San Francisco Business Lawyer Blog

Google "free contracts online" and you will find a profusion of websites touting inexpensive legal documents without the need to consult an attorney. While this may seem like an appealing alternative, the use of such online forms can be risky business indeed. I regularly advise established businesses and entrepreneurs on a wide array of business services, including contract formation.

Using a document that is not comprehensive, clear and specific to your specific circumstances can result in expensive and lengthy litigation if the insufficient form leads to a deal gone south or a lawsuit. Commercial contracts should include tailored, customized provisions in the vast majority of instances. These critical clauses may be missing when downloading a generic contract from the Internet.

Key Clauses for Commercial Contracts

Severability: If a court decides that any of the provisions in a legal contract are unenforceable, the court can "sever" that provision from the contract, and enforce the remainder of the contract.

Choice of Law and Forum: It is imperative to designate which state law will control in the event of a dispute arising from the contract. Certain areas of the law, employment law for instance, often have substantial state law implications. The generic nature of online legal forms may not address state law issues or requirements. This missing element can render the parties unprotected against serious financial and legal consequences.

Damages: Parties may agree in advance to a specified sum of money which will be the "liquidated damages" in the instance of a valid breach of contract claim. Inclusion of a liquidated damages clause removes the non-breaching party's requirement to prove actual damages. This clause can dramatically streamline dispute resolution.

Time is of the Essence: Delayed performance of the terms of the agreement would be a material breach.

Attorneys' Fees: This clause specifies that the non-prevailing party will pay the attorneys' fees of both sides in any legal dispute.

Indemnification: One party agrees to release another party from future liability.

In addition to problems that can occur when online legal forms lack sufficient provisional clauses, there are other potential issues to look at.

Lack of Specificity

The intention of downloadable, publicly available legal forms is to cover a broad range of common scenarios. The inherent problem here is obvious. Every business and situation has unique aspects. It is highly unlikely that a standardized, replicated form will adequately address the particular circumstances involved in a specific agreement.

Out of Date

It is the nature of the law to be in a continual state of flux and change. It is your attorney's job to stay abreast of such changes and advise you accordingly. More often than not, it is impossible to know the creation date of an online legal document. Determining whether the document addresses recent legal developments is difficult to do without the help of an attorney. This lack of information leaves you essentially "in the dark" as to the relevance of the content of many online legal forms.

Clarity of Writing

An overwhelming number of published court cases stem from unclear written agreements. The precision of words in a contract dramatically affects the meaning and enforceability of the agreement. It is essential to have competent counsel when drafting important legal agreements. Gambling with anonymous online contracts can be a short-sighted, costly and regrettable act.

To learn more about business contracts check out What Makes A Contract Valid in California Anyway? Part 2: Consideration and Other Formation Requirements.

Continue reading "Form Contracts from the Internet? Think Again! (A Primer for San Francisco Businesses & Entrepreneurs)" »

Trademarks differentiate products and services from competitors and enable consumers to reliably associate the quality of your goods and services with your brand.

All businesses and companies use names, logos, taglines, domain names, colors and more to identify and distinguish their goods and services. As a San Francisco trademark attorney, I believe that sound trademark protection and enforcement is essential to protect these valuable business assets.

Trademark Strength

Not all trademarks are created equally. Some are stronger than others, meaning they are entitled to greater legal protection. Distinctive marks are entitled to legal protection; however, may be distinguished on a scale of strong to weak as follows: Arbitrary, fanciful, suggestive and descriptive.

Generic marks are not eligible for trademark protection because they have become synonymous with a general class of product or service. Examples of marks which lost trademark significance through "genericization" include Escalator, Aspirin and Heroin.

Trademark owners are required to protect their marks from becoming generic by alerting the public to their trademark significance. Examples of widely recognized consumer products which have been subject to "genericization", but have maintained their trademark rights include "Photoshop" and "Xerox".

Fanciful and Arbitrary Trademarks

Fanciful and arbitrary marks are the strongest of trademarks. Fanciful trademarks are novel, original words, which have no connection to the product or service they represent. An example of a fanciful trademark is "Google".

Arbitrary trademarks are comprised of recognizable words, but they are not inherently connected to the related product or service. "Apple" is an example of an arbitrary trademark.

Business owners must carefully consider the pros and cons of selecting a business or product name. While fanciful or arbitrary trademarks are the strongest of trademarks, entitled to the strongest legal protection, it can be difficult for a new company using a fanciful or arbitrary mark to generate consumer association with their product or service due to a fanciful or arbitrary trademark's abstraction along with a new brand's relative anonymity in the commercial market.

Suggestive Trademark

A suggestive trademark implies the product or service it represents by the name alone. A suggestive mark differs from a merely descriptive trademark, because a suggestive mark requires a consumer to use some imagination to determine the nature of the product or service the mark represents. An example of a suggestive trademark is the name and associated logo of the men's publication "Playboy". The line between a descriptive and a suggestive trademark is not always clear-cut.

Descriptive Trademark

A descriptive trademark is one in which the word or mark literally describes the service or product. The product or service is immediately apparent in the mind of a consumer upon hearing or seeing the mark. No imagination is required whatsoever to make the determination as to what product or service the mark represents.

An example of a descriptive trademark is the optometry store and optical service facility, Vision Center. This type of mark receives little trademark protection. In fact, descriptive trademarks are only registrable on the Principal Register at the U.S. Trademark Office once the marks have achieved widespread consumer recognition, referred to as "secondary meaning". Secondary meaning is shown only by extensive advertising and evidence of consumer association between the mark and the product or service it represents.

Trademark Registration

Trademark rights in the United States are garnered by use of the mark. This differs from trademark law in other parts of the world, such as the EU, which has a system where trademark rights are secured only by registration of the mark, not use. In the U.S., registration of a trademark with the USPTO is not mandatory to secure trademark rights, but does provide important legal advantages.

The many benefits of federal trademark registration include: presumptive legal ownership of the mark, the right to use the ® symbol adjacent to the mark notifying the public of an existing federal registration, federal jurisdiction for trademark infringement claims and the right to recover lost profits, damages and costs as well as treble damages and attorneys' fees.

State trademark registration confers certain advantages as well. In California, as in other states, the Secretary of State's office maintains records of registered trademarks and will not allow others to register the same name. The mark, once registered with the state, appears on search reports and provides a deterrent to others considering the same or similar names.

Sources

United States Patent and Trademark Office -Trademarks

United States Trademark Office-Trademarks Basics

United States Trademark Office-Trademark Process

California Business and Professions Code sections 14200

California Secretary of State-Trademarks and Service Marks

Continue reading "Trademark Law 101 for SF Bay Area Start-ups and Entrepreneurs" »

In my experience as a San Francisco Bay Area start up company attorney I frequently talk with software developers, technology companies and other inventors and creators who seek to protect trade secrets by use of non-disclosure agreements and compliance with the rules of confidentiality. Trade secrets, confidential information and other proprietary assets must be secured to guard a company's unique competitive advantage.

In my last post entitled IP Protection for San Francisco California Entrepreneurs Part 1: Trademark & Copyright, I discussed the essential characteristics of trademarks and copyrights. In this post, I will describe the defining characteristics of patents and trade secrets.

Patent

A patent protects ideas and discoveries and grants a complete right to the profits of an invention by the U.S. Patent Office for a specified time. The criteria for a patent includes, novelty (previously unknown), "non-obvious" (something that an expert in the same field could not identify) and usefulness.

While awaiting federal registration of the patent, the company may mark the designs or product "patent pending". Once the patent has been issued, the product can be marked with "patent" along with the number assigned by the U.S. Patent Office. A patent holder can sell or transfer the patent to another, as long as the transaction is in writing, signed and notarized.

Trade Secret

A trade secret is a formula, practice, process, design, instrument, pattern, or compilation of information which is not generally known or reasonably ascertainable, by which a business can obtain an economic advantage over competitors or customers. The recipe for Coca Cola is the most famous trade secret.

For most businesses in California, trade secrets are invaluable assets. Trade secrets afford successful businesses the edge over competitors. This information can be in the form of ideas, devices, business procedures, formulations or recipes. With such intrinsic value at stake, businesses must keep proprietary information confidential and away from unethical competitors.

Companies attempt to protect their trade secrets with the signing of non-disclosure agreements. A non-disclosure agreement is a contract, where the parties agree to keep certain information confidential, shielded from public view.

If that secrecy is breached, the survival of the business itself may be in jeopardy. Conversely, just the allegation of trade secret violations or security breaches can place a business's reputation or a professional's career at risk.

Sources:

United States Patent and Trademark Office

Uniform Trade Secrets Act/CA Civil Code Section 3426-3426.11

Continue reading "IP Protection for San Francisco California Entrepreneurs Part 2: Patent & Trade Secret" »