Author: Aaron Galloway

Lots of hard work is needed to turn a business idea into reality. There are long hours spent on researching, securing funding, and accepting potential risks. Entrepreneurs can easily feel overwhelmed at the sheer amount of information needed about their company, competition, and customers. Writing a business plan can dramatically increase the odds of entrepreneurial success, while effectively communicating goals to investors and potential employees. While it may initially take some time to create, a sound business plan can provide security and anticipate potential issues that can be solved ahead of time.

There are many components that entrepreneurs should consider outlining in their business plan:

• Business description and structure
• Day-to-day operations
• Start up costs
• Financial projections
• Desired market
• Potential customer base
• Ownership structure
• Marketing strategies
• Well-communicated goals
• Potential problems

The components listed above can help entrepreneurs organize their vision, while also aiding in making difficult business decisions. A business plan can also help minimize risk and identify potential future opportunities for growth and profits. Having a team of professionals, including an attorney, to provide guidance can ensure that your business and personal interests are protected as you begin the process of creating a business plan. Let Lynn Jackson help you. Contact Aaron Galloway at agalloway@lynnjackson.com.

On June 24, 2019, the United States Supreme Court handed down a 6-3 decision in favor of Erik Brunetti in Iancu v. Brunetti, 139 S.Ct. 2294 (2019). In Iancu, the Court held that the Lanham Act (15 U.S.C. §§ 1051 et seq.), which is the set of statutory laws governing federal trademarks, prohibition on the registration of “immoral” or “scandalous” trademarks infringes on the First Amendment protection of freedom of speech.

In 1990, Erik Brunetti launched his brand of clothing “Friends U Can’t Trust.” This name became known, and marketed by, its acronym. When reading the acronym on articles of clothing, it was synonymous in sound for a well-known term of profanity. Brunetti had been trying to acquire trademark protection for years so he could protect against copycat companies and clothing lines. Brunetti repeatedly tried trademarking his brand but was unable to do so with the United States Patent and Trademark Office. Trademark examiners cited the Lanham Act, which bars protection for words deemed “scandalous.”

Justice Elena Kagan authored the majority opinion, and five justices joined the majority: Clarence Thomas, Ruth Bader Ginsburg, Samuel Alito, Neil Gorsuch, and Brett Kavanaugh. All nine justices agreed that the federal law banning “immoral” trademarks was too broad and that it would allow the government to grant trademarks to messages it approved and deny trademarks for messages it disapproved. Whether Congress will now act to revise those portions of the Lanham Act to more narrowly define purported “immoral” or “scandalous” marks, while balancing free speech protections, is a question going forward.

Brunetti’s case got a “boost” from a prior case in which the Supreme Court ruled that an Asian American band, called “The Slants,” could not be denied trademark protection just because the name used a term viewed as racially disparaging. Matal v. Tam, 137 S. Ct. 1744, 198 L. Ed. 2d 366 (2017). Such acceptance of trademark application highlighted the inconsistencies in consideration and application of the Lanham Act by the government office.

Whether the Supreme Court’s ruling will usher forth an onslaught of offensive and possibly racist applications seeking trademark protections remains to be seen. However, in the meantime, the Court has demonstrated that the Constitutional protection afforded by the First Amendment’s freedom of speech clause is paramount even for individuals and entities looking to utilize such terms and logos in the American marketplace.

In this age of technology, there is more and more of a focus on intellectual property rights. This is because intellectual property rights are often the most valuable portion of a technological company’s portfolio. But, for all companies, there may be considerations of intellectual property rights, such as protecting the company’s brand or protecting grandma’s secret family recipe.

When thinking of property rights, most people think of real property (your home or agricultural land) and personal property rights (your money and other personal possessions). But, there is a third property right – intellectual property. Generally, there are four different types of intellectual property rights. The most well-known are patents, copyrights, and trademarks. A few months ago, I wrote a post on the different types of trademark rights. One of the most commonly forgotten intellectual property rights is the right to trade secret information.

Patents, copyrights, and trademarks all can be federally protected by filing with the appropriate federal office. But, trade secrets are generally a creature of state law, though there is a model law that has gained widespread adoption. In South Dakota, these are protected by South Dakota’s adoption of the Uniform Trade Secrets Act.

In this post, I will highlight the different types of intellectual property rights, what they generally entail, and how they are protected. Of course, if you are seeking to protect your own intellectual property rights, you should consult a licensed attorney, such as the professionals of Lynn Jackson’s intellectual property practice group, who can guide you through the processes.

Patents

Patents are one of the best known intellectual property rights, and they generally cover inventions through what are known as utility patents. In order to receive a patent, you have to reveal how the invention was created and what it entails, and, in exchange, you are granted exclusivity for a number of years.

Patents are also one of the most complicated of the intellectual property rights, with very little common law protections and nearly all of the protections coming from statute – and only available if you file the patent application. Importantly, in 2013, the United States switched from a “first to invent” system to a “first to file” system – meaning that if you invent something before someone else, but they file their patent before you do, they will likely get the patent protection instead of you.

Patents are issued by the United States Patent and Trademark Office, and only specially licensed attorneys can actually file patent applications on your behalf or practice before the office.

Copyrights

Copyrights generally cover artistic works such as music, books, and paintings. Copyrights are premised on the belief that artistic works should be rewarded by precluding others from copying or reproducing the work without your permission for a number of years – after which point the copyright expires and the work goes into the “public domain” where anyone can copy or mimic it.

Copyrights are one of the most misunderstood intellectual property rights because copyrights are not absolute. Others are given a “fair use” of your copyrighted material, such as a radio station that wants to do a review of your new song or a newspaper that wants to do a summary of a new book. For copyrighted material that ends up on the internet, there are protections under the Digital Millennium Copyright Act (“DMCA”). Under the DMCA, you can send a “takedown notice” requesting that internet providers force the content down, though there are risks involved if you incorrectly determine whether the use was indeed fair.

Unlike patents, there are common law copyright protections. This means that just by writing the song or the book or painting the painting, you have rights in that image or work. However, the U.S. Copyright Office oversees registration of copyrights. The main reason for registering a copyright is that you are entitled to claim statutory damages and attorneys’ fees if someone is infringing your copyright.

Just as with patents and trademarks, if you are hoping to register your copyright, you should consult with a licensed attorney with experience in this area for more advice.

Trademarks

The last of the federal intellectual property rights are trademarks, which overlap with state trademark rights. Trademarks generally protect brands and logos. The key behind trademarks is that we don’t want someone to be confused that they are buying a Pepsi only to get a store brand that looked “confusingly similar.” This allows brands to protect their likeness and to make sure that consumers know what they are getting.

As I wrote about in February, there are different ways to register trademarks between federal registration and state registrations. With federal registrations, there is a presumption of national protection. With state registration, you only have protection in that state. But, importantly, there are also common law protections that protect your brand once you are using your name or logo.

Generally, if you are the only company in a region using your brand name or logo, you have common law trademark rights in the region where you are using that name or logo. However, this would not preclude another company in a different region or a different industry from using the same (or similar) name or logo. The key would be whether you are competitors and whether there is a chance that customers are confused.

The key for registering trademarks federally is that you get a presumption of national protection. Registration also opens the door to additional statutory damages and attorneys’ fees, as well, just like with copyrights. However, the issue with trademarks is not first to register, but first to use. So, even if you were to trademark AwesomeBrand™, if a company somewhere in the country was already using AwesomeBrand, you would not be entitled to trademark protections against that company in the area where they were using their trademark and had earned common law trademark protections.

As with patents, if you are hoping to file for a state or federally registered trademark, you should consult with a licensed attorney with experience in the field for more advice that is tailored to you.

Trade Secrets

The last of the intellectual property rights is one of the least known and least protected: trade secrets. Generally, trade secrets are defined in South Dakota as:

information, including a formula, pattern, compilation, program, device, method, technique, or process, that:
(i) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and
(ii) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

A great example of a trade secret is grandma’s secret recipe. A restaurant may become well known for a signature dish. Or, your brand may become known for that distinctive flavor. But, the only way to protect that information is through statutory trade secret protection or through non-disclosure agreements with your employees.

Imagine that you created Coke®. You have come up with what you think is the perfect recipe. You start to get success. And then, one of your employees who is mixing a batch, writes down the ingredients, leaves, and begins to compete with you. Under statutory regimes such as South Dakota’s adoption of the Uniform Trade Secrets Act, you would have protection and recourse under which to sue that former employee.

But, the problem with protecting trade secrets is that you have to be trying to protect your secret recipe, so to speak. If you were a restaurant and had your recipes posted on the wall, this would no longer be trade secret information. And, if someone were to reverse engineer your recipe, there is nothing that you can do to stop that.

One of the best ways to protect trade secrets is to get employees with access to this sensitive data to enter into non-disclosure agreements. A lot of companies go so far as to have employees sign non-compete agreements, which go into the realm of employment law, but a well-tailored non-disclosure agreement can adequately protect your company’s trade secrets and give extra strength to the argument that you were trying to keep your trade secrets just that – secret.

However, to understand if what you think is your secret ingredient is a trade secret that can be protected, you should consult with a licensed attorney experienced in this area.

The ongoing litigation between Sturgis Motorcycle Rally, Inc., and Rushmore Photo & Gifts, Inc., has recently provided more twists and turns in its long and winding road. Last November, the United States Court of Appeals for the Eighth Circuit upheld a jury verdict finding infringement of two registered trademarks, and reversed a verdict finding infringement of three trademarks because the owner of the trademarks failed to establish that the trademarks had acquired “secondary meaning.” Sturgis Motorcycle Rally, Inc. v. Rushmore Photo & Gifts, Inc., Case Nos. 17-1762, -1869, 2712, -2731 (8th Cir. Nov. 2, 2018) (Arnold, J).

With the case back before the United States District Court, District of South Dakota, Western Division, as part of the record, the District Court must conduct a new trial on the plaintiff’s Anti-Cybersquatting Consumer Protection Act claim in which the plaintiff seeks injunctive relief against the defendants. A preliminary injunction has issued, but trial has not yet been set.

Since that time, the parties have continued to file motions with the District Court relating to ongoing discovery matters, the defendants have filed a motion related to cancellation of certain plaintiff’s trademark registrations with the United States Patent and Trademark Office, and the plaintiff has filed a motion for reconsideration of the District Court’s preliminary injunction currently in place. The parties most recently participated in a settlement conference before the U.S. Magistrate Judge. Although no global resolution was reached, another meeting is to be scheduled by the end of the month with the parties’ respective principals to continue discussions. In the meantime, motions are pending and the case continues forward…down the road.

If the parties are unable to reach a resolution, expect this multi-faceted IP litigation to “rev up” full throttle, and run wide open in the coming year in South Dakota.

More and more businesses of all sizes are recognizing their names and logos as an asset to their operation. As an asset, protection by trademark is advisable. Trademarks serve multiple purposes, in that they distinguish goods or services of one company from goods or services from another, and they also indicate the source of those goods or services (i.e., branding). The question then arises whether state or federal trademark registration is better. While it is true that an owner of a trademark may have “common law” rights in that mark, the United States has a two-tier system for trademark protection that sets forth such protections under codified law.

State Trademark Registration.

State trademark applications are filed with the South Dakota Secretary of State. Applications are only accepted for marks that are currently in use by the business. Applications must be accompanied by a sample or facsimile/copy of the mark and fee of $125. Successful registration is effective for a term of four years from the date of filing, and it is renewable upon application filed within six months prior to expiration. Once registered, mark protection is effectuated under South Dakota law.

Federal Trademark Registration.

Federal trademark applications are filed with the United States Patent and Trademark Office (USPTO). You may submit a paper application for an additional fee. The USPTO filing fees range from $275 to $375 per registered classification. The term of a federal trademark is ten years, with ten-year renewal terms. However, the USPTO requires that between the fifth and sixth year after the date of registration, the registrant must file an affidavit stating that the mark is still in use. If no affidavit is filed, the registration is cancelled. With federal protection under the Lanham Act, a registrant who obtains a federal registration that predates another’s use of the same (or confusingly similar) mark has superior rights to use the mark throughout the entire United States. Under the United States Supremacy Clause, a federal registration will trump a state registration if there is any conflict between the two, with one exception. To the extent a state mark was registered prior to the federal mark and in use before the date of the first use of the federally registered mark, the prior state mark holder may have some rights to continue use of the mark (limited to a certain geographic area, usually where the mark is registered and used).

Which is the right registration for you?

State registrations are typically easier, more quickly accomplished, and cheaper to acquire. But they offer protection only within the confines of the state of registration, and may be subject to a superior federal registrant with the USPTO. By contrast, federal registrations are more time-intensive, intricate, and costly. This may include comprehensive trademark searches, identifying the basis for the mark (actual use or intent to use), including classifications, design code (if applicable for logos), and description of each good or service. However, the successful registrant will have the right to use the mark across the entire United States, backed by federal law. We recommend working with an attorney when preparing to file a trademark application, particularly if seeking a federal trademark registration.

Please contact Lynn, Jackson, Shultz & Lebrun, P.C., to discuss any trademark questions you have or assistance in obtaining a trademark for your business.