The 2010 Women Grow Business Boot Camp

Sponsored & hosted byNetwork Solutions and Steptoe & Johnson LLP

June 19, 2010, Washington, D.C.

Overview of Program

• Corporate Law Overview

• Intellectual Property and Social Media

Choice of Legal Entity

Four basic forms of legal entity:

Sole proprietorship

Partnership

Corporation

Limited Liability Company

Choice of Legal Entity (cont’d.)

• Some factors we consider when selecting the type of legal entity– Taxation– Limiting liability of owners or investors– Transferability of equity interests in the

business– Raising capital– Formalities necessary to maintain the entity

structure

Choice of Legal Entity (cont’d.)

• Sole Proprietorship – Owned by individual; controlled by owner– DANGER: owner personally liable for all

business debts– all business income considered personal

income taxed at personal income tax rates

Choice of Legal Entity (cont’d.)

• Partnership– Two or more individuals or other entities under a partnership

agreement– Controlled by the partners, per partnership agreement (note:

transferability may be limited)– All general partners fully liable for debts, liabilites and obligations

of partnership– Limited partners are liable to the extent of their capital

contribution– Income taxed to the extent of the partner’s distributive share of

the partnership income. No tax on the partnership at the entity level

Choice of Legal Entity (cont’d.)

• Corporations– Shareholders are NOT personally liable for corporate

debts, obligations and liabilities (liability limited to investment)

– Management limited to limited number of individuals (officers & directors)

– Disadvantage: if C-Corp, pays corporate tax on earnings. Shareholders pay individual tax on dividends (“double tax”). If S-Corp, taxed at personal tax level

– Must adhere to certain formalities (board meetings, shareholder meetings, minute books, etc).

Choice of Legal Entity (cont’d.)

• Limited Liability Companies– No member of an LLC is personally liable for the debts, liabilities

or other obligations of the LLC. Owner’s liability limited to amount of capital contributed

– Management may be centralized in certain members– LLC may elect partnership or corporate tax treatment for federal

income tax purposes– LLC may (if desired) limit the transfer of membership interests

and substitution of new members per Operating Agreement– No formalities require to maintain LLC (of course, though, must

create it formally)

Marketing Law Basics

• Can Spam Law– The surveys from you indicated that the

majority who are marketing use e-mail solicitations

– Be aware of the Federal Can Spam Law– You MAY send unsolicitated commercial e-

mails, provided you do so per the law

Marketing Law Basics (cont’d.)

• Under Can Spam – the key requirements are:– no false or misleading headers – no deceptive subject lines (“here’s the information you

requested” – when not requested)– include valid postal mailing address and company name– provide working opt-out method and HONOR opt-outs no later

than 10 business days (can’t charge a fee, ask for more than e-mail address, or require more than reply e-mail or visiting more than a single page on a website)

– identify as advertisement– check your privacy policy to make sure being consistent– FTC primarily enforces, penalties can be severe $$$$

Marketing Law Basics (cont’d.)

• Telemarketing – BEWARE• There are a host of federal and state laws

restricting telemarketing• Regulators/private parties can sue- $$• Live calls: Feds: Existing customers can be called

(3 mos for an inquiry/18 mos for a purchase), unless they tell you NOT to call – then you must remove them from your calling list

• Prospects – do not call databases must be scrubbed first.

• Calling hours – nothing before 8am, after 9pm, per feds (some states more restrictive)

Marketing Law Basics (cont’d.)

• Fax Marketing– heavily regulated and very litigious– need existing business relationship or prior

express consent to fax unsolicited fax ads– specific opt-out language on fax – without it,

separate violation– must promptly process opt-outs (within 30

days) – best to seek counsel

Final Points

• Advise any employees to get any advertising initiatives approved by you or another responsible official – sometimes employees think there are being creative and “running with the ball.” This can lead to $$$ penalties, litigation costs, loss of goodwill, etc.

• Any lawsuit notices, threatening letters, investigations – PAY ATTENTION – do not ignore – defaults, annoyed regulators, etc.

Intellectual Propertyand Social Media

• Intellectual Property Basics

• Trademarks 101

• Social Media for Small Businesses

Intellectual Property Types

• Trademarks

• Patents

• Copyrights

• Trade Dress

What is a Trademark?• A trademark is a mark, name, word, or symbol

used to identify goods and to distinguish them from competitors’ offerings

Example: COACH® leather goods

• A service mark is the same as a trademark, but identifies the origin or sources of services

Example: DELTA® for air travel services

What is a Patent?

• Exclusive right to prevent others from making, using, selling or importing an invention in the United States

• Exists for a limited time only• After expiration, invention becomes part of

public domain and can be made, used, or sold by anyone

Copyright Examples

Literary WorksSoftware

Sound Recordings

Paintings

DesignsPatterns

What is a Copyright?

• Bundle of exclusive rights in a “creative work”

• Includes right to reproduce a work, to create adaptations (“derivative works”), to distribute copies, and to publicly perform/display a work

What is Trade Dress?

• Overall look and feel of a product or its packaging

• Signifies to the consumer that it comes from a particular company

• Sum-total of the appearance of the product or its packaging, including:– Trademarks– Copyrights– Other non-protectable design features

Trademarksand Domain Names

• Examples of Trademarks

• Importance of Trademarks in Business

• Selecting a Trademark and Domain Name

• Obtaining and Protecting Trademarks

• Trademark and Domain Name Enforcement Basics

• Proper Trademark Use

Symbols/designs:

Numbers:

The Many Faces of a Trademark

Words:Walmart®

American Red Cross®

Letters:

The Many Faces of a Trademark

Slogans:

Shapes:

Sounds:

Color:

Importance ofTrademarks in Business

• Represent a company’s good will and reputation• Ensure that your customers and the public associate

your brands with your business• Can be a company’s most valuable business asset

Choosing a Trademark or Domain Name

• When choosing a trademark, consider whether the mark is available:• Is someone else using the same or a similar

mark, especially for the same/similar goods or services?

• Has someone filed an application for or registered the same or a similar mark?

• Conduct a WHOIS search before selecting a domain name

Obtaining and Protecting Trademarks

• Trademark rights in the United States are based on use• Trademark rights are geographical in scope

• If a trademark is used locally, only local rights are granted• If a trademark is used in interstate commerce, national

(federal) rights are granted

• Registration of a trademark• Can apply based on current use of a mark• Can also apply based on a bona fide intent to

use a mark in the near future• Allows time to do market research product

development and regulatory clearance--and obtain rights in a clever mark!

Trademark and Domain Name Enforcement Basics

• Monitor the marketplace• Document situations of confusion• Help co-workers use your company’s marks

properly• Honor and make proper use of other

parties’ trademarks

Proper Use of Trademarks

• Once obtained, trademarks must be protected and nurtured like any other property

• Proper use on all business documents, advertising, displays, packaging, labels, and correspondence is critical to survival

• Use the ®, TM, and SM trademark notices as frequently as possible!

• Make sure that only those with a license to use the marks use them under your control

• DO NOT permit modification of your mark• Monitor the marketplace to make sure others are

not using your mark for similar goods or services

Social Mediafor Small Businesses

• Overview of major platforms and demographics

• Business uses of social media

• Best practices for developers

• Developing and executing a social media policy

• Enforcement in social media spaces

Social Media Platforms

• Facebook

• Twitter

• YouTube

• Mobile Applications

Noteworthy Demographics

• Users are decision-making consumers with strong purchasing power

• Many users are over 35, have children and earn over $100,000 per year

• Tens of millions of visitors a month (or more) for major platforms such as YouTube, Craigslist, Blogger, Twitter

• 30% global growth in social media use from February 2009 to February 2010

Business Uses for Social Media

• Increasing brand exposure

• Improving customer satisfaction and investment

• Search engine optimization

• Application development

Developer Considerations

• Use the proper platforms for your demographic, including geographical considerations

• Consider mobile applications and different types of hardware

• Look to user community to help determine optimal app features and feature updates

• Understand terms and conditions for developers – different and separate from user policies

• Conduct legal review before releasing an app to the public

• Use your trademarks properly and respect others’ trademarks and copyrights

Social Media Policy Basics

• Policy defines acceptable social media behavior for employees, third parties such as licensees and affiliaties, and other third-party users of social media resources

• May include one or more of the following:– Information on philosophy, strategy and presence– Guidelines for employees authorized to speak officially for the

company, including who is authorized to speak.– General employee and affiliate guidelines– Terms and conditions for general user community

• Ensure that policy is designed to suit your organization’s needs – do not copy another organization’s policy

Social Media Enforcement Mechanisms

• Maintain library of information on major platforms’ terms and conditions and enforcement policies

• Facebook has takedown procedures for copyright infringement and other IP infringement, as well as an impersonation reporting mechanism

• Twitter also has copyright, trademark, and impersonation reporting options

• YouTube allows for submission of copyright complaints; videos that violate community guidelines can be flagged

THANK YOU!

Michelle W. CohenPartner, CIPP

Thompson Hine LLPPhone: 202.263.4151

Email: michelle.cohen@thompsonhine.com

Rachel HofstatterAssociate

Steptoe & Johnson LLPPhone: 202.429.3903

Email: rhofstatter@steptoe.com