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Norton Law Corporation Blog Etsy Business Trademarks and Corporate Formation

How to Protect Your Etsy Business

The idea for this post came from a couple of different sources. First of all, I’m getting married in just over a month, and my fiancee and I have been ordering quite a few things from the handmade capitol of the world over the last few months. Secondly, I recently read an article a couple weeks back about Urban Outfitters, H&M, and Forever21 allegedly ripping off the designs from a number of artists on Esty—I’d post the link, but I forgot to save it (and in true lawyer fashion, I also can’t really comment on whether those companies engaged in that kind of activity). So I figured, why not make a post on how shop owner on Etsy can best protect themselves not only from liability, but from other companies leaching off of their great ideas and unique designs.

Now, it should be noted that Etsy’s corporate counsel, Hissan Bajwa, wrote a post a year or so ago about the various types of business entities an Esty shop owner could own, but I feel like he may have left out a few things and wanted to go into a little more detail. Keep in mind that everything in this post is merely general advice, and none of it should be considered legal advice since (for most people reading) I’m not your attorney and I’m not basing any of this article on specific, individualized, facts but merely general observations.

The Best Legal Structure for an Etsy Shop Owner

What the best legal structure is for your business is going to be a question for your own personal business attorney. That’s right, you’ll need to evaluate what you’re selling, whether you’re working with anyone else, and what the taxes will be like depending on the type of structure you’re interested in (and that’s also a good question for a CPA, as most good business attorneys will tell you).

Let’s Talk Sole Proprietors

With that said, I’ve been shopping on Etsy for a long time, and I know that for most of the seller out there, who are working part time crafting their wares, a sole proprietorship is fine. You’re doing business as yourself (or under an assumed name, for which you’ll need a “Doing Business As” DBA recorded pursuant to your county’s rules), and as a result, if you run a shop on Etsy, you’re already a sole proprietor. From a tax perspective, you and your business are one in the same, and from a liability perspective, you’re also one in the same—which an lead to you being held personally liable for any lawsuits that may pop up against your business. Do keep in mind that you may be able to protect yourself with liability insurance, but be sure you really know what your policy says.

In short, a sole proprietorship structure is easy to run (all the money just goes to you), easy to maintain (you don’t need any specific filings or documentation except for a DBA), easy to form (automatic as soon as you start doing business), but you need to watch out for the liability problems or you could get seriously burned (you’re personally liable for everything done in the name of your business).

So, in an incredibly general way, I’m going to say that for most Esty sellers, a sole proprietorship is all you need—especially if you’re just starting out and don’t want to invest a bunch of money into a business you’re not sure is going to work—unless you’re selling items that could injure someone, including vintage items, food products, beauty and grooming products, certain types of furniture, or anything that could injure someone.

Partnerships Are Just…Meh

Now, the question when you decide to start working your business with another is whether to form a partnership or one of the more “sophisticated” business structures like a corporation or a limited liability company (LLC). This might just be personal preference talking, but I’m not a fan of the partnership structure unless it’s absolutely necessary (which does happen in very specific circumstances which are way, way outside the scope of this article). Essentially, you and another person enter into a business partnership, at which point I always recommend a partnership agreement—seriously, if you’re partnered with someone and you don’t have a partnership agreement, call an attorney and get one drafted now, this very instant, I’m not kidding—when you start operating the business together.

A partnership is kind of like a sole proprietorship, but for two people. Same as before, they’re easy to run (just split that money as stated in your partnership agreement, or equally if you don’t have a partnership agreement), easy to maintain (again, just file for a DBA and that’s all you’ll need provided you and your partner are still getting along), easy to form (just start doing business with someone else), and as with the sole proprietorship, easy to get totally screwed if someone sues the partnership. And why you may ask? Because in a partnership, both partners are on the hook for the entire amount of any liability the partnership incurs. So if your partnership is sued, and your partner can’t or won’t help pay, you’re going to be stuck holding the bag (though in all fairness, you can try and get the money from her later).

My feeling about partnerships for Etsy store owners is this: if you’re doing enough business that you’re in need of a business partner, skip the partnership, spend the money and form a corporation or an LLC.

Better Liability Protection Comes at the Price of a Corporation or LLC

We come to the last two types of businesses for Etsy shop owners: the corporation and the LLC. Now, there’s only one type of LLC (unless you count LLPs, which are like LLCs and partnerships mashed up and only used in limited circumstances), but there’s a whole slew of corporation types, from C-Corp to S-Corp to B-Corp. We’re going to talk about a few pros and cons of all of them, but a somewhat more detailed study, you may want to check out my other articles on corporations and LLCs.

For a lot of small business owners, the biggest issue I run into with corporations and LLCs is that entrepreneurs don’t like to pay for them. Most of the time, as long as you do yourself a favor and stay away from the non-lawyer legal service providers you see advertised on TV, you’re going to have to shell out around $500 to $1000 to get a corporation or an LLC formed after attorney fees and filing fees with the state you choose to incorporate in. For some business owners, especially Etsy sellers who are just getting started, that’s quite a chunk of change, and you’re probably wondering what you get for that.

What you get for that is a lot more liability protection in case something goes wrong and your business gets sued. This means that if the business is sued, you’re most likely going to be protected. It also means that you have to keep up with a lot more busywork to keep your business going. Extra documents will need to be drafted, meetings will need to be held, a separate set of taxes will need to be done, and so on. But all of that comes with the big perk that if your business is sued, you and your family aren’t going to have to pay for the damages out of pocket if you lose—your business is solely responsible. And because of that big benefit of a corporation or LLC, if you’re selling products that run a higher risk of hurting someone, do yourself a favor and talk to a business attorney (most of us are free to consult with) about whether you should go the corporation route.

On top of the liability protection, some of the corporation types also give you extra benefits. For smaller businesses, I say stay away from the C-Corp structure unless you’re interested in securing some kind of venture capital investment. However, an S-Corp can help you save money on taxes, and a B-Corp can help you save money on certain supplies and other necessaries to keep your business running since having a (Certified) B-Corp shows the world that your businesses takes social responsibility seriously.

Protect Your Handmade Items from the Prying Eyes of the Big Companies

While the first part of this post dealt with how to protect yourself in the face of liability, the second part of this article will deal with how to protect your products from “theft” by the competition. At the outset, it’s important to know that not everything can be protected and a full on, proper protection scheme will cost you a lot more than you’re probably making selling your products on Etsy, but I’ll give you a few hints and tips on how to protect your products without breaking the bank.

Also, every industry has a preferred type of protection, wether it’s copyright, patent, trademark, or trade secret, so I’ll be touching on all types of protection.

Don’t Copy Me…I Have a Copyright

Copyright protection is automatic for things that qualify for it. That’s right, you don’t need to file any paperwork, pay any fees, or anything like that if your items qualify for copyright protection. However, obtaining a copyright for many types of products is simply impossible, and if you want to go after someone for money damages who has copied your work, you’re going to have needed to register your copyrighted item with the Copyright Office arm of the Library of Congress.

So here’s how copyrights come to be. They need to meet two main requirements: originality and fixation in a tangible medium. First, something needs to be original to be copyrighted. It doesn’t have to be super original, just mostly original. Second, it needs to be fixed in a tangible medium. Say what? That just means it has to be more than just an idea, it has to be “touchable” for lack of a better word. There’s also a third requirement: the item can’t be functional.

With the requirements out of the way, let’s talk about a few items currently on Etsy’s front page that may be able to qualify for copyright protection. Jewelry, clothing and accessories, photographs, paintings, furniture, and eyewear. That’s a pretty wide range of products, all of which may be available for copyright protection provided any individual item from a group of items like that is able to meet the requirements for a copyright.

If You’re Trading Goods, You Need a Trademark

Trademark protection is another great way to keep the big companies at bay and protect your products. First things first, I’m a trademark attorney, so I always recommend that if you’re serious about your business, you really need to spend the few hundred dollars to trademark your company’s name. You don’t have to spend extra to trademark a logo or a slogan, but do yourself a favor and trademark the name of your company to give you that extra leverage to fend off competitors who may try to leach off your success. And even if you’re not worried about that, at least have a qualified attorney perform a trademark search to make sure you’re not infringing on the trademark of another. Seriously, I’ve seen it happen before, and a few hundred dollars now can save you tens of thousands later.

With that out of the way, trademarks are designed to protect brands and make sure consumers know where any given item is coming from. Most notably, business owners register trademarks for the name, logo and any slogans used by the business, along with the names they use to brand their products. However, beyond that, certain characteristics of the products themselves may be eligible for trademark protection under what’s known as trade dress. Trade dress extends trademark protection to the decorative, non-functional, non-essential portions of a product, which makes it an excellent way to protect certain types of products. Here’s a few examples of where trademark protection may be applicable: watches, clocks, clothing, jewelry, eyewear, and accessories.

Patents are Patently Expensive

Patents are the third category of intellectual property protection, and to be perfectly honest, they’re way beyond what you’ll likely need as an Etsy shop owner. They’re usually incredibly expensive and take a long time to obtain, and I really don’t recommend patents for most small businesses.

Keep Your Recipes a Secret, a Trade Secret

The final type of protection for your products is trade secret protection. Purveyors of food products, beauty products, and other consumables, its time to listen up. Trade secrets protect the recipes and formulas you use to create your products, but they can also be used to protect things like customer lists, supplier lists, and pretty much anything that makes you different from your competition. The catch? You need to keep your trade secrets a secret. Don’t tell anyone you don’t need to. Make those you do tell sign a non-disclosure agreement. And if you write any of your trade secrets down, keep them under lock and key and only let others see them on a need to know basis.

A Quick Conclusion to a Long Article

At over 2400 words, I think this is the longest article I’ve written on my site, but there was a lot of information to cover and I hope you’ve learned a thing or two about how to protect yourself and your Etsy business. A few things to keep in mind in parting.

Sole proprietorship is probably fine for many Etsy shop owners, but not all, so call an attorney if only for a quick (free chat) about business structures if you’re worried about liability or interested in taking advantage of the perks of a corporation or LLC.

Copyright and trademark protection may be available for your products, but don’t just assume. As far as trademark protection goes, take a look at the (growing) database of common trademark questions for some quick answers on whether your product may be trademarkable. And if you have a product or service to add, let me know and I’ll give you credit for it.

Whether you’re a sole proprietor using a DBA or a full-fledged corporation, trademark your business name, or at least spend the money on a professional trademark search to make sure you’re not infringing on the trademarks of another.

And that wraps it up. Good luck in your endeavor on Etsy and I hope your business continues to grow into a huge success. And if you’re already a shop owner on Etsy, feel free to share your shop in the comments below.

Norton Law Corporation Trademark Attorney Trademark Available

How to Find Out if a Trademark is Available

One of the most common questions I’m asked about trademarks is how to find out if a trademark is available. Unfortunately, it’s a question I’m often asked too late in the process and not before my clients begin using their marks with their brands. Usually the client is already using the mark and they’re just now going to register it. But every so often, I’ll get a call from an enlightened client (who must have been reading one of my blog posts) about trademark availability before they actually start using the mark.

So the process for determining whether a trademark is available is a fairly straightforward one. All you need is a trademark search or two. Simple enough, right?

Not so fast. Trademark searches can be tedious. If you’ve never seen the interface for the United States Patent and Trademark Office’s (USPTO) trademark search, known as TESS, you should take a look and then come back here. It’s nothing like Google and daunting is a good word to describe it. Issues with design and functionality aside, TESS is a good starting point for people looking to see if their trademarks are available for use.

Let’s do an example search for something interesting. Say you’re interested in wristwatches and you want to develop your own brand. You’re about to launch a new Kickstarter campaign to help you crowdfund your venture, which you’re going to call OhhMega, but before you do you realize you’d better see if any other watch makers are currently using the same mark as you. So you start with a Google search to determine if anyone’s already using that word. Nope, just some kid on Twitter who hasn’t posted for about four years now. Then, because you’ve read other posts on the importance of trademark searching, you head over to TESS to do a quick search for an exact match of your brand’s name. We trademark attorneys call these kinds of exact match searches “knockout searches.”

You don’t have a logo yet, so you select the option for a Basic Word Mark Search for new users since you don’t know anything about how to use operators in the search or anything like that. You just want to find out if OhhMega is currently registered. A few keystrokes later, and you see that TESS returned no results. Not surprising since OhhMega is a really weird way to spell omega. Congratulations, your very basic search is complete.

But as any good watch enthusiast knows, there is a watch brand out there called Omega. They’re very famous, have some impeccable designs, and have been around in one form or another for about a century—but I digress. In fact, they have a rather old trademark, Registration Number 0025036, dating back to 1894, along with a slew of other marks registered for their specific models and changes to the look of their logo. As you can see from our example above, your knockout search would not have been able to discover even such a well known, famous mark. And that’s why you need more than just a knockout search to determine if your trademark is available.

Now, as a trademark attorney, I’m apt to tell you to that you really need to hire a trademark professional to conduct this search for you. And even if I wasn’t a trademark attorney, I would still tell you the same thing. The truth is that trademark searches are incredibly important, and can mean the difference not just between getting your trademark registered or not, but the difference between finding yourself faced with a demand letter to rebrand your business or face a very costly trademark infringement suit. That’s why a proper trademark search to determine the availability of your mark includes not just a knockout search through TESS, but a full-on trademark search through TESS, a search through the state trademark databases, a search through the World Intellectual Property Organization’s database of international trademarks, and a search through common law trademarks (those trademarks that are used by local businesses, online or whatnot, but are not registered with any governmental organizations—and yes, they may still have rights even though they never bothered to register their marks). And for all of those searches, you’ll need to conduct it using other phonetically similar searches, which, in the case of the OhhMega watch company, would mean searching for Omega since they sound the same even though they’re spelled differently.

So as you can see from our little example, a knockout search is not enough. A quick googling (yes, I’m helping to perpetuate genericide on Google’s trademark) is not enough. A comprehensive clearance search is what you need if you’re serious about your brand and you want to make sure your trademark is available before you begin using it. Ultimately, the few hundred dollars you spend now on a trademark search conducted by a professional is well worth it when compared to the possibility of facing hundreds of thousands of dollars in liability for trademark infringement or tens of thousands to millions of dollars in rebranding.

However, one thing a trademark search cannot tell you is whether you should go ahead and register your trademark if there is a problem with the search. Maybe the search came up with a result that’s very similar to yours but is currently being used in a completely different market. For example, you’re selling telephones and the current user is making mattresses. Or maybe the search found something that looks like it’s not being used but is still a live mark with the USPTO. When these kinds of issues arise, it’s time to sit down for a nice chat with your trademark attorney for a discussion on how to proceed, as the answer to whether you’ll be able to register your trademark at that point will depend on a mix of sound legal advice and savvy business judgment.

2 Simple Ways to Protect Your Trademarks

If you’ve looked at any other pages about trademarks on our site, you’ll know we say the same thing over and over again. Trademarks are perhaps the most important asset your business has. Yet time and time again we hear from business owners that just aren’t willing or aren’t able to keep up with protecting their trademarks from infringement or dilution. Hopefully this post will introduce those business owners to a couple of great ways to protect their trademarks without having to sacrifice their spare time—if they have any—or was their money needlessly.

Monitor Your Trademarks for Infringers and Diluters

Trademarks are susceptible to two major forms of attack from other businesses, and the general public. These are commonly known as infringement and dilution. The details of each are too broad for this post, but in general, infringement means the violation of your rights as a trademark holder and dilution means, well, the dilution or tarnishing of the trademarked brand. Nevertheless, you want to avoid both from happening to your mark.

But how do you stop trademark infringement and trademark dilution? Before you do anything, you’re going to have to find out where the attacks are coming from. And in order to find out who’s attacking your mark, you need to monitor what other similar businesses are doing. After all, in general, it will be these similar businesses who are most likely to start chiseling away at your trademark rights.

While the easiest way to monitor your trademark is to find a great trademark monitoring service, you can also watch your trademark yourself. The route you choose depends on whether your time or your money is more valuable.

In any event, if you decide you want to monitor your trademarks yourself, there are a few free tools available that can help you out. The first is the, widely regarded as very user unfriendly, trademark search through the United States Patent and Trademark Office (USPTO). TESS, as it is commonly known, allows you to search through the USPTO’s trademark registry with a variety of options. How often you choose to search is completely up to you, but the general recommendation is usually once a month.

The next tool at your disposal is to track social media and domain name registrations. See what people are talking about. Check out newly registered usernames that sound incredibly similar to your best-selling product. Should only take an hour. Or three. Or ten. Luckily, there is a tool out there that can help speed things up a bit. KnowEm, a social media and username search engine (with a very rudimentary trademark search function) can help you keep track of who is using what username on social networking sites as well as which domain names have been registered. This kind of information can go a long way to helping you sort out who may be trying to plunder your trademark.

Finally, we have the good old search engine search. Google, Bing, Yahoo, whatever your favorite search engine is, use it. Conduct a search every so often to make sure your mark isn’t turning up in places you don’t want it to. You can even use Google Alerts to notify you when new content with your trademark—or something highly similar to it—appears in Google’s search results.

Hire An Attorney Before You Send Out That Cease & Desist Letter

The cease and desist letter. Favorite document of all those who think they’ve found a trademark infringer. Sent to intimidate those who may be violating a business’s trademark into submission. But are they really all they’re cracked up to be?

Imagine this scenario. You think you’ve found an infringer. You’re absolutely livid that this guy is totally ripping off the name of your product you’ve worked years to perfect and spent hundreds of thousands of dollars to produce and market. So you decide to draft a cease and desist letter to tell this guy to put a stop to his actions. In your haste, you adopt a pugilistic tone in hopes of making him shake in his boots. You send it off, and a few weeks later you get a response from the guy’s attorney. He’s responded to your cease and desist letter with one of his own—except this time he’s telling you his client has a senior trademark and he wants you to stop selling your product and change its name to something that’s not infringing on his trademark.

Yeah. That’s not a situation you want to find yourself in. But it happens to some business owners. They think they’ve found an infringer. They send off the letter. And whoops, it turns out they were wrong and now they either have to stop selling their product or they decide to fight a long and expensive trademark infringement suit.

And it can all be so easily avoided in two easy ways. First, keep your cool and don’t send off a cease and desist letter to every person you think is infringing or diluting your trademark. Second, contact a trademark attorney if you think you’ve found someone negatively impacting your trademark rights. At the very least, a cool head and a second pair of (well trained) eyes can go a long way to make sure you don’t inadvertently get yourself into trouble by acting too hastily.

Image courtesy: Steve A Johnson