This article originally appeared in OBJ.ca on Monday, November 20, 2017.
It’s the legal question known to elicit grimaces in startup circles. Have you done your due diligence?
If you’re a successful early stage entrepreneur, the odds are good that the answer is no; you’ve simply been too busy running a business.
But there comes a point where it’s important to sit down and ask yourself some tough questions about where your legal risks lie.
Do you actually own the rights to that spiffy logo you hired a freelance illustrator to design? Can your line cook quit and take the menu you spent months perfecting to a competing restaurant down the road?
Intellectual property issues affect businesses across all industry sectors. While it may seem intimidating, working through these issues early on can prevent a costly and messy legal battle down the road.
“There are a lot of steps you can take ahead of time to avoid potential downstream risks,” says Adam Tracey, an associate lawyer at Nelligan O’Brien Payne LLP and a member of the firm’s intellectual property group.
Here are some of the steps he recommends his clients take:
Establish your brand
As with so many things in life, protecting your intellectual property should start with a Google search. When a brilliant name, logo or slogan comes to mind, it’s worthwhile to search to see if anyone else is already using it, or something close to it.
Business owners can also check the Canadian Intellectual Property Office’s databases and the U.S. Patent and Trademark Office’s databases.
Oftentimes, Mr. Tracey finds the cursory search leads to more questions.
“You may come across a name that’s too close for comfort,” he says. For example, there are plenty of “Excel” companies in the business world, including the global gum brand and the Ottawa-based employment agency.
Does that mean you can use the name too?
“If all you’re getting is questions and uncertainty, then it’s probably a good idea to get a legal assessment or move on,” Mr. Tracey advises.
To ensure you can establish trademark rights, it’s a good policy to keep a record of every time your company’s name or branding is used, whether by you or an external source. Mr. Tracey recommends keeping a physical file containing everything from newspaper clippings to periodic printouts of your website to copies of your brochures.
In Canada, unregistered trademarks are determined by longevity of use. Changing your company’s name or logo frequently makes it trickier to prove your rights.
Mr. Tracey gives the example of Nike’s swoosh, which is instantly recognizable and has been consistent through the company’s branding since the early 1970s. While styles and trends have changed, the swoosh remains the same.
Inevitably, some companies opt to rebrand, whether with an update to their logo or a complete overhaul of their branding. Mr. Tracey notes that occasional changes to a company’s branding are fine, so long as they are well-documented.
Another common barrier to establishing trademark rights can be the spelling or grammar used in a company’s branding. Whether it’s inconsistent capitalization, a misplaced apostrophe or incorrect spelling, small mistakes can lead to big issues in the long run.
Document your agreements
In addition to challenges from outsiders, problems can also arise within an organization. In an age where new businesses are cropping up all the time, Mr. Tracey says there tends to be a “move-fast-and-break-things attitude.”
A team forms at the start of a new company and often fails to outline expectations – whether in terms of compensation, ownership or equity.
“It’s easy to not worry about conflict at the beginning when everyone’s getting along,” says Mr. Tracey. “Nobody wants to talk about what happens when things go poorly.”
Similarly, fledgling businesses often rely on contractors to develop parts of their product or brand. This can include graphic designers, photographers, web developers and many others.
To avoid bad blood, Mr. Tracey recommends asking the tough questions before you begin any kind of collaboration. Who will have rights to the finished product? What are the terms of your employment or contract?
Having a facilitator, such as a lawyer, in the room to raise delicate topics in a sensitive manner can help open the conversation and act as a buffer.
Mr. Tracey adds that a trusted legal advisor will help an entrepreneur prioritize their issues and not try to force a premium package on every client.
“A bootstrapped company should be focused on growing, not paying professional service providers,” Mr. Tracey says. “This is where a good lawyer will stand out.”
For more information, contact our Intellectual Property Group.