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Internet startups have plenty to do before they go live. In addition to setting up the corporate structure, pursuing investors and polishing the bells and whistles on the Web site, there are also a few precautionary steps concerning trademarks and copyrights that should not be overlooked. From selecting a protectable company or trade name, product name or Internet domain name, to ensuring that the startup company owns all of the content its Web site displays, there are several things a company can do before it is up and running to save time, money and heartache down the road. SELECTING AND PROTECTING TRADEMARKS The mark a company chooses to identify itself as the source of goods or services has the potential to be one of that company’s major assets. It also has the potential to be one of its major liabilities. With this in mind, all Internet startup companies should consider the following before adopting or using any names, trademarks or service marks: 1. When selecting a company name, product name or domain name to be used in connection with a startup Internet business, a company should consider the name’s potential for protection. Generic marks (for example, “hats” or “hats.com” for the sale of hats over the Internet) are never entitled to protection, regardless of how long they are used. On the other hand, arbitrary or fanciful marks (for example, “Apple” for computers or “Xerox” for the sale of photocopy machines) generally receive a lot of protection. The marks that fall somewhere in between generic and fanciful are descriptive or suggestive of the goods and services offered in connection with them. The more descriptive a mark, the less likely it is to be protected from uses of similar marks in connection with similar goods or services, absent proof of “secondary meaning” — proof that consumers have come to associate the mark exclusively with the company using it. Although arbitrary or fanciful trademarks are likely to get more protection initially, startup companies also should consider the benefits of adopting suggestive marks — marks that communicate to consumers some idea of the goods or services offered under them. Startup companies often have little or no name recognition. They can compensate for this lack of name recognition to some extent by using a mark that suggests the goods or services offered under the mark. To illustrate the foregoing point, consider the following examples. A company selling hats under a generic mark such as “hats.com” will communicate to consumers the nature of its product, but will have no protection against competitors who must use the word “hats” to sell competing goods. Similarly, a company selling hats under a merely descriptive mark such as “firstclassfedoras.com” will have little or no protection until and unless the mark achieves the aforementioned “secondary meaning.” At the other extreme, a company selling hats under an arbitrary mark like “donkey.com” will have protection against competitors who use a similar mark, but will not have immediate dialogue with consumers concerning the nature of the product offered under the mark. If an emerging company wants a mark that is entitled to protection and communicates to consumers that the company sells hats, it could chose a suggestive mark, perhaps something like “brainshields.com.” Because the emerging company’s competitors would not need to use the word “brainshields” to communicate that they sell hats, such a mark would be entitled to a fairly broad scope of protection. One last point on name selection: When searching for goods or services provided by a particular Internet company, many consumers will type in the company name or the product name in search engines, or simply type “company name.com.” Therefore, having the same name or similar names for the company, product and domain will aid in customer recognition. 2. In addition to being protectible and having the potential to give customers a clue about the products or services that the startup company provides, the mark or domain name selected by a startup company should not conflict with marks already used by others. The costs of a trademark dispute could ground an emerging company before it has a chance to take off. To avoid such a dispute, once a company’s name, product name or domain name has been selected, its counsel should perform a search to determine the mark’s availability and its likelihood of being registered. A similar, although not identical, pre-existing mark that is used in connection with similar goods or services may preclude the use and registration of the new mark, if such new mark creates a likelihood of confusion with the pre-existing one. The factors to be considered when analyzing the likelihood of a new mark being confused with a pre-exiting mark will not be discussed here, but it is important to recognize that, if an element of a third party’s pre-existing mark is used in the new mark, there is a possibility of conflict. This also applies to domain names, which, although initially accepted by the domain name registrar unless there is an exact match in use, are subject to cancellation if the registration is challenged successfully. 3. Prior to launch, a startup Internet business should decide whether to federally register the marks that it has selected and investigated. The owner of a federally registered trademark enjoys, among other things, a presumption that the trademark is valid. Federal registration also amounts to nationwide constructive use of the mark and constructive notice that the mark is in use — things that are important if a dispute over the mark arises. When it comes to defeating the claims of other trademark holders, the earlier a trademark’s “priority date,” that is, the date of first use, the better. Since trademark registrations provide nationwide constructive use, obtaining a registration can serve to optimize a trademark owner’s priority. An application to register a mark may be filed prior to actually using that mark. The priority date for the mark’s registration will date back to the date on which the application for registration was filed. For this reason, the startup’s counsel should apply to register his or her client’s marks as soon as possible after each mark has been selected and searched for use. REGISTERING COPYRIGHTS Copyrights exist in all original creative tangible works of authorship. Such works include Web site designs, sound recordings and all original creative expressions contained on a Web site, including the text and the source code for any software associated with the site. Under the Copyright Act, copyright owners have, among other things, the exclusive right to reproduce the work, prepare derivative works based on the work and distribute copies of the work. In addition to the foregoing rights, owners of copyrights in literary, musical, dramatic, choreographic and audiovisual works have the exclusive right to perform and display those works publicly. Furthermore, owners of copyrights in sound recordings have the additional exclusive right to perform the sound recordings publicly by means of a digital audio transmission. The copyrights in any given work vest in the work’s author, that is, creator, from the moment of the work’s creation. Internet companies whose Web sites incorporate work created by an independent party do not own the copyrights in that content if the author of the work does not assign such copyrights to the Internet company. This has the potential to cause crippling problems for a startup Internet business. A blossoming Internet company cannot sell its business or raise more capital by licensing some of its content if it does not actually own any of the content on its Web site. To avoid these problems, in addition to consulting an attorney who specializes in copyright law, startup companies should take the measures described below. 4. The Copyright Act provides that works prepared by a company’s employees within the scope of their employment are “works for hire.” The employer-company owns all copyrights in such “works for hire.” Therefore, whenever possible, a startup Internet company should have all works created for its site prepared by employees of the company who were hired for such work. If a company has any doubt about whether a particular creation would fall under the work-for-hire doctrine, it should have its copyright counsel prepare a document assigning the company all copyrights in the work. 5. The company should procure an assignment of ownership for the copyrights in all works prepared by nonemployees, such as consultants, before such nonemployees prepare the works. Since it is crucial for an Internet startup company to own all of the copyrights related to its Web site, and since copyrights vest in a work’s author upon the moment of the work’s creation, such a company should have an agreement that contains an assignment of copyright in place prior to the creation of any works by a consultant or independent contractor. If no such agreement is in place when an independent contractor creates content for a site, the company may go through a nightmarish limbo period, during which it will most likely be operating its Web site as a licensee with an implied license of limited scope from the copyright owner. A company in this situation will need to procure an assignment of copyright from the author/copyright owner subsequent to the creation of the work. This can be a tricky situation, especially if the author/copyright owner is aware that he or she now enjoys a lot of negotiating power. If a company’s counsel cannot negotiate an assignment of all rights, they should at least secure an express license to reproduce, distribute, display and prepare derivative works based on the work in question. 6. Once a start-up company has obtained ownership of the copyrights in a work, it should apply for a federal registration for such work within three months of the date of the work’s first publication. This practice ensures the ability to seek statutory damages and attorney fees against unauthorized users of the company’s copyrighted material. The six points raised above address crucial concerns that all Internet startup companies should consider before going live. Addressing these concerns with an attorney who specializes in trademarks and copyrights will give an Internet startup a leg up on the competition. Camille M. Miller is a partner and Derek D. Wood an associate in the trademark and copyright group at Woodcock Washburn Kurtz Mackiewicz & Norris. Both work in the firm’s Philadelphia office and can be reached at Camille M. Millerand Derek D. Wood, respectively. This article reflects the authors’ views and does not necessarily represent the views of the firm.

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