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A Uniform Domain Name Dispute Resolution Policy (UDRP) is a process used to resolve disputes over domain names, often involving claims of cybersquatting, where a domain name may infringe on trademarks. If you receive a UDRP complaint or a cybersquatting claim, it's essential to understand your rights and options. As the domain name holder, you have the opportunity to defend your registration by providing evidence and arguments that demonstrate your legitimate interest in the domain name and prove that it was not registered in bad faith.
Lloyd & Mousilli, a boutique law firm specializing in IP litigation, offers expert guidance to help you navigate this complex process. Our experienced IP team will support you through every step, from preparing a robust defense to presenting your case before the arbitration panel. With our deep understanding of UDRP proceedings and a commitment to protecting your online assets, we ensure your interests are vigorously defended.
Lloyd & Mousilli's IP practice features seasoned legal counsel with hands-on experience in IP litigation. In addition to their impressive backgrounds at companies like Apple, Dell, and the USPTO, the team has successfully defended against UDRP complaints from major software enterprise companies. The Lloyd & Mousilli team stands out by focusing on securing strategic protection in a cost-effective manner.
Lloyd & Mousilli is a boutique law firm specializing in intellectual property, technology law, and related litigation. Since its founding over a decade ago, headquartered in Houston, Texas, Lloyd & Mousilli has been dedicated to the strategic use of intellectual property, providing counsel to businesses ranging from startups to large enterprises.
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Houston, TX - August 23, 2024 – Many online copyright service providers may seem appealing at first glance, especially if you don't look deeper. A quick search for “file copyright application” will reveal sponsored ads for online services that promise a fast, easy, and budget-friendly DIY approach to copyright filings. However, these services may not be the best choice for startups or individuals focused on long-term growth. Strategic, attorney-led copyright applications can still be efficient and are often more beneficial in the long run.
As a boutique law firm specializing in trademarks, copyrights, and patents, Lloyd & Mousilli’s IP practice is designed with efficiency at its core.
Lloyd & Mousilli's copyright practice features seasoned legal counsel with hands-on experience in startups and small businesses. In addition to their impressive backgrounds at companies like Apple, Dell, and the USPTO, it's also important to note that they are small business owners themselves. The Lloyd & Mousilli team stands out by focusing on securing strategic protection in a cost-effective way.
From IP strategy discussions before your brand launches to enforcing your copyright registration in court, Lloyd & Mousilli specializes in supporting startups through the entire IP lifecycle.
Lloyd & Mousilli is a boutique law firm specializing in intellectual property, technology law, and related litigation. Since its founding over a decade ago in Houston, Texas, Lloyd & Mousilli has championed the strategic use of intellectual property, counseling businesses from new startups to large enterprises.
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Houston, TX - July 24, 2024 - Numerous patent service providers may seem appealing at first glance if thorough due diligence is not performed. A quick search for "file patent application" will produce sponsored ads for online providers promoting a quick, easy, and budget-friendly DIY approach to patent filings. However, what is marketed is often not the best option for a startup looking to optimize for long-term growth and investor appeal.
Strategic, attorney-led patent searches and applications can still be efficient. Lloyd & Mousilli, a boutique law firm specializing in intellectual property, technology law, and related litigation, designed its patent practice specifically with startups in mind.
(1) Book a free intake call at lloydmousilli.com/calendar
(2) Provide details and context about your business
(3) Electronic engagement letters and flat fee payments
Lloyd & Mousilli's patent practice includes seasoned legal counsel with practical experience in startups and small businesses. Their impressive resumes feature positions at companies like Apple and Dell, and the USPTO. Equally important is their experience as small business owners. Patent strategies for startups and small businesses differ significantly from those for larger enterprises, and there is no one-size-fits-all solution. The Lloyd & Mousilli team distinguishes itself by focusing on securing strategic protection in a cost-effective manner.
From the prior art search before your application is filed to enforcing your patent registration in court - Lloyd & Mousilli specializes in supporting startups through the entire IP life cycle.
Lloyd & Mousilli is a boutique law firm specializing in intellectual property, technology law and related litigation. From its founding over a decade ago, headquartered in Houston, Texas, Lloyd & Mousilli has championed the strategic use of intellectual property, counseling businesses from new startups to enterprises.
Lloyd & Mousilli, Attorneys & Counselors at Law
For Immediate Release
Houston, TX - June 9, 2024 - There are countless trademark service providers available and seemingly attractive if further due diligence is not conducted. A quick search for “file trademark application” will yield sponsored advertisements for online providers aiming to provide a quick and easy, budget friendly experience for a “DIY” suite of trademark filings. Unfortunately, what is marketed is often not the best choice for a startup aiming to be optimized for long term growth and attractiveness to investors.
Strategic, attorney led trademark applications can still be an efficient process. As a boutique law firm specialized in intellectual property, technology law & related litigation - Lloyd & Mousilli's trademark practice was built with startups in mind.
Lloyd & Mousilli's trademark practice consists of experienced legal counsel with real world experience in startups and small business. While their resumes are stacked with prominent experience at companies like Apple and Dell, as well as the USPTO itself - deserving equal attention is that they are small business owners themselves. Trademark strategies for startups and small businesses are not the same as an enterprise approach and there is no one size fits all solution. Focusing on obtaining strategic protection in a cost effective manner sets the Lloyd & Mousilli team apart.
From the clearance search before your brand launches to enforcing your trademark registration in court - Lloyd & Mousilli specializes in supporting startups through the entire IP life cycle.
Lloyd & Mousilli is a boutique law firm specializing in intellectual property, technology law and related litigation. From its founding over a decade ago, headquartered in Houston, Texas, Lloyd & Mousilli has championed the strategic use of intellectual property, counseling businesses from new startups to enterprises.
Intellectual property rights showcase a startup’s value, ability to dominate the market, and stand strong in times of adversity. Specifically, with trademarks and patents, startups are 10 times more likely to secure funding from investors and about 3 times more likely to have favorable odds when exiting as evidenced by a study from the European Union Intellectual Property Office (EUIPO). Accordingly, the acquisition of IP rights, for startups are fiscally essential in providing a durable foundation and may be correlated with the increase in filing in Trademarks from 28% to 72 and Patents from 10% to 44% from the initial seed stage to later funding stages. There are two key reasons why these IP protections incentivize investors to engage with startups.
First, IP protections are perceived as unique signatures connecting startups with a strong brand identity. This is significant to investors for three key reasons. First, IP protections demonstrate a sense of identity to investors for a startup’s potential recognition in the marketplace. Second, investors view IP protections as vital pieces to the construction of a valuable portfolio because they can provide tangible capital in future business dealings. Third, IP protections demonstrate to investors the startup is protected against infringement.
Second, IP protections, demonstrate a startup’s innovative nature. This is significant for investors for three key reasons. First, IP protections, especially patents, showcase a startup’s innovative qualities signal and demonstrate to investors the startup is unique and has strong technical capabilities. Second, IP protections, demonstrate to investors startups can establish dominance in the market because IP protections reduce competition by preventing the use of the startup’s mark. Third, IP protections signal to investors they are safe to invest because the startup could liquidate its assets for sale in unpredictable times of change.
With IP protections, investors are incentivized to fund your startup, leading it to have the ability to achieve fiscal success and dominance in the global marketplace. If you are interested in the potential to achieve fiscal success, recognition, and financial support from investors, please reach out to Lloyd & Mousill, a team of visionaries, who will protect your vision and future goals.
Equity, or ownership, is a company’s most expensive and most valuable asset. When splitting ownership, it is important to keep in mind that no one knows what the future may hold. You might expect that if you and your partner have equal ownership, that your work, time, or financial contributions will be equal. The reality, however, could be very different. You may end up bearing more of the workload than your co-founder and still have the same equity split. As the startup grows, each of your commitments and life priorities may change and your share of the equity split or your partners’ may no longer be representative of each of your contributions to the company.
Founders also have different ideas about the types of contributions they will be making, and this vision changes over time as the company grows. Some may envision taking an active role in daily operations and management, while others want to handle marketing, and some may prefer a more passive style of investment. It is important that the split in ownership be reflective of these styles. It takes time to understand these differences and how to work with them, and most startup founders do not have that degree of familiarity with each other, thus making a 50/50 ownership split a risk. Startup founders that negotiate longer are more likely to decide on an unequal split, as they have been able to discover and address important differences in their expected contribution levels.
Another risk with a hasty 50/50 ownership split is that it can lead to your startup falling apart fast. Compared to founders who took the time to establish a well thought and calculated equity split, those who neglected to have this discussion and chose to split equally shut down their companies significantly faster due to a fallout amongst the founders. This also applies to startup founders who are related to each other- they are more likely to spend less time negotiating equity, and in turn are also more likely to share equally and end up splitting faster. The consequences and tension of an ill established ownership split can be devastating for a startup.
A major consequence of implementing an equal ownership split is that it makes bringing in investors a lot more difficult- equal splits are sometimes seen as a sign of bigger issues within the startup. Investors tend to pay attention to the way co-founders divide ownership because it tells a lot about their experience level and engagement within the company. They may find an equal split to be impractical, and see it as an inability to negotiate seriously within and outside the company. Teams who quickly establish an equal ownership structure may face significant difficulty in raising their first round of financing, either in reduced ability to raise or in lower average valuations.
An equal ownership split between startup founders means that both partners have equal control and voting power. This inevitably leads to deadlocks and an inability to move forward on key issues, which at best could end up stalling the business. These stalemates can easily be avoided by having one founder maintain majority control, even through an almost-even split. This ensures one founder has majority voting power when it comes to important business decisions. Startup founders need to be able to compromise and negotiate for the good of the company.
Making these decisions can be overwhelming. Lloyd & Mousilli can help you implement the right ownership split for your startup. Our firm has the experience necessary to set your company up for success.
Your business name is not just a label; it's the beacon of your brand's identity, guiding consumers to the unique products and services you provide. In the entrepreneurial journey within the United States, where your brand essence is crucial to your market presence, the protection of your name isn't just an option—it's essential.
However, the formation of an LLC, just like a Corporation or Sole Proprietorship, while providing a foundation for your business structure, does not automatically shield your name from potential infringement.
Without robust intellectual property safeguards, your cherished business name remains exposed to risks that could undermine your brand and reputation, or even lead to a costly lawsuit.
No, an LLC doesn't protect your business name, and neither does a C-corp, S-corp or sole proprietorship. But trademark registration does. Read on to find out how your business name can be protected from legal risk and what you can do about it—starting today.
Your business name is not just a label; it's the beacon of your brand's identity, guiding consumers to the unique products and services you provide. In the entrepreneurial journey within the United States, where your brand essence is crucial to your market presence, the protection of your name isn't just an option—it's essential.
However, the formation of an LLC, just like a Corporation or Sole Proprietorship, while providing a foundation for your business structure, does not automatically shield your name from potential infringement.
Without robust intellectual property safeguards, your cherished business name remains exposed to risks that could undermine your brand and reputation, or even lead to a costly lawsuit.
Trademark protection is vital for business owners seeking to secure their brand identity against infringement, as LLCs and other legal entities do not offer this safeguard inherently. For entrepreneurs considering forming a business entity, understanding the trademark process and consulting with a trademark law firm for legal advice can greatly enhance their assets' security and ensure comprehensive brand protection.
An LLC, or Limited Liability Company, offers a blend of flexibility and protection, shielding owners from personal liability for business debts and offering favorable tax treatments, much like other corporation structures but with distinct advantages.
While essential, forming an LLC through filing a Certificate of Formation with your Secretary of State is merely the first step. Here at Lloyd & Mousilli, we dive deeper, preparing all vital corporate documents to ensure your business is a well-constructed fortress from the start.
Trademark protection is essential for any business, regardless of its structure, to safeguard its valuable assets and branding. Understanding the intricacies of trademark rights and the implications of trademark infringement is crucial for entrepreneurs and LLC owners looking to effectively shield themselves from potential legal challenges and liabilities.
But what about protecting the very essence of your identity—the name of your LLC, or your product or service? This is where trademarking, guided by the United States Patent and Trademark Office (USPTO), shines as your safeguard. Registering your business name as a trademark solidifies your claim over it, marking it as uniquely yours in the commercial arena.
A trademark not only includes the name of your LLC, but it also extends to the logo that represents your brand, ensuring you have exclusive rights to it. For many entrepreneurs, securing federal trademark protection through the United States Patent and Trademark Office (USPTO) can be a crucial step in safeguarding their legal name and preventing other companies from infringing on their ownership rights.
A trademark is a word, phrase, symbol, and/or design that distinguishes one company's products and services from a competitor. Trademarking empowers you to take decisive legal action against any misuse of your brand name, preserving the integrity of your brand.
A trademark is more than just legal protection; it is a declaration of your brand's uniqueness, differentiating your offerings from competitors', enforced by the stringent laws of the United States.
A trademark serves as a vital tool for new business owners, offering important legal reasons to protect their chosen business name and brand identity. By filing trademark applications with the US Patent and Trademark Office and conducting a comprehensive trademark search, small businesses can significantly lower the risk of litigation and safeguard their interests against competitors who may attempt to steal their business money or reputation.
With Lloyd & Mousilli's expertise in intellectual property, we guide you through the nuances of trademark registration with the USPTO, ensuring your business name commands the respect and recognition it deserves within your industry.
Our specialized team is ready to navigate you through the intricacies of trademark application. From identifying the appropriate goods and services class to crafting a comprehensive trademark strategy, our hands-on approach simplifies the process, giving you peace of mind and more time to focus on what you do best—growing your business.
By partnering with us, you ensure that your trademarks are legally secured, providing you and your limited liability company (LLC) with the necessary legal entity protections. Our approach not only clarifies whether an LLC can shield its owners from bankruptcies and lawsuits but also prepares you to combat scenarios where a business steals your intellectual property rights.
No. Granted, forming an LLC does offer a solid foundation for protecting your business identity. The structure of an LLC shields personal assets in legal situations. It also clearly separates the organization from its owners in the eyes of the law. However, forming an LLC alone does not guarantee automatic protection for your trademark or business name. To ensure your business name is fully safeguarded, you must undertake trademark registration at state or, ideally, federal levels for nationwide protection against infringement.
Forming an LLC protects your business in many ways:
Without appropriate steps to protect your LLC name, you may encounter legal challenges and brand recognition issues. Competitors might register similar names, potentially compromising your unique market identity and leading to disputes. Proactive methods like securing patents and trademark registration are vital for maintaining your LLC's distinctive character and preventing conflicts.
In summary, LLCs don't automatically secure your company name against competition or misuse. The power's in your hands to protect it. And how do you do it? Actively managing your brand, applying for trademark registration, and complying with relevant legal requirements. Only through these efforts can you realize the full benefits of an LLC in protecting your business name. That's the sure way to reap the rewards of long-term brand credibility and market position.
Take the first step in fortifying your brand's legacy. Schedule a free consultation with a Lloyd & Mousilli expert today. Or, if you're ready to propel your trademark journey forward, our straightforward trademark intake form awaits your key details to kickstart the process.
Let Lloyd & Mousilli be your companion in transforming your brand from vulnerable to invincible. Your business name, whether tied to an LLC, Corporation, or Sole Proprietorship, is the cornerstone of your identity. Protect it with the vigilance it deserves, under the vigilant eyes of the United States Patent and Trademark Office.
When incorporating a start-up company, founders are typically concerned with growing their company and bringing in capital to execute their vision. To properly set the company up for growth, the company needs to have a sound policy for allocating equity. There is not just one correct way for all start-ups to allocate their stock. Rather, there are many considerations that founders must address. The path to a sound corporate equity structure starts from the very beginning. Even before incorporation, meet with your co-founders and discuss these issues to ensure you start the right way.
After determining the amount of stock your company will authorize, which is the total amount of issuable stock, you will decide how much stock each founder will receive. The number of stock issued to each co-founder should be catered to each co-founders’ involvement and relationship with the company. If one of the co-founders has a passive role in the company’s business operations, it may not make sense to issue them the same amount as someone more involved. Although this may be a difficult discussion to have with your co-founders, it ensures that the ownership of the company rests with the members closest to it.
After determining the appropriate amount of stock each founder should receive, founders will need to execute some form of a stock purchase agreement. This agreement will dictate the terms of each founders’ ownership in the company. The value of each share at an early-stage company will likely be very low, so the purchase price will be small, but it is integral to enter into this agreement.
In these agreements, companies should consider whether they want to include provisions like right of first refusal, IP rights, limitations on transfer, vesting schedules, and other language that will solidify the boundaries of a given shareholders’ interest. A right of first refusal provision will give your company the initial right to buy stock from an existing stockholder that is planning to sell their interest before they can sell it to any other buyer. IP rights provisions will dictate what intellectual property will belong to the company after a stock purchase. Limitations on transfer can include many different provisions that essentially prevent the purchaser from selling their stock unless certain conditions are met. Vesting schedules are discussed below.
Founders should determine whether to implement a vesting schedule into their issued stock. A vesting schedule is a time-based restriction to issued stock, typically applied to founders’ and employees’ stock. It incentivizes critical members of the company to stay for the long-term by preventing the member access to all their issued stock until they have been at the company for a certain amount of time.
Founders may feel like a vesting schedule is an unnecessary restriction on their interest in the company but there are a few reasons that implementing a vesting schedule is a good idea. First, potential investors love, and often request vesting schedules. From the investor’s perspective, a vesting schedule provides some assurance that the company’s key members are in it for the long haul. Second, a vesting schedule also provides an assurance to co-founders. It may seem unlikely that any of your fellow founders would abandon the company, but it is helpful to provide an extra incentive to make sure.
It is also important to decide how many of the corporation’s authorized stock will be available to issue and how many will be saved for later issuance. As your company grows, you may want to offer employees some type of equity package as compensation. To do so, you would want to set up an option pool that you can eventually pull from. Typically, an option pool should make up about 10-20% of total authorized stock, with the remaining stock allocated among founders, advisors, and investors. It is crucial to decide on an option pool early on because it will dictate your corporation’s total available stock.
Start-up companies usually benefit from hiring advisors or consultants that are not typical employees but have some sort of expertise that brings value to the company. Allocating equity to advisors is a practical consideration because the start-up may not have enough money to pay a typical compensation and it can be attractive to investors. Since advisors will usually not be involved with the management of the company, they will not be issued a large portion of the company’s stock. When deciding to bring on advisors, consider the value that they are adding and how much time they will be dedicating towards the company, and allocate stock accordingly.
A capitalization table, or cap table, is a document (usually on a spreadsheet) that provides a layout of the company’s ownership distribution. After tackling the equity issues raised in this article, it is important to keep an updated cap table that documents how your company has allocated its stock and to whom they allocated it to. Therefore, the table will include all the stockholders, how much they own, what type of stock they own, how much stock the company has issued and how many are still available for issue.
There are several different software platforms that you can use to store your equity documents and produce a cap table for you. Carta and Pulley are two examples of commonly used platforms. The best way to make sure your cap table is properly constructed and regularly updated is to hire a law firm to manage this platform for you. Hiring a law firm administrator is especially helpful for start-ups engaging in multiple financing rounds because expressing the specific terms of each financing instrument can be difficult.
You should consider hiring Lloyd & Mousilli to successfully implement your company’s equity allocation plan. Our firm has helped form hundreds of startup companies, and we have the experience and expertise necessary to set your company up for past, present, and future equity allocation.
In determining whether you should form your company in your home state or in another state, consider your long-term goals. It may be a good idea to gage the preference of your target investors so that you don’t end up creating more complications for yourself by embarking on a more creative, non-traditional approach. As always, if you have any doubts at all, make sure you consult with your Lloyd & Mousilli team of experts.
As soon as you’re ready to materialize your idea and take the next steps in forming a team, building the idea or developing the application, entering into contracts, seeking investor funding, issuing stock options to your employees, advertising, or making a sale, you should consider incorporation. Some non-US residents also choose to incorporate in the United States to satisfy investor visa requirements or attract US investors.
Many accelerated growth companies choose to incorporate in Delaware at the earliest stages of their ventures. Read this short article to learn more: Why do Startups Incorporate in Delaware?
In short, incorporation is one of the EARLIEST steps that a founder should take in launching a startup venture. Note that a stock corporation (C Corporation) may not be the best choice for your specific goals and, if you have any doubts, you should consult an experienced startup lawyer.
Early on in a venture, founders tend to enter into agreements with co-founders, investors, developers, employees, and independent contractors. When you form a corporation, your corporation takes on the risk of these contracts so that you don’t have to. Reducing your business risk will be significantly more attractive to investors. A properly formed corporation provides directors and officers with indemnification against claims from third parties. In a sole proprietorship, by way of example, any personal debt or liability of an owner will allow the creditors to pursue the business, even if there are no ties between the owner and the business itself. A corporate director or officer’s personal finances will not, in many cases, be affected by any third party claims and any personal claims against a director or officer will not be imputed to the corporation. Also, by incorporating, you will ensure that the company will continue without disruption if you depart or suddenly die. There are limitations to this, which a lawyer can explain to you in more detail, based on prior case law and a review of your formation documents.
Incorporation allows you to freely transfer your shares, pursuant to state law and any restrictions in your stock purchase agreement. If permitted, you may be able to freely transfer your shares without the prior written consent of all the other shareholders. Most startups place restrictions on this transferability to protect the corporation and shareholders from certain share transfers by other shareholders. This right of first refusal is one type of restriction, where the corporation has a priority right to repurchase the departing founder’s shares in certain circumstances.
Investors at every stage of your startup, from angels to venture capitalists, will invest in your company in exchange for some corporate interest (usually stock or the option to buy it at a discounted rate later on). Although you are an integral part of your company, any investor is most interested in their return on investment in your company. To this end, and for other legal and tax reasons, any investor funds you receive should NOT be deposited in or co-mingled with your personal funds. You will need to incorporate or set up another form of legal entity so that you can open a bank account in the company’s name and proceed to receive investments and maintain the corporation’s financial statements.
When you, your team, and your contractors continue to turn your idea into reality, whether its an iPhone app or an e-commerce site, you are taking the first steps in building your company’s intellectual property (IP) portfolio. Your IP will include things like patents, copyrights, trademarks, and trade secrets. Your company’s IP is what investors, partners, acquirers, other team members, and your users will perceive as valuable. The value in your company’s IP is often what will increase the company’s valuation as a whole. If you invest in IP protection and a strategy for building a solid IP portfolio, then your company’s valuation will also increase accordingly. If you develop your IP prior to incorporation without taking the necessary steps to assign the IP to the corporation, then the company may not end up owning the IP in full, which may result in a break in the chain of title. This will negatively affect future investments, partnerships, and acquisitions at the due diligence stages. Remember to consider seeking protection for your IP in the company’s name as early as possible so that the chain of IP rights and title are not broken.
Corporations are able to use certain designations such as “Inc.” or “Corp.” as a suffix to their names, which may increase your credibility to investors, partners, and users of your products or services, particularly at the earliest stages.
Incorporating a business is the process of forming of a new entity that is recognized as a separate “person” under the law. At the very early stages of your business, you will need to decide which entity is the best fit for your purposes. This is often overwhelming for founders and first time business folks. The three types of entities discussed in this article (C corporation, S corporation, and LLC) all partially shield the individual owners from certain types of personal liability. They each have varying benefits regarding fundraising and stock option grants. They also each result in different tax implications or benefits, and provide your company with greater credibility among investors, clients, and customers.
A C corporation is the standard corporation structure. An S corporation is a corporation that has elected special tax status with the IRS. Both of these corporate entity statuses share the following:
The advantages of C corporations are:
The disadvantage of a C corporation is double taxation:
When a corporation is originally chartered by the state, it exists as a C Corporation. It will remain a C corporation unless the company wishes to elect S corporation status.
The main difference between a C corporation and an S corporation is the taxation structure. S corporations only pay one level of taxation: at the shareholder level. To choose S corporation status, a tax lawyer or accountant may assist with filing IRS Form 2553 and ensuring all S corporation guidelines are met. Since S corporation election is not required at the time of incorporation as a C corporation, a company may wish to momentarily hold off on S corporation election in order to consult with an accountant or tax lawyer.
Startup companies will choose an S corporation if the founders wish the benefit of a flow through tax treatment. In other words, a founder can include business losses on their personal tax returns as deductions, which may be particularly attractive during the early stages of a company. A startup can elect S corporation status before the financing stage and revoke S corporation status at the time of a financing. However, S corporation status prevents a startup from having entity (other corporations or LLCs) or non-US citizen/resident stockholders.
The disadvantages of S corporations, unlike C corporations, are:
A limited liability company (LLC) blends elements of partnerships and corporate structures. An LLC is an unincorporated association that protects the liability of a company.
Startup companies often avoid LLCs because most technology startups seek to grant options to employees and consultants, and it’s very difficult to get professional investors interested in investing in an LLC. LLCs provide no standard or easy way to grant such options. A startup may convert from LLC status to a C corporation but, depending on the state, there may be statutory limitations or additional requirements in doing so. Consultancy and bootstrapped businesses, on the other hand, are often the best choices for LLC status.
Benefits of LLCs:
Disadvantages of LLCs:
You should consult with the Lloyd & Mousilli team if you have any doubts about the appropriate entity type for your business.
People often compare the founder and investor relationship to a marriage- both parties have high expectations going in and expect it to last forever (or, admittedly less romantic, at least a long-ish term). The term sheet is the prenuptial agreement in the marriage analogy- with similar benefits of setting expectations for the relationship and establishing a defined process if the parties need to part ways.
Specifically, a term sheet is a document that provides a skeleton outline of the terms an investor and an entrepreneur’s company use to reach agreement on a financial investment in the company. Generally, the term sheet includes provisions related to funding, corporate governance, and liquidation events.
Negotiating a term sheet is one of the most critical parts of the equity investment process; it defines the expectations between the investors and company, and can make the ensure alignment on the more difficult issues that may arise over the course of the relationship.
In this article, we’ll discuss some of the issues that commonly arise from the entrepreneur’s objectives, the investor’s objectives, and how to best ensure alignment between the competing interests.
Often the most negotiated provision, valuation of the company is where the parties to a term sheet negotiation usually start. It is critical to get the valuation correct from the start, as it helps determine what portion of the company the founder retains and many other terms are ultimately dependent on it.
Valuation has many competing calculation methods that are subject to fierce debate, often depending on the stage of the company, development of any underlying technology, paying customers, users acquired, and other metrics specific to the industry and business model.
Once a valuation is established, the respective objectives of the entrepreneur and the investor have to be considered and are discussed further in the next sections.
As a founder, your motives and goals are typically the following:
When negotiating a term sheet as a founder, consider the investor’s motives and goals:
Investors can use different methods and tools to make sure that the interests of founders and key management are aligned with the investors’ goals for the corporation:
Throughout the negotiation process, each side rarely achieves all of their objectives. If there is limited capital, then the investor will have the upper hand with the company. If there are competitive term sheets on the table, then the entrepreneur will win important negotiation points from the investors.
Hopefully, you have developed an appreciation for the competing interests and objectives of both parties to the term sheet negotiations.
We stand ready to review your business needs and help you achieve your business objectives in consultation with your lawyer at Lloyd & Mousilli.
Considering the importance of investment into the growth of your company, the following are suggested references for your review:
Trademarking is a critical step for businesses seeking to establish their brand identity and protect their intellectual property rights. This article walks you through all the steps involved in the USPTO trademark process and trademark registration timeline, from filing to declaration of your Trademark.
Submitting your USPTO trademark application is exciting, and also risky. There are many steps to not only achieving trademark registration in the United States, but keeping it, as the USPTO enforces various fees and deadlines from the very start all the way through the life of your trademark. It is your responsibility to comply with these trademark laws.
Knowing the steps in the process can help eliminate uncertainties beforehand. If you need advice for your specific situation, it's best to retain experienced trademark attorneys who can guide you through the entire trademark process, including the initial trademark clearance and filing with the U.S. Patent and Trademark Office (USPTO).
This step takes about 3 months. Lloyd & Mousilli files the application on your behalf based on your use of trademark in commerce. The filed application is assigned with a Serial Number. This number should always be referenced when communicating with the USPTO.
Once filed, you can check the status of any application throughout the entire process by entering the application serial number at http://tsdr.uspto.gov/ or by calling the trademark status line at 571-272-5400. Alternatively, you can retain a United States trademark law firm such as Lloyd & Mousilli, and we will update you on the trademark application status on a regular basis.
After the trademark application is filed, it enters the official trademark application process. It’s crucial to monitor its status for any updates or requirements from the USPTO. A well-structured trademark application not only signifies ownership but also strengthens trademark rights, safeguarding your brand names, logo mark or design against potential infringement.
Once the minimum requirements are met, the application is assigned to an examining attorney. The examining attorney conducts a review of the application to determine whether federal law permits registration. Filing fee(s) will not be refunded, even if the application is later refused registration on legal grounds. This process takes about 1 month before moving onto step 3b.
To ensure a smooth progression in your trademark journey, it is essential to meet all statutory deadlines set forth by the United States Patent and Trademark Office (USPTO). Engaging with trademark attorneys can provide expert guidance to navigate potential trademark situations and enhance your trademark protections effectively.
If no refusals or additional requirements are identified, the examining attorney approves the mark for publication in the Official Gazette (OG). The OG, a weekly online publication, gives notice to the public that the USPTO plans to issue a registration. Approximately 1 month after approval, the mark will publish in the OG for a 30-day opposition period. Any party who believes it would be harmed by the registration may file an objection (opposition) within that 30-day period with the Trademark Trial and Appeal Board. No further action is taken until the opposition is resolved. Approximately 3 months go to step 8.
The publication in the trademark official gazette is a significant milestone in the trademark registration process, as it alerts the public and allows for a 30-day period where any relevant parties can file opposition to the registration. Understanding the nuances of trademark law and working with knowledgeable trademark firms can greatly enhance the chances of ensuring trademark ownership while avoiding pitfalls during the trademark journey.
If refusals or requirements must still be satisfied, the examining attorney assigned to the application issues a letter (Office action) stating the refusals/requirements. Within 6 months of the issuance date of the Office action, applicant must submit a response that addresses each refusal and requirement. Within 6 months go to step 4a or step 4b.
In the trademark registration journey, addressing Office actions promptly is essential to prevent delays in gaining official registration. Companies should maintain thorough documentation and consider trademark registration strategies to safeguard their brands against future infringement.
In order to avoid abandonment of the application, applicant must submit a timely response addressing each refusal and/or requirement stated in the Office action. With Lloyd & Mousilli, there is no reason for the application to be abandoned.
The examining attorney will then review the submitted response to determine if all refusals and/or requirements have been satisfied. Approximately 1 to 2 months go to step 5a or step 5b.
Timely responses to Office actions will protect your application from abandonment. If your application is abandoned, it can jeopardize your future with federally registered trademarks. By collaborating with a licensed trademark attorney, you can rest assured all responses will be timely.
If the applicant does not respond within 6 months from the date theOffice action was issued, the application is abandoned. The term “abandoned” means that the application process has ended and the trademark will not register. Filing fees are NOT refunded when applications abandon.
Abandoned applications are “dead,” since they are no longer pending or under consideration for approval. To continue the application process, the applicant must file a petition to revive the application within 2 months of the abandonment date. If more than 2 months after the abandonment date, the petition will be denied as untimely and the applicant must file a new application with the appropriate fee(s).
To make sure this will not happen, Lloyd & Mousilli offers this service to clients like yourself.
In short: If the applicant fails to act within the specified timeframe after an Office action, it may result in the abandonment of the application, marking a significant setback in the overall trademark registration process. That's why using services from a knowledgeable trademark team can significantly improve your chances of preventing abandonment and ensuring your desired trademark receives the necessary protections under current trademark statutes.
If the applicant's response overcomes the refusals and/or satisfies all requirements, the examining attorney approves the mark for publication in the Official Gazette (OG). The OG, a weekly online publication, gives notice to the public that the USPTO plans to issue a registration.
Approximately 1 month after approval, the mark will publish in the OG for a 30-day opposition period. Any party who believes it would be harmed by the registration may file an objection (opposition) within that 30-day period with the Trademark Trial and Appeal Board.
No further action is taken until the opposition is resolved. Approximately 3 months go to step 8.
Once the mark is published in the Official Gazette, all interested parties have the opportunity to review the registration and potentially challenge it if they believe that they would be harmed by the trademark. This period is critical in the trademark timeline, as it sets the stage for any disputes that may arise, emphasizing the importance of thorough preparations by trademark applicants, including trademark searches and consultations with a qualified trademark expert.
If the applicant's response fails to overcome the refusals and/or satisfy the outstanding requirements, the examining attorney will issue a “Final” refusal letter (Office action). The Office action makes “final” any remaining refusals or requirements. An applicant may respond to a final office action by a) overcoming the refusals and complying with the requirements or b) appealing to the Trademark Trial and Appeal Board. Within 6 months go to step 6a or step 6b.
To successfully navigate the intricacies of the trademark application process, understanding the role of a trademark examiner is essential. A trademark examiner carefully evaluates each trademark application to ensure compliance with the U.S. Trademark Office's requirements, which can significantly influence the outcome of your trademark filing.
To avoid abandonment of the application, the applicant must submit a timely response addressing each refusal and/or requirement stated in the“Final” refusal letter (Office action).
Alternatively, or in addition to the response, the applicant may also submit a Notice of Appeal to the Trademark Trial and Appeal Board (TTAB). The examining attorney will review the submitted response to determine if all refusals and/or requirements have been satisfied.
If the applicant's response fails to overcome the refusals and/or satisfy the outstanding requirements, the application will be abandoned unless the applicant has filed a Notice of Appeal, in which case the application is forwarded to the TTAB.
The term “abandoned” means that the application process has ended and the trademark will not register. Filing fees are not refunded when applications abandon. Abandoned applications are “dead,” since they are no longer pending or under consideration for approval. Approximately 1 to 2 months go to step 7a or step 7b.
To maintain the integrity of your trademark journey, timely action is crucial to fulfill the requirements set by the United States Patent and Trademark Office (USPTO). Collaborating with a go-to trademarking expert can ensure that your new trademark application navigates potential challenges efficiently, ultimately safeguarding your trademark portfolio.
If the applicant does not respond within 6 months from the date the Office action was issued and the applicant has not filed a Notice of Appeal to the Trademark Trial and Appeal Board, the application is abandoned.
The term “abandoned” means that the application process has ended and the trademark will not register. Filing fees are not refunded when applications abandon.
Abandoned applications are “dead,” since they are no longer pending or under consideration for approval. To continue the application process, the applicant must file a petition to revive the application within 2 months of the abandonment date, with the appropriate fee.
If more than 2 months after the abandonment date, the petition will be denied as untimely and the applicant must file a new application with the appropriate fee(s).
Abandonment of a trademark application can have serious implications for your company, impacting your marketing strategies and overall reputation in the marketplace. To mitigate risks associated with trademark abandonment, it is advisable to engage a trademark/patent attorney who can help navigate the complexities of the trademark process, ensuring thorough documentation and adherence to the specific timelines set by the USPTO.
If the applicant's response overcomes the refusals and/or satisfies all requirements of the “Final” refusal letter (Office action), the examining attorney approves the mark for publication in the Official Gazette (OG). The OG, a weekly online publication, gives notice to public that USPTO plans to issue a registration.
Approximately 1 month after approval, the mark will publish in the OG for a 30-day opposition period. Any party who believes it would be harmed by the registration may file an objection (opposition) within that 30-day period with the Trademark Trial and Appeal Board. No further action is taken until the opposition is resolved. Approximately 3 months go to step 8.
If the applicant's response does not overcome the refusals and/or satisfy all of the requirements and the applicant has filed a Notice of Appeal with the Trademark Trial and Appeal Board (TTAB), the appeal will be forwarded to the TTAB. Information about the TTAB can be found at www.uspto.gov.
Timely communication with the Trademark Trial and Appeal Board (TTAB) can greatly influence the outcome of your appeal process. By conducting a comprehensive trademark search and working closely with an experienced trademark lawyer, you can better navigate the complexities surrounding your trademark application filing and enhance your chances of final trademark approval.
Within approximately 3 months after the mark published in the Official Gazette, if no opposition was filed, then the USPTO issues a registration. If an opposition was filed but it was unsuccessful, the registration issues when the Trademark Trial and Appeal Board dismisses the opposition.
After a registration issues, to keep the registration “alive” the registrant must file specific maintenance documents. Between 5 to 6 years go to step 9 and every 10 years go to step 10.
After the registration is issued, the trademark owner must ensure they comply with maintenance requirements to keep their trademark alive and enforceable. Understanding the trademark timeline is critical, as maintaining attention to filing deadlines and renewal trademark applications can significantly influence both revenue and the integrity of the brand's legacy.
Before the end of the 6-year period after the registration date, or within the six-month grace period after the expiration of the sixth year, the registration owner must file a Declaration of Use or Excusable Nonuse under Section 8. Failure to file this declaration will result in the cancellation of the registration.
It’s important for brand owners to understand the potential challenges that can arise after the initial trademark registration. Being proactive and incorporating trademarking strategies can greatly assist in addressing issues related to trademark needs throughout the extensive trademark clearance process and ensure that the brand continues to thrive within the trademark timeline.
Within one year before the end of every 10-year period after the registration date, or within the six-month grace period thereafter, the registration owner must file a Combined Declaration of Use or Excusable Nonuse/Application for Renewal under Sections 8 & 9. Failure to make these required filings will result in cancellation and/or expiration of the registration.
The trademark timeline, vital for securing brand identity, begins with the effective filing date and ends with a trademark certificate issuance, highlighting the importance of submitting well-structured trademark applications to the United States Patent and Trademark Office (USPTO). This process reviews logos, slogans, and descriptions against pre-existing trademarks under common trademark law, enhancing success rates. A comprehensive trademark search further increases the chances of eventual registration, and it can help greatly in refining your mark.
The trademark registration process unfolds in critical stages, from preliminary trademark clearance to avoid conflicts with similar trademarks, to the thorough examination by the USPTO. This evaluation against existing records is essential to prevent trademark office scams and align with the Trademark Act. The timeline extends with each stage, notably through publication periods in the Official Gazette, which invites public opposition and establishes the trademark portfolio. Essential actions like filing Section 8 Declarations maintain trademark validity, guiding through trademark registration's complexities.
Ensuring successful trademark registration involves a structured USPTO trademark timeline, which requires attention to each step, from a detailed pre-filing trademark search to identifying conflicts with existing trademarks, to timely actions that lead to the issuance of the trademark certificate. This regimented approach addresses every facet of the trademark journey today, emphasizing the critical nature of deadlines and detailed documentation in achieving trademark approval, underscoring the necessity of adherence to U.S. trademark practice and laws for a robust trademark portfolio.
If you would like more specific guidance about the trademarking process as applicable to your scenario, schedule a free 15-minute strategy session with Lloyd & Mousilli.
Our award-winning trademark and patent lawyers have counseled everyone from the Fortune 500 to startups locally, nationally and all around the world. Whether you're a new startup wanting the competitive advantage of a registered trademark, or would like advice on your existing portfolio of trademark registrations, your legal needs will be covered. And if your company requires international IP protection, we can also help you secure international trademark registration with offices such as the World Intellectual Property Organization.
The 2017 program includes:
The valuable time that you invested in coming up with just the right creative name and developing the branding and marketing around that company name is impossible to measure. After creating signage, letterhead, and advertising materials the last thing that you want to learn is that another company has sent you a cease and desist letter to stop using your company name. This costly mistake can be avoided by taking proactive steps on the front end to ensure that you have all the rights to use the name you choose through trademark searches and registration.
With this in mind we offer the following guidelines for trademark protection for your business. This is a brief but critical overview of what trademark rights businesses should protect and, most importantly, how.
Often businesses have no idea what should be protected by trademark registration, since it extends far beyond just your company name. Here are a few of the items that you should consider seeking trademark protection for your startup.
First, a small business should always protect its company name. Your company’s name is how consumers, your customers, find you and your goods or services (e.g., Nike, Amazon, Apple, McDonald’s, etc.). Without protection a competitor can open shop under a highly similar corporate name and siphon away business from you by confusing your customers as to the business they are patronizing.
Like your company name, consumers also locate your goods and services through your product names. As such, if you provide a product or a service under a particular name you must also protect the same to avoid competitors from using like names on their goods and services (e.g., iPhone, Wii, Explorer).
In addition, it is not only the names of products that should be protected but logos as well. The Nike Swoosh, the Adidas three stripes, and, of course, Apple’s now iconic apple with a bite are all examples of logos that serve as trademarks.
If you use a particular advertising slogan in connection with the promotion of your goods and services these should also be protected as a trademark. Think of
Often businesses wonder if trademarking is worth the cost and efforts at the early stages. In addition to the potential savings of avoiding a costly rebranding after learning that the name you have been using is trademarked by another company that has sent you a cease and desist letter, here are a few of the benefits of having a trademark registration for your startup.
Having your trademark registered with the U.S. Patent and Trademark Office makes them easier to uncover by those doing trademark searches to see if their own trademark is available to be registered. This, in turn, helps to prevent the adoption of confusingly similar marks by third parties who may not choose a specific trademark similar to yours if they see your trademark is already registered with the U.S. Patent and Trademark Office.
Only trademarks that have been registered with the U.S. Patent and Trademark Office have the authorization to use the® symbol in their advertising and marketing. The right to use the ® symbol in connection with your trademark which, in turn, also deters potential infringers from adopting or using a similar trademark to yours. It is also a great way to communicate that your brand is legitimate and valuable in a crowded field of imposters and cheap knock off brands.
Unfortunately it is a reality that we often have to resort to filing lawsuits to enforce trademarks against infringers that don’t respond to cease and desist letters. When your trademark is registered it increases the type of monetary damages you can demand in a lawsuit if it is later infringed upon such as the ability to recover lost profits associated with the infringement including the possibility of receiving treble damages in certain circumstances as well as recovering attorneys fees. Essentially, having a trademark registration really pays for itself multiple times over.
If your trademark is used in connection with goods this is a key factor. Once registered your trademark registration can be provided to the U.S. Customs and Border Protection that will block the importation of any goods into the United States bearing a trademark that infringes upon yours.
In this digital commerce age where many brands are distributed in online marketplaces like Amazon and eBay, one of the most powerful weapons that you have against counter-fitters and unauthorized distributors is their infringing use of your registered trademarks. With a trademark registration, it is relatively straightforward to provide notice to these online marketplaces to remove the infringing listings in the quickest fashion possible.
If you have yet to begin use of your product or service name it is imperative that you research to see if it is available. A properly conducted research report will let you know if the name you seek is available to be registered before you incur the expense of the non-refundable government filing fees required for registration. Also, a research report will ensure you are not adopting and using a name that is infringing upon another’s trademark. If this occurs, you could be forced to give up use of your name and even pay damages to the entity you have infringed upon, even if done innocently. A research report will avoid these issues and make sure your name is available to use with minimal risk.
You should be leery of any “free” trademark searches. Recall the old adage that you always get what you pay for. The “free” trademark searches are largely marketing ploys that do not provide the quality of search a trademark holder needs to determine whether their trademark is available for registration. As such, they may inform you your name is available to get you to use their trademark registration services when, in fact, their search algorithms fail to discover and advise you of actual trademarks you will be infringing upon if you begin use of your trademark. If this happens, your “free” trademark searches can be very expensive in the long run.
Once you have determined your desired name is available to trademark you should immediately apply to register it with the U.S. Patent and Trademark Office. Since trademark rights can be acquired either when you first use your trademark or first to file for an intent to use the same, it is imperative you get a trademark application on file with the USPTO as soon as possible to secure your rights in the trademark before someone else does.
Now that you have a trademark you need to make sure that no one else adopts and begins use of a confusingly similar trademark. Trademark infringement costs businesses hundreds of millions of dollars each year in lost revenue. Even if a competitor begins use of a similar, albeit not identical, trademark to yours it can still funnel customers away from your business. In essence, competitors create confusion between your and their goods and services by adopting a similar trademark to yours. They then use the good will you have created in your trademark through your marketing and otherwise to steal your customers through use of their infringing trademark.
To stop this before you notice a decline in business regularly monitor your trademark and others’ use of similar trademarks by watching trademark filings before the U.S. Patent and Trademark Office as well as online and through other traditional means.
There are a number of solutions for monitoring online use of your trademark. Seek the advice of a trademark attorney on options available to automate this monitoring process.
Once infringement of your trademark is discovered you must act quickly to stop the same. There are numerous ways to enforce your trademark depending upon how it is being infringed upon. For instance, if a competitor has registered and is using a domain name that is similar to your trademark, a domain name dispute may be the right avenue for you. If a competitor is simply using a similar trademark on their web site to yours than sending them a cease and desist letter or possibly suing them in court may be the best option. Or if they have applied to register a confusingly similar trademark with the U.S. Patent and Trademark Office you can oppose the registration of the trademark through several different means.
Of note, enforcement can be tricky as there are many pitfalls associated with determining first use of a trademark to ensure you are not enforcing against someone who may actually have acquired rights in their trademark before you. As such, seeking the advice of trademark counsel specializing in enforcement is always advised.
For many businesses, their brand is their most valuable asset. Through a few judicious steps in seeking trademark protection, monitoring use by others, and policing infringement, you can ensure that your company brand is secured and flourishes with the growth of your business.
Read a thorough discussion about Trademarks on the next article for a better view on how this works.
When a business is organized or expands ownership ranks, the owners need to consider what will be done when the relationship has run its course and it becomes necessary or desirable for the company and/or the owners remaining with the company (“Buying Owners” or “BOs”) to buy out a member of the ownership team (a “Selling Owner” or “SO”). There are several basic questions to address and, when those questions are answered, to document -- (i) What sort of events should trigger a buyout? (ii) When should such buyout be mandatory (and if so, for whom?) or optional? (iii) How should the buyout price be determined? and (iv) How should buyout funds be obtained?
A change in ownership status may be dictated by (i) ‘life’ events such as an SO’s death, disability, divorce or conventional retirement, (ii)an SO’s wish to “cash-out” all or a portion of the SO’s interest or (iii) disagreements among the ownership team. When an SO leaves the company in a ‘life’ event situation, companies will usually not want to have estate executors, ex-spouses or family members succeeding to SO interests and able to access company records or vote on company affairs. In other cases, SOs simply wish to monetize all or a portion of their interests and use the sale proceeds for personal purposes such as retirement, children’s education or investing in other ventures. In such situations, companies will not want interests falling into the hands of competitors or other potentially hostile persons. Finally, when involuntary termination or business disagreement is involved, it can get especially thorny. In light of the usually strong feelings (and occasional litigation) associated with these hostile situations, the company or the BOs will probably want to reclaim the interests and not deal with someone motivated by a desire for retribution. Anticipated third party interest in purchasing the company may call for some variation of these techniques.
Mandatory vs Optional. Three basic mandatory purchase techniques are (i) company (or BO) ‘call’ or right to purchase, and corresponding requirement of the SO to sell; on occasion, this is embodied in a so-called ‘right of first refusal’ or ability to buy if there is a desire to sell to a third party; (ii) SO ‘put’ or right to require the company (or BO(s)) to buy; and (c) mutual commitment to buy and sell under specified circumstances. Of course, parties are always free to negotiate voluntary deals in accordance with individual needs and preferences. With many of the events described in this article, it is highly unlikely that the parties can come to terms on a voluntary transaction. Typically, some sort of mandatory transaction is called for in cases where animosity is likely, such as a divorce or involuntary termination. That is, a company will want to be able to force a repurchase of interest from a terminated employee or one going through a divorce involving potential transfer of the interest pursuant to a decree or settlement. SOs not leaving on their own terms will often want to require a buyout.
Again, while parties are always free to negotiate a price, the likelihood of acrimony trumping rationality in an exit situation, makes it essential that a default mechanism be prescribed in advance. For unvested interests, the buyback price is usually de minimis. For vested interests, such mechanisms consist of an appraisal by an
objective third party or a formula based upon what is reasonable in the particular industry. All concerned should be mindful of tax consequences. If an appraisal is desired, parties need to specify how the independent appraiser(s) are determined and paid and required background. A specific firm can be identified in the original agreement. Buyout formulae can be based on multiples or percentage of sales or earnings/cash flow (EBITDA) for one or a number of years, balance sheet book value, or simply a dollar amount per percentage point, or a combination of metrics.
A minority interest in a closely-held business is almost always highly illiquid and, consequently, subject to a discount to its ‘inherent’ value. Accordingly, prudent employee-owners will often want a commitment to have their interests purchased at a fairly determined price in the event of an involuntary termination. A similar discount would likely apply in connection with a normal retirement although the company may not have the same motivation as it would with a termination. Companies will often bargain for a further discount in the event of a termination for cause.
Unless companies and BOs are likely to keep cash on hand for buyouts, business owners should prescribe a method to fund buyouts. For buyouts upon death, term or whole life insurance owned by the company is often quite helpful. Some companies maintain a standby line of credit to fund buyouts. In other cases, subject to tax considerations, companies may periodically put aside funds out of earnings to cover anticipated buyout obligations.
Our lawyers are ready to work with you to determine which techniques make the most sense now and as your business grows.
Often our clients will ask about how they can meet the requirements for a "specimen" in their application to register a service mark with the United States Patent & Trademark Office (USPTO), since it's usually easier to understand examples of specimens with physical goods and difficult to understand what can meet the threshold for a service.
A "service mark" identifies and distinguishes the services of one party from those of another and indicates their source. To obtain registration of a service mark under Section 1 of the Trademark Act, an applicant must submit a specimen showing the mark as used in commerce. A mark is deemed to be in “use in commerce” on services “when it is used or displayed in the sale or advertising of services.”
To be acceptable for registration in the USPTO, a service mark specimen must show use of the mark in association with the claimed services in their sale or advertising in commerce, namely interstate, territorial and commerce between the United States and a foreign country. “Interstate commerce" generally refers to buying and selling products, and selling or advertising services, across state borders or internationally.
The way the service mark is used in a specimen must be in such a way that customers would understand the service mark as identifying and distinguishing the services in a way that indicates their source. To be acceptable, a service-mark specimen must show the mark sought to be registered used in a manner that demonstrates direct association between the mark and the services.
For your trademark application, a single specimen as currently used in commerce is required in an application to register a service mark with the USPTO.
The mark on the drawing must be a substantially exact representation of the mark shown on the specimen. Furthermore, the designation must appear sufficiently prominent or stand out in the specimen (e.g., placement, size, or stylization) so that it will be perceived by consumers as a mark. For instance, if shown in the same font, size, and color as the surrounding text on the specimen, the designation may not be perceived as a source indicator and thus rejected as a trademark.
The following are examples of submissions that are acceptable as specimens for service application purposes.
The specimen must show the mark as actually used by the applicant in selling or advertising the services. Therefore, materials such as news articles and mock-ups of advertisements are not acceptable because they do not demonstrate the required use of the mark by the applicant. In some instances, a specimen or the specimen description may indicate that the specimen is not yet in use in commerce by inclusion of wording such as “internal only,” “printer’s proof,” “website coming soon,” or “under construction.” These types of specimens are typically not acceptable for a trademark application.
The following are examples of submissions that are not acceptable as specimens.
For our technology clients, often the only service is a software interface, website, or mobile applications (“apps”). Because apps are simply the interface that enables the providers of the services to reach the users and render the services, and the users to access those services, screenshots are often the only specimens that can be used. Common specimens of screenshots demonstrate the apps delivering the services. Such a specimen may not always depict proper service-mark use of the mark in connection with the identified services, but it may be acceptable if the displayed screenshot clearly and legibly shows the mark associated with the identified services as the services are rendered or performed via the app.
Similarly, applicants often submit screenshots of sign-in screens as specimens for online services, such as non-downloadable software services and application-service-provider services. Sign-in screens show that the services are available and the context indicates that they are accessed by inputting credentials. Such a specimen may provide a sufficient basis for accepting the sign-in screen, as long as there is no contradictory information in the record indicating that the mark is not associated with the identified services.
This detailed explanation may seem incredibly complicated, but it is critical to applying for and securing a trademark related to your services. Not fully appreciating these details will often lead to your trademark application being rejected and unnecessary delays in securing your brand. Lloyd & Mousilli attorneys are ready to help you understand the nuances of protecting your intellectual property and preparing your trademark applications to protect your company and brand.
The U.S. Patent and Trademark Office (USPTO) offers inventors the option of filing a provisional application for patent which was designed to provide a lower-cost first patent filing in the United States than traditional nonprovisional patent applications.
A provisional application does not have the same formal patent claim, oath, declaration, and other requirements of a nonprovisional application, but does provide the means to establish an early effective filing date in a later filed nonprovisional patent application. It also allows the term “Patent Pending” to be applied with the described invention.
This overview may seem complex, but it is extremely important to know and understand the specifics in applying and getting your services patented. Not fully appreciating these details will often lead to your patent application being rejected and unnecessary delays in securing your brand. Lloyd & Mousilli attorneys are ready to help you understand the nuances of protecting your intellectual property and preparing your patent applications to protect your company and brand.
Companies of all structures andsizes often find themselves desiring to conduct business under a name that isdifferent from the legal name that the business entity was formed with. Thevariance could be as slight as wishing to drop the entity type from the end,such as “LLC” or “Inc”, or may be a completely different name altogether. Ineither circumstance however, the required fictitious business name (FBN)paperwork still needs to be filed. It is critical to note that this processtakes 4-5 weeks from beginning to end so should be initiated well in advance ofwhen your business wants to begin using its new FBN.
When choosing a fictitiousbusiness name, the name must be “sufficiently different” from names that otherentities are already using. If your entity is an LLC, it can have the same FBNas an INC, but not as another LLC. There are online searches that your Lloyd& Mousilli team can run on your behalf to check the availability of the FBNyou’ve chosen.
After an FBN has been selected, if your business is not already registered with the county tax office, that paperwork needs to be filed. In California, FBN’s are done only on a county by county basis, so for each county requested, separate tax registrations are required. While these business registrations are done online, there is both a cost and diligence aspect as they also need to be renewed annually. From the time the registration is submitted online, it usually takes 48 hours to become effective. Depending on the needs of your company, your Lloyd & Mousilli attorney can help direct you on which counties are necessary to register within to maintain compliance.
After your business has filedits registrations with the tax office in the appropriate counties, it is timeto submit the FBN application itself. There is a fee associated with this whichvaries by county. In addition to being accepted by only by hand delivery or byregular mail.
After your business has filedthe FBN application, it is time to begin fulfilling the publishing requirement.In many California counties, FBN need to run in an approved publication for aminimum of four (4) consecutive weeks. There is a cost associated with this,which can vary greatly depending on which publication is chosen. Many publishingvendors will also file the appropriate paperwork with the county afterpublication is complete.
While it is fairly straightforward, the process is lengthy. If you need help filing the appropriate paperwork or making sure you're following the law, reach out to your contact at Lloyd & Mousilli and we will make sure that your business successfully registers its FBN in California.
Working with provisional patent lawyers will provide you with an expedient way to establish a priority date for an invention with the United States Patent and Trademark Office (USPTO). It is an effective and relatively cost-friendly way to safeguard your place in line with the USPTO while you decide whether to file a regular patent application.
A provisional patent application by itself is not a patent, but simply a holding place. To receive the benefit of the earlier provisional patent application date, a regular patent application must be filed within one year. Importantly, the 12-month period cannot be extended. Filing a provisional patent application also allows you to immediately start labeling your invention as “patent pending.” (See: Provisional Patent Applications Overview)
It’s possible but risky. Patent law is one of the most complex areas of law in the U.S; it can take a regular person weeks, even months, to learn the ins and outs. If you have that type of free time and dedication then you can certainly try to apply on your own. Even so, there’s still a chance of making a small mistake that can have a drastic impact by delaying your priority date and spending even more money on a patent attorney to clean up your mess. With patent law, it’s just not worth trying to do it on your own.
The provisional application requires a specification satisfying 35 U.S.C. § 112, except claims are not required. The specification must allow for someone skilled in the art to be able to practice the invention, and must disclose the best mode known for practicing the invention. Also, a drawing must be provided if needed to explain the invention. The provisional application must also identify the inventors who contributed to the subject matter disclosed in the application. Lastly, a cover sheet and the necessary filing fees are required.
All provisional patent applications received at the USPTO are kept secret until that patent “Issues.” When an application is issued (or approved), the entire application file becomes public. Inventors are encouraged to use “patent pending” on items that are in the provisional patent application phase in order to provide some type of warning to possible infringers.
No. Provisional applications for patent may not be filed for design inventions.
An applicant who files a provisional patent application must file a corresponding non-provisional patent application within 12 months to benefit from the earlier filing date. The non-provisional application must specifically refer to the provisional application. The USPTO will compare the non-provisional patent application with the provisional application and if the subject matter of the descriptions is determined to be the same in both applications, the USPTO will grant the non-provisional application with the earlier filing date. (See: Non-Provisional Patent Applications Overview)
Design patents will help you protect the unique shape, look, and form of your products that are independent of the function or usefulness of your invention covered by utility patents. Furniture, packaging, fashion articles are typical subjects for design patents.
Think of the classic Coca-Cola glass bottle, Crocs shoes, or the multi-color triangular shaped Mac computers as examples of products that have design patents. Filing a patent application for your product design is a smart way to enhance the value of your offering.
A design patent lawyer will help you protect the unique shape, look, and form of a product. The design patent does not focus on usefulness and instead focuses on the ornamental design of the invention. If the product has no unique or distinctive shape or appearance at the time it was created then it cannot obtain a design patent. A design patent allows the owner to exclude others from making, using, copying, importing a design substantially similar to the design claimed in the design patent.
Design patents are granted for the term of 15 years from the date of issuance (14 years if issued before 12/19/2013) and are not subject to maintenance fees. Like all patents, a design patent application should be filed with the assistance and guidance of a patent attorney because of its complexity.
A design patent is a great option for those with unique, ornamental designs for manufactured products. If your design is different enough that it is eligible for protection, you can receive a design patent on it. Common industries include apparel, furnishings, food and drink containers, and electronics.
You should consider applying for a design patent if your item has an ornamentally different design that qualifies for patent protection.
The elements of a design patent application should include: (1) the Preamble; (2) a cross-reference to related applications (if any); (3) a statement regarding federally sponsored research or development; (4) a description of the figure(s) of the drawing; (5) a feature description; (6) a single claim; (7) drawings or photographs; (8) an executed oath or declaration; 9) the filing fee, search fee, and examination fee.
No. Provisional applications for patent may not be filed for design inventions.
Yes. While a utility patent protects the functionality of a product or process, a design patent protects the unique visual elements of such product or process. As a result, design patents are made up of drawings that show the invention and, unlike a utility patent application, contains very little text.
A design patent protects the physical appearance of a product whereas a trademark protects the symbols or words used to identify the product as coming from a particular business.
No. Each application is limited to a single, distinct claim (design). If you intent to submit multiple versions of a design then you can attempt to include them but it’s possible that the USPTO may restrict your application to one version of the design and require additional applications for the other versions.
The following patents cannot receive patent protection: 1) purely functional designs; 2) designs that are intended for items that cannot be seen; 3) designs that have no fixed appearance, and 4) colors of an object.
The basic USPTO filing fee for a design patent application is $760 for a large entity and small entity’s fee is $380. To assist with preparing documents and filing the design patent application, our typical costs are around $1,500-$3,000.
A utility or “non-provisional” patent protects the invention or creation of a new or improved product, process, or machine. To obtain a utility patent, the invention must be useful and serve some practical or functional purpose and be non-obvious. Filing a utility patent application requires a tremendous amount of legal and technical expertise to define and layout the parameters of the invention and negotiate with the patent office examiner. Our experience in preparing applications is why so many of our clients turn to us to draft and file their patents.
A utility patent protects the creation of a new or improved product, process, or machine and is by far the most common filed patent application with the United States Patent and Trademark Office (USPTO).
To obtain a utility patent, the invention must be useful and serve some practical or functional purpose. While utility patents are more expensive than design patents, which protect a product’s ornamental design, they typically provide broader patent protection.
A utility patent expires 20 years from the application filing date, subject to the payment of appropriate maintenance fees. Filing for a utility patent application on your own is no easy task and carries too much of a risk for making a mistake. That’s why so many turn to the top-notch patent attorneys on Lloyd & Mousilli for their patent needs.
Most utility patent applications include:
1) a description and claim of the invention (called a specification);
2) drawings and the explanation of them (if necessary);
3.) a declaration or oath by the inventor;
4) fees for the filing, search, and examination of the patent
All non-provisional utility patent applications have to be in English, or have an English translation with a statement that confirms that the translation is accurate, and a fee.
Public disclosure is the making public of a concept or invention. In the U.S., an inventor’s public disclosure of their work made less than one year prior to their patent filing date will not count as prior art. This is referred to as a “grace period” for the inventor’s own disclosure. The grace period allows others to publish similar work or work that builds off your own work. These intervening publications can prevent or prevent patentability of your invention.
Utility patent protection extends to:
1) machines;
2) articles of manufacture;
3) processes, and (chemical) compositions of matter.
No. Provisional applications for patent may not be filed for design inventions.
While the length is subject to a myriad of factors, it generally takes between two and three years for the USPTO to determine whether to issue the patent.
Yes the software may qualify for a patent if the patent application produces a useful, concrete, and tangible result. The lawyers on Lloyd & Mousilli have helped many software startups obtain utility patents.
The general timing for each step in theapplication is provided in the outline below. In case of urgent needs,expedited processing is available as required.
The U.S. Patent and Trademark Office (USPTO) offers inventors the option of filing a provisional application for patent which was designed to provide a lower-cost first patent filing in the United States than traditional nonprovisional patent applications.
This is a prudent and essential step ofdue diligence to determine the scope and extent of the relevant prior art. Thesearch will identify any patents or patent applications that might beconsidered relevant to the inventive concept.
PatBase offers access to bibliographicinformation and Full-Text of patent documents from over 95 patent issuingauthorities worldwide. PatBase offers additional patent information and relatedservices, such as direct links to patent registers, legal status, copies oforiginal patent documents, translations and more. PatBase has been designedspecifically for patent professionals and patent searchers. It facilitates thecombining of full-text searching with the five main classifications andproduces results grouped by patent families.
Pat Base is used frame for completingand reviewing the patent prior art search is typically two weeks.
The prior art search typically takesfrom 5 to 8 business days. We generally give the client a couple of days to aweek to review the material before going over it and discussing strategiesgoing forward.
Search queries will be developed tofind issued patents and patent application publications that are relevant tothe invention:
1) Key word and Boolean operators willbe used and tested for scope and relevance;
2) Citation analysis using selectedpatents and patent applications will be included in search queries;
3) Specific patent classes andsub-classes will be evaluated and included for refining the
scope of broad keyword queries;
4) Assignee searches will be conductedwith class and/or keyword limitation.
A full set of claims and figures areprepared for review and evaluation. The drawings are prepared to ensure thatall embodiment and critical features of the invention are shown. The claims areprepared to ensure the full scope of the invention is covered and to confirmthat the nomenclature used for describing the features of the invention arecorrect. The inventor is asked to comment and provide feedback on the drawingsand claims. Edits and additions will be made as required.
With confirmation from the inventorthat the drawings and claims are acceptable, a full patent application isprepared complete with the following:
1) Background;
2) Summary of the invention;
3) Description of the figures;
4) Detailed description of theembodiments; and
5) Additional claim edits and additionsas a function of preparing the full specification.
The inventor is asked to review andprovide feedback on the patent application draft. Edits and additions are madeas required.
The filing forms for the patentapplication will be prepared and signatures will be required from theinventor(s). A determination of the filing status, (non-discounted, small andmicro-entity) will be made and the application will be filed accordingly. Acertification of micro entity status will be required if the inventorqualifies.
Upon approval from inventor usuallywithin 1 to 2 business days)
An acknowledgement receipt will beprovided along with a copy of the application as filed after filing.
Starting a business, opening a business bank account, and filing taxes are just of few of the tasks that require setting up an Employer Identification Number (Tax ID). How do you obtan an EIN? The process is fairly straightforward if you already have a Social Security Number and can be done online through the Internal Revenue Service (IRS) website. However, if you are a foreign individual or company, the process of obtaining an EIN becomes more tedious, and specific steps must be followed.
If you do not have a Social Security Number (SSN), the following process should be followed:
To guarantee accurate and timely completion of the EIN application process, it is highly recommended to have a business attorney act as your Third-Party Designee to apply for your EIN on your behalf.
You can use your EIN to start and conduct business in UnitedStates, open up a U.S. bank account, hire employees, comply with the InternalRevenue Service (IRS), apply for permits or licenses, and file taxes.
An EIN is a form of a Tax ID. Tax ID and EIN are sometimes usedinterchangeably to mean the same thing.
No, as outlined above in “The Process” section, by reaching out Lloyd & Mousilli, to act at a Third-Party Designee, we are able to apply for the EIN on behalf of yourself or your company—even if you do not have a social security number.
No, you can get an EIN even if you do not have an Individual Tax Identification Number (ITIN).
No, you do not need a U.S. mailing address to apply for an EIN. You can use a non-U.S. address to apply for an EIN.
Tax ID, Employer Identification Number, Tax ID Number, TaxIdentification Number, Federal Employer Identification Number, FEIN, EmployerID Number, Business TIN, Business Tax ID Number, Federal Tax ID Number, among othernames.
From the time theprocess begins by reaching out to Lloyd & Mousilli and providing basicinformation, to the IRS fully processing the paperwork is typically between twoand four weeks.
You will receive yourEIN via email.
Yes, you can use yourEIN to open up an account with any of the online services above.
A Social Security Number, or SSN, is anine-digit number issued by the government for tax identification. Social security numbersare issued to people in the United States. You must be a permanent residentcitizen or a temporary alien resident working in the country. If you weren’tborn in the United States, you have to fill out a form to ask to be issued asocial security number. This form is Form SS-5 and the United States ofCitizenship and Immigration Services office reviews your application.
An Individual Taxpayer Identification Number, or ITIN, is anidentification number issued to people who are not eligible for a socialsecurity number. An ITIN allows you to file a tax return and is issued by the IRSafter you fill out Form W-7. An individual taxpayer identification number is anine-digit number used for tax purposes only.
If you need help applying for your ITIN, Lloyd & Mousilli can help with that process as well.
The cost to get an EIN depends on your situation and can vary. Please reach out to Lloyd & Mousilli to receive an accurate cost assessment.
You may need an EIN if you have your own business.The EIN is used to identify you as a business.
If you answer yes to any of these questions, you need an EIN:
If you’re unsure whetheror not you need an EIN, contact Lloyd & Mousilli and we can help youdetermine the answer.
You don’t need an EIN if you don’t have a business or only have a soleproprietorship with no employees. Since an EIN is used to separate business finances from personalfinances, you don’t need an EIN as a sole proprietorship because you are yourbusiness. Remember that an EIN is needed to differentiate your personalfinances and those of a business. While you aren’t required to obtain an EIN asa sole proprietor in most cases, you may want to do so.
The types of business entities that needan EIN are C Corporations, S Corporations, Multiple-Member LLCs, andSingle-Member LLCs with employees. As a C or S Corporation, you are required to have an EIN. Ifyou don’t have a social security number or an ITIN, there are still optionsavailable. Reach out to Lloyd & Mousilli to help obtain an EIN for you soyou can start your corporation as soon as possible. If you’re forming a generalpartnership or a limited partnership, you also need an EIN. There’s no way towork around it, so scratch this major item off of your list so you can moveforward in your business.
If you’re forming an LLC, you may not need to have an EIN.It all depends on whether you’re forming a multiple member LLC or if you’regoing to hire employees.
If your LLC will have more than one member, you need anEIN even if you aren’t going to hire employees.
If your LLC is a single member LLC, you do not needto obtain EIN.
As long as you aren’t going to hire employees, you don’t have aKeogh plan, nor do you have a company that owes federal excise taxes – youdon’t have to use an EIN.
As a sole proprietorship, your need for an EIN is the samerequirements that a single member LLC follows, mentioned above.
The easiest thing to do in order to find out what you need as anew business is to contact Lloyd & Mousilli, and we will make sure yourbusiness is compliant.
There are multiple benefits to securingan EIN, even if your business doesn’t need one to operate lawfully. For example, you can’tobtain much of anything with your business name unless you have an EIN. Usingan EIN also increases individual privacy and lowers the risk of theft. If youoperate a sole proprietorship or single-member LLC, you’ll be able to use yourEIN when you work as an independent contractor instead of your social securitynumber.
If you believe you may already have an EIN for your business but are unsure (or simply can’t remember what it is), you may call the IRS Business & Specialty Tax Line at (800) 829-4933 to find out what it is.
There are also times when knowing the EIN of your employer isbeneficial. The best place to start that search is on your W-2.
The EIN for a public company can be found on their InvestorRelations website or their SEC Filings page.
If the company doesn’t post its SEC filings online, you can usethe SEC EDGAR online Forms and Filings database to find an EIN.
The process of obtaining an EIN as a foreign individual or entity is tedious, but it does not need to be stressful. Reach out to Lloyd & Mousilli to help determine whether or not an EIN is necessary for you, and to begin the process.
A patent for an invention is the grant of a property right to the inventor, issued by the United States Patent and Trademark Office (USPTO). Generally, the term of a patent is 20 years from the filing date of the application in the US.
The rights in the granted patent grant provide “the right to exclude others from making, using, offering for sale, or selling” the invention in the US or “importing” the invention into the US. What is granted is not the right to make, use, offer for sale, sell or import, but the right to exclude others from making, using, offering for sale, selling or importing the invention. Once a patent is issued, the patentee must enforce the patent rights themselves.
Patent law defines the general subject matter that can be patented and the criteria under which a patent may be obtained. Any person who “invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent,” subject to the conditions and requirements of the law.
The word “process” is defined by law as a process, act, or method, and primarily includes industrial or technical processes. The term “machine” used in the statute needs no explanation. The term “manufacture” refers to articles that are made, and includes all manufactured articles. The term “composition of matter” relates to chemical compositions and may include mixtures of ingredients as well as new chemical compounds. These classes of patentable subject matter taken together include practically everything that is made by man and the processes for making the products.
Utility. The first criteria for an invention to be patentable, it must have utility (i.e. be useful). For an invention to be useful, the invention must work, even if it works crudely, but it must do what is claimed.
To satisfy the utility requirement the claimed invention must be useful for some purpose, either explicitly or implicitly. Most often the applicant will make explicit utility statements in a patent application, but this is not always necessary. For example, if you were to invent a new and improved hammer the utility of the device would be apparent. Still, given that the utility requirement is a low threshold requirement there is little to be gained by hiding the ball and relying on what is implicitly disclosed or inherently present in the invention.
Novelty. Another criteria for an invention to be patentable, it must be novel (i.e. new) as defined by patent law, which define that an invention cannot be patented if:
(1) “the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention” or (2) “the claimed invention was described in a patent issued [by the U.S.] or in an application for patent published or deemed published [by the U.S.], in which the patent or application, as the case may be, names another inventor and was effectively filed before the effective filing date of the claimed invention.”
Non-obviousness. Even if the innovation sought to be patented is not exactly shown by the prior art, but it involves one or more differences over the most nearly similar thing already known, a patent may still be refused if the differences would be obvious. The innovation sought to be patented must be sufficiently different from what has been used or described before. The standard for non-obviousness is from the perspective of a person having ordinary skill in the area of technology related to the invention.
The components of a non-provisional application for a patent include:
(1) A written document which comprises a specification (description and claims); (2) Drawings (when necessary); (3) An oath or declaration; and (4) Filing, search, and examination fees. Fees for filing, searching, examining, issuing, appealing, and maintaining patent applications and patents are reduced for small entities that meet USPTO criteria.
• The U.S. joined the “first-to-file” world and the first inventor to file gets the patent, as opposed to the old USPTO system of “first-to-invent”
• Filing a provisional application is NOT a substitute for filing a non-provisional (utility or design) patent application
• The provisional filing fee is less than the non-provisional filing fees ($130 USD versus about $730)
• The attorney fees are typically substantially less to prepare a provisional application than the non-provisional application, depending on the complexity
• Once the Invention Disclosure Questionnaire has been completed by the client, a better estimate of the attorney fees can be provided
• The patent application needs to anticipate as many different ways of practicing the novel aspects of the invention as possible
• The non-provisional application disclosure requirements require at a minimum:
o (1) sufficiently teach others how to “make and use” the invention, and
o (2) show that they were “in possession” as of the date of filing of the entire invention AS CLAIMED in the follow-on nonprovisional application
• There is a risk of not including enough details if no provisional claims are submitted with the provisional patent application
Publication of patent applications is required by the American Inventors Protection Act of 1999. The patent application is generally published 18 months after the filing date. After publication, the patent application is no longer confidential and any member of the public may request access to the entire file history of the application.
A patentee is required to mark articles with the word “patent” and the patent number. Failure to mark means that the patentee may not recover damages from an infringer unless the infringer was notified of the infringement and continued to infringe notice.
Persons with an application for patent in the USPTO may mark articles sold with “Patent Pending” but this has no legal effect, since the protection afforded by a patent only starts with the actual grant of the patent.
• Reasonable royalties and other patent damages are court awarded judgments for successfully proving patent infringement by others on a patent that has been published and later awarded
• Reasonable royalties are only available from the time of publication and only if the infringed claims as published match the claims as issued
Founders have been known to set up LLCs at the earliest stages of their ventures for obvious reasons, including:
For more information, check out our article on What’s the Difference between a C Corp, S Corp, and LLC?
LLCs have some notable limitations and are not the best choice for accelerated growth startups for many reasons, including (but not limited to) the following:
Not so fast! You may run into some problems if you try to convert your LLC into a C corporation at a later date:
This is the essential first step prior to purchasing your Delaware Post Incorporation Documents and issuing stock to founders in your company.
Incorporating in Delaware is the overwhelming popular choice for anyone who is:
With Lloyd & Mousilli's’ Incorporate in Delaware service you will get:
This allocation is so critical and pressing that teams often push themselves to make a decision very early on, with very little information. In fact, a 2016 study, T. & N. Wasserman, The First Deal: The Division of Founder Equity in New Ventures, found that 73% of teams split the equity within the first month of the startup, at the heights of the uncertainty about their startup’s strategy and business model, their roles in it, and their levels of commitment to it. Most of the teams barely spent any time discussing the split, avoiding having the difficult conversations necessary to really understand each other’s potential contributions and intentions. And the majority of them split it statically – meaning the teams didn’t allow for future adjustments as new information emerged about contributions and commitment. This is a classic fallacy that we see too often for first time founders and is highlighted in the Wasserman study.
The study refers to teams who split equity equally, without much discussion as “Quick
Handshake” teams. The analysis showed that Quick Handshake teams incurred a significant penalty when raising their first round of financing, either in reduced ability to raise the round or in lower average valuations if they did raise. It's important to note that was only the cost in terms of financing; within the founding teams themselves, the destructive tensions caused by a bad split are often even more devastating.
How can founders avoid the angst, destructive tension, and legal problems that come with a bad equity split? The hard-learned advice was to adopt something more “organic” – something that takes seriously the remaining uncertainties and is able to adjust to their occurrence. The most common “organic” approach is to adopt vesting, in which the individual has to earn his or her equity stake instead of being granted it fully at the time of the split. In the U.S., this vesting is almost always time-based, but about 10% of teams adopt milestone-based vesting, which requires clearly-definable milestones, a concrete division of labor within the team, and other characteristics lacking in many founding teams. Vesting is a huge improvement over the static splits that pervade Silicon Valley. However, in many cases, time is a weak proxy for the creation of value in a startup, making it an imperfect basis on which to split.
To avoid these typical pitfalls for cofounders, an excellent resource on the topic of equity distributions for startups is the Slicing Pie manual. Slicing Pie is a universal, one-size-fits all model that creates a perfectly fair equity split in an early-stage, bootstrapped start-up company.
Allocation of shares should be a simple formula based on the principle that a person's percentage share of the equity should always be equal to that person's share of the at-risk contributions.
What are "At-risk contributions" in this formula? They include time, money, ideas, relationships, supplies, equipment, facilities or anything else someone provides without full payment of it's fair market value. Every day people contribute more and more to a startup in hopes that it will someday generate a profit, go public or sell. Because contributions are constantly being made, the model should be dynamic, and not a simple static split. The model self-adjusts to stay fair as circumstances change.
There are two basic types of contributions to be considered in the calculations. Cash contributions consume cash, non-cash contributions do not. Time, for instance, is a non-cash contribution whereas a reimbursed expense is a cash contribution. The model behind Slicing Pie normalizes cash and non-cash contributions by converting to a fictional unit called a "Slice." A slice represents a normalized at-risk contributions. A slice is similar in many ways to a poker chip.
Here's the basic formula to be utilized:
An individuals % share = individual's Slices ÷ all Slices
At any given time, the above formula from Slicing Pie will provide a perfect equity split. The formula applies until the company breaks even or raises enough capital to pay participants for their contributions. At this point the split "freezes" and subsequently determines the distribution of dividends or the proceeds of a sale.
Not only does Slicing Pie determine a perfect equity split, but also it will help you calculate a fair buyout price, if any, when someone leaves the company before breakeven. This is better covered in our article entitled, "Thinking About the End- Equity Buyout Agreements".
Hopefully, this article has provided you with enough curiosity to really think through your approach for approaching equity allocation for your startup. Our attorneys are ready to help you work through these issues with your co-founders. We highly recommend that you purchase a copy of the Slicing Pie Manual, but you can access a free sample of the Slicing Pie Manual by Mike Moyer here.
It’s quite common, and even expected, for apps and online services to collect some type of personal information from users, ranging from names and emails to log and device information. Users have some expectations of privacy so that personal information isn’t used in unauthorized or annoying ways. But the reality is such that online service providers require users to relinquish at least some identifiable information for marketing, research and development, and strategic partnerships. This information is collected automatically by online service providers or is voluntarily provided by users (though most likely a combination of both).
Read about the California Consumer Privacy Act to get a better view on what obligations these companies have when collecting user information from California residents.
App developers and online service providers typically collect personal and anonymous user information to provide, improve, and develop services or products. However, they may also use such information for other (sometimes nefarious) purposes. The following is a non-exhaustive list of ways that app developers and online service providers use the personal and non-personal information that they collect from users:
App developers and online service providers should always use a publicly accessible and conspicuous privacy policy to disclose how personal information is collected, used, shared, and accessed, and what types of choices users have with regards to reviewing, updating, and controlling their own personal information.
Lloyd & Mousilli offers a fairly comprehensive Privacy Policy template generator. You can always consult with us if you have any questions around the legality of your privacy practices.
Congratulations on registering your new business! Or if you're still contemplating forming your business, and just trying to better understand the steps required for having a bank account under the company name, you're in the right place. Be sure you have seen our guide on incorporation here for a step by step analysis.
There are many benefits to having a bank account under the name of the corporation- checks printed under the company name, corporate credit cards with a host of perks, accounts on PayPal and other online processors, and receiving payments from your clients under your company name.
But beyond the benefits of opening a bank account in the name of a corporation, it is actually a necessary step for legal compliance. Having a corporate bank account helps prove that the company is not mixing the shareholders' personal funds with cash generated from the company. A corporation that does not open a bank account using the corporation's name puts the company's limited liability status in serious jeopardy.
The corporate resolution indicates to the bank the individuals who are authorized by the corporation to open the corporate banking account and sign checks. The individuals listed in the corporate resolution have complete authority to act on the corporation's behalf in regard to the company's bank account. Some banks will require a corporate resolution to open an account in the corporation's name.
Every person who is authorized by the corporate resolution to control the company's bank account must supply the bank with a photo identification. This allows the bank to verify the identity of each person who is authorized to make transactions for the corporation. Acceptable photo identification includes a state identification card or a driver's license.
Present the corporation's employer identification number (EIN) that is issued by the Internal Revenue Service. The EIN is a 9-digit number used to identify a corporation for tax and banking purposes. Most banks will not open a business account in the corporation's name without an EIN.
You can apply for an EIN by following this link to the IRS website.
Show the corporation's seal to the bank. The corporate seal contains information about a corporation such as the date when the company became incorporated, the state of incorporation and the legal name of the corporation. Banks may require a corporation to use the company's seal as a signature on all the corporation's banking documents.
Present the corporation's articles of incorporation to the bank representative. The articles of incorporation contain information about a corporation such as the number of shares the company has the authority to issue, as well as the legal name and address of the corporation. A corporation's articles of incorporation offer proof that the company has been established as a separate legal entity.
Often, you will be required to present the copy of your articles of incorporation that are file-stamped by the Secretary of State's office in the state in which the corporation was registered.
The specific documentation that the bank may require will often vary depending on the type of entity that you are opening an account for. Below you will find the documentation often requested based on the type of entity for your business.
Our corporate and transactional practice helps you generate the necessary corporate and founder formation documents and provides you with a detailed guide for how to use them. (Read the process of incorporating in Delaware if you're not familiar with the process yet.)
Lloyd & Mousilli's Delaware Post Incorporation service is a popular choice for anyone who:
With Lloyd & Mousilli's Delaware Post Incorporation service you will get:
A Copyright is a form of protection for original works of authorship fixed in a tangible medium of expression. Copyright covers both published and unpublished works. In short, U.S. Copyright law protects original works of artistic expression such as movies, books, songs, lyrics, computer programs, paintings, photographs, graphic designs and other similar works.
No. Once registration was required to protect a work under U.S. Copyright law. However, the current law is explicit: “registration is not a condition of copyright protection.” 17 USC §408(a). Copyright protection attaches as soon as “original works of authorship” are “fixed in any tangible medium of expression.” 17 USC §102(a). In other words, your words, images, code, music, paintings are protected as soon as you write them down, paint them, record them on film, or otherwise.
Registration gives you several additional protections not afforded to unregistered works. For instance:
You can register a copyright anytime during its statutory lifetime which is currently the life of the author plus 70 years. However, as set forth above, you can obtain certain benefits only by timely registration.
When someone infringes your copyright you are entitled to “actual damages” and “profits of the infringer that are attributable to the infringement” 17 USC §504(b). Proof of these forms of damages are highly subjective and often makes pursuing a legal remedy not worthwhile.
However, a copyright registrant may elect statutory damages in lieu of actual damages. 17 USC §504(c). Statutory damages ranges from between $750 to $30,000 per work and can even go up to $150,000 per work if the infringement can be proven to have been willful. Additionally, you may get attorney’s fees and costs at the court’s discretion. 17 USC §505.
The U.S. Copyright Office, part of the Library of Congress, is the official registrar of U.S. Copyrights. The cost to register a work varies on the filing timing- if the registration is needed within a few days, there is an expedited fee for several hundred dollars. Given the complexities of the process and the ability of defense lawyers in copyright actions to invalidate registrations that contain even the slightest of errors it is recommended that you seek assistance from an experienced service to register your copyrights.
Registering your works is affordable and, if done properly, grants you significant additional rights making it easier and more lucrative to enforce against infringement which may occur. If you do not do not register your copyrights as we have discussed you may lose certain statutory rights against infringers lessening the value of your work. Moreover, if you intend to sell or license your work in whole or in part registration makes it easier to do so and is often a prerequisite for companies who buy, license, or distribute works (e.g., publishers, record labels, etc.).
Accordingly, think of a copyright registration as an investment in your work that can result in significant benefits both by assisting to stop infringement as well as making your work more marketable for potential distribution thereof.
As always, if you have any questions regarding copyrights, please feel free to reach out to our attorneys.
Can you form an LLC in a state you don't live in? The answer is yes. Companies have flexibility when choosing where to establish their domicile. An LLC formed out-of-state is also known as a foreign entity.
Several states actively compete for new business formations; in particular, limited liability company (LLC) formation. The most popular, in no particular order, are New Mexico, Nevada, Delaware and Wyoming. Each state competes for a different part of the market. Unfortunately, there are many misconceptions about the benefits of registering legal entities in each.
Yes. That said, each state's corporation law differs in how you're protected, and the way state income tax is applied, so the goal is to find the state which works for you and form your legal entity there. Below is a guide to how the states differ when it comes to LLC price, privacy and asset protection.
Every state is different and you can form LLC in the state where you reside, but we find the low cost and simplicity of a New Mexico LLC often make the difference for business owners.
Here is a brief overview of your options with a lengthier analysis further down:
Navigating the LLC registration process requires careful consideration of business licenses and legal frameworks that vary by state. If you're seeking to establish an LLC outside your home state, it’s prudent to engage with qualified business attorneys who can guide you through out-of-state business requirements and ensure compliance with both federal law and local state laws.
With New Mexico, you enjoy all the benefits of an LLC at a fraction of the usual cost. New Mexico acknowledges the corporate veil and provides the same limited liability as other jurisdictions. There are no annual fees or annual reports. In other states, periodic reporting is really just an excuse to collect fees on businesses. New Mexico skips this step, saving you time and money.
Establishing an LLC in New Mexico is not only affordable, but it also streamlines the process by eliminating the need for annual fees and reports, which can burden businesses in other states. The pro-business environment and the flexible business regulations make New Mexico a favorable choice for those looking to form an LLC out-of-state, while ensuring that the corporation's veil is respected for maximum liability protection.
Delaware is most famous for its Corporations. The Delaware General Corporation Law offers hundreds of years of well-defined corporate case law to act as precedent.
For large corporations, such formalities are important. This is why many Fortune 500 companies are incorporated in Delaware. Small businesses do not benefit from these corporate laws, however. The only difference most owners will notice are the significantly higher fees that Delaware levies on its companies. Delaware LLCs offer privacy, too, but are simply not worth the extra cost versus the other three states we cover. See Why Do Startups Incorporate in Delaware?
While Delaware is a prominent choice for many corporations due to its established legal structure, small business owners may find that states with lower LLC formation costs provide a more advantageous environment for forming LLCs. By opting for an LLC in one of the other states suggested here, even if not a domestic LLC, business owners can benefit from lower fees and a straightforward business entity structure while still ensuring effective liability defense against potential lawsuits.
Wyoming is a haven for asset protection. If personal liability is a top concern, Wyoming's business entities offer a number of debtor friendly laws for those seeking protection from personal creditors. These protections come at a price, however. Wyoming’s filing fee is twice that of New Mexico’s, plus there is a $50 annual report which must be signed by someone. This means if you want true anonymity, then you are stuck paying for an additional nominee service to handle the filing each year.
Wyoming offers unique protections for LLC members, primarily shield individuals from pursuing personal liabilities. While considering out-of-state LLC formation, it's vital to evaluate how the state's legal framework, including court structures and regulations, may affect your business operation and asset protection strategy.
Nevada is similar to Wyoming in being a haven for asset protection. They have a well-developed brand and their Secretary spends considerable sums on advertising the benefits of moving your company to Nevada. They have leveraged this brand value by increasing fees for eight straight years. This makes Nevada’s LLC one of the nation’s most expensive to start and maintain, just behind California. The Secretary also requires a list of members and managers which they do not publish… yet. In short, Nevada is not the best state for LLC privacy; it is the worst among these four.
Which of the above states appeals to you will depend on your situation. You may even select different states for different companies and operations. Large corporations will enjoy the familiarity of Delaware, asset protection specialists will utilize Wyoming, and those wanting a simple and inexpensive solution should choose to form an LLC in New Mexico.
Establishing an LLC involves understanding various complexities, including initial filing procedures and ongoing compliance requirements in different states. For business owners contemplating the question, "can I form an LLC in any state," it’s pivotal to consider the associated benefits of low LLC formation costs and the legal protections provided by each jurisdiction, including how home state court systems may influence business operations.
New Mexico is best suited for small businesses, cost conscious investors and privacy minded individuals. They are a good fit for internet businesses, consulting, real estate and other location independent businesses.
New Mexico's favorable conditions for business formation include the absence of annual fees and a lack of extensive regulatory requirements, making it a prime location for new LLC entities. Business owners seeking privacy protection for LLC owners, benefit from the pro-business state’s advantages can streamline their LLC formation process, ensuring compliance while safeguarding their business assets effectively against potential legal action.
New Mexico LLCs are the cheapest anonymous LLC in the USA. There are no annual reports which saves hundreds of dollars over the life the company. You only need to maintain a registered agent in New Mexico.
Members and Managers are not listed. Only the Organizer (us) has to list their name. With no additional annual reports, there are also no additional chances for your name to be exposed or nominee services to pay for.
Online business formation services like Lloyd & Mousilli streamline this filing process, help you maintain and enforce your privacy, and navigate state regulations.
New Mexico companies offer the same corporate veil as other states. This means you are not personally liable for the company’s debt - hence the “limited liability” in limited liability company.
With New Mexico, you enjoy all the benefits of an LLC at a fraction of the usual cost. In other states, periodic reporting is really just an excuse to collect fees from businesses. New Mexico skips this step, saving you time and money.
New Mexico LLCs are suitable for small-business owners most of all due to the lower entry fees and protections—plus, your ownership is protected and private if you desire privacy. The state is not well suited for large corporations, however. If you are a large company, then you should consider Delaware or Wyoming.
Establishing an LLC in New Mexico provides a straightforward path to enjoy the advantages of a traditional limited liability company while benefiting from low entry costs and privacy. And if you are in New Mexico and considering in-state LLC formation, you may find the absence of annual fees appealing, alongside the strong business asset protection that helps mitigate exposure to creditors and lawsuits.
Delaware offers over a hundred years of well-defined corporate case law to act as precedent. They also have a dedicated court system for hearing business disputes called the Court of Chancery. This court system which ensures cases are heard quickly. However, if your creditor is pursuing you, then the last thing you generally want is a fast track trial, let alone constant litigation. They also do not have as favorable of asset protection laws. This combination makes Delaware ideal for large corporations, but not for small business.
For large corporations such formalities are important. It is also important to have a dedicated court system for complex matters. The only difference most small business owners will notice are the significantly higher fees that Delaware levies on its companies.
If a Delaware entity is a fit for your company, engaging with an LLC formation service can ensure that all necessary legal documents, such as operating agreements, are correctly prepared. Unsure? Lloyd & Mousilli attorneys determine what's best fit for your LLC size.
Delaware LLCs command several hundred dollars in fees, including a $300 annual franchise tax. The Secretary fee to change registered agents is $50. Again, large companies may not notice these register fees, but small companies certainly will.
Delaware allows anonymity and nominee officers. There are cheaper ways to obtain anonymity, though, like New Mexico.
Delaware companies offer the same corporate veil as other states.
You can obtain the benefits above for a much lower price elsewhere. Delaware has obtained a certain mystique because of the large corporations which reside there. However, you should not believe that Bank of America has the same needs as an entrepreneur. Find out more on Delaware Post Incorporation and Checklist here.
Overall, forming an LLC in Delaware might appear advantageous due to its established corporate system, specifically its Chancery Court; however, small business owners may find that business-enabling states with simpler regulations offer comparable benefits.
Nevada limited liability companies are among the nation’s most popular. This is due to their great asset protection features and even better marketing. Nevada remains one of the most popular states, but their sky-high fees have many second guessing—turning to other states offering similar LLC benefits.
There are several fees to start an LLC, not all of which the Nevada Secretary of State is up front about. You may be mistaken into thinking they only charge $75, but within 30 days of filing you must pay additional fee, e.g. members/managers list and a business license tax.
Hidden fees do complicate foreign LLC registration somewhat for the unaware. That's why an out-of-state LLC attorney can advise you on any hidden fees before they ever appear, starting with a free consultation. We deal with such matters all the time.
Just like the other states, Nevada allows anonymity. However, the Nevada Secretary of State still requires a list of Members and Managers in your LLC filing.
Because they will have your Members and Managers on record, there's nothing to stop the State of Nevada from later releasing this information if legally required to do so. And if the state suffers a data breach or hack, your Members and Managers may be disclosed inadvertently.
Therefore, if you really need to register your LLC in the State of Nevada, be careful. Your information is not truly anonymous.
When establishing an LLC, maintaining anonymity is an attractive feature for many business owners, though it requires some disclosure of LLC members and managers. It is crucial to utilize an online filing system that can facilitate the necessary legal documents and ensure compliance with various licensing and initial LLC filing requirements to avoid unwanted public LLC information exposure.
Nevada became popular state because of its asset protection. They provide the same corporate veil as other states, but also provide asset protection from personal creditors. Assets inside the LLC are not as easily accessible to creditors as personal assets.
The Nevada LLC certainly earned its popularity early on. Years of continual price increases have eroded its value however. Having to spend money before registered agent fees is an expensive pill to swallow. With Nevada's history of rising fees, those needing personal asset protection are often advised to consider Wyoming.
Wyoming companies have become popular as Nevada became less competitive. Wyoming does not market as extensively and is less well known. They also have a less developed financial system which can make establishing a bank account difficult, especially for cash-strapped new business owners.
Wyoming charges $100, twice New Mexico, to form an LLC. They also charge $50 each year after and there has been talk of raising it. Plus, there is a tax on annual reporting variable on the company's assets located and employed in the state of Wyoming.
When forming your LLC in a different state, you should carefully consider the long-term implications of these costs and how they compare to the other states, especially those offering more favorable financial conditions for LLCs.
Wyoming does not list owners, managers, directors, etc. There is an annual report which asks the name of the filer, thus necessitating the use of a nominee – further raising costs.
Business owners must be mindful that while Wyoming offers advantages like privacy, it also requires navigating its annual report requirements, which can add to costs through the need for nominees.
Wyoming offers asset protection similar to Nevada.
While the choice of which state to form your LLC in is personal, you can always seek advice from an attorney experienced in LLC registration.
Book a 15-minute strategy call here with the Lloyd & Mousilli team to discuss your situation and we'll recommend the business structure & state legislations best fit to your business. As a client, you'll get help with drafting & filing LLC formation documents and an operating agreement specific to your company.
Our corporate lawyers have counseled numerous clients, from startups to the Fortune 500, on business entity structuring matters, including foreign entity formation when necessary. We also specialize in other categories of legal advice for startups including securing funding and protecting intellectual property.
For more on this topic of Delaware corporations, you can read our article, Why do Startups Incorporate in Delaware. One popular reason for international startups to form a Delaware corporation with accelerated growth is to establish a US presence that will attract US investors, since most US investors will not invest in a foreign legal entity.
The State of Delaware website describes who qualifies as an incorporator in Section 101 of the Delaware General Corporation Law:
"Any person, partnership, association or corporation, singly or jointly with others, and without regard to such person's or entity's residence, domicile or state of incorporation, may incorporate or organize a corporation under this chapter by filing with the Division of Corporations in the Department of State a certificate of incorporation..."
The short answer is any person, regardless of where that person resides (in the US or outside), may form a C corporation in Delaware. There is no specific State of Delaware requirement that the person be a resident of Delaware or a US resident. The US government has little to no controls or restrictions on stock ownership.
It's also important to note that visa or immigration status has no bearing on ownership or interest in a Delaware corporation. A startup founder in Egypt, Ukraine, Croatia, Slovakia, or California can be a stockholder in a Delaware C corporation. Any foreign founder in any country can own stock in a Delaware corporation. Our law firm regularly helps foreign founders that wish to setup a legal entity in the USA, often because venture capital and other investors will often require the US entity formation as a prerequisite to writing a check for investment.
The question of employment in a US corporation is a different issued, however. The US government can and does regulate foreign workers working in the United States. If you plan to work for a corporation in the United States and are not a US citizen or green card holder, proper work authorization will be required.
If you are a non-US resident founder looking to expand your startup or business, or if you have any questions surrounding your legal status and qualifications as a non-US resident, the Lloyd & Mousilli team is ready to answer all your questions to understand your visa options. Book a free consultation call here.
Prior to selecting the state of incorporation, entrepreneurs should take into account factors such as the size of their business, the market for their product or service, the jurisdiction, business licenses required, and future goals.
Startups and large corporations have traditionally preferred Delaware to register their LLC, since Delaware law provides businesses greater flexibility in their corporate structure and stock options. In recent years, Texas has emerged as an attractive alternative to California for startups, particularly those managing rental properties or planning to form a holding company.
Yes. Here are some of the different states California companies can incorporate in and the pros and cons of each:
Any LLC registered in a state other than California is a foreign LLC and would need a foreign qualification in California to transact intrastate business in California.
California law classifies transacting intrastate business as the physical presence of company officers, employees, offices, or other facilities within California, or if the business plans to develop extensive commercial relations within the state over a long period of time. However, your business does not need to be registered in California if your only connection to California is hiring independent contractors located in California.
You may not have any option other than registering your LLC in California or registering it as a foreign LLC in California if your online business hopes to solicit customers in the state. Failure to register in California can bar businesses from bringing lawsuits in the state.
The inability to utilize California's court system can be particularly detrimental to online businesses with valuable intellectual property prone to infringement. If you wish to register as a foreign LLC in California, then you must provide the same information needed to create an LLC in your state of incorporation and pay all the fees required to register and maintain LLCs in California.
Unsure of where to go next? Lloyd & Mousilli provides startup legal advice and functions as your Registered Agent. Schedule a free strategy session to kick off the process. We help you navigate the new LLC registration process, regardless of your jurisdiction, and set up a solid legal framework for your startup. Read the case studies of numerous small business owners who had our help in finding the best fit entity structure for their company.