Intellectual property (IP) might be one of the most valuable assets of your company. But if it’s not protected, you can be foregoing a significant advantage in the marketplace.
There are four major IP categories:
- Patents, which protect inventions;
- Copyrights, which protect artistic forms of expression;
- Trademarks, which protect brands; and
- Trade secrets.
Generally, the types of IP small businesses may be interested in protecting are unique to the kind of company and its core competencies. For example, businesses that are predicated on developing new products or technology will be interested in patent protection, while another business may be identified by its brands and would want to protect those through trademarks.
However, John P. Cornely, of counsel at Fay Sharpe, LLP, says it’s important to take a close look at everything — from catalog photographs to manufacturing processes — to ensure the security of all of your IP.
Smart Business spoke with Cornely about successful strategies to identify and protect IP.
How does a small business identify and track its IP?
In a small business, to some extent, you have IP being created by many people in your organization at many points in the workflow cycle. You want to be systematic about identifying your IP. When it comes to patents, consider using an invention disclosure form. These forms can be made available to employees, especially those involved in the invention creation process, and are used to collect the data necessary for completing a patent application — inventor’s names, the date the invention was created, a description and/or drawings of the invention and the location of records that support the invention, such as a hard drive or lab notebook.
Encourage your inventors to use the forms and have regular sessions to review inventions and the potential for protection. Regular review meetings can also assist in identifying and/or ranking the relative importance of multiple inventions.
This form system can be used with other types of IP to identify creations and have a way to systematically collect information about them.
What are important inventions to protect?
It’s most important to protect those that make a product stand out in the market. As a small business, maybe you don’t have the resources to file 100 patent applications and might only be able to do a couple each year, so it’s critical to identify where to best apply your resources. Find the aspects of your products that make them more valuable and desirable in the marketplace. Think of it in terms of what features of your products your competitors would like to copy and select strategic patent protections that will keep your competitors from doing so.
Should companies federally register their trademark?
Yes. There are procedural benefits to registering your trademarks that will help in potential infringement actions.
When you start using a trademark in commerce you naturally gain common-law rights whether you’ve registered the mark with the federal government or not. However, one of the problems is those common-law rights are limited to the geographic area in which you’re doing business. So if you’re selling a product in Cleveland, Ohio, under a specific mark, you only have common-law rights in Cleveland. A federal trademark registration extends your rights nationally. Further, federal registration of your trademark provides you with procedural benefits if there’s an infringement action.
And, much like patents, you want to register those marks and brands that are most important to you if your resources are limited.
What can a company keep as a trade secret?
Sometimes there may be an idea that’s not a good fit for patenting or that you don’t want to disclose, for example, like a process of manufacturing a product. Trade secrets are great tools for protecting some ideas because, theoretically, the protection can last forever while patents commonly expire after 20 years. However, the secret generally has to be something no one else can easily discover, for example through reverse engineering; you have to treat it cautiously and control its dissemination. Many small businesses may think they have trade secrets, but since they are not effectively treating them as such that information won’t enjoy the legal status of trade secret, which has certain advantages.
Some things are easy to keep secret, such as formulas and manufacturing processes, because only a few people have or can discover that information. If the information can be discovered from viewing or reverse engineering your product, you won’t be able to keep that a secret. One risk is that if your secret is discovered legitimately then you’ve lost your trade secret status, but if someone were to uncover your trade secret through theft or breach of contract, then you have a case.
How does a small business secure rights to the company’s IP from its employees and contractors?
While this is important, it’s also often overlooked. You want to have some language in your employee or contractor agreements that details ownership of any IP rights. Contrary to what some might think, it’s not always the small business that owns the rights to IP developed by contractors. For example, when hiring a contract photographer to take pictures for your website, the copyright for the work (i.e., the photographs) stays with the photographer unless you have a written agreement that says otherwise. That also extends to contract programmers who can retain the copyright for developed software absent a sufficient written contract to the contrary.
In general, it’s a good rule to have your agreements explicitly spell out IP ownership rights in writing up front.
John P. Cornely is of counsel at Fay Sharpe, LLP. Reach him at (216) 363-9000 or email@example.com.
Insights Legal Affairs is brought to you by Fay Sharpe, LLP
At the end of the year, a couple of tax provisions are expiring that have been a great benefit to those who own real estate. First, the 15 percent capital gains tax rate will return to where it was before 2003, to 20 percent. The historically low capital gains tax rate allowed many to sell their properties with a significantly reduced tax obligation. Second, bonus depreciation has made it possible for property owners to write off as much as 100 percent of the cost of machinery, equipment, vehicles, furniture and other qualifying property. This method of depreciation allows the business owner to record lower incomes, and therefore pay less in taxes.
While these tax features will come to an end, Terry Coyne, SIOR, CCIM, an executive vice president with Newmark Grubb Knight Frank, formerly Grubb & Ellis, says there are still solutions that will allow property owners to defer expenses.
Smart Business spoke with Coyne about the changes and what to do if you can’t take advantage of them before they expire.
What real estate tax strategies should business owners take advantage of in the short term?
The capital gains tax rate is scheduled to go up on Jan. 1 from the current, historically low rate of 15 percent to 20 percent because the Tax Relief, Unemployment Insurance Reauthorization, and Jobs Creation Act that extended the Bush-era tax cuts until the end of this year will expire. In addition, the Patient Protection and Affordable Care Act, in 2013, will impose a new 3.8 percent tax on certain investment income for households that make more than $200,000 for singles and $250,000 for married couples, which includes real estate transactions. So the net effect of these two tax increases could result in a 23.8 percent tax rate for high earners.
When capital gains rates are raised, those still wanting to unload an investment property should consider a 1031 like-kind exchange. These real estate transactions have actually become less popular in the past couple of years because the capital gains rate has been so low, and building owners are trying to sell by year-end to take advantage of the rates.
This tax-deferred exchange involves selling one qualified property for another within a specific time frame. For example, you can sell a property and take up to 45 days to identify three qualified properties for the exchange. You’ll then have 180 days to close. To do a 1031 exchange, you need to work through a qualified entity, so make sure you’re dealing with someone reputable because if they’re wrong and it blows up, you’ll be stuck with the tax.
Next year, many owners will go from paying the capital gains rate to transacting through a 1031 exchange to avoid paying the taxes on those sales altogether. So, if you can, try to close your transactions this year, and if not, expect to pay more next year if you don’t use a 1031 exchange.
What real estate tax strategies exist for those who own and occupy their building?
For those who own their buildings, the biggest impact could be the potential change to bonus depreciation, which has been around for the past couple of years and was extended by the American Recovery and Re-Investment Act.
Typically, in real estate, you spend money and capitalize it. So, if you put a new roof on your building, you look at the cost of the roof and how long it takes to depreciate it, let’s say over the course of 20 years. Recently, bonus depreciation has allowed you to expense as much as 100 percent of an investment in qualified business properties. The bonus depreciation will likely go away, though it’s not clear when. Going back to standard methods of depreciation is a big deal because it ends a program that provided an immediate tax benefit. Bonus depreciation has had a positive impact on the real estate industry because builders will spend more on improvements or spend on speculation because they’re trading dollars — rather than paying taxes, you’re spending that money on real estate.
You’re well advised to pay close attention to depreciation. The question remains whether it will go back to normal right away or if it will be phased out. If it is phased out, take advantage of it soon because it will never be 100 percent again. Bonus depreciation absolutely creates jobs in the short term because it encourages people to spend money.
What if I miss out on bonus depreciation? Are there other strategies a business owner can use to defer expenses?
It’s a good idea to cost segregate your building, using the expertise of a professional such as an accountant and an engineer, so you can depreciate the components of your property over the life of each component’s expected use and not over 39.5 years, which is a typical depreciation cycle for a building. More sophisticated business owners are segregating their costs and depreciating everything they can because it gives great tax benefits for those who are unable to do bonus depreciation.
The Internal Revenue Service allows you to depreciate a building, not the land, over 39.5 years, so that every year you get a benefit on your taxes, which is a noncash loss. But the code also allows you to cost segregate all of your different costs. For example, the roof is segregated from the parking lot, which is segregated from the HVAC, etc., on a schedule that outlines the ‘life,’ or schedule of depreciation, of the different components of your building. It’s a way to reduce your current income tax obligations.
Terry Coyne, SIOR, CCIM, is an executive vice president with Newmark Grubb Knight Frank, formerly Grubb & Ellis. Reach him at (216) 453-3001 or firstname.lastname@example.org.
The costs of litigation can quickly escalate, especially if you’re facing a motivated and well-funded plaintiff who seems intent on aggressively pursuing litigation. Dealing with litigation can create a big burden upon management to respond, collect documents and be available to give a deposition, testimony or consultation.
“If you have experience with lawsuits, then you understand the cost and time pressures associated with them,” says Stephen L. Ram, Attorney with Stradling Yocca Carlson & Rauth. “That’s why attempting to come to a resolution with the other party ahead of reaching the courts makes sense for both parties.”
Smart Business spoke with Ram about resolving disputes without litigation and the legal protections that exist around conversations undertaken to come to an agreement outside the courts.
What are kinds of disputes do companies become aware of before a lawsuit is filed?
There are a number of common disputes that can come from vendors, contractors and shareholders that stem from some dissatisfaction with your business relationship. Most often, a company is made aware of them through a demand letter sent from counsel, or, as with many vendor disputes, a sales representative will be aware that some looming frustration is becoming more than a trifle and should be a concern for the company.
How do you approach a solution when one or both parties are emotionally charged?
It’s common to have a powerful initial emotional response to a dispute when it arises, particularly when a party makes substantial or possibly outlandish monetary demands. Understand that emotional reactions are natural, but consider what is best for the company and its shareholders and find a suitable resolution. Recognize that the other side has different pressures and emotions to which it’s reacting. Step back and be dispassionate and objective because a measured, discerning approach makes it easier for you to facilitate a resolution. Also consider the applicability of any insurance coverage and notify the broker or carrier after receiving a demand.
What needs to be considered when unequal information is causing or adding to the dispute?
Disputes generally arise because one party speculates the other has done them wrong or has done something suspicious. While there may be a grain of truth to the gripe, the other party’s speculation is usually accompanied by a lack of information or a misunderstanding regarding what actually transpired. Naturally, you will undertake your own formal or informal investigation into the basis for the dispute. There is an opportunity before this dispute boils over into a lawsuit to be open to what the other side needs and wants from you, and you can consider your willingness to share information from your own internal inquiry. Being open to this type of dialogue makes it easier to work toward a resolution.
When should a representative begin talking with the other side?
The decision of when or how to open a dialogue is unique to each situation. Most times, the initial dialogue should be between counsel to ensure confidentiality protections and avoid a blindsided attack. The first step is to gauge and engage the other party, which involves acknowledging the other party’s monetary or other demands. However, you also need to be clear that you do not intend to cave to those demands to manage their expectations, but state your willingness to work with them to reach a fair resolution.
Next, establish parameters for future dialogue. If the other side is requesting information or you would like to voluntarily provide information to correct misunderstandings, legal counsel can assist in determining what documents to provide, what level of detail to share, or perhaps to make a company employee available to tell the story of what happened or answer questions.
If you are going to make a member of management or another company employee available, the third step is preparation. Preparation involves understanding the parameters for the dialogue, understanding of the relevant facts and your story, and that person’s ability to bring back conversations that go astray, or refrain from going beyond the scope of the conversation. This conversation can be as simple as a phone call or as structured as mediation.
Are you putting yourself at risk by engaging in this type of dialogue?
There are legal protections for communications that are undertaken for the purpose of reaching a settlement of a dispute. These protections, available under state and federal law, dictate that what you say during these resolution conversations is not admissible in court to prove liability. This means you can share information that might legally amount to admitting to a breach of a contract, for example, in an effort to reach a compromise.
To invoke the protections of these statutes, you just need to tell the other side you are having the conversation in order to resolve the dispute. But for added protection, talk with outside counsel about what you’re planning, that you’re serious about reaching a resolution, and ask for a confidentiality or nondisclosure agreement. Convince the other side to put this protected dialogue in place, as well. The confidentiality under these statutes and a binding agreement offer comfort to both parties and help facilitate conversations. Still, there may be situations where it’s not advisable to share or only share limited information.
If a resolution cannot be reached, how should you proceed with management of a lawsuit?
Keep an open dialogue and don’t entrench yourself in an emotional reaction or overly rigid position. Allow the other side to see that you’re serious about defending or prosecuting, but hopefully cooler heads can prevail and a resolution is reached, especially if there is an ongoing relationship. An early resolution is usually far less costly and disruptive than one reached after protracted litigation.
Stephen L. Ram is an Attorney with Stradling Yocca Carlson & Rauth. Reach him at (949) 725-4102 or email@example.com.
In the past 20 years, companies have been generating an increasing amount of data. A company’s database used to be filled with the traditional information necessary for conducting business, such as product sales or demographic information. However, the growth of social media has created a massive pool of information that any company can access, mine and benefit from.
“Utilizing big data can help a company uncover the relationships it has with consumers and businesses that perhaps it didn’t previously realize it had,” says Pervez Delawalla, president and CEO of Net2EZ. “In many ways, that data can help a company gain a better understanding of its clients’ needs and formulate its products to win more business.”
Smart Business spoke with Delawalla about big data and how to effectively store and utilize it to the benefit of your business.
Where can companies find big data, and how can they use it?
With the advent and proliferation of social media, there is information that companies can collect called ‘big data,’ which can be used to analyze, in a cost-effective and time-efficient way, the social habits of consumers. This information allows them to devise targeted marketing campaigns and develop products.
Data about consumers is being collected from social media outlets such as Facebook and Twitter, data about businesses can be collected from sources such as LinkedIn in and Foursquare, and there is data contained in emails coming into a company. This data had previously not been considered a useful source of mining but has now become fair game.
Do all companies have access to big data?
In today’s world, any company that uses computers has a big data resource or is collecting it without realizing it. For example, most salespeople have a contact database that includes people they’ve met through work, in their personal lives and through networking. If you are going to meet with the CFO of a potential client company and you learn that someone on your sales team knows that CFO, that is an invaluable personal connection. Knowing about that relationship allows you to bring the person to the meeting and quickly establish a connection with the prospective client.
Even small companies selling few products are gleaning this information and benefiting from it. Customer information can be pulled from social media and email campaigns and used to promote your business to those customers. Big data is viable for companies of all sizes.
What challenges are associated with having big data?
Storing big data was traditionally cost prohibitive, which is why only large companies could do it. The McKinsey Global Institute estimates that the volume of data growth in the U.S. for big companies will increase 40 percent year over year from 2009 until 2020. When you look at the amount of data being generated and the growth of that data, the cost of maintaining it had been the biggest hurdle for smaller companies.
However, solutions such as new, lower-cost hardware have recently hit the market, which has given smaller companies the ability to have large sets of storage devices to store big data. At the same time, cloud computing allows a company to rent storage on a monthly or short-term basis, meaning more companies can collect, store and mine big data.
Indexing this data so that it can be used to benefit the company is a challenge, but there are plenty of tools available from major software manufacturers that can be used to mine it.
What methods are available to companies to help store this data?
Big data can be stored privately or on servers that host multiple clients. Which option a company chooses depends on how important it is to keep that information secure. If a hospital were storing patient data, it would want it hosted on a private server.
Private cloud services give companies a certain amount of secure storage on a server that only belongs to them. The type of data being stored determines which tools are applied to extract it, such as a dashboard through which a company can query or search its data. There are also data feeds that provide ticker updates as data comes in, giving fast access to information.
Public cloud services are available, but these are less secure than private services. Public storage is more suitable for things such as marketing campaigns, in which the data being used is critical only for a short time and has no real value proposition for anyone other than the company.
How can companies efficiently navigate such large data sets to get the most use out of the information being retained?
It takes some time to understand which data is going to be useful and to learn which tools are available to store and sort it. For example, you could buy and deploy big data-mining tools to start collecting various sets of data from multiple sources, then create a dashboard that puts that information at your fingertips. However, you can’t simply keep storing information and expect results. You need to better understand your company’s demographics and understand what is going to help your company grow. You have to know your end result and employ the tools necessary to achieve it.
Many companies don’t realize what they have beyond their traditional database. Big data may be beyond the scope of traditional customer relationship management tools and that is sometimes where the treasure trove of data exists. Accessing that data will open a world of opportunities for your business.
Pervez Delawalla is president and CEO of Net2EZ. Reach him at (310) 426-6700 or firstname.lastname@example.org.
An employee’s commute to and from work can be costly in terms of money spent on gas, insurance, and wear and tear on a vehicle, and the increased stress it brings. However, there are programs available that companies can support that will help alleviate employee stress, reduce absenteeism, save employees money and improve productivity.
“One of the benefits of a commuter program is that it provides a less-stressful commute to and from work,” says Tim Dilsaver, Pace Suburban Bus’ community affairs representative for Lake County, Ill. “It leads to a better parking situation, with companies often providing preferential parking to commuters; fewer cars in your office parking lot; and commuters getting a break on their personal car insurance because they’re not using their primary vehicle to get to and from work.”
Smart Business spoke with Dilsaver about commuter programs and the benefits they bring to both employees and companies.
How does a commuter program get organized at a company?
There are several types of commuter programs that people use. A couple of examples include public transportation and an informal employee carpool. But there are also commercial programs that can benefit both passengers and companies alike. One program, operated by Pace, uses vans that pick up passengers at existing bus and train stations and also can pick up people from their homes or at other predetermined locations.
Similar to an employee-organized carpool, this ride-sharing program utilizes vans that pick up groups of up to 13 people along a route and transport them to and from work. The vehicle is provided, as is the maintenance, gas, insurance, van washes and tolls.
Participants can choose their routes and select their pickup times. Furthermore, this program offers a Guaranteed Ride Home program in the event that a participant has to leave work early for, say, a family emergency. The cost of a taxi is reimbursed up to a certain amount when situations prevent a rider from being able to use the vanpool.
How do employees benefit from a commuter program?
Employees benefit by saving thousands on commuting expenses during the course of a year. They also benefit from having less stressful commutes. They don’t have to deal with the drudgery of a morning drive. Instead, while someone else is driving, they can sleep, prepare for the workday, talk with the other commuters or just watch the world go by. Employees also save because they’re putting less wear and tear on their personal vehicles and refueling less often.
How do companies benefit from commuter programs?
Companies benefit from commuter programs by having employees who arrive at work less stressed. It’s also a great way for those who don’t have reliable transportation to have an affordable and reliable way to get to work, which ultimately improves attendance and employee retention. Companies can provide premium spaces for vanpools and carpools and free up spaces in the company lot because the vans can hold as many as 13 passengers, which opens up additional parking.
They often appoint a transportation coordinator who oversees the program, enrolls employees in the pretax payroll deduction program, and chooses pickup and drop-off locations at the place of business.
A commuter program also can provide businesses with matching grants that can be used to set up a program. For example, with one program in Chicago and the collar counties of northern Illinois, the company puts up $2,000 that’s matched by the provider.
It can be used for a range of things, including signage that designates commuter program parking and to support raffles for items such as bikes to promote green transportation. It’s a great way for a company to support environmentally friendly alternatives to driving.
What are the common responses from companies and employees using such commuter programs?
Companies that participate in commuter programs are excited by the results. These programs start with one vehicle, and then word of mouth spreads quickly and companies soon have as many as 10 commuter vehicles bringing employees to and from work for all shifts, day and night.
Human resources personnel who promote the program say their employees really enjoy it. The HR representatives put sign-up sheets on the Internet to allow people to sign up and fill open spaces, which are quickly taken.
Employees say they save money compared to what they would spend driving their own car because the fees associated with the commuter program don’t come close to what they spend driving alone to and from work. They also skip the drudgery of daily drives and the traffic jams, and many employees say they would never go back to the daily drive.
Are there any environmental benefits companies can promote that are related to providing commuter programs to employees?
Commuter programs allow companies and employees a chance to reduce their carbon footprint by having fewer cars drive to and from the workplace. Less gas is consumed, traffic is reduced and many issues with crowded parking are resolved. Some companies have multiple vehicles running in the program, which means significantly fewer cars are traveling to the facility.
Tim Dilsaver is the community affairs representative for Lake County, Ill., at Pace Suburban Bus. Reach him at (847) 228-4282 or email@example.com.
More information on Pace’s RideShare program is available at www.PaceRideShare.com.
Insights Transportation is brought to you by Pace Suburban Bus
There are many pressures on organizations to make the most out of every customer interaction and maximize the return on investment on marketing and sales spend. However, businesses often don’t have the work force necessary to handle these functions as timely and effectively as they would like or the tools and processes in place to measure and track success. Companies that are able to track interaction, engagement, investments and customer patterns and behaviors often enlist the help of a customer relationship management (CRM) tool.
“A CRM tool helps businesses manage sales, marketing and customer service operations without significantly expanding their work force,” says Gina Rosen, a consultant at Columbus. “CRM, in the past, may have been nice to have — a luxury technology, but in today’s marketplace, it’s a must have to stay competitive.”
Smart Business spoke with Rosen about CRM, its applications and how it has helped businesses improve processes to better engage customers, target sales and gauge marketing effectiveness.
What are the typical features offered by a CRM system?
The features offered by CRM are very diverse. It’s primary applications are contact management; marketing automation; sales force automation; sales and lead management; reporting and analytics; call center and case management, particularly with respect to customer inquiries or complaints; workflow automation, or automating manual processes; and social media integrations. Businesses have the option for on-premise solutions where the software is hosted at the business on its servers, or they can utilize a Web-based or cloud option, which involves less initial financial investment. The software can also be customized to meet the particular needs of a business.
Is CRM cost prohibitive for businesses?
No it is not, however, had this question been asked six or seven years ago the answer would have been yes. Previously, enterprise-ready CRM software required significant funds to get the software and hardware in place. But with the advent of cloud-based solutions, even businesses run by a sole proprietor can afford CRM and leverage its applications to optimize processes. The cloud-based model allows business owners to pay through subscriptions that charge per user. The pay per user cloud-based model offers a low-cost opportunity to implement CRM, experience the value and see the return on investment (ROI).
What are the most compelling reasons an organization would implement CRM technology?
A recent survey of 200 top-performing small and medium-sized businesses showed that the number one reason businesses implement CRM software is to establish data-based metrics for sales and marketing. It also provides the ability to show ROI and quantitative key marketing metrics that mean a lot to businesses.
The second reason CRM is implemented is to proactively communicate with customers. Customers expect a lot these days, and one of those expectations is that businesses, whether small or large, interact with them. To stay in front of your customers and offer personal interaction is critical.
Within that same vein, the third reason companies take advantage of this software is for custom-targeted sales and marketing. With CRM you can customize that end user experience, which makes your sales force more effective. Customers can interact directly with your CRM custom solution through your existing website and experience a tailored visit based on previous interactions, or your sales force can utilize the standard feature when interacting with customers and have all of a customer’s history available in one spot.
What are the most important value drivers for CRM?
The top value for a business is the software’s ability to help manage marketing and sales campaigns. CRM can help businesses test marketing and distribution strategies and gauge customer reactions. This information can be applied to future marketing efforts.
Another important value driver is that the software serves as a customer data repository, allowing you to consolidate customer knowledge within the organization in CRM. This includes far more than just contact details, but also customer behaviors and attitudes and price sensitivity. This, combined with personal data, can allow businesses to build more effective and predictive sales models and marketing campaigns that result in higher sales.
Further, CRM systems can help demonstrate ROI. With CRM you can quantitatively show increases in sales, customer referrals and participation in promotions.
What is the most common challenge a business faces when implementing CRM?
Typically the challenge is user adoption — getting your sales force and front line users to embrace CRM. They often see populating the fields as double entry, an extra step, or another way for management to check in on them. But once the sales force sees that using the software results in more sales, they can easily overcome that hurdle.
What are the most common performance metrics?
The top one, hands down, is revenue growth. The faster you can show ROI the better.
Second is growth in a business’s customer base, which means adding new customers or converting leads into paying customers.
The third most common performance metric is aggregating customer data. Many companies have customer data spread out over disparate systems. CRM gives businesses a one-stop shop for their records.
Can you give us some examples of companies that have benefited from implementing CRM?
The Toledo Mud Hens baseball team, which works within the media and entertainment industry, had ticket sales go up 88 percent in one year and their internal operations couldn’t keep up with demand. Adopting CRM allowed them to automate and streamline inefficient processes, which translated into more ticket sales. A customer testimonial is available with more information.
Another example is the human resources consulting firm Findley Davies. Implementing CRM in their call center has given them the ability to manage daily responsibilities and track productivity. It has dramatically changed and improved day-to-day operations within their Benefits Administration department.
Gina Rosen is a consultant at Columbus. Contact her at (248) 850-2195 or firstname.lastname@example.org.
With more than 20 years in the market and 6,000 successful business implementations, Columbus is a preferred Microsoft Dynamics business partner for ambitious companies. Columbus’ key deliverables include flexible and future-safe ERP, CRM, BI and related business applications that deliver competitive advantage and immediate impact.
While it may be tempting to snag an image from the Web and use it on your company website, that image is protected under copyright law and using it without permission could lead to significant losses.
“Copyright infringement is essentially a ‘strict liability’ offense,” says John Zanghi, a partner at Fay Sharpe. “In other words, if you infringe on a copyright owner’s exclusive rights you can be found liable for copyright infringement, even if you had no knowledge that an infringement occurred or did not make any money using the photograph.”
Smart Business spoke with Zanghi about copyright law and five strategies to protect your company from infringement.
Who is the owner of a photograph and what rights do they have?
The owner of a photograph is the creator of the work, which is generally the photographer. There are situations where an employer owns the photograph, for example, through a work-for-hire situation, or when the owner of the work transfers the rights to another via a written assignment.
Generally, however, an independent contractor or freelancer owns the work they produce. Being the owner means having exclusive rights to the work, such as the exclusive right to display it, prepare derivative works or modifications based on the original copyrighted work, and the right to distribute copies to the public through any means.
What is fair use of a photograph?
Fair use is an exception to copyright law that allows the use of a photograph without express authorization from the owner. Generally, fair use is limited to various specific purposes, such as criticism, teaching, scholarship, research, comment and news reporting.
Courts look at the purpose and character of the use to determine if an act truly constitutes fair use. Other factors are the nature of the copyrighted work, the amount and substantiality of the portion used in relation to the work as a whole, and the effect of the use upon the potential market or value of the copyrighted work.
If a photograph is posted on the Internet, is it open to public use unless clearly marked as copyrighted?
A copyright owner doesn’t have to provide notice to preserve copyright protection because it’s protected through public display. A photographer could expressly state that a photograph is in the public domain, but it’s safer to assume it’s not and that the copyright owner needs to be contacted to use the photograph. Even if you’re trying to minimize your exposure by citing the source, you could still infringe the copyright in the photograph.
If I’m not the person posting the image to the website, am I still infringing on the copyright?
The company may be liable regardless of who posts the image. The company may try to say it wasn’t aware the Web designer was using a copyrighted image, but if the company had control over the Web designer, it could be vicariously liable for the infringement. Most likely both parties could be held liable. Ignorance is not an excuse for copyright infringement.
Do I have to make money from using the photographs to infringe?
No. Copyright infringement is a strict liability offense. However, the amount of money you made on a protected image could factor into damages for the infringement and could affect the extent to which the copyright owner is entitled to statutory damages. Those can range from $750 to $150,000 for willful infringement, presuming the copyright owner has timely registered the copyright. But even if they didn’t have a timely registration, the owner could still seek actual damages for the profits obtained by the copyright infringer.
What strategies should business owners keep in mind regarding photographs?
- When hiring a photographer, have a contract outlining the scope of use of the photographs including when and how you may use them. To take ownership of and any or all of the copyright owner’s exclusive rights in the photographs, ask for an express, written transfer of the rights from the photographer. It’s always best to get your rights on paper and up front.
- When posting images to your website, make it clear to the Web developers that they must secure the rights and proper licenses to any image they use. Advise them not to just lift photographs from the Web without receiving permission from the owners. An infringement could lead to a cease and desist order that causes you to pull the images you’ve used from your site or from other materials and subject you to possible damages. To avoid this, you could hire your own photographer to take the photographs, which allows you to control the content.
- In the event that you do produce your own photographs and you do own the exclusive rights in such photographs, you may want to protect them further with copyright registration. There are different rules of how to submit photographs or collections of photographs, so ask your Intellectual Property attorney about the best procedure. But generally, because of the timeliness required for registration and the advantages of getting protection, it’s something to consider right away. You may also consider embedding a copyright notice in the digital image metadata.
- When using images from the Web, assume they are not in the public domain unless there is an express statement to that effect. Just because they’re on the Web doesn’t mean they’re free. Assume there is a copyright owner because you could be liable.
- It’s always better to obtain and define your rights before a problem develops, so get contracts when working with contractors. Generally, legal issues develop because someone didn’t imagine there would be a problem and he or she moves forward with a handshake agreement. Then when someone finds there’s more value in a photograph than he or she initially thought, disputes arise. So define the agreement up front, and establish what you’ll pay and what you’ll get back in return.
John Zanghi is a partner at Fay Sharpe. Reach him at (216) 363-9000 or email@example.com.
Insights Legal Affairs is brought to you by Fay Sharpe LLP
“This year’s election is critical to the future success of our country,” says Albert D. Melchiorre, president of MelCap Partners, LLC. “The selection of the next president of the U.S. should be based on experience, track record and shared values. So too should it be with the selection of your M&A adviser.”
He says much like each election is pivotal to the country’s progress, selling your business will have grand implications on the rest of your life, so it’s wise to put the transaction in the hands of an expert.
“It’s a very involved process with many risks,” he says of the merger and acquisition process. “Making a mistake could result in a bad transaction, which is why it’s important to find help.”
Smart Business spoke with Melchiorre about the role of an M&A adviser and what qualifications to look for when
What is an M&A adviser, and what is his or her role in merger and acquisition transactions?
An M&A adviser is a financial adviser who has experience in completing merger and acquisition transactions. The role of this adviser is to represent the interests of the business owner in achieving their goals and objectives through either a merger or acquisition transaction. This adviser also quarterbacks the deal team, which typically includes attorneys, accountants and other advisers who help to successfully compete a transaction.
What does the resume of a qualified M&A adviser contain?
An experienced adviser should have a relevant and proven track record of successfully completing transactions in your field of business. They should also have an applicable education, as well as the proper financial securities license to complete the transaction. Additionally, look for an adviser who has the relevant industry experience necessary to understand the nuances of your industry.
There are a few ways to qualify potential advisers. One way is through a referral from the seller’s trusted advisers. Many M&A advisers are fairly transparent in their experiences, so you can conduct an initial screening by visiting their website to see the number of deals they’ve completed. Also look to see if they have experience in the industry in which you do business and that they have qualified personnel at the firm.
While you’re really hiring a firm, it’s equally important to choose the right individual. You can have a firm with a well-known name that has been through many deals, but you still need to know that each individual within the team is qualified to handle your transaction. You don’t want an inexperienced adviser on your deal.
How does a company decide whether an M&A adviser will help facilitate its sale?
In a sale transaction, one role of an M&A adviser is to help business owners achieve their goals and objectives, but also to maximize the value of their business. An experienced adviser can bring the appropriate parties to the table and create a competitive environment where that can take place.
There are many aspects to completing an M&A transaction. Having an adviser who can expect the unexpected will help you navigate through the land mines associated with completing the deal. This will likely be the most significant liquidity event you’ll ever face, and your adviser should treat it as such. Business owners in the middle market will only sell their company once, so it’s important that they’re hiring an experienced adviser who has a record of facilitating and closing transactions.
What are the risks of negotiating an M&A transaction without an adviser?
You should have an experienced deal team to ensure you’re not being taken advantage of through the terms and conditions of the deal. They can also help maximize the value of the transaction, while lessening the risk of not getting a transaction done.
It’s a very time consuming process that involves highly confidential information. As a deal is pursued, there is the risk that customers and employees could find out about the sale too soon, or a buyer could be brought to the table who is not serious, which is a concern when you’re talking to a competitor. An experienced adviser can make sure confidential information is properly disclosed and facilitate its secure transfer.
When do you bring in an adviser?
Bring in your M&A adviser at the forefront, before you even embark on the process. You need to make sure you’ve taken the steps necessary to prepare yourself for an appropriate sale and get a sense of whether your goals and objectives are achievable in the current market. Right now may not be the time to sell your business, but there may be some steps you can take to make a future sale both successful and efficient. A qualified adviser can present you with the best options and advice to achieve your goals.
On the buy side, an M&A adviser can help by assessing the value of the company you’re considering to ensure the offer is competitive. Your adviser can help you determine how you’re going to finance the acquisition and can also assist you with your due diligence as the process is closing.
An M&A adviser can make the initial contact with the company you’re interested in acquiring to gauge its interest. He or she can be there earlier in the process to help determine and develop your acquisition criteria, and use it as a basis for the search process by identifying companies through other intermediaries that may have companies for sale. Your adviser can also help you develop a list of suitable acquisition candidates and initiate contact with them.
Albert D. Melchiorre is president of MelCap Partners, LLC. Reach him at (330) 239-1990 or firstname.lastname@example.org.
Insights Mergers & Acquisitions is brought to you by MelCap
Regardless of where you are at in your company’s life cycle, it is prudent to protect your brand by obtaining state or federal registration for your mark or company name. State or federal registration helps ensure that your business and reputation are not tarnished, or that you do not lose clients as a result of others encroaching upon your area by using a name or mark that is confusingly similar to yours.
“There exists common-law rights that take effect from the moment you start your business, but to enhance your protection it is best to obtain federal or state registration for your brand to better enforce your right of ownership,” says Timothy Jordan, a shareholder at Garan Lucow Miller PC. “Registration establishes that you own the mark and anything confusingly similar can be barred from entering the market.”
Smart Business spoke with Jordan about registering a trademark and the consequences of not doing so.
What are common-law rights and what protections do they offer?
As soon as a company uses a name or mark, it’s developing common-law rights of use. However, the protection of that mark under such rights is limited.
Say you have been using your name in the Detroit area for six years without obtaining federal or state registration. Suddenly a businessman from California, independent of you, comes up with the same or similar name and applies for and obtains federal registration. That registration can provide for the blanket use of that name throughout the United States. Your competitor may now be able to stop you from expanding the use of your mark outside of the geographic area in which you are currently operating, if the business appears related. You can still use your name and continue to do business in your geographic area, but you cannot expand your business beyond that point.
In a similar scenario, another company in the same field and state obtains a state registration after you have been using your mark. That company can prevent you from expanding into the other company’s territory within the state.
When should you apply for state and/or federal registration?
A state registration is relatively inexpensive and fairly easy to obtain. If you are a startup that has any realistic hopes of getting your business out of your garage, spend the money to obtain a state registration. If things are taking off within the first year apply for federal registration, a process which can take between eight months to a year and a half.
But first, find out if the name you would like to use is already registered or in use. You do not want to spend the money on a website, materials and advertising only to find out there is another business with the same or similar name doing similar work or selling a similar product.
How do you search for a name?
There is a federal database maintained by the U.S. Patent and Trademark Office that you can access and search to determine if the word or phrase you would like is ‘live,’ in other words is in use as a trademark. You can navigate the site as you would most any Internet search engine.
Trademarks are valid for 10 years but require a notice of renewal be filed in the fifth year to maintain it, and again between the ninth and 10th years for each additional 10 years of protection. If you do not file for renewal after five years, the mark can become part of the public domain and will eventually expire, which means someone else can use that name.
How do you protect a slogan or phrase associated with your business prior to registration?
Companies that have tag lines or a slogan that accompanies their mark often put the initials ‘TM’ or ‘SM’ at the end of it. By doing so the company is using the phrase as if it were a trademark or service mark. While there is no registration in place, the company is putting the world on notice that the phrase is viewed as a trademark or service mark.
The phrase attached to your company name has to develop secondary meaning before registration is possible. Once the word or slogan conjures up a meaning different than the literal words or slogan, such as Levi’s® representing jeans, then your mark has developed secondary meaning and you can seek registration.
Make a note of when your phrase or tag line was posted to your website or used on some other material viewed by the public because it will help establish the date of your initial use, which will be noted by the trademark office.
When is it appropriate to seek registration for a new product or line?
If you are a large, existing business and you are going to expand into a new product line, from the get-go it is worth the time and money to obtain registration on the new product name. It may cost you a few thousand dollars, but it will save you more down the road. However, if you’re only making $10,000 annually, it might be more prudent to use the TM designation because that is free.
You have to look at your market, your perception of your future success and your resources. If you work only in Michigan, and not all over the country, a state registration may be sufficient. If your product takes off, then you have to decide when it is right for you to invest the money to obtain a federal registration. It’s a personal decision to determine when you are successful enough to need to protect your name.
Timothy Jordan is a shareholder at Garan Lucow Miller PC. Reach him at (313) 446-5531 or email@example.com.
Insights Legal Affairs is brought to you by Garan Lucow Miller PC
Buying commercial real estate is not the same as buying a residential property. While there are some initial steps prospective buyers can do on their own, it’s best to get some help from an expert as the commercial real estate search progresses.
“On the commercial side, there are so many ways to lose money on a deal without the right assistance,” says Terry Coyne, SIOR, CCIM, an executive vice president with Grubb & Ellis. “It’s the ‘unknown unknowns’ that you’re hiring someone to handle.”
Smart Business spoke with Coyne about commercial real estate transactions, how the process unfolds and when to bring in help.
What are the first steps when looking for commercial real estate?
To get started, you can conduct a simple Internet search using any typical search engine. There are also a few dedicated commercial real estate websites, such as CoStar and Loopnet, which can be good vehicles for finding commercial space, comparable sales and public records. However, many of these sites only give users access to a limited amount of information, then lead you to a representative to get the remaining details.
Those sites can get you a little more in tune with the properties available in the market, some of the industry terms and the geography, so when you’re calling a broker you are prepared with some general information. But keep in mind the information you’re getting about commercial real estate on these sites is most likely coming from brokers. It’s hard to find information from owners or developers.
The commercial real estate industry is not good at using the Internet for selling a product. Most of what’s out there will just lead you to a broker or salesman — sort of, ‘Call us and we’ll help you.’ The prominent strategy is to withhold information to get you to sign up with them or contact them regarding a search or a sale.
What’s the next step after an Internet search?
The next step would be to call around and qualify brokers. What you’re looking for is whether the person is a tenant or buyer representative, and some people do both. You have to ask yourself whether you feel comfortable with someone who handles one side or both sides of the transaction.
If you work with someone who handles just one side there’s no conflict of interest, since they’re working for the best deal for either a buyer or a seller. However, if he or she handles both sides, you can argue that they know the market better because they’re seeing it from both sides of the transaction, but there may be a conflict of interest.
Also, look for certain designations or titles attached to the representative’s name, such as SIOR or CCIM, which stand for Society of Industrial and Office Realtors and Certified Commercial Investment Member. SOIR means the representative has been in the industry for at least five years and has hit a certain volume of transactions. CCIM is similar, but indicates that person has also taken college-level classes.
Find a broker who knows the market well because he or she will likely have information on properties that are not yet on the market. The broker can do the investigative work; he or she has knowledge of the area and good intuition, which will save you, as the buyer, time.
Have a broker come out and talk to you about what kind of space you’re looking for. Show him or her the space you’re in and work with him or her to understand his or her process. It’s not unusual in the first meeting for a broker to ask for a representation agreement, which says you’ll only work with that broker. This helps prohibit a prospective buyer from using the broker’s resources, such as time and gas, and then squeezing him or her out of a deal. While you can certainly negotiate his or her fee, there’s no doubt he or she is owed money for the time spent on the deal.
What happens once you’ve found a property you’d like to buy?
When you’re interviewing a buyer or landlord, make sure you understand the services he or she is offering. You’re weighing all of the factors that go into a lease — rate, term, tenant improvements, etc. Also, conduct a financial analysis and look at the design services being offered.
When you’re looking at renting a 20,000-square-foot office space, for example, you’ll want to know how your business will fit the space, which will be laid out in a fit plan. It’s paid for by the landlord and comes into play when you’re being considered as one of the top three potential tenants. At this point, you’ll also start negotiating lease terms and looking at possible incentives from the city.
When your broker is negotiating city incentives, he or she is pitting cities against each other. They’ll negotiate sewer and water rates, the kilowatt charges per hour and other details, so it’s important to work with someone who has experience in those types of negotiations.
As you move toward closing, all the due diligence components require some shepherding by your broker because there are typically many consultants involved. Brokers basically help coordinate the process.
Terry Coyne, SIOR, CCIM, is an executive vice president with Grubb & Ellis. Reach him at (216) 453-3001 or firstname.lastname@example.org.
Insights Real Estate is brought to you by Grubb & Ellis