Patent Copyright and Trademark intellectual property entertainment blog.

Trademarks and Clothing Lines:  Do I Trademark my T-shirts or Copyright it?

By far, the most popular question we get is in regards to protecting a clothing line, whether it’s a small startup t-shirt company or an established name brand apparel company with new designs, logos, or slogans.  This article will cover many of the basic questions and quandaries that many clothing lines have.

 What is protectable?  Can I protect the name?

 Trademarks

Having your attorney file a trademark application with the United States Patent and Trademark Office (“USPTO”), is the way to gain protection of the brand, as it can protect the name, logo, or slogan of the apparel brand.  To better understand what is protectable, let’s look at the classic example of Nike.  Nike, Inc. has several trademark registrations for the word “Nike” under different classes of goods and services.  One registration is filed in connection with their goods of shoes, while a different application is for sporting equipment, and another for backpacks.  Further, Nike has several design registrations as well, most notably the swoosh symbol.  Additionally, Nike has separate trademark registrations for its slogan “Just do it.”  So as you see, one company may have several trademark applications for the same word or logo, but just under different goods and services.  The more trademark registrations a company has, the greater the strength of its intellectual property portfolio.  To a startup clothingline, having multiple trademark registrations can attract more investors, and create greater confidence and valuation to your company.

Clothing has unique trademark issues compared to other goods and services.  Most importantly in regards to the filing process, a proper specimen of use must be submitted that shows the name you have used, on the clothing itself, and must appear in the right location and be used in a trademark manner.  Inexperienced attorneys typically receive ornamental rejections based on their specimen of use submitted during the trademark application process.  That is why it is critical to have an experience trademark attorney file the application the first time. 

Once the application is filed and ultimately approved and registered, the owner of the registration will received nationwide rights to enforce the trademark against other subsequent users.  Further, the owner will be able to license, either exclusively or nonexclusively, the right for others to use the trademark name or logo.  Licensing can be important to newer clothing companies that have established and created goodwill and a strong following of the brand, but have yet to develop the expertise or resources to manufacturer, distribute, or efficiently sell the clothing.  The clothing company can provide a trademark license to a separate company that is more experienced in manufacture, distribution and sales, while the newer company reaps the benefits of the license royalties.

Copyrights

Many people ask if they can copyright their clothing designs.  It depends.  The ornamental designs that will be placed on the face of a shirt should definitely be copyrighted.  In fact any unique and original work of authorship, i.e., a unique design, or the graphic or artistic portion that many t-shirt companies use on the face of their clothing can be copyright, assuming it is not substantially similar to another copyright holder’s work.  However, if the artwork is used to identify the brand or name of your clothing company, then trademark is probably more applicable. 

What about general patterns on clothing, can that be protected?  Sometimes.  For example, I have once litigated a copyright infringement case in which the copyrights were for floral patterns used on fabric of clothing.  So certain patterns that are original works for authorship can be and should be copyrighted.  So as you see, copyright protects more of the artistic patterns and artwork designs on clothing, whereas trademarks protect the name, logo, or slogan used to identify the brand of the clothing company. 

Patents

What about the shape and design of the clothing itself, how do I protect that?  Protecting clothing designs is more difficult.  Neither trademark nor copyright can protect the actual article of clothing.  However, sometimes protection may be afforded by patents, specifically design patents.  Design patent protection can be granted to nonfunctional aspects of clothing, i.e., the scope of protection only covers the ornamental nature of the design of the clothing.  So, it is possible, and we frequently obtain design patents for our clients on unique looking shoes, bags, and other accessories or apparel itself to protect the “way it looks.” 

Occasionally, an inventor may create some article of clothing that actually performs some specific function or has some utility to it.  For example, a shoe that has a built iPod sensory device that can monitor your heart rate.  In that case, a patent called a Utility Patent, would be filed.  Otherwise, design patents are typically used to protect the aesthetics of clothing.

Trademark Searching and Clothing Lines, the Most Important Step

When a new client calls me for the first time consultation and they say they have already started their clothing line and they have picked a name they love, I immediately discuss clearance and searching.  Simply because you have picked a name that you are married to, does not mean you can use it.  The worst case scenario is that you invest in a name and receive and cease and desist letter or worse a lawsuit telling you to stop and requesting damages and attorney fees.  So the name you picked may very well have been trademarked by another company.  That’s why it is extremely important to have an experience trademark attorney conduct a search prior to your adoption of a name.  Here are some common questions and my typical response to clients:

Client: But I have registered the domain name and got my DBA, so I am protected, right?

My response:  Wrong, simply registering domain names and a DBA is not actual “trademark use.”  To establish trademark rights, you have to actually use the trademark in interstate commerce.  And more important have a federal trademark application filed for you.

Client:  I have filed for a corporation using the name I want to trademark but I have not sold any apparel yet.

My response:  You still have not developed any trademark rights yet.  You need to use, i.e., sell the apparel with the trademark on it.

Client: I did my own search, and mine is different from another registered trademark I found, because the name I want to use is “X, Inc.” and their trademark is “X Clothing”.

My response: You will still most likely receive a rejection from the USPTO, because words such as “Inc” “clothing” “enterprise” “LLC” and/or “apparel” and deemed to be descriptive and do not typically distinguish your chosen name from other trademarks. 

Client: I saw a registered trademark with the same name that I want, but they only sell snow wear, and we sell water sports related clothing.

My response: Since the goods are very similar, you will likely receive a rejection.  Only in some cases you can avoid a rejection if the style and market channels of sales of the clothing are different enough.

Client:  Ok, so what should I do?

My response:  We should conduct a trademarks search.  First, pick a good, unique, nondescriptive name, so I can conduct a comprehensive trademark search, after which I will discuss with you possible conflicts in light of other existing registered or even pending trademark applications that have priority over your proposed new name.

Client:  What if I have been using the trademark for many years but I never asked an attorney to file a federal application with the USPTO.  And now there is a new guy on the block with the same name as me selling the same or similar products.

My response:  Let’s investigate to see if you have a claim for trademark infringement.  Also, if he filed a trademark application with the USPTO, we may also be able to file an opposition or cancellation proceeding in the Trademark Trial and Appeals Board. 

International Rights

So when you file for a trademark application for me, am I protected throughout the world?  No.  Filing a US trademark application with the USPTO will only afford trademark protection within the United States.  In order to protect and enforce your trademark against others in different countries, we must file in those individual countries.  You must contact me and discuss exactly which countries you are interested in so we can obtain a quote and determine the proper procedure for filing.  Sometimes, there may be a streamlined and more inexpensive method to file international trademarks such as using the Madrid Protocol system rather than filing applications in each individual country.

These are only some of the issues regarding apparel and trademarks and intellectual property in general.  As with any legal issue, always consult with a specialist, namely a trademark lawyer before you start or invest in your new venture or line of clothing.

© 2009 Michael N. Cohen, Esq. Mr. Cohen specializes in intellectual property and is a licensed patent attorney in Los Angeles, California. No portion of this article may be copied, retransmitted, reposted, duplicated or otherwise used without the express written approval of the author. Michael Cohen can be reached at 310-288-4500, www.patentlawip.com or

This article is not intended as a substitute for legal advice. The specific facts that apply to your matter may make the outcome different than would be anticipated by you. You should consult with an attorney familiar with the issues and the laws.

The Nevada Myth: Rethinking the Nevada Corporation

After you have decided that incorporating is beneficial for your business, some people consider incorporating in states outside of their home state. Most notably, Nevada has been promoted by many "incorporating services" as having incredible benefits as opposed to the client's home state. Other states such as Delaware and more recently Wyoming have also received consideration for incorporating. In some cases, depending on the facts of your business, there are some benefits in forming an out-of-the-home-state corporation in states such as Nevada. However, in the majority of cases the benefits of forming a Nevada corporation is simply a myth and will often be more expensive and troublesome than filing in the company's home state.

Law of the Land: Foreign Entities

This may be a surprise to many, typically, corporations will be governed under California law despite being incorporated in Nevada. Let's assume you do file in Nevada, yet you operate all of your business in California. Under this scenario, you are deemed to be a "pseudo foreign" corporation. If the corporation is a pseudo foreign corporation, California law in many areas will supersede the law of the state where the company was incorporated in. (See California Corporation Code §2115(b)). Therefore, for companies entirely based in California and doing business in California, practically all of the claimed benefits of incorporating in Nevada are out the window. It should be noted that if a Nevada corporation operating in California fails to qualify as foreign corporation, it may be subject to a number of sanctions. (See California Corporation Code §§2203, 2258, 2259).

Nevada v. California

The benefits typically touted by a Nevada corporation are the following: lower costs; tax savings; and greater privacy. But is any of it true? Below we will discuss some of these issues.

Expense: Contrary to what many people believe, it is more expensive to file in Nevada than in California. Here are some of the additional expenses: the initial filing fee is more; the Statement of Information is much more; you will be required to file a Statement and Designation of Foreign Corporation in California; and you will be required to hire a Nevada Agent for Service of Process each year. For large clients, the additional cost (of approximately $500 more) is not a big consideration, but for smaller businesses every dollar counts.

Taxes: The tax ramifications is usually one of the most important reasons for deciding whether to incorporate and where. Nevada's secretary of state website says that Nevada has none of the following: (1) corporate income tax; (2) taxes on corporate shares; (3) franchise tax; and (4) no personal income tax. So how does this actually play out? The bottom line is if you are doing business anywhere other than Nevada, you will still be required to pay taxes in the state where you are conducting business. So if you are operating and generating business in Nevada, this can be a huge benefit, otherwise if you are generating money in California, you are required to pay California's taxes. Furthermore, any income earned by a Nevada business and paid out to a resident of another state will be subject to the taxation of that state. Therefore, the income passed on to the shareholders of an S-Corporation in Nevada will be taxed at both the federal level and in the state where the shareholder lives (this also applies to other pass-through entities such as LLCs).

Thus, as indicated in the paragraph above, if you are operating primarily in California, you will not be able to legally gain the Nevada tax benefits if you form a Nevada pass-through entity such as a S-corporation or LLC. However, a Nevada C-corporation can avoid the state taxes (remember that a C-corporation is subject to double taxation at the federal level). The way a Nevada C-corporation operating in California could be structured to minimize its taxes is as follows: As a C-corporation, your company will be stuck with double taxation at the federal level. Rather than withdrawing the profits from the corporation, keeping the profits within the Nevada C-corporation will allow it to grow free of any state taxes.

Limited Liability Protection: Whether your company has greater limited liability protection in Nevada versus other states is debatable. Many believe that Nevada state precedence makes piercing the corporate veil much more difficult. Whether this is true will depend on the facts of your case and how good your lawyer is, since the test for piercing the corporate veil in both states are substantially similar (both California and Nevada require a showing that a substantial injustice or perpetuation of a fraud occurred). However, in regards to directors and officer liability, Nevada law provides that directors and officers are not liable for any damages resulting from a breach of fiduciary duty unless the breach involved intentional misconduct, fraud, or a knowing violation of the law. (See Nevada Rev. Stat. §78.138(7)).

Jurisdiction: This can be good or bad for your company. If you are operating in California but are a Nevada corporation, the question is which state law takes precedence? As indicated above, in most circumstances, your corporation will be deemed a pseudo foreign corporation and thus be subjected to California's laws. So if you are sued, the lawsuit would likely occur in the California. However, if the plaintiff attempts to pierce the corporate veil, the lawsuit may occur in Nevada, thus the plaintiff would have to face additional expenses to travel to Nevada to try the case. Likewise, you as the defendant would be required to go to Nevada as well. However, if you enter into contracts with others, your contract can include "choice of law jurisdiction" provisions, which require that the contract falls under the laws of Nevada. Similarly, "choice of forum" provisions in your contracts will require your case to be heard in Nevada.

Privacy: Nevada is generally more restrictive than most states in sharing information about its corporations with other states and the government. As such, many celebrities and high profile individuals seeking anonymity often end up incorporating in Nevada. However, both California and Nevada do not require its stockholders to be listed in public records. Further, Nevada does not share information with the IRS unlike California. But if a Nevada corporation conducts business as a pseudo foreign corporation in California, it would be required to disclose the information to the IRS.

© 2006 Michael N. Cohen, Esq.

This article is not intended as a substitute for legal or tax advice. The specific facts that apply to your matter may make the outcome different than would be anticipated by you. You should consult with an attorney familiar with the issues and the laws.

9025 Wilshire Boulevard, Suite 301, Beverly Hills, CA 90211 Phone:310.288.4500 | Fax: 310.246.9980 | Website: www.patentlawip.com

LLC v. S-Corporation

The most common decision for smaller start up companies is whether to form a LLC or corporation with a "s election".  Both entities have many similarities such as limited liability protection of personal assets against lawsuits and debts.  However, there are several differences, especially in regards to taxation.  Although there is a lot of information regarding s-corporations and LLC's in general, there is very little available that breaks down the important differences.  Below I have summarized the major characteristics and issues associated with each entity:

I.                   S-Corporation

A.                Liability

1.                  Shareholders granted personal protection from debts and liabilities of business (like c-corp and LLC)

B.                 Taxation

1.                  Pass through: Profits and losses pass through the corp and reported to the individual tax return of shareholder (same as partnership and LLC)

2.                  Self-Employment Tax Break: Profits of the S-Corp which pass through to the shareholders are not subject to self-employment tax (Social Security and Medicare which is approximately 15%).  Rather, self-employment is only taxed on the portion classified as a "reasonable salary".  LLCs and sole-proprietorships must pay self-employment tax on all income.  The ability to minimize self-employment tax is deemed to be one of the greatest benefits of a s-corporation.

3.                  Corporate Losses: losses in the corporation can be deducted from the individual tax returns of the shareholder thereby allowing them to offset other sources of income such as their W-2 income.

4.                  Franchise Tax: Franchise Tax is waived your first year.  LLC on the other hand, must pay franchise tax its first year.  S-Corp must pay the CA Franchise Tax board either a 1.5% tax on net CA income or $800, whichever is greater. 

5.                  Distribution of Profits and Losses: No special allocation of profit and losses for shareholders.  Corporate profits and losses must be split up proportionately to the percentage of shares owned by each shareholder.  LLCs on the otherhand allow for flexibility as to how they split their profits and losses.

C.                 Formalities

1.                  Must file an S-Corporation annual income tax return each year (IRS Form 1120S)

2.                  Must file annual report with Secretary of State, and a reporting fee of $25 and a statement of information are required 90 days after formation.

3.                  Must maintain corporate formalities such as: Drafting Bylaws, Minutes, Annual Meetings, issuance of stock, to keep a paper a trail of financial dealings between the corporation and its shareholders, and to avoid "piercing of the corporate veil."

D.                Other Characteristics

1.                  No more than 100 shareholders

2.                  Shareholders must be US citizens or have US residency status

3.                  Shareholders must be individuals (not corporations or partnerships)

4.                  Only one class of stock (but different voting rights permitted, and same rights to participate in dividends and sale of assets)

5.             Owners are called "shareholders"
 

II.                LLC

A.                Liability: shareholders granted personal protection from debts and liabilities of business (like s and c-corp)

B.                 Taxation

1.                  Pass through: Profits and losses pass through the LLC and reported to the individual tax return of shareholder (same as partnership and Corps)

2.                  Self-Employment Tax:  LLC members must pay self-employment tax on all income from the LLC.

3.                  LLC Losses: losses in the LLC can be deducted from the individual tax returns of the member thereby allowing them to offset other sources of income such as their W-2 income.

4.                  Franchise Tax: Must pay first year minimum annual tax of $800, and is due 75 days after formation and every year thereafter.  Annual franchise tax is greater if total reported income is greater than $250,000. 

5.                  Distribution of Profits and Losses: It is flexible since an LLC allows you to decide what share of the LLC profits and losses each owner will receive.

C.                 Formalities

1.                  Very little formalities required.  Operating agreement is recommended, annual meetings not required.

2.                  A reporting fee of $25 and a statement of information are required 90 days after formation and then every two years.

D.                Other Characteristics

1.                  Licensed professional in California must form a Professional Corporation instead.

2.                  Owners are called "members"

3.                  Members may be individuals or separate legal entity such as a corporation.

4.                  Member's investment receives a percentage ownership interest in return.  Percentage ownership determines how profit and losses are split up.

© 2006 Michael N. Cohen, Esq.

This article is not intended as a substitute for legal advice. The specific facts that apply to your matter may make the outcome different than would be anticipated by you. You should consult with an attorney familiar with the issues and the laws.

9025 Wilshire Boulevard, Suite 301, Beverly Hills, CA 90211 Phone:310.288.4500 | Fax: 310.246.9980 | Website: www.patentlawip.com

What are Trademarks and Why You Need to Take Them Seriously

By Michael N. Cohen, Esq.

What is a Trademark?

A trademark can be any word, slogan, design, symbol, or even a color, smell, product configuration or a combination of these, used to identify the source of origin of particular goods and services. The trademark serves as a source identifier of your goods and services, to distinguish it from the goods and services of others. For example, Nike has a registered trademark with the United States Patent and Trademark Office ("USPTO"). Their mark is used to distinguish their goods and services over other shoe companies. Nike actually owns several trademarks, including design marks as well, such as their swoosh symbol.

Here is another example, remember when Paris Hilton was saying "that's hot" everywhere? She applied for a trademark application with the USPTO. If it ultimately gets issued, it doesn't mean that no one else can ever say that phrase. Ms. Hilton's trademark attorney has filed the slogan only in connection with particular specified goods and services. Therefore, if the mark does ultimately issue, she will have federal rights to prevent others from using the mark in connection with the same or similar goods and services she registered the mark with.

Why You Need to Conduct a Trademark Search and File an Application

You are ready to launch a new product, form a band, or you are about to start a new business and you have a great name you've been wanting to use for years. But can you? Here is a typical scenario: Company A opens its doors (a physical store and online) choosing a name without conducting a trademark search. Company A starts promoting its name by investing in advertisements (print and online such as Google adwords). Months go by and Company A is doing quite well financially, has invested a lot money in advertising and marketing, and its page ranking in Google went up considerable for its desired terms (after spending a ton of money to search engine optimization marketing firms). Then one day, Company A receives a cease and desist letter from Company B's attorney similar to this:

"Company B is the owner of United States Federal Trademark Registration No. XX and other trademark registrations pertaining to this mark. Company B uses this mark in the United States in conjunction with its goods and services. Company B legally owns the trademark upon which your online store, products, and advertisement are infringing.

Company B believes that you are intentionally trading on the goodwill of Company B by using a trademark that is confusingly similar to Company B's Trademark and that your use of the Trademark does, or is intended to confuse or mislead customers seeking Company B's products or services. This activity is actionable under federal law and causes you to be liable to Company B in every state in which you have made sales or done business. Your activities are unlawful and constitute unfair competition, intentional trademark infringement and dilution, false designation of origin and/or cybersquatting.

Federal Law provides numerous legal remedies for trademark infringement and dilution, including, but not limited to, preliminary and permanent injunctive relief, monetary damages, claim to a defendant's profits… "

So now what? You are thinking it can only be a bad dream, I can't stop using the name I've been using all this time. Think again. Although you may be able to fight or settle in order to prevent your name from being taken away, it typically takes time and a lot of money. This is the sad scenario many business owners face when the neglect to take into account intellectual property rights of others.

Rather than being a victim to bad business practices, the proper way to proceed is to obtain a trademark search on each and every name you intend to use in connection with the goods and services your business is promoting. A competent trademark attorney can conduct the search and analyze the results to advise you whether or not you should use the name. If the name appears to be clear, then it is advisable to proceed with your own application for a trademark in order to serve as a defense and to be used offensively against would be trademark infringers.

Upon issuance of your federally registered trademark, you have the following significant benefits:

• Nationwide constructive notice of trademark ownership

• Evidence of and a presumption of ownership

• Federal court jurisdiction (should you have to sue to prevent infringement)

• Federal registration can be used to obtain foreign registration

• The registration may also be filed with U.S. Customs Service to prevent importation of foreign goods that infringe on the trademark

Trademark Issues on the Internet

What about domain name disputes; use of trademarks in Google adwords advertising or banner advertisements; cybersquatting; how about parody or criticism websites like www.starbucked.com; trademark issues with pop up ads; etc. These are all issues that occur everyday online and are costing business owners millions. Each issue can be resolved in different ways, either by the use of cease and desist letters; negotiations and settlement; a traditional trademark infringement lawsuit in either federal or state court; an Anticybersquatting Consumer Protection Act (ACPA) lawsuit; or an Uniform Domain Name Dispute Resolution Policy (UDRP) proceeding.

Michael N. Cohen, Esq. is an intellectual property attorney with specializations in trademark, patent and internet law.  The Law Office of Michael N. Cohen, P.C., is located in Beverly Hills, California, and Mr. Cohen can be contacted at 310-288-4500 or http://www.patentlawip.com or http://www.trademarkattorneyip.com

© 2006 Michael N. Cohen, Esq. No portion of this article may be copied, retransmitted, reposted, duplicated or otherwise used without the express written approval of the author.

This article is not intended as a substitute for legal advice. The specific facts that apply to your matter may make the outcome different than would be anticipated by you. You should consult with an attorney familiar with the issues and the laws.

Time and again I receive calls from clients that are adamant that their script was surreptitiously stolen from them and manifested into the latest and greatest blockbuster. Usually the story goes like this:

"I worked for years on my script about ______________ [fill in the blank], and a few years back I submitted it to an acquaintance at [big movie studio]. Then I never heard back from them. My contact at [big movie studio] personally knows [big time producer/director] and I heard that they talk about it but [big time producer/director] said he wasnt interested. Lo and behold, [big time producer/director] just came out with [blockbuster movie] that just grossed $20 million this weekend. I want to sue!"

These scenarios are so common and usually very hard to prove. The first problem is that most people never bother to obtain a federal copyright or even a writers guild registration. An even bigger problem is proving the defendants access to the work and substantial similarity. Case in point is the recent copyright infringement claim of screenwriter Christopher Merrill in Merrill v. Paramount Pictures, Corp. Merrill's script was about bunch of young kids that traveled across the US to get to Los Angeles to make their entertainment dreams come true, where one of the kids gave a fantastic audition which lead to bigger and brighter things for her. Coincidentally, Merrill envisioned Ms. Britney Spears for the lead role.

Merrill sent the screenplay to several entertainment companies and allegedly even to Ms. Spear's fan club. Of course, when the movie Crossroads came out, Merrill saw the similarities and sued Spears and many of the entertainment companies that he submitted his work to. Merrill's case was dismissed as the judge concluded that a jury trial is not need because there was such a weak showing of the defendants' access to the script. Further, Merrill failed to sufficiently show that the two scripts were similar, i.e., that the similarity itself greatly suggested copying as the only explanation.

So I am not saying that if your work was copied, that you should throw your hands up in the air. However, you must first obtain a federal copyright either through the US Copyright Office or through an attorney, (obtaining a writers guild registration is not enough!). Also, you must have a clear and documented paper trail, or other clear evidence that links the defendant to your work. And of course, the two works must be substantially similar. It's not enough to have broad conceptually storylines to be similar, rather, the characters, the dialogue; essentially the fleshing out of the story must be very similar to your work before you can even think about pursuing such a claim.

© 2006 Michael N. Cohen, Esq.

This article is not intended as a substitute for legal advice. The specific facts that apply to your matter may make the outcome different than would be anticipated by you. You should consult with an attorney familiar with the issues and the laws.  For more information, go to http://www.patentlawip.com