Crash Course on Trademarks

One of the myriad items to consider when starting a new business is what to call your company, what logo to use, and how to prevent others from copying your ideas.  Especially for tech startups reading this blog, I want to give a few quick thoughts on trademarks for you to consider as you begin building your brand.

A trademark identifies goods or services as your own; it lets consumers know the origin of a good or service is you--not some third party.  In the U.S. you obtain basic rights in a trademark simply by using it.  That said, there are distinct advantages to registering trademarks with the U.S. Patent and Trademark Office (see below).  Trademarks are not the same as registered business names / assumed names, which are just the name under which you do business (as may be registered typically with the Secretary of State's office).  Trademarks are not the same as web addresses (although a trademark incidentally--if you're lucky enough!--be a web address).

When selecting your mark, you ideally want something that is fairly unique, that is not similar to the mark of another party.  Using a mark that is too similar to another's trademark poses a real risk of a trademark infringement suit (which may lead to you having to pay money damages).  Don't be generic.  Generally, I recommend against last names (since they may require secondary meaning to be of much value).  I also strongly discourage descriptive marks (e.g. "the running store" or "the data vault") since they too can be a lot harder to protect.  If you can, try having an arbitrary or truly unique (possibly nonsensical in ordinary English) mark, since they are the easiest to protect.

Before you use your mark, definitely perform a trademark search to make sure the mark isn't already used.  Any competent trademark attorney can do this and issue a legal opinion on the risks of using the mark, whether the mark is even eligible for registration, what kind of costs you should expect to be involved, how to "police" third party uses of the mark, etc.  Registration is really valuable: while you don't necessarily have to have your marks registered with the USPTO, registration greatly expands the geographic scope of the rights you obtain.

Talk with your attorney about when to apply for USPTO registration.  Applications when a mark is in commerce may be slightly less expensive tan applications in advance of use in commerce.  For cash-strapped startups, that might matter (especially if you foresee multiple applications / multiple marks).  Also, at the end of the process, make sure you establish protocols for "policing" your mark (as mentioned above).  Failure to make sure others do not wrongfully use your mark may jeopardize your legal rights to the mark.

Crowdfunding Portal Rules & B2C Ventures

Over the last few years I have been working with a number of Austin-based startups, primarily in the tech sector.  Austin-based VC (and even a number of angels earlier in the capital raising progression) seem more accustomed / are more comfortable with B2B models or B2C already demonstrating significant sales.  While I understand the caution these investors exercise while evaluating the various investment opportunities that come to them, the result is that investment capital for early stage B2C ventures in Austin can be extraordinarily difficult to source locally.  Not to sound crass, but raising capital for a venture should be hard: someone throwing money at your endeavor without good cause would be outright foolish.  That said, B2C developers understandably get frustrated from their comparative hurdle for sourcing capital.

On April 5, 2012, President Obama signed into law the Jumpstart Our Business Startups Act (the "JOBS Act").  Via that act, Congress carved a significantly easier path for startups to access certain smaller amounts of capital.  This past January, the Securities and Exchange Commission (SEC) approved crowdfunding portal rules proposed by the Financial Industry Regulatory Authority (FINRA) for implementing the JOBS Act.  The FINRA rules may be found here.  These rules will go into effect on May 16, 2016.

Section 302 of the JOBS Act provides a specific crowdfunding exemption to existing federal securities law by amending Section 4(a)(6) of the Securities Act of 1933.  The amendment to Section 4(a)(6) specifically exempts from registration a securities offering of less than $1 million on an aggregate basis during a 12-month period, so long as that the offering is conducted through an approved broker or funding portal.  A number of these funding portals are being formed now and should provide significantly easier access to smaller amounts of capital than currently exists.  If, like many Austin B2C founders, your business is in need of equity investment but you are not making progress among local investors, consider investigating your options with the new crowdfunding portals.  For more information about the legal practical limits of using this new source of equity, please contact our firm.