just use your trademark on your website and business card. Think creatively about where else you can project your new brand. Letterheads? Sticky notes? Pens or mugs for friends and clients? Get mileage out of your trademark. Don't park it in the garage!"
"You could avoid some upfront costs by first determining whether the aspect of your business is appropriate and necessary for trademarking. By doing a proper search you can see if there is a conflicting trademark or if there could be potential overlap. Depending on your circumstances, talking to a lawyer or using a platform like LegalZoom to file for trademark would be your next best step."
"When looking to trademark, do some research on trends, popular search terms and keywords within your industry. What are some words and phrases that your target market is searching for on a regular basis? You want to make sure that what you are trademarking (domain name, company name, company tagline, etc.) is SEO-friendly and something that will not be buried in search engines."
As a recent Wall Street Journal article points out, when there’s suspected theft, employers must tread carefully, as a wrong move can open you up to serious legal ramifications. For example, the employee could turn around and sue you for defamation of character or unlawful termination. Before you approach the employee, I recommend seeking the legal advice of an attorney that specializes in employment issues. They can provide you with the best advice on how to discuss the theft and protect yourself from a potential lawsuit.
Regardless of the reason an employee may have committed theft, their employment should be immediately terminated. Contact the police, your lawyer and the company’s insurance firm if needed. You must have proof beyond a shadow of a doubt that they did steal from the company. I once had an employee who when asked to see what was in their bag, wouldn’t show it. Our warehouse camera had footage of him stealing.
It’s important that you send a bold message to the rest of your staff that this kind of behavior is not tolerated in any way. Even if employees need financial help, it doesn’t change the law or company rules. Depending on the situation, I file a police report or, if it’s a considerable theft or fraud, begin paperwork for a lawsuit. As unfortunate as it was, I’ve had to do this with two former employees.
In order to ensure that there is as little room for theft in your organization as possible, keep a close eye on financials for anything that doesn’t seem to add up in terms of an increase in office supplies expenses or discrepancies in the revenue. I can never be too busy to not pay attention to whether there are more fingers in the pie than should be.
You should also ensure that employees are well-paid to begin with. Run background checks, and provide an open-door policy for anyone to talk to you before they reach the point of feeling like they have to steal. I want to ensure my staff is happy, and if they aren’t, what can I do to change that for them? This might include helping to cover the cost of therapy or a treatment facility that can turn their life around.
While I do run background checks, a person’s past is not always a reason to stop me from hiring a talented individual. People make mistakes and they deserve another chance. If I do hire someone who has stolen in the past, they are observed just as much as any other employee and have the same result if they do steal from my company.
It’s an awful moment when you realize that someone stole from you, especially if it’s someone you trusted. However, you should deal with it quickly and efficiently so that others see that this is not tolerated. While it rarely happens in most companies, it’s important that everyone knows there are no second chances when it comes to stealing.
]]>As an attorney, I’m familiar with these slip-and-fall cases. While they’re certainly the best-known instances of premises liability, they’re hardly the only ones. As a business owner, your responsibility for others’ injuries is far-reaching, covering everyone from employees to visitors to your next-door neighbor.
I’ve come across too many people who know it’s important to keep their employees and customers safe but aren’t aware of the full extent of their culpability. A better understanding of premises liability can not only reveal ways to improve workplace safety, but it can also help you avoid becoming the next case study for a personal injury ad.
Regardless of whether you rent or own the building your business is located in, you’re responsible for whoever steps inside — from employees and customers to vendors and solicitors. Even trespassers have limited protection under premises liability law.
While your landlord may be sued for negligence in some instances, you will almost always shoulder the primary burden. In fact, most landlords include clauses in rental agreements that require tenants to assume full responsibility when it comes to maintaining the safety of the property. That means that if your landlord is sued, your business is on the hook for the incurred expenses.
Slip-and-fall incidents are just the tip of the iceberg. Many different scenarios fall under the umbrella of premises liability, including a visitor or an employee assaulting another visitor, a piece of equipment or merchandise injuring someone, or hazardous substances running off your property and onto a neighboring property. Basically, if you could have taken steps to prevent an injury or damage from occurring, you’re going to be held accountable by an attorney like myself.
On top of that, if you decide to fight a premises liability suit, your business will be affected in more ways than one. While most commercial general liability insurance policies will cover many of the expenses of a premises liability lawsuit, lawyers’ fees alone can be exorbitantly expensive. And no insurance policy will be able to repair the damage to your business’s reputation.
Unfortunately, accidents will always happen, and lawsuits will always be filed. At a minimum, consider buying a basic commercial general liability insurance policy. For as little as $500, a standard policy will cover up to $1 million. In the long run, it could end up saving you tens of thousands of dollars.
After you get insurance, here are some best practices to prevent most workplace injuries and expensive liability claims:
When it comes to premises liability, the bottom line is this: If it’s your business, it’s your responsibility. Stay alert for potential dangers, and correct problems as soon as they crop up. That will hopefully be enough to keep you out of court.
DISCLOSURE: This material is provided for general and educational purposes only and is not intended to provide legal advice or to avoid penalties that may be imposed by U.S. law. Contact your attorney or other advisor regarding your specific situation.
]]>"You need to research your idea and make sure no one else has done anything like it. Otherwise, if there is 'prior art' as they call it, your patent application is unlikely to succeed. You should thoroughly run searches through sites like Google and Amazon of course, but also through the USPTO."
"It's never a bad idea to consider a patent, but going through the process is expensive and time-consuming. Talk to someone who specializes in your specific area. Technology patents have different requirements than other categories. Do your due diligence, and talk to legal council about filing for patent-pending status while you determine if you need full IP protection around your idea."
"The first step is to make sure your product or technology works. If you apply for a patent and your product doesn’t work, someone could invalidate your claim, and that would invalidate your patent. "
"Patents are sometimes the right path, but definitely not the only path. Spend some time thinking through the best way to turn this idea into a product that people are willing to pay for. If you need to divulge the "secret sauce" to determine if there is commercial appeal, then consider filing a provisional patent that will give you some time to figure things out while limiting cost. Get professional help!"
"I believe patenting ideas early in the game is a waste of time. Ideas need to be developed into products before a patent can protect them. So, your first step is to create a working prototype and then get customers to use the product. Then, make it better based on customer feedback."
"One of the most common questions I get from entrepreneurs that assume they have a unique idea is "should I patent my idea?" My advice is always the same -- most successful businesses aren't successful because they have a patent or because of a great idea. Ideas are a dime a dozen and patents are overrated. Instead, take action and focus on execution. As you demonstrate success, then get defensive."
"Patenting software is a waste of your time and money. Your idea (and eventually product) will change so fast anyways that the patent will cover very little if it is granted. Instead, invest those resources in furthering your product development and sales. Use speed to market and inside knowledge of your market place (see Lean Startup and Lean Development) to gain and keep a competitive edge."
"As long as you reasonably believe that your IP is both valuable and patentable, then you absolutely should consider filing a patent. The USPTO has recently opened up a new "Accelerated Examination" process that can get your final disposition back within 12 months, and usually it comes back much faster. Get quotes from patent lawyers to potentially save money but protect your IP no matter what!"
"Some people like the idea of running a business, others fully commit to it. The latter will be the successful ones, but the level of mental, emotional and physical commitment shouldn't be underestimated. Also, the temptation at the start is to sign everything and deal with it later. Be careful of what personal liabilities are excepted as they can come back to bite even much later on."
"You do have to live on if the company fails, gets sued or the tax man investigates. Be sure you are insulated, informed and insured. Don't leave accounting or contracts to the last minute or to those who don't know how to do them. Be sure that as much as possible is in the company's name, not your own. "
"We all learned that reading something before you sign it is best-practice in Adult Life 101. But how often do you really do that? Spending a little on attorney review now can mitigate the risk of a legal disaster down the line. Attorneys can catch the things that an untrained eye glazes over — like an indemnification clause that could end up with you on the hook for another entity's legal fees."
"You need to be aware of the risk of litigation against your company ruining you if you don't keep corporate and personal assets separate — and I do mean completely separate. Particularly where startups are concerned, businesses are often seen as the alter ego of their founders. Facebook and Mark Zuckerberg are synonymous. That can easily come back to bite you if you aren't careful."
Here are the top five reasons you may want to change your company from a Limited Liability Company to a corporation:
The process for converting from an LLC to a corporation depends on the state in which you originally formed your LLC. Some states (like Calif.) have a fast-track conversion statute that specifically allows for a domestic LLC to convert to a foreign (out of state) corporation. In other states, a conversion may actually require a merger. In both cases, be sure to consult with a tax expert. You want to consider all tax issues prior to drafting your conversion or merger plan.
Disclaimer: This article discusses general legal issues, but it does not constitute legal advice. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction. Bend Law Group PC expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this article.
Tucker Cottingham co-authored.
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