Protecting one's intellectual property online can seem like an onerous task. This is especially the case with copyrighted content. However, content creators can help protect their copyrights by taking several actions.
Keep in mind that according to the U.S. Copyright Office, a copyright is a "form of protection grounded in the U.S. Constitution and granted by law for original works of authorship fixed in a tangible medium of expression. Copyright covers both published and unpublished works." Notably, copyrights protect the expression of ideas, and not the ideas themselves. Additionally, copyrights attach immediately when the work is fixed in some form of tangible medium of expression (like a book, recording, painting, blog post, etc.) Although it is not necessary to register a copyright for protections to attach, a registered copyright has additional benefits should someone infringe. For more information on what a copyright is, see my earlier post here.
So what steps can you take to protect your creative, copyrighted works?
Place a copyright notice on your work. In the context of protecting copyrights online, you can place a copyright notice alongside your work. This need not be complicated, and can simply state "Copyright (your business' name) 2014. All Rights Reserved." Although this isn't necessary, it informs potential infringers that you are aware of your rights with respect to the work, potentially discouraging them from infringing. For photos, this can be effectively accomplished by watermarking your images.
Define others' rights in utilizing your work. Create a policy (and place a link to it on your site) that tightly defines how people may use your content with and without your permission. Effectively, this creates a route for potential infringers to utilize your work in a manner that respects your copyrights by offering them a limited license under terms you decide. Even better, these terms establish how other people can freely advertise your work.
Consider registering your copyright. Some content, especially if used as a means of generating income, may warrant a Federal Copyright Registration. This is purely optional, although there are benefits to registering a copyright which primarily manifest during litigation. Some of the added benefits of registration include: the ability to sue for attorney's fees; the ability to sue for statutory damages (which is easier to prove than actual damages); a presumption (after 5 years) that the copyright is valid and all facts in its registration are true; the registration itself constitutes notice that said content is copyrighted. Additionally, registration may allow you to transfer copyrights easier.
Find out if your copyrighted material is being infringed upon. Once you are aware that your work is being infringed upon, you can take steps to have the infringing work taken down, or at least attribute credit to you, whichever you deem appropriate. There are many different tools you can use to find out if your works have been infringed upon. Not surprisingly, a Google search is a great place to start as the search engine has both text and image search capabilities. Sound recordings are much more difficult to police as there can be multiple copyrighted elements, in addition to the technical difficulties of searching audio recordings.
Contact the infringer. Generally, there is some manner available to contact someone that improperly posts your content, be it via email, comment, or message. Utilize whatever method you believe to best contact the infringer and request that they remove your content, or point them in the direction of your use policy and request that they abide. If they fail to remove the content or fail to adhere to the policy, locate the website's ISP information. To do so, you can use this site or this site. Once you have the ISP's information, send a Takedown notice (free samples can be easily found through a Google search) to the ISP, which states that one of the sites it is hosting contains infringing material. The Digital Milennium Copyright Act allows for an ISP to be held liable for hosting infringing content. Generally, once the ISP is notified that they are hosting an infringing work, the website will be taken down so the ISP can avoid liability.
When to hire an attorney. If the ISP fails to remove the content, or take down the website, then you may wish to hire an attorney to prosecute your claim of intellectual property infringement. If you have yet to register the copyright of your protected content, then you may have to do so before any litigation may commence.
Following these steps will help you protect your copyrighted content online, allowing you to only worry about creating more content to share with the world.
Yesterday, an article appeared in the New York Times which discussed the declining use of Non-Disclosure Agreements ("NDAs") among startup companies. The article centered on two main points:
The second point is particularly troubling for business owners. If the startup needs funding from VCs who refuse to sign an NDA, whats to stop them from sharing one business' idea or concept with another company they invest in? Simply put, nothing.
I was speaking with the founder of a startup last night who shared with me his uneasiness about VCs refusing to sign NDAs. He echoed a sentiment that I'm sure many other start-up owners feel "What can we do? We need the money." The unfortunate reality is that VCs refusing to sign NDAs only benefits the VCs. However, that does not mean that businesses should not request that an NDA be entered into with anyone that will be privy to proprietary information/materials.
So what does a non-disclosure agreement do? An NDA protects confidential information, materials or knowledge that is to be shared with another business or person (including employees.) The agreement establishes not only how the receiving party may use the confidential information, but also the remedies should a breach of the agreement occur. Of course the disclosing party is entitled to damages for a breach of the agreement, but the agreement can spell out how the damages are to be calculated or whether injunctive relief is appropriate.
NDAs also help establish the protection of a business' confidential information, which is a necessary element to any litigation challenging whether or not the confidential information qualifies as a trade secret. Simply put, a business must take steps to protect its proprietary information to qualify as a trade secret, and routinely entering into NDAs helps establish that. Even if a VC doesn't sign an NDA, it is in a business' best interests that they require other parties to enter into NDAs to help ensure trade secret protection.
In my discussion with the founder last night, he asked me "Even if the VC doesn't sign an NDA, aren't my ideas protected some other way, like by copyright?" The short answer to that question was no. Although this was already the subject of a blog post, copyright protects the expression of an idea, not an idea itself.
Upon learning that without an NDA, his business has no control over the proprietary information shared with a third party, the founder was rightly uncomfortable, but repeated "What can we do? We need the money." I told him what I would tell any business owner, that an NDA should at least be offered. Some VCs may sign it, some may not, but the few that do will at least give some piece of mind that the business' proprietary information is protected.
Although a business may make the decision that VC funding without an NDA is acceptable, NDAs should still be extended to all others with whom proprietary information is shared. No matter who a business is sharing proprietary information with, an NDA should be proposed.
Earlier this week, the Supreme Court of the United States of America issued an important decision on the case of American Broadcasting Cos. Inc., Et Al. v. Aereo, Inc. The key issue in this case was whether Aereo could broadcast copyrighted content (which it did not own the copyright to) that appeared on TV without obtaining a license to distribute the content. The Supreme Court ruled against Aereo, holding that its broadcasting of copyrighted content without a license from the copyright holder was unlawful.
Although the case hinged on technical, copyright law concepts which are too lengthy for discussion here, the Aereo case serves as a reminder for a very basic copyright law principle:
DON'T USE ANOTHER'S COPYRIGHTED MATERIAL UNLESS YOU FIRST OBTAIN THE LICENSE TO DO SO
But what is a copyright? According to the U.S. Copyright Office, a copyright is a "form of protection grounded in the U.S. Constitution and granted by law for original works of authorship fixed in a tangible medium of expression. Copyright covers both published and unpublished works."
This means that a work must be:
Copyrightable subject matters include, but are not limited to:
Notably, copyright law does not protect:
However, copyright law may protect how facts, ideas, systems and methods of operation are expressed.
Additionally, copyrights do not need to be registered anywhere for protection to exist. However, there are benefits to registering a copyright with the U.S. Copyright office, such as having the facts of the copyright on public record and also granting the copyright holder certain legal remedies such as statutory damages and legal fees in litigation.
It does not take very much for someone to have copyright protection, so people/businesses should be extra careful when using content in any way that they did not create. When it comes to using material this kind of material, err on the side of caution, and don't be like Aereo. Seek a license to use the work, which you will likely have to pay for, but will come far cheaper than any potential copyright infringement lawsuit.
When starting a business, one of the most important choices that is frequently overlooked is the business entity selection. The choice between forming your business as a sole proprietorship, partnership, LLC, C Corporation or S Corporation is much more than a choice of letters. Each entity alters how the business must be structured, how taxes are reported and paid by the owners, and impacts the business' ability to raise capital. Further, it is difficult to change business entities once the business is running, and doing so may incur substantial costs. This post will be the third, and final, in a series of explanations of the different corporate entities as well the features that make them attractive or unattractive to new businesses.
The final two types of business entities to discuss are known as C corporations and S corporations. Although the corporate entities have important differences, the formation of the corporations is the same. Firstly, it is important to recognize that a business which wishes to incorporate should do so in Delaware, as the State has the most robust corporate governance law in the country. In order to create a corporation in Delaware, the business must first choose a name including some derivation of one of the following words: Incorporated; Institute; Society; Union; Syndicate; Company; Club; Foundation; Corporation; or Limited. This name must be unique. Next, the business must prepare to file the certificate of incorporation. On the certificate, the business must state its registered agent, the nature of the business, the amount of shares of stock of the incorporators, the directors, and addresses for all named parties. Once completed, the certificate of incorporation must be filed with the State. Delaware also requires that corporations maintain written bylaws, although they are not required to be filed with the state. The bylaws establish the rules and procedures of the corporation, such as the size of the board of directors, the board's responsibilities, who may call shareholder meetings and where the meetings are to occur. Next, the corporation must appoint its initial corporate directors, hold its first board of directors meeting, and issue stock. Lastly, corporations must comply with any other business, tax, state (if conducting business outside of Delaware) or industry specific regulations, such as obtaining the necessary licenses to do business and filing other required paperwork.
The sole additional step in forming an S corporation is that the business must designate "S" status with the IRS within 75 days of the incorporation date (the date the business filed the certificate of incorporation). The S corporation must also meet the additional requirements of not having more than 100 shareholders, the shareholders cannot be non-resident aliens or corporations, and S status must be approved by all shareholders. These requirements generally necessitate that S corporations are small businesses.
The key distinctions of S corporations and C corporations are in the benefits that each structure receives. Although the directors and shareholders of both corporate structures enjoy limited liability, S corporations are taxed as "pass-through" entities, like LLCs and sole proprietorships. This means that the profits are passed directly to the shareholders, who must report their share of the profits as income on their personal taxes. In contrast, C corporations' profits are taxed twice as the forming of a C corporation creates its own taxable entity. The C corporation is taxed when it turns a profit, and is also taxed when the corporation pays dividends. However, a distinctive advantage for the C corporation is its ability to attract investors due to its highly regulated structure. Simply put, the regulated nature of C corporations makes the structure predictable and easily understood by investors. Contrast that with LLCs which are similar but can be structured any way the members please. Additionally, C corporations are also attractive to investors as shareholders are not subject to taxes unless the corporation pays them through dividends, distributions, or salary. This relieves investors of the possibility of being taxed on money they may not have necessarily received, as could happen under "pass-through" companies such as LLCs or S corporations.
The disadvantages of S and C corporations are few. Firstly, the requirements of S corporations, particularly that its limited to 100 shareholders, limits S corporations to small businesses. It would be extremely difficult, if not impossible, for a large corporation (or a company planning on expanding very quickly) to limit itself to 100 shareholders. Additionally, S corporations are restricted to one class of stock. Multiple classes of stock are normally issued in C corporations to establish different levels of voting rights. Under a single class of stock, the voting rights are equal. The disadvantages of C corporations are predominantly administrative. C corporations are costly and time consuming to start and operate. Additionally, C corporations have increased paperwork and recordkeeping burdens as it is highly regulated by federal and state governments. The most notable disadvantage to C corporations is the double taxation at the corporate and individual level. However, corporate tax levels are favorable as compared to income tax.
As a result of its requirements, advantages and disadvantages, S corporations are best suited for small businesses who seek greater structure than LLCs have to offer, and intend to remain small businesses. The 100 shareholder requirement is limiting, and it is important to note that changing corporate structures can be costly. As for C corporations, they are best suited for businesses that plan to utilize investor funding and/or plan to expand rapidly into large corporations. The startup and operating costs are greater than its S corporation counterpart, but any need for investor financing logically requires a business to form a C corporation.
These are just some of the advantages and disadvantages of LLCs. It is important to remember that the best choice of entity varies business to business.
When starting a business, one of the most important choices that is frequently overlooked is the business entity selection. The choice between forming your business as a sole proprietorship, partnership, LLC, C Corporation or S Corporation is much more than a choice of letters. Each entity alters how the business must be structured, how taxes are reported and paid by the owners, and impacts the business' ability to raise capital. Further, it is difficult to change business entities once the business is running, and doing so may incur substantial costs. This post will be the second in a series of explanations of the different corporate entities as well the features that make them attractive or unattractive to new businesses.
An LLC is an unincorporated business organization established by a single member, or group of people, who have limited liability for the debts and liabilities of the business. State law determines the formation and operation of an LLC. To form an LLC in New York, the organizing members must file the business' Articles of Organization with the state and pay the requisite fee. Subsequently, a notice that the LLC was formed must be published in two newspapers (that are designated by the county clerk of the county where the LLC is located) consecutively for six weeks. A Certificate of Publication, affidavits of publication in the newspapers, and the requisite fee must then be filed with the Department of State within 120 days of the initial filing of the Articles of Organization. The timing of the submission is important, as failure to provide this documentation would result in the suspension of the LLC's ability to conduct business. Additionally, the members of the LLC are required by New York law to adopt a written Operating Agreement. Under New York law, this agreement must be entered into no later than 90 days after the filing of the Articles of Organization. This document does not get filed with the State but is maintained internally by the LLC. Lastly, depending on the industry the LLC does business in, the members may have to comply with other tax and regulatory requirements. Although there are fees and several steps required to form an LLC, the benefits to its members are substantial.
The LLC is a flexible business structure that avoids some of the pitfalls of sole proprietorship. This entity allows the business to add members as it sees fit, unless otherwise provided for in the Operating Agreement. The necessity of an Operating Agreement also allows businesses to create its own organizational structure. One of the greatest advantages to the LLC is that members enjoy limited liability. This means that the members do not share in the liability of the business' debts or judgments like sole proprietors do. Essentially, the business insulates its members from liability by absorbing any debt or judgment. Limited liability is extremely beneficial to the members as their personal lives are not on the line with every debt or lawsuit. Additionally, LLCs are usually taxed like sole proprietorships, as they are considered "pass-through" entities. This means that the LLC's members report their share of the business' profits on their personal tax return. LLCs can also elect to be taxed as a C or S corporation instead of "pass-through" taxation (which will be discussed in a future blog post).
The disadvantages of LLCs are few, but could be impactful to a business. Firstly, it may be difficult for LLCs to raise money from investors. Generally, investors are hesitant to invest in LLCs due to the lack of a mandatory corporate structure and "pass-through" taxation structure. Simply put, investors may not be amenable to investing in LLCs because they would be taxed on a share of profits from the LLC, despite potentially not receiving any money to pay the taxes, and/or have tax-exempt partners who do not want to receive business income. The need for investor funding should be heavily weighed during business formation. If investor funding is, or will be, necessary for the business to thrive, it may be more advantageous to form a C corporation. Additionally, it is a disadvantage that there are no structural requirements to an LLC because it necessitates an all encompassing, tightly drafted, Operating Agreement. Such an agreement can be difficult to draft, review, negotiate and agree upon between the members.
These are just some of the advantages and disadvantages of LLCs. It is important to remember that the best choice of entity varies business to business.
When starting a business, one of the most important choices that is frequently overlooked is the business entity selection. The choice between forming your business as a sole proprietorship, partnership, LLC, C Corporation or S Corporation is much more than a choice of letters. Each entity alters how the business must be structured, how taxes are reported and paid by the owners, and the impacts the business' ability to raise capital. Further, it is difficult to change business entities once the business is running, and may incur substantial costs. This post will be the first in a series of explanations of the different corporate entities as well the features that make them attractive or unattractive to new businesses.
Sole proprietorships are a common business structure for single owner small businesses. Forming this type of business entity is very simple. Several states, including New York, only require you to register with the state if you will be doing business under a name other than your own. For instance, if Bob Jones opened up Happy Time Graphic Design in New York, he would have to register his sole proprietorship with the state. On the other hand, if Bob Jones were to do business under his own name, he could operate his graphic design business without having to register with New York. This ease of formation is what attracts single owner small businesses to this structure. Additionally, under the sole proprietorship, income is directly imputed to the owner. That means the business income is reported on the owner's taxes directly.
Sole proprietorships have two main disadvantages. Firstly, the business owner and his/her line of credit is all that is available to the business should it need additional capital. This could become particularly problematic if the business owner's credit score is low. In contrast, other business entities have the multiple methods to raise capital for their businesses. Secondly, and most importantly, sole proprietors face unlimited liability. This means that the owner can be personally sued for any debts obtained in the process of running the business or any accidents at the business. For most, the risks should outweigh any advantage. Hypothetically speaking, a sole proprietorship structure is not worth losing your family's home because someone slipped at your business and broke their arm. Yes, an owner should have insurance which would help mitigate the liability faced by the owner, but the coverage may not be sufficient.
So what types of businesses are best suited for a sole proprietorship? Home businesses are best suited for sole proprietorships. Assuming that the home business does not meet with clients in the home, the liability risk for accidents on the business premises is eliminated. The business would still be liable to creditors, but at home businesses generally operate with little overhead as compared to their storefront counterparts, so the need for a line of credit may also decrease.
These are just some of the advantages and disadvantages of sole proprietorships. It is important to remember that the best choice of entity varies business to business.
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