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What Small Business Owners Need to Know About Patents, Copyrights, and Trademarks

Starting a small business is no simple feat. Entrepreneurs sacrifice time, money, and hard work to make their business dreams reality. With so much invested into your small business, it’s important to be sure your original ideas and creations are legally protected, as they are often the most valuable assets of your company. This protection usually comes by way of patents, copyrights, and trademarks. We recently spoke with expert Xavier Morales of SecureYourTrademark.com to find out what small business owners need to know about patents, copyrights, and trademarks.

What Do Patents, Copyrights, and Trademarks Protect?

Patents, copyrights, and trademarks are similar in that they all fall under the umbrella of protecting intellectual property (IP). However, each protects a different type of IP.

Patents typically protect inventions. Morales, a trademark attorney that practices on a nationwide basis, said, “If you’ve invented something new or created a new way of doing something, you could potentially get a patent. You would want to get the patent to have that invention protected. You don’t want someone else to start producing a very similar type of device without your permission, and certainly not without getting credit and monetary compensation as well.”

Copyright protects creative expression in works such as paintings, books, and films. While copyright safeguards the actual work, it does not protect the ideas included in the work. “Somebody would want to get copyright protection if they want to prevent others from copying or distributing a work of art or a book or some kind of creative work without their permission,” said Morales.

Trademarks usually protect business names, logos, and slogans to prevent a competitor from using a similar name, logo, or slogan to avoid customer confusion. Morales explained, “You want to be the only business out there with this name. You don’t want another business that’s selling the same type of product or providing the same type of service using your exact name or using a very similar version of that name. Otherwise, your customers or clients might go to that other business thinking that it’s you, when in fact it’s not you, but some other unrelated business. You want to prevent that confusion in the marketplace.”

When Should a Small Business Start Thinking About Protecting Its IP?

According to Morales, the sooner the better when it comes to protecting your company’s IP. With patents, it’s best to start applying as soon as you’ve created your invention. “You don’t want to wait too long because the longer you wait, the potentially harder it could be to get the patent, because someone else could beat you to the punch and they might claim that they created that device or invention before you did,” he said.

Morales continued, “In terms of trademarks, usually you want to do that before you launch the business, because you don’t want to launch the business and then it turns out that this particular business name is already taken or trademarked by some other business. You don’t want to become the infringer, so for that reason, you probably want to have the trademark search conducted first to make sure there are no conflicts with other prior-filed trademarks or prior-registered trademarks.” As long as the research comes back clean with no conflicts, Morales said, “You can file the application at the trademark office even before you start the business to reserve your rights to that particular business name while you’re in the process of actually starting the business up.”

The Most Important Tip Small Business Owners Should Know About Patents, Copyrights, and Trademarks

Morales shared that often, what small business owners need to know about patents and trademarks is how lengthy the registration process can be. For the most part, a business can obtain a copyright within six to eight months, but with trademarks and patents, things can take much longer. “You kind of have to manage your expectations. It’s not going to happen overnight. It might take upwards of a year or longer to obtain a trademark or a patent,” said Morales. “You want to make sure that you plan ahead. You don’t want to be in the position where you need the trademark right this minute in order to enforce a claim against somebody, because it’s not going to happen. It’s going to take at least a year to get a trademark or a patent.”

Can I Get a Patent, Copyright, or Trademark Myself, or Should I Hire a Professional?

According to Morales, there are varying degrees of difficulty involved in protecting your IP. Copyrights tend to be the easiest to secure and it’s likely a business could obtain a copyright on its own. “Usually, it’s a pretty simple process to get a copyright with the Copyright Office. It’s a pretty straightforward form that you would need to fill out, and then you would send them a specimen of whatever material is being copyrighted,” Morales said. “Of course, there are some exceptions. Some copyrighted works are a little more complicated than others.” You can find more information on the process at Copyright.gov.

Generally speaking, Morales advises the aid of an attorney that handles this type of work when obtaining a patent or a trademark. The process can be lengthy and complex, and it’s best to work with someone who is familiar with navigating the course.

Think your small business could benefit from an IP attorney, but don’t have room in your budget? Consider a small business loan or alternative financing to ensure your company is protected.

Even though it’s inevitable, most people have a hard time thinking about and planning for their own death. Without the proper provisions in place, family members are often left with a mess of paperwork and legal issues to sort through when a loved one passes. This is only compounded when the loved one was a business owner who didn’t answer the critical question, “Who should inherit my business?” Transferring ownership of a business posthumously is a complicated issue with many potential implications for the business and the beneficiaries. There are many elements to think about before deciding how you’d like your business handled in the event of your death.

Is Family Best?

In most states, your business is considered part of your estate. If you were to die without making specific plans for your business, it would likely be divided among those listed in your will. In most cases, this means your family will inherit your business. But, is this the best outcome for your business? If your family members were already an active and trusted part of your business team, then it makes sense for them to take over ownership of the business. However, if your children are very young or your family members have never had any interest in joining you in your business, it might not be to the best advantage of the business or your family to transfer ownership that way.

Of course, if your family is not interested in continuing the business, they can opt to sell it and divide the profits. Selling your business is also an option if there are disagreements between family members regarding how the business should continue running. And, if you’d like your family members to own the business, but realize they have no clue how to run it, you can work with a lawyer to stipulate a “non-voting” ownership, leaving the actual hands-on work to existing partners and employees.

Partnership Issues

If you own your business together with another person, there are special issues to plan for in the event of your death. Though your partners chose to do business with you, they may not wish to do business with your beneficiaries when you pass.

One way to prevent complications if a partner dies is to work with a business lawyer to determine how you’d like things handled in this situation. For example, you can create a buy/sell agreement, which is like a contract that gives the surviving partners the option to acquire the deceased partner’s ownership portion from his estate. This buy-out could also be mandatory, if that’s what your and your partners agree would be best. A restriction agreement is another possibility that outlines how and to whom ownership shares can be passed down. Restriction agreements are generally used to avoid an ex-spouse from inheriting the business.

Other Options

Are you wondering, who should inherit my business if I don’t have partners and don’t want it to go to my family? There are some other routes that may work for you. For example, you can purchase “key man” insurance, which will give your business a sum of cash if you die, so that the business can purchase your ownership shares or hire your replacement. An employee stock ownership plan is another choice that essentially puts your ownership shares into a prepared trust for all or specific employees, so they inherit the business when you die.

Keep in mind that there are heavy estate taxes (sometimes in excess of 40 percent) on the people who inherit your business, unless it is your spouse. You will want to work with a seasoned tax attorney to ensure you are using the proper strategies to mitigate this burden for your beneficiaries.

Getting the legal documentation in place to secure the transfer of your business’ ownership in the event of your death is an important task that small business owners should not ignore. Working with an estate attorney can be costly, but it is definitely worth it to save your family and your business unnecessary headaches and tax bills.

Just starting out and don’t have the cash to incur this expense without a gap in cash flow? Consider a business loan or line of credit to help get this important paperwork in place so you know your business and your family will be taken care of when you pass.
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