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Some tips on protecting your business.

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  • Some tips on protecting your business.

    I just responded to JC's Plumibing post on Non-Competes and figured I would throw in a couple other items that those of you that are running your own business should be aware of.

    Little wordy but hopefully it helps someone out.

    Property rights. (its not what you think)

    If you hire a third party company, for example a printer, or a web designer, a graphics art guy to make up a web sight or your logo etc... did you know you do not actually own the rights to that work.

    There is an obscure section int the Federal Copyright laws that allows anyone that produces any form of artistic work to retain ownership of that work by filing an Artistic Copyright. I think its around $25-$40.00 bucks.

    That even includes your own employees.

    How this can screw you as a business. Let's say you go down to your local printer and tell them you want there help in creating a logo for some business cards, letter head and envelopes. They do a bang up job and you sign off on the design and they in turn print up the goodies.

    A year later your business is really taking off and you decide to print up a brochure so your guys can hand them out. You decide to go online and order them cheaper from an internet company then from your local printer.

    You get the brochures and start handing them out and your business increases. Unfortunately your guys just happen to hand out a brochure to the guy that owns the printer that made your original stuff, etc....
    He then contacts his lawyer and you get sued for copyright infringement and loss of revenue because in the course of doing the original work for you he filed a Artistic Copyright.

    Another example. Let’s say that same printer designed a one page brochure and he printed a 1,000 of them, The brochure had wording on it that was specific to residential customers. The brochures were a big hit, but were pretty expensive to print through that guy. You go online and find an internet printer that will do it for half the cost. Plus they will change a couple of words and take the same brochure and target it to commercial customers. Sounds great right. WRONG. If the original printer finds out you get sued for not only copyright infringement but illegally using the art work for additional goods and services not to mention altering the original work.

    Don't think it happens. It happens every single day especially in the "Stock Photo" business.

    So, how do you protect yourself.

    Before you even begin to look at any work that someone is going to be contracted out to perform, example a web design guy, local graphic art/printer.... It is imperative that they sign a Proprietary/intellectual property rights agreement.

    The one that we use is two fold. First its incorporated in our employment contract and our employee manual and we have it as a stand alone form for vendors, suppliers and independent contract work etc...

    It covers everything from inventions, designs, electronic transmission, art, photos, engineering, web sight, models, prototypes, formulas, name it. Its so strongly written that if you figure out a new more efficient way to screw in a light bulb, we own it. If you design a background graphic that mentally gets a person to buy what ever is pasted on top of it, I own that too. Also the form needs to incorporate that anything they do for you, they actually have the right to do. There not using a NIKE style Swoosh in your design, or maybe they did a squiggly for another company and they decide to re-use the squiqqly in your design. If the first company made them sign a release and you get caught using it in your own stuff you get sued.

    Here is two great examples of how it works.

    One of my best friends over the years owns a advertising and graphic arts company. Back in the mid 90's he got hired by this Asian Computer company out of L.A. to develop a trade show package for COMDEX, (big annual computer show in Vegas) Anyways he came up with a boat load of stuff and presented it to them. No intellectual or copyright agreement in place. They signed off on a couple of items. Basic two page brochure, bz cards etc.... He printed it up and delivered it to them at COMDEX. To his surprise everything that he had presented to them weeks earlier had been produced by them in Asia and was sitting in the booth.

    A few month later another L.A. company, owned by Asians contacted him.
    They wanted him to develop a marketing package for a new call center service they were developing in the U.S.A.

    This time he called me up and asked me to go with him to the initial meeting because he did not have the Balls to demand that a copyright/intellectual ownership form be signed.. I told him the only was I would help him is if he used my contract and made them sign it up front.

    I went to the meeting with him. The meeting was in a boardroom with around 20 corporate guys from this company. My friend introduced me as his partner in the firm. We did our formal handshakes etc.... I then opened my briefcase and proceeded to hand everyone in the room a copy of the agreement telling them that prior to us showing them any of the design work, mock ups, even verbally giving them ideas, they would all have to sign. It was pretty funny. For ten minutes they all argued back in forth in Korean as to what they should do. They tried over and over to convince us to make the presentation without signing the form. Making excuses etc... as to why they would not sign it.

    After ten minutes of this I stood up, closed my brief case and walked out with my friend in tow. He looked like a deer in headlights. Panicked that he had lost a big contract. The next day his competitor came in to make there presentation. The Asians took this poor bastard’s ideas, copied them and reprinted the entire marketing package in Asia and had it sent back to the USA.

    That was when my friend finally got it into to his head that he has to protect his company first and foremost.

    Story 2: Another very good friend of mine decided that he wanted to create a web sight to sell a unique product line. (What it is, is not important) Anyways he found a web design company that was willing to do what he wanted. Before he allowed them to show him any work, logos, etc. He made them sign the ownership agreement I created. They agreed to sign it because they wanted the work. The web sight cost $250,000.00 when it was done. A year or so later he decided to make improvements on the web sight. He found another company that could do the changes for a fraction of the cost of the original company. However what he needed, to do those improvement was specific software and codes that had been written into the web sight design but were in the possession of the first company. When he went back to get the code the company refused to provide it. My friend sued them in court and before it went to trial they settled. They gave him the code, software, paid his attorney fees and a lump sum payment of around $100,000 for violating the ownership agreement he made them sign.
    Last edited by Watersurgeon; 09-22-2010, 01:09 PM.