Mitch's Blog

I was reading a forum where people were talking about the new Swivl and saw someone complaining about the name “Swivl” being too weak for a “copyright”. I’ve seen a lot of confusion about what the differences are between a copyright and a trademark, a copyright and a patent, and a patent and a trade secret. Briefly,

A copyright protects a work that is authored. In the case of a technology product, this includes the source code, the documentation, and also marketing materials such as the web site or datasheets.

A trademark protects a word or other way to identify a brand. In the case of a technology product, this includes the name of the company, the name of the product, and any logos or slogans tied to the brand identity. Trademarks may be claimed but unregistered (TM) or registered (R). Trademarks apply to a specific category of products or services, which is why it’s fine that we have Delta Airlines and Delta Faucets.

A patent protects inventions or discoveries. In the case of a technology product, this can be pretty broad—an algorithm used by the software¹, a way to build a product, or some other invented technique.

A trade secret is something that is not revealed and kept intentionally secret because it is something of value. Companies must mark any information as confidential as part of reasonable efforts to keep such information secret. The classic example of this is the Coca-Cola formula. There is no protection of a trade secret if someone else can clean-room reverse engineer the secret.

There is a balance between patents and trade secrets; a patent provides broad protection but the science behind the invention must be disclosed in return for that protection—and the patent does eventually expire.

By no means are the above descriptions detailed, exhaustive, or legal advice, but they are brief and understandable. For more information, visit these pages:

• US Copyright Office FAQ
• US Patent and Trademark Office on Trademarks
• US Patent and Trademark Office on Patents
• Wikipedia articles on trade secrets and reverse engineering

Many thanks my friends and colleagues who reviewed this post prior to publishing.

¹ When embodied in something real. And there’s the argument about whether or not software is real. Anyway, the goal of this post isn’t to debate this point.

I get this question a lot. I wrote this down as my standard answer.

First, you need to be sure you are building a product people want. This means doing market research and talking to potential customers before you do anything else. It sounds obvious, but building something people want is the hardest part. When you’re evaluating whether or not people want what you’re building, you need to hear people say, “OK, when can I buy this? I need this right now.” Potential customers who say, “Yeah, that sounds like a great idea” are misleading–that kind of response means you haven’t gotten them to the mental finish line such that they want to buy. It is crucial to understand the difference between these two reactions.

If you are serious about starting a company to the point that you or your partners are quitting your jobs, you need to go ahead and legally form the company. You can “do it yourself” but I recommend finding a respected attorney familiar with the law of where you are starting your company. In particular, you should have employment contracts between all partners and the company, and you should have intellectual property assignment agreements between all contributors and the company.

Without these basic agreements in place, your company can suddenly be in a position of being (1) un-fundable by VCs or other capital sources, (2) un-acquirable, (3) sued by a partner who has dropped out or feels he has been wronged. And of course, without some non-compete agreements, a partner can leave and potentially take know-how of your business to start a competing company.

Do not depend on a ‘gentleman’s agreement’ of what will happen when someone leaves–even if everyone trusts everyone and everyone has known everyone else for many years. In every company I have ever started, someone has left before the first product was ready to go to market. In one case, that tanked the company and the remaining partners, including yours truly, lost many thousands of dollars.

Setting up a company and getting these agreements in place is relatively cheap, even with a high-end law firm in an expensive city. The cost is essentially zero compared to other start-up costs and it will save you serious stress and money down the road.

Hire an attorney who specifically deals with business. I would not hire a “front door attorney” who “practices whatever comes in the front door.” Ask for references from businesses that were once starting out like yours. Also, you will need a CPA to keep you in-line with the IRS and other government agencies. The CPA will cost you much less and, in some ways, be a far greater value. I wouldn’t start a business without either of these people on my “team”. I’ve done it the wrong way and the right way–and the right way is MUCH better and less stressful.

When you’re just starting out, it can be very easy to fall into the trap of thinking that what you’re doing isn’t going to be “big” or “maybe it’s not important enough” to be worth protecting. But if you have quit your job to do something, it must be big and important enough to justify taking some basic precautions such as these. Chances are living expenses while you build your product will dwarf the costs of protecting yourself–there’s just no reason not to.

Of course, if you’re building a company alone, you might not need much of the above–I am really referring to scenarios involving 2 or more people. If you’re going at it alone, you might still need protection from contractors you hire, though.

See also: Top Ten Legal Mistakes Made by Entrepreneurs. I also recommend this book which covers the above scenarios and many other issues.

Finally, this is not legal advice.

(This is from my office FAQ; it felt more appropriate here.)