On November 5, 2019, the U.S. Federal Trade Commission (“FTC”) released an updated guide and video for online influencers and streamers about complying with mandatory sponsorship disclosures. Some of the important points discussed are as follows:
Trademarks are the foundation of branding, as they protect the rights holder from third parties using any protected words or logos for their own pecuniary gain. Fnatic, Fatal1ty, and Overwatch League, are a few of the many examples of trademarks utilized in the esports and streaming industries. Trademarks are extremely valuable assets to those who own them because they provide heightened protections and rights to owners. These benefits are not only available to companies, like when a streamer or influencer creates a company to provide their services through, but also to individuals who can prove that their name, or pseudonym, has acquired “secondary meaning”. Secondary Meaning is a legal term used to mean that the mark owner can show that the individual’s name or pseudonym is indicative of the producer of the services and not the services themselves. Popularity certainly plays a role in whether Secondary Meaning can be proven. Athletes like LeBron James and Cristiano Ronaldo have trademarked their names, nicknames and even their commonly-used phrases to provide themselves with exclusive use of these words and phrases for their own pecuniary gain. Streamers and influencers should follow in these athletes’ footsteps with respect to their intellectual property.
What are trademarks?
Trademarks are words, symbols, or phrases, used to identify and distinguish the specific source of goods or services. A trademark provides its registrant with the exclusive right to use a registered word, symbol, or phrase in connection with the goods or services specified in its registration. This means that the use of confusingly similar words, symbols or phrases in the same or similar industries could be unlawful. Trademark registration provides owners with a number of other benefits as well.
Once a trademark is federally registered, the registration serves as notice to the rest of the United States that the word, mark or phrase is being utilized in commerce by the mark’s owner. This means that if someone tries to utilize that mark, or a confusingly similar mark, for the same service or product, even if they were unaware of the registered mark, the prior registration precludes that mark from being utilized in commerce.
The federal registration also allows the mark holders to use the ® symbol. This symbol appears after the registered mark, in the upper right hand corner, when the mark is being used in connection with the goods and services listed in its registration. It gives constructive notice to potential infringers that the mark has been registered with the United State Patent and Trademark Office (“USPTO”) and that the mark holder has the exclusive right to use and license the trademark.
Oftentimes, the registration and use of the ® symbol alone will prevent users from creating marks that are confusingly similar. However, if a third party infringer utilized a mark that is confusingly similar, a mark owner can demonstrate their ownership by directing any infringers to their registered trademark, which is publicly viewable on the internet. Federal registration also allows a mark owner to obtain statutory damages up to $200,000 (in counterfeit cases), treble damages (for willful infringement), and attorneys fees, should the mark owner need to pursue any infringement of its trademarks through litigation. For these reasons, trademarks can act as both a sword and a shield for the registrant.
Why Trademarks are Important for Streamers
A trademarked alias will provide you with complete control over the use of your name in connection with the goods and services in which your trademark is registered. For instance, if your alias is “CKNdinner”, and you file a trademark registration for that phrase in connection with Class 25 (clothing, footwear, headgear, etc.), you will be the only person or business that is able to sell t-shirts, hats, etc. with that name on it once the mark is registered. These goods will also show the ® symbol after the mark, which will help deter potential infringers before they even think about utilizing the registered mark, or a confusingly similar one, on their own goods. Further, if someone were to infringe on their registered marks, they would have a strengthened position to pursue a claim through court due to the potentially increased damages and ability to be awarded attorney’s fees.
Without the trademark on your alias, it is much more difficult to protect against a third party trying to profit off of your established brand. It sounds uncommon, but this happens more frequently than you may think. A few years ago, professional athlete Johnny Manziel was forced to take legal action against a man who sold t-shirts using his popular moniker, "Johnny Football". Although Manziel did not have formal trademark protection for the nickname, he still had common law rights to use the phrase and the opportunity to plead his case in court. Plaintiffs in these types of actions may still be successful without a registered trademark, but in order to receive a monetary award, they would have to demonstrate actual damages, which can be in difficult in many cases. Nonetheless, the federally registered trademark would grant streamers and influencers the right to sue in federal court, and due to the statutes which govern trademarks, the bar to recover monetary damages would be much lower.
As online streaming viewership continues to grow, individual brands are becoming increasingly more valuable by the week. Subscribers and companies alike are willing to pay a great deal of money to streamers and influencers in the hopes reaching their audience and showcasing its brand. In order to make sure that their brand is adequately protected, streamers and influencers should consider the benefits a trademark can provide to them. In addition to the benefits described in this blog post, trademark registration in the US may also serve as the basis for a foreign trademark registration, which is especially helpful given the increasingly global esports and streaming industries. Sophisticated streamers and influencers should follow in the footsteps of the entertainers before them, and their massive brands, in order to shield themselves from any potential infringers while they grow their brand.
If you are a streamer or influencer and you would like to discuss how our attorneys can help you with this process, please contact us.
Whether it’s apparent or not, streamers and influencers are each a business. However, many of these individuals have not considered that their current business entity structure may not be the best option for them, given the risks at stake and the protections that could otherwise be available to them. Let’s explore the different types of entities and how they relate to streamers and influencers.
Sole proprietorships are one of the most commonly used business structures by streamers and influencers in the videogame and esports industries, as they are the simplest to create. In order to ”create” this structure, no formal action is necessary. The sole proprietorship is created once the individual begins performing business activities. As a result, streamers and influencers often operate under this designation without being aware of it.
Sole proprietors can operate under their own names, or a trade name. If an owner does decide to use a trade name, states generally require the owner to register the fictitious business name with the state. Any trade name should always be unique.
In addition to its uncomplicated setup, the taxation of sole proprietorships is relatively easy since there are no distinctions between owners and their businesses. Any income earned by the sole proprietorship will be reported as income by its owner on his or her personal income taxes. The owner will also have to report any losses to the business on their personal taxes.
Though a sole proprietorship is the easiest kind of business to establish, it’s also the most risky.
Limited Liability Company
LLCs are a popular entity selection for business owners because they provide their members with the benefits of limited personal liability and tax flexibility, while still being relatively simple to create and operate. LLCs are created by filing the requisite certificate of organization with the state where the LLC will be located.
The most substantial benefit to an LLC is that its owners are not subject to personal liability for debts/liabilities incurred on behalf of the business. Since LLCs are designed to separate business assets of the company from personal assets of its owners, the owners’ personal assets remain protected while the business’ creditors are only able to reach the business’ assets. For streamers, this protection from liability means that if, for example, you are sued for failure to perform your sponsorship obligations, the only assets that the sponsor could sue you for are the business’ assets (your computer, the business bank account, etc.) and NOT your personal assets and income that your business has paid you to perform your services. Accordingly, this is an easy way to protect your life from the activities of the business.
With respect to taxes, profits and losses from an LLC pass through to the owners’ tax return and losses can be used to offset other the owners’ income, but only up to the amount invested. As with sole proprietorships, this is helpful as the business itself is not subject to its own taxes.
LLCs are a good option for streamers and influencers because it shields liability while still allowing the streamers or influencers to profit off of their business as they would have if there were no business entity in place. However, it is important to note that the liability protection is not perfect, as certain actions can limit and/or destroy that liability shield if the LLC is not managed properly.
Corporations are the most rigid business structure. Corporations are created by filing an articles of incorporation with the State. Once the company is incorporated, it issues stock to its shareholders in exchange for cash or other assets. The amount of stock each shareholder receives determines the shareholder’s ownership percentage in the corporation. There is no limit to the amount of stock that can be issued.
Choosing to set up an organization as a corporation will provide its shareholders with several benefits. Similar to that of an LLC, corporations provide its owners with protection from personal liability. Additionally, this type of structure is generally more attractive to investors than an LLC. Furthermore, companies using this type of structure may also use stock as a business incentive to their employees. This has become a popular option for start-up companies who, in their beginning stages, do not have the amount of capital required to pay talented employees. However, corporations are taxed separately to its owners, meaning that any profits that the business earns are taxed at the corporate level, and then any profits paid to the owners are taxed as income.
Corporations are not ideal business entities for individual streamers and influencers due to the rigid nature of the structure and double taxation. However, it is plausible that a corporation could be a good fit for a group of streamers or influencers who wish to come together and create a business bigger than any of them individually.
Streamers and influencers should be aware of the various business entities that they could utilize to perform their services while possibly offering themselves a shield from liability. Though it may seem odd, any streamer or influencer is a business unto themselves. Though the choice of business entity will always vary based on the business owner’s circumstances, exploring the possibility of creating an LLC to perform their services is a sound business decision. If you’d like to discuss how our attorneys can help you establish your business, please contact us.
Quiles Law is an esports-focused law firm based in New York City.
1177 Avenue of the Americas
New York, NY 10036
(P) (917) 477-7942
(F) (917) 791-9782
Attorney Advertising. The information presented in this site should not be construed to be formal legal advice nor is it intended to form any attorney/client relationship. Our attorneys are licensed to practice law in the States of New York and New Jersey. Copyright Quiles Law, 2020. All rights reserved.