Making It Legal:

Have you ever Googled yourself? (Of course you have.) That’s just what Beverly Stayart did. Curious about what she would find when she checked Yahoo’s search engine, she typed in her name and hit “enter.” What she found upset her greatly. Among the results, she found that her name links to pharmaceutical websites, porn sites and other sites promoting sexual escapades. So she did what any red-blooded American would do: She sued Yahoo.

However, as Evan Brown notes in his Internet Cases blog, Stayart was not successful. First, she asked Yahoo to remove the search results. Yahoo refused. Then she brought her lawsuit, claiming that the results (showing the name “Beverly” or “Bev” Stayart) on the porn and pharma sites implied that she endorsed — which she never did. The District Court sided with Yahoo, and Stayart appealed.

Unfortunately for Stayart, the Seventh Circuit Court of Appeals sided with Yahoo. As Brown points out, they did so for one significant reason: Stayart did not have any “commercial interest” in her name. Although she had written some articles, blog posts and poetry that appeared on the internet — and was involved in charitable causes — this wasn’t enough to be considered “commercial.” In short, Stayart was not using her name in connection with a business.  Nor was her name a registered trademark (like, say, Martha Stewart). Trademark/trade name/false advertising claims are limited to commercial parties.

This leaves an open question: Would the Court have decided the same way if Stayart had had a business that used her name?

For a full text of the decision, click on Stayart v. Yahoo.

Q: The website of my former employer (which is my “competition,” sort of) seems to have a lot of issues, and I know his domain will expire later this year. Just for background, a few years ago he purchased a domain that matched my company name (with a hyphen) and made it a redirect to his own site. Pretty nasty, but I didn’t contact him about it, since I didn’t think this was really pulling any traffic away from my own site.

Anyway, I want to purchase his domain name when it expires. Is there anything I need to watch out for, legally, if I buy his domain and make it redirect to my own website? He can’t sue me for that, can he?

A: Generally, when it comes to ownership of domain names, it’s on a “first come, first served” basis. So if the former employer’s domain name became available and you snapped it up, that could be the end of it if the company is going to go out of business.

However, if the company stays in business and you happen to jump on the domain name before he has a chance to renew it, you could run into difficulty. You could run into an unfair competition claim. In addition, as a former employee, you want to look back at any agreement you may have signed when you left the company to make sure that you don’t run afoul of any “don’t poach my clients” clauses.  If you only want to grab his domain name so that you can do to him what he did to you several years ago, you have to question whether the potential of thousands of dollars in legal fees is worth the $10.87 for the domain name.

Jersey Shore star Nicole “Snooki” Polizzi’s latest wrangling with the U.S. Patent and Trademark Office over her trademark just goes to show ya: Celebrities are ordinary businesspeople, too, and they also run into trouble with their trademarks.  Seems that Polizzi wanted to trademark her nickname, Snooki, but ran into a cat fight.  Literally. 

Here’s the issue: Snooki wanted to trademark her name in connection with her entertainment personality and in connection with books. (Is a bare-all memoir in the works?) The Trademark Office had already, in 2004, cleared a trademark for Snooky the Cat (who, apparently, has all sorts of adventures of his own) in connection with the book, Adventures of Snooky.  As noted on The Smoking Gun, the Trademark Office indicated that there was a “likelihood of confusion” between Snooky and Snooki.  If Snooki insists on using her name in connection with books, she could find herself on the wrong end of this cat fight.

This doesn’t stop Snooki from moving forward on the “entertainment personality” claim, but it does derail her on some of her “expansion” plans.  Which is something Snooki might have uncovered had she done a proper trademark search. For more about what makes for a solid trademark (or service mark), get your free copy of my “Intellectual Property Protection Kit,” available at http://bit.ly/freeintellectualpropkit. 

Too many entrepreneurs jump into the trademark pool with both feet.  They don’t check to see whether they’ll be landing atop someone else’s head . . . in which case all of the money they’ve pumped into logos, websites, text and marketing initiatives may need to be scrapped. They can avoid getting snookered like Snooki, and fully check out that great new mark before they waste the money.

And dat’s The Situation.

Complaining about someone stealing your IP when you sat on your hands is like complaining that someone broke into your house when you left the front door wide open. If you have items at home that you value, you take steps to protect them. You put a lock on your door. You hire an alarm company. You get a Rottweiler, Fang, as a household pet.

The same applies to your intellectual property. If you value it, take steps to protect it. First, though, you need to know what you have.  My article, “Protect Your Intellectual Property,” looks at the top five categories of intellectual property.  Give some thought to what you’ve created for your company. Can it be protected by:

1. Patent
2. Copyright
3. Trademark (or service mark)
4. Trade dress
5. Trade secret?

Many small companies create websites, brochures, articles and other written materials that are strong candidates for copyright protection.  Check out attorney Mark Grossman’s article “Some Copyright Mechanics,” to get familiar with the truths and the myths about how to protect your copyrights.

Q: Just wondering if my kids can sell their Lego creations online? I’m mostly concerned about the “Lego” brand name infringements. That is, if my kids were to make their own original creations using Lego pieces and advertise them on the internet as, oh, I don’t know, “Jake and Joe’s original Lego designs”–and sell the completed creations–without implying their creations are bigger, better and more valuable than Lego’s . . . could they do that?

A: While you can sell Lego creations online (check out this artist who has actually made a “business” out of large-scale Lego creations–http://www.brickartist.com/), you have a number of issues to consider. They include:

• If your children are under the age of 18, in those states, they cannot open bank accounts or enter into business relationships. In other words, the responsibility will fall on your shoulders (or that of another responsible adult).
• If your children used someone else’s creations (or instructions) as a model for the designs they created, there could be an issue with copyright infringement.
• There may be truth-in-advertising laws in your state that govern your description of the designs. If you are going to tout the fact that Lego pieces were used in the construction of the creations, you should divulge whether any non-Lego pieces were used.
• You will also want to be careful about the way you refer to Lego in your description of the creations. It’s one thing to state factually that the creations were made from Lego pieces; it’s quite another to start trading off the Lego name and goodwill by implying that the creations have a greater value, physical strength or quality because of the use of Lego pieces.

There was a case about this kind of issue not too long ago involving the Tiffany jewelry store, which was quite upset that its trademark was used to describe possibly counterfeit merchandise being sold on eBay. The court said “too bad”: As long as consumers are not confused about the source of the goods (in your case, that Lego itself is not selling these creations), and there’s no indication that Lego is endorsing what your kids are creating, you can say (if true) that the creations are original designs made with Lego pieces (or words to that effect). To make sure that you’re in compliance with all appropriate laws, it would be worthwhile consulting with a local intellectual property attorney to make sure that you have all your ducks in a row for these online sales.

For anyone who ever doubted the benefit of confidentiality agreements, the case of Chris Botticella, former Thomas’ English Muffin executive should put the doubts to rest. 

As recently reported in the New York Times, Botticella was one of a small handful of people who knew the entire “nook and cranny” secret.  He signed a confidentiality agreement with the company. Within a year, he gave two weeks’ notice (ostensibly, to retire), but then rumors circulated that he was jumping ship to go to a competitor, Hostess Bakeries.  It was also claimed that, after Botticella confirmed he was going to work for Hostess, he immediately started downloading Thomas’ confidential company information. 

Lawyers for Thomas’ parent company, Grupo Bimbo, acted quickly to prevent him from making the move.  Because the case is tied up in court . . . and presumably because they don’t want to get dragged into the lawsuit, Hostess has said it is no longer holding the job for Mr. Botticella.

For the fuller story, see http://www.nytimes.com/2010/08/07/business/07muffin.html

It’s a good reminder to companies of all sizes of the value of protecting their intellectual property.  Too easily, they let employees and others have access to their proprietary information, only to find out they may have trained their next competitor.  A confidentiality agreement that prevents any misuse of their property can go a long way to keeping their business intact.

A wise tax attorney colleague of mine once said, “Tax deductible does not mean ‘free.’ ” Likewise, fat-free does not mean calorie-free.  And freely viewable (online) does not mean you can freely take it and use it for your own purposes.

This week’s Basic Training query wonders if it’s OK to take images found on a Google Image search. The short answer:  No.  Even if the photo was on a not-for-profit website? Still no. Even if the site is for a good cause (hey, they’re not-for-profts–they don’t care about money, do they? No.  Even if I want to use it in connection with a good cause?  No, no and no.  You may not use that image.  Not without permission.

Just because you find an image online doesn’t mean that the owner is giving up all intellectual property rights to it . . . and the right to determine how the photo is used is a privilege of the owner/creator of the image.  Although there are some exceptions to this rule, you’re on safest ground if you contact the owner, describe the use you plan to make of the photo (website only? Brochures? Slides at a gala event?) and ask for permission (get it in writing!).  The owner may ask for compensation.

If you’d rather not (or can’t) pay, then look for shareware or royalty-free images (although you’ll likely have to pay a nominal fee there, too).  Otherwise, you risk finding yourself on the wrong end of a copyright-infringement lawsuit.

Q: I’m an independent/freelance software developer by profession. Over the past last few months I came up with an innovative idea for a web-based-to-mobile-device business solution.  I’ve tested it and, suffice it to say, it works.  I was contacted by one of the leading global telecommunication giants, who expressed interest in talks that might reveal ‘’synergies in going forward.”  My concerns are:

1. To what legal extent can a business owner/creator/founder maintain control when the business becomes “larger” than the individual?
2. How can I protect my intellectual property?  What would prevent others from developing the same solution in other parts of the world?
3. Given that this would appear to be a global opportunity, what checks and balances can be put in place when developing a strategic partnership?

A: This question came to me from an eager and seemingly successful entrepreneur based in Kenya. (I love questions like this, especially when people want answers for free.)

Let me start by saying that anyone in a position of doing business globally will be best served by having a face-to-face consultation with a local attorney (not one based in another country) who has experience with international transactions.

Now, on to answering the questions:

1.  The extent of control that the owner of the business maintains can depend on a number of factors. An important factor will involve the extent to which the owner needs outside capital in order to more fully develop the product and get it to market. If the owner will be seeking outside capital (and not just a bank loan), the extent of control the owner maintains over the business is an issue of negotiation with equity investors. That can depend on the amount of money invested, the management style of the investor and the extent to which the owner needs to maintain flexibility for bringing on additional investors. If your company will be formed in Nairobi, Kenya, you will be best served by speaking with a local attorney who understands these issues.

2. Generally, patent protection is obtained on a country-by-country basis. There is nothing that can prevent others in other parts of the world from independently developing the same product (obviously, provided that their development of the product does not involve reverse-engineering yours).  Some countries are party to international patent treaties, which is why it’s best to consult with an attorney who’s familiar with this area. The attorney may be able to help determine which countries will provide the most advantageous patent protection.

3. Anytime an entrepreneur enters into negotiations for the marketing and distribution of a prospective product, there is a risk that your negotiating partner might not act ethically and might cut you out of an eventual licensing deal. One of the ways to combat this is with a confidentiality and nondisclosure agreement. In addition, your intellectual property protection strategy–and the extent to which you have begun that process–will play a key role in determining your negotiating leverage.

Q: I have a small business in which I sell bails for jewelry. Another company (of course larger than mine) is claiming I’m infringing when the two items don’t even look alike. What should I do? 

A: For those of us Saturday morning cartoon fiends, this is reminiscent of the Ant and the Aardvark. The aardvark, much larger and tougher, was always trying to eat the little ant. So the ant had to come up with a host of tactics designed to either outsmart the aardvark, or make the aardvark believe that eating the ant would be an unpleasant experience indeed. 

Your task is to make this experience unpleasant for the larger company by not simply capitulating (assuming, of course, you have a good case). To do that, I’d strongly suggest that you consult with an intellectual property (trademark) attorney. They are trained in evaluating claims of infringement and could look at your actual product vs. the “aardvark’s” to point out the areas of dissimilarity. In situations like this, it’s best if your response comes from an attorney–that way, you come across as less vulnerable, and the other side will have to seriously evaluate how much it wants to spend in legal fees to keep the claim going. If you’re on target, and there really is little similarity between your products, a strongly and intelligently worded letter may be all that’s needed to turn them away.

Q: I want to sell goods online. There is a specific product which I can get for a very low price. The problem is that it may be a fake. The name is a well-known name, but I think it is a copy. Can I get in trouble by selling fake goods on the internet?

A: The short answer is “yes,” you can get in trouble selling fake merchandise online.  Making sure that your distribution source is reputable and acting legally (that is, adhering to license agreements from the appropriate source) is an important part of your due diligence as a business owner. Part of the reason you may be able to get the goods for a low price is that the distributor is knocking off the rightful manufacturer and trading on its name. That can put you at risk of being named in a trademark infringement or “dilution” lawsuit. Also, you have to be careful that the knock-off goods are safe to use–you could run into trouble with not just the rightful manufacturer, but with customers as well.  Your smartest move at this point is to speak to an intellectual property lawyer who is also familiar with e-commerce. Do it before you start operations.

This tragic story of insufficient planning is just another example from the Department of Not-Beginning-With-The-End-In-Mind. So many entrepreneurs get all “over the moon” about getting launched and off the ground that they ignore thoughts about their exit strategy. What do they want to get out of the business? How will they exit? Will they sell the business or will they want to bring in investors (as was the case here)? If that’s the case, what might be some of the obstacles to accomplishing that goal?

As Ryan Roberts reports about these “Shark Tank” losers (kudos for Ryan; I spend my spare time watching NCIS), they had intellectual property that was a vital part of the business.  But the owners of the company (and the company itself) didn’t own the IP outright. No IP, no meaningful business. No meaningful business, no investors. Back to the drawing board.