Tag: Intellectual Property

  • Starting a Start-Up

    Starting a Start-Up

    By: Ranja Bose, KSG Contributor

    Before starting your own business venture, what are the potential issues that you may need to consider? Our law firm works with entrepreneurial clients every day to get them started, and to allow them to maintain and flourish their business in today’s fast-paced world. Whether your business will be for profit, non-profit, service-oriented, or something entirely unique, there are a few things that you will need to consider.

    a.         Your product should solve a problem, partially or wholly.

    A new business should offer something unique to the marketplace, ideally a product or a service which offers a solution to an existing problem, or which makes life easier for its users. Firstly, make sure that the problem being “solved” needs solving. For example, many users were disappointed with Apple’s removal of the headphone jack, lamenting that the presence of the headphone jack was not an issue that needed solving in the first place. A way to do this would be to reverse engineer the issue at hand; identify a problem, and then think of a unique product or service that would solve that issue.

    After doing the basic market research for existing products, you need to evaluate your target audience. Who are they, what is their purchasing power like, are they distributed uniformly geographically? Surveys, questionnaires, and networking come in handy during this step. The results found with these can be used to create fictional user personas to test the product or service on. This step requires a lot of manpower and research and will let you know if the product or service is needed. Some startups hire external agencies to do this, then develop their good in accordance with the findings.

    b.         Protect your IP.

    Your market research should make sure that your product is not infringing on anyone else’s intellectual property. Remember, two different products may solve the same problem, but may not do so in the exact same way. Conversely, your product must also be protected from infringement. This can be done through contacting an attorney to assist you with the process of obtaining registration of your patent, copyright, or trademark, or possibly more than one of these. What type(s) of protection your product requires will depend on the product itself and the circumstances surrounding the creation and marketing of the product. A prudent step after obtaining IP protection may be to speak with your attorney regarding transferring the ownership of the IP to your company or business entity, if you have one. This may help to shield the individual creator from certain liabilities, and to shift certain legal obligations to the entity. You may also obtain business license and tax permits at this time.

    c.         Solidify your brand and secure it.

    Solidifying your brand may include assigning an identity to your product. People need to relate to what a company offers. The brand will differ from company to company, and depends on the industry. Solidifying your brand may also include creating and securing incidental IP like websites, any supplementary products, marketing methods, as well as having a pitch ready. These pitches, or descriptors, should be short. This ensures that you do not lose your investor’s attention, while demonstrating that you are providing the best possible product for that particular problem. You should conduct extensive research on and be well-versed in the issue, enough so that you can call yourself a subject matter expert. This will encourage others to value your opinions and ideas and thus help reinforce your brand.

    d.         Define your company.

    You have your product and you know what it does. Now might be the time to formalize the company, i.e., the entity that will have ownership of the product. Choosing the name would be the natural first step. You will then have to register your company as a particular type of organization. This can be done by contacting an attorney to help you register the company as a corporation, limited liability company (LLC), non-profit, sole proprietorship, or limited or general partnership. The way in which you register your company will affect its structuring and tax liability. You also need to choose which state you want your company incorporated, organized, or domiciled in. This step should include consultation with tax and financial professionals, and once the company is formed, will also include obtaining a federal EIN (Employment Identification Number) from the IRS.

    e.         Pick a team.

    Now that you have protected your product and company, it is time to pick a team. This team may consist of many people, or only one other person, but you should make sure they each have a separate skill set from you. Investors are more confident in a company that has diversity of thought and know that the team members will keep each other in check.

    f.          Raise capital.

    This “step” is usually not just a step, but an ongoing process which should be done simultaneously with the steps above, after your IP has been secured. Often times, startups do not have the money to hire people without some seed capital. Thus, you need to know a basic pitch of your product as soon as you have secured your IP. Most of the networking required to raise capital is often done while you are solidifying your brand and creating your company. By the time you reach this step of raising capital for your product, you should preferably have moved your product through your local investment circles.

    g.         Make a business plan.

    For your product to be successful, you need to market it to the right people. Business plans may differ by company and industry. This also helps keep track of the finances, turnovers, and making plans for subsequent growth.

    h.         Pick a workplace.

    Once you have accumulated enough capital that your company can afford a place, get a sufficient workplace, and be sure to set policies and procedures for your expenses, hiring practices, future possible employees, etc.

    The process of starting a new business may seem complex at times, but it can be incredibly rewarding, both personally and professionally. Contact Kloss Stenger & Gormley LLP today at 716-853-1111 for more information, and for help navigating these important legal issues.

  • Trade Secret Protections for Small Businesses

    Trade Secret Protections for Small Businesses

    Business owners seeking to protect their proprietary information or invention have many different options. The most common method that people think of is patent protection. Depending on the complexity of the subject matter, patents can be expensive to draft, prosecute, and defend. Additionally, not all information that a business may find valuable will fall under the umbrella of patentable subject matter. Where can a business turn to protect their valuable information that is not protected by a patent?

    The simple answer is to turn to trade secret for protection. The same protections that have protected the iconic taste of Coca-Cola, Google’s proprietary search algorithm, McDonald’s Big Mac special sauce recipe, as well as WD-40’s secret formula can be put to use by your business to efficiently and effectively protect your business’ information.

    What is a Trade Secret?

    A trade secret can take several forms. For instance, a trade secret could be a formula, pattern, compilation of data, computer program, or device. Practically, with trade secret protections you can protect any information that is valuable to your business that you keep secret. In order to receive common law legal protections for a trade secret, the information must meet a few requirements.

    Trade Secret Requirements

    First, the information must actually be economically valuable. That is, what you are seeking to protect must convey some kind of economic benefit to the holder. For example, a curated client list satisfies this requirement because the list is valuable to a competitor in the field. Think of this as the secret sauce.

    Second, the information must be secret. This requirement is a bit confusing because secret here means not widely known by the public. You do not need to keep the information you wish to protect as a trade secret absolutely secret. Your business’ managers and employees are free to possess and use the secret knowledge for the benefit of the business. The secrecy requirement is closely tied to the economically valuable requirement. If your competitors and the public are generally unaware of the information then it is likely valuable to your business.

    Third, the holder of the information must have taken some kind of precautions to keep the information secret. You can satisfy this requirement, for example, through non-disclosure or confidentiality agreements that prevent employees from sharing your valuable, secret information.

    What is Trade Secret Misappropriation?

    Trade secret misappropriation is legalese that simply means that some bad actor stole your business’ valuable information and either used it or disclosed it in a way that harmed your business. There are a few requirements to meet in order to assert a claim of trade secret misappropriation in state court.

    Information is a Trade Secret

    First, the holder of the trade secret must prove that the information met the requirements for a trade secret. Business-owners often overlook this initial step. You or your business’ conduct prior to the trade secret theft could potentially be detrimental to your ability to recover for the trade secret theft. For example, if your business does not have a confidentiality agreement in place with your employees, vendors, or potential business partners then the courts may find that your business did not do enough to protect your trade secret.

    Trade Secret Acquired Through Confidential Relationship

    Second, trade secret misappropriation requires that the bad actor acquired the trade secret information as a result of a confidential relationship with the holder of the trade secret. For example, if you hired an employee who signed a non-disclosure agreement and then upon leaving your business that employee spread confidential information protected by the non-disclosure agreement, you or your business could potentially pursue that employee for trade secret misappropriation. However, if you disclose the information outside of that confidential relationship, it is likely not actionable (think of an inventor or entrepreneur’s elevator pitch).

    Here, it is important to note what trade secret misappropriation does not cover reverse engineering. Reverse engineering of a trade secret is not trade secret misappropriation. This is the big trade-off associated with trade secret protection. Unlike patent protection, trade secret protection does not prevent use of the secret information. Instead, trade secret protection only prevents a bad actor bound by some kind of agreement from violating that agreement. Trade secret provides another cause of action to help to protect the internal workings of your business that set you apart from your competitors.

    Unauthorized Use or Disclosure

    Third, trade secret misappropriation requires that the bad actor has either made unauthorized use of the trade secret information or has disclosed the secret information. For example, this requirement would be satisfied if a disgruntled ex-employee of Coca-Cola who signed a non-disclosure agreement shared Coca-Cola’s secret formula on the internet.

    Potential Remedies for Trade Secret Misappropriation?

    Remedies for trade secret misappropriation fall generally into the two buckets. First, pursuing trade secret misappropriation as a cause of action allows the court to enter injunctive relief. If a disgruntled ex-employee is sharing your company’s secrets online on social media, a court can order that ex-employee to stop spreading your business’ trade secrets. A judge can enter this order early in litigation before any arguments on the merits of the case have begun. This is a time and cost-effective way to protect your business’ trade secrets.

    Second, juries have been extremely sympathetic to businesses harmed by trade secret misappropriation. Juries have awarded huge awards in the past. For example, in a case recently heard in a Texas state court involving a Quicken Loans company allegedly stealing the trade secrets of a Silicon Valley real estate start-up, a jury awarded the start-up over $706 million dollars to compensate the start-up for the theft of its trade secrets.

    Trade secret protection is a valuable option for businesses seeking to protect the inner workings of their businesses.

    For more information, or to speak with an attorney about protecting your business, please contact our office for a free consultation.

    Disclaimer: This blog is made available by Kloss, Stenger & LoTempio for educational purposes only. It is not intended to provide legal advice nor form any attorney client relationship between the reader and Kloss, Stenger & LoTempio. You should always seek professional advice from a licensed attorney for any legal questions you may have.