Wisconsin Business Law and Litigation
A blog dedicated to Wisconsin business law and business litigation matters, authored by Chris Moander of the Moander Law Firm.

Forgive me for lapsing into legalese in my last post. I believe I should clarify some things.

Copyrights are an actual property right. If you own the copyright, you control that content for the allowed period of time and can generally use it how you see fit. Businesses struggle with the idea of intellectual property (particularly non-patent areas) because intellectual property rights are applied to what we call “non-exclusive property,” versus “exclusive property.” For example, consider a plot of land. If you own it, you can exclude others from entering or otherwise using the property. You have exclusive rights to the land. Nobody can use or take part of the land without depriving you of your right to use that part of the land - the property is exclusive. Intellectual property is not like that. The copying of your work does not deprive you of your property (the work itself) - two or more entities are using the work at the same time, hence the work is not exclusive. Rather, copying deprives you of your right to economically benefit from distribution of the work.

From another perspective, you and your business have invested time and money into generating even basic materials (such as marketing materials), much less major products (books or digital media). Costs sunk into these works are almost always substantial. It’s important to protect this work as your own, much like you would want to protect physical items you create or goodwill you generate - copyrights help protect your livelihood.

I briefly mentioned the need to invest money in legal advice when determining a suitable business name. It is well worth the cost to have an attorney confirm whether your chosen name is either not protected (nobody else has it) or able to be protected (geographical names and descriptive terms are not protected). You seriously curb the risk of being sued for copyright infringement and ensure the protection of your chosen company name - both are preventative in nature. Additionally, lawyer review can also help evaluate the marketing efficacy of the chosen name - is it unique enough to be remembered easily and get attention drawn to your company?

In an attempt to be witty, I tried to find some jokes on the topic of copyright law and, sadly, I found none, which is a real shame. My goal was to provide some levity on a subject that is in the papers daily in regards to pirated music and movies. Clearly, I did not meet my goal, so let’s delve into the area and how it can affect your business.

Copyright is the primary tool used to protect works of authorship (ex: music, movies, books, etc) under federal law (the Copyright Act). The goal is to protect the expression of ideas, but not the ideas themselves. Consider the concepts of authorship and expression together - combined, they apply to more than just a few set concepts, like movies. Rather, copyright can apply to your marketing materials, your website designs, or various other pictorial or literary works used in your business.

There are a few requirements to secure a copyright:
(1) copyrightable subject matter - covers a fairly broad spectrum of things, but generally (and I do mean generally) literary works, images, music, and video recordings are protectable insofar as the expression of the work goes (remember that ideas themselves can’t be protected). You cannot copyright things like procedures, processes, or systems - note, though, that these things can be protected by other areas of the law.
(2) modicum of originality - translated, you need some original input into the work.
(3) fixed in a tangible medium of expression - translated, one needs to be able to perceive, reproduce, or otherwise communicate the work (ex: recording music on a CD).
(4) Register the work for copyright protection with the U.S. Copyright Office.

• While registering a copyright is very important, one’s copyright is effectively created at the time the work is fixed (see #3 above).
• Registration with the USCO allows you to sue should someone infringe on your copyright. Please note that you don’t have to register with the USCO to have a copyright, but generally you can’t sue for infringement without having registered.
• Registration also lets the whole world know that you own the copyright.
• Sometimes, you will have to submit copies of your work to the USCO for filing in the Library of Congress. Whether you need to do this is a case-by-case judgment.

Business owners need to know who actually owns the copyright for work produced. The Work for Hire Doctrine, which determines whether a business has a copyright on work, is applicable in two situations: (1) the work must be made by an employee in the scope of his or her employment (as part of the job) and (2) if there is a written agreement that the work produced is a work for hire. If the work is produced in either scenario, the business owns the copyright. As always, the key is a written agreement stating who owns what.

As with all contracted-for work, there can be disputes about whether a person or entity is an employee or independent contractor and thus who has the copyright. Courts will look at several factors, including the control the business had over the work’s creation, tax status of the creator, whether employee benefits were extended to the creator. If you don’t watch these ownership issues and handle them with care, you could lose the copyright to an independent contractor.

Copyright holders possess three major rights: (1) the right to reproduce the work, (2) the right to distribute the work (sell it for profit), and (3) the right to create “derivative works,” works based on the original copyrighted work (ex: all the Star Wars films after the original movie from 1977). If the copyright is registered, the copyright holder has the right to sue infringers. The duration of these rights extends: for the life of the creator plus seventy years; for the life of the last co-author (if there is more than one author) plus seventy years; and for works-for-hire, ninety-five years from first publication or one-hundred twenty years from creation, whichever expires first.

Copyrights are great to have because they protect your work but they can also be sold with the company if you decide to bail. As with most legal work for startups, the up-front costs are very much worth it. Your attorney can determine whether your idea could infringe on another’s copyright and, if not, can secure your copyrights to the benefit of your company.

Trademarks are designed to do one thing: protect the goodwill generated by your company and protect your consumer’s ability to distinguish your products/services from your competitor’s. Your trademark will cause a consumer to associate certain qualities and recollections with your business - in other words, the meaning of the mark to the mind of your customers. Thus the economic value of a trademark can be enormous. A good example is the Nike Swoosh, which is recognized all over the globe and therefore Nike gets the benefits of people recalling what company the Swoosh represents. Certification and Collective marks, those used by trade associations and commercial groups, can also be protected as they, too, reflect qualities and recollections of patrons.

A protectable trademark must be distinctive (to a degree) from all others in the marketplace. Generic, descriptive, and commonly used terms are not enough. Trademarks that are “fanciful” are protectable. For example, Kodak or Exxon - the terms themselves lack inherent meaning, but were created to brand a company’s products. “Arbitrary” terms are also protectable. Examples include Amazon.com and Apple Computer - the terms do have inherent meaning, do not describe the products offered, but have acquired secondary and unique meaning to the public. You can also protect “suggestive” terms, those terms that suggest but don’t describe the product or the product’s characteristics. Suggestive terms can be tougher to distinguish than other protectable trademarks because they require the consumer to use their imagination to connect the goods/services to the appropriate use (thus a good deal of proof is necessary to support protectability). For example, Greyhound is a suggestive trademark because it implies that the bus service is fast, like a greyhound.

A business does not need to register a trademark to get protection from infringement. First use of the mark and continual use of the mark are enough to establish rights to the mark. However, registration is always important to formalize rights and let the world know the mark is yours. In Wisconsin, trademarks are registered with the Secretary of State for a nominal fee. Protection is effective for ten years, but renewal applications must be received by the Secretary of State within 6 months of the expiration date. Protection of the trademark through the state is limited. Better protection is offered through the U.S Patent and Trademark Office, although the process is more costly and complicated. USPTO protection announces to the whole world that you own the mark and secures protection across the U.S.

Aside from registration, it’s important for your attorney to verify nobody else uses your mark or a mark that is very similar. This is where the real costs of trademarks appear. Good trademark research is not cheap, but as usual, it’s imperative to the protection of your work. You don’t want to start using a mark and build up a customer base only to get sued two years down the line and have to alter your now well-known mark.

As a trademark holder, you have some specific rights. One is the ability to sue for infringement. Infringement means that someone is, in some form or another, interfering with the use of your mark - they are potentially tapping into your customer’s goodwill. In infringement cases, courts usually look at factors such as whether your opponent uses its mark in the same geographical area, if goods/services are similar, and the strength of each mark (uniqueness). Another right is the option to sue for trademark disparagement - basically, another entity is ripping on your trademark and goods/services under that mark through misrepresentations of fact. Finally, you also have the right to remedy trademark dilution should your mark be “famous” (it’s not always clear what constitutes a famous mark) - if a competitor is devaluing your mark by using their own, you might be able to recover damages.
Trademarks, in my personal opinion, are the most valuable intellectual property you can own. Trademarks are signs of quality or experiences that stick in the minds of your customers for a very, very long time - they are marketing at its finest. As a quick experiment in the value of trademarks, think back to your childhood…now, think about places you and your family would eat out…I’ll bet that burger chain is still something you think of fondly…and I will also bet you can recall imagery about that restaurant….and at least some of that imagery contains a trademark, like McDonald’s golden arches. What’s more, trademarks accumulate value of time and that value can be sold with a company - all your years of hard work in customer service can yield volumes of extra cash when a business is finally sold. Trademarks are a worthwhile investment.

April 1st is an annual event that Americans do love, but of course, there are those who take the pranks too far. If employees don’t know where the line is drawn on gags, the dreaded “T” word might come up…torts!

Mark Toth’s “guidelines” are particularly helpful in determining where funny turns into economically dangerous:

“Pranks that involve any of the following should never be allowed:
* race, gender or other protected or physical characteristic
* threats
* physical contact, including ingestion of unwelcome odors or substances
* weapons (even toy ones) or other potentially dangerous objects/substances
* damage to property or a person’s reputation
* interference with a person’s ability to do his/her job”

No, I’m not kidding. Bullying is not just for junior and senior high. John Philips notes that we should expect legislation on workplace bullying in the near future because of the pervasive nature of the problem. The trend has begun in Wisconsin (starting with the schools).

The reality is that (1) bullying hurts morale and productivity and (2) there is a likelihood it could cost your company dearly now and in the future. As with most business legal matters, prevention is preferable to cure - lesson: if you know you have a bully (or are one), act now.

Even after posting a bit on the matter of e-discovery, I think that further clarification as to what the business owner really needs to do regarding the relationship between litigation and digital information is in order. Thankfully, RenewData has provided me (and you) with a handy little booklet on the practical aspects of e-discovery. Just fill out the form and you’ll get your free copy in a few weeks.

While I am certainly not stumping for RenewData’s services (I have not used them and so cannot attest to the quality), I can say this book skillfully reveals the abstract nature and intimidating scale of e-discovery. Specifically, the book outlines some of the various locations data can be found (such as PDA’s and flash drives) and the so-called “technobabble” that business owners may hear coming from tech folks handling e-discovery materials.

One also finds general recommendations on how to prepare digital information, on a daily basis, for potential litigation - I believe that the sections addressing anticipatory preparation of digital information are the most important. Ensuring that your digital materials are properly labeled, filed, and backed-up with regularity will save an untold amount of money should litigation erupt and you will sleep better at night knowing that you are prepared. Much of this preparation can be automated, further reducing the front-end costs.

I am a moderately geeky attorney and I learned quite a bit from this book. Business owners ranging from sole proprietors to corporate executives could benefit from this wisdom. I recommend ordering your free copy today and educating yourself on some quality CYA information.

Small businesses have to leverage each dollar spent to maximize return and software is often one of the major expenditures. Traditionally, software was based on the individual computer or on a server. For example, Microsoft Word is installed on each individual computer in the company and creates documents on that specific computer. Things have changed. Software as a Service (SaaS) is showing its might in areas ranging from document creation to customer relationship management. Examples include Google Docs, 37signals tools, and Linked-In.

There is no doubt these tools are useful, mainly because they are affordable (or free), there are no pure setup costs, and software downtime is rare. Instead of paying for a license per computer, you can buy access based on the number of users, usually totally a far cheaper pricetag. Many companies that offer SaaS have developed simple and easily understood graphical user interfaces - drag-n-drop, tabs with obvious names, and other tools. These are great reasons to use SaaS and I agree, they are compelling. Nothing sounds better than using software that appears to level the playing field by a wide margin between small business and behemoth corporations.

However, there are some downsides to consider and they are quite real and quite problematic for small companies. One is the matter of proprietary and confidential information. Almost anything can be considered proprietary (client lists, schematics, etc); the same applies to confidential information. Does your SaaS provider have quality security? Do they also effectively back up whatever information you’ve given them? Is there any way for you to do an independent backup for your information (aside from paper printoffs)?

What happens if there is a billing tiff? And the SaaS company cuts you off from your information?Any service agreement needs to be examined closely with a mind for these matters.

Another issue is the customization capability of SaaS. Most vanilla modification abilities are available, but what if you need to cater software to extremely specific uses? The other side of this issue is that money saved on basic services can be reallocated to area-specific and customizable software.

Finally, one area that should probably be avoided for SaaS is the company’s financials. It is very much in your best interest to maintain ownership of your financial and economic information.

The moral here: evaluate SaaS for your own needs. If the service fits and you trust the provider and the agreement, by all means use it.

John Phillips at The Word on Employment blog explains, with simplicity, the difference between and independent contractor and an employee.

It is absolutely imperative that an employer understand the differences because the tax implications are massive. Mere agreements labeling a person or business as an “independent contractor” is far from sufficient. As Mr. Phillips simply states, “The fact that you have an “independent contractor agreement” with the worker isn’t determinative. If a worker is doing what other employees do, he/she is likely to be an employee irrespective of an agreement that says otherwise. If the worker performs work only for you, as opposed to performing work for multiple companies, he/she is likely to be an employee. ”

IRS tools provided in the article can be found here, here, and here.

Social networking sites have been a “hot topic” for some time. There is site for every persuasion, which would indicate that your employees could very likely be a member of a social networking site. “So what,” you say? “I monitor whether my employees are looking at inappropriate material or spending a lot of time surfing.” As you should! However, these sites offer a unique set of problems, as outlined in this Computerworld article. Are you, as employer, aware of all that is being or can be posted on these websites? What about the unintentional downloading of malware, loss of bandwidth to the sites…or the risk that your employees engage in various business torts? Obviously, information can leak out of a company in any number of ways, but does it hurt to close off one more opportunity and reduce your risks? I don’t think so and neither does Bill Gates. Further, one particular site appears to have made it all but impossible to actually delete a person’s profile, so any given item of information posted may live on forever and thus be accessible to any number entities.

I personally use Linked-In and so disagree with the Computerworld article’s stance that executives don’t use these sites. I’ve found a lot of my professional friends, older and younger, put Linked-In to good use. Then again, it is also used as an effective recruiting tool…

So, employers, how do you respond to these social networking site concerns?