Many new entrepreneurs choose to bury their heads in the sand when it comes to their legal requirements. Not because they don’t care, but because legal issues are often complex, difficult to understand and can be costly. But unfortunately, it’s a necessary evil, and one that could cost you dearly if ignored.
Peter Adediran, Principal at PAIL Solicitors, which specialises in small business law primarily within the digital, technology and media space, shares some valuable legal tips for small businesses.
TRS: If someone is launching a digital project such as a website or app that they plan on selling their products or services on; legally speaking what do they need to be aware of? What needs to be in place to protect both them and their customer?
When launching a digital project your first step is that you should clearly specify to your customers, partners or affiliates the commercial terms on which you do business. You need to let your customers know what goods or services you are offering and how they are going to pay you for it. Second, you need to minimise the risk that you will be breaking any regulations or laws. You accomplish both steps by having terms and conditions. There are a number different issues that need to be dealt with in the terms and conditions. These issues include – privacy and data protection; acceptable use; refund policies; intellectual property; tax; governing law; any specific regulation of the industry your project is concerned with (e.g. employment, finance); and software licences. These terms and conditions are recommended whether it’s a mobile app or website project.
A note of caution here. It’s really easy to draft website terms and conditions badly. For example I’ve seen many governing law clauses referring to UK law (there is no UK law only English law). Also using the website terms and conditions of a similar business is not advisable for several reasons, including that the regulations or laws they refer to may have changed. Legislation affecting the Internet is fast moving and is constantly being updated.
TRS: What’s the difference between intellectual property rights, copyright and trademarking?
Intellectual property rights is the collective name given to rights in so called intellectual property. It’s called intellectual property because it’s distinct from so called real property or personal property. Real property refers to land, factories, warehouses. Personal property refers to movable items like jewellery and furniture. They are both tangible assets, you can feel and touch them. Intellectual property is still property but it is intangible because it is a creation of the mind. You cannot feel and touch intellectual property. However it has value equal to, and in digital projects far greater than real and personal property. The important thing to bear in mind is that you are given rights over the property for a specific period (which is in most cases renewable), after which the property reverts back to public use or what is sometimes referred to as the commons.
Copyright and trademarks are types of intellectual property. Trademarks are concerned with brand definition, identity, ownership, building and maintenance. Copyright also protects brands but in a different way. Copyright protects so called works of which there are several including writing, drawing, photographs, software coding and performances. Although the works must be original they do not have to have a very high creative quality to be afforded copyright protection.
TRS: If like us, an entrepreneurs website content is their product or service, is copyrighting your content a necessity? Is it enough to simply feature the copyright symbol?
First, it is important to bear in mind that copyright protects certain so called works. They are literal, dramatic, musical and artistic. If your website content consists of works that fall within these four categories of works then it will be copyright protected. So you can protect certain works in your website (including the database). Under English law there is no need to register copyright it is automatically granted at the date and time of creation. Simply setting out the date from which you claim copyright and the famous symbol is all this is required.
However it is highly recommended that you do register it with a copyright registration authority in a competent jurisdiction. Particularly if your website and content is your business. It is also important to remember that copyright is granted to the author of the works. So if there were several people involved in creating the website then they would all share in the copyright. Additionally, if your web developer created the website then technically they own the copyright (unless they are an employee) until they assign it over to you. Any additional work done by developers after the initial assignment which is copyrightable will also have to be assigned.
TRS: How do you go about copyrighting your content? How much does it cost and how long does it typically take?
The important thing is to make sure that the work is original. That it is copyrightable work. Lastly, that you own it. If you can tick the box on these preliminary matters you can claim copyright. The cost and length of time it takes to register copyright depends in which jurisdiction and the type of registration. Fast track registrations are usually much more expensive. If you use a solicitor you will have to factor in their fees.
TRS: I believe there are lots of different types of trademarks and it’s a complex minefield; you can trademark names, descriptions, designs, fabric. When does a small business need to use trademarking and at what stage in the business?
In brief, a trademark is primarily concerned with defining/identifying your business brand. Typically you start off your business by having an idea. Then you get a pr/marketing agency to come up with a name and/or logo or you think of one yourself that captures the idea. Once you have your brand identity the next step is to protect it. That’s when registering a trademark is helpful (you don’t have to register a trademark, you can have an unregistered trademark).
Trademarks specifically deal with protecting the identity of the business that the brand represents. This is to stop another business using that name so as to pretend that they are the same business or are affiliated to trade off your reputation. Trademarks help strengthen your brand in the marketplace. I would recommend getting a trademark for the goods and services you intend to trade in right at the outset of setting up your business.
Designs are related but are not trademarks. They are protected under design rights another very complex area.
There is more information, including how to apply for a trademark and the official fees at the intellectual property office website for the UK.
Our website also contains a library resource with 26 articles about trademarks for more further research.
TRS: Where do you go to secure intellectual property rights and how much does it cost?
You go to a solicitor that specialises in intellectual property. The fees will vary depending on the solicitor. Choose a solicitor that you have a rapport with and who appears to have experience in your industry. Good communication is very important between solicitor and client.
TRS: Can someone with no knowledge of law or jargon process these types of protection with ease?
Yes, it is possible to deal with basic protection yourself and/or draft your contracts and website terms and conditions. The issue is whether your time is better spent dealing with these formalities or building your business. Additionally, solicitors who specialise in this work do it all the time and less likely to get it wrong or to miss out important things to consider. In other words, solicitors are not a “nice to have” but a priority.
TRS: What legalities does one need to consider when growing a digital business internationally (particularly if you are selling your products and services)?
The Internet is borderless so it is natural to market your products or services internationally. There is no single international body that regulates the Internet. Different jurisdictions have their own laws. To be on the right side of the law trading internationally you should get legal advice from all the countries you are marketing to.
- Spend more time thinking about how your idea is going to work. Do your research. Too many start-ups think that if they build a novel website in an emerging space then it will be successful. This impacts on legal advice because you are advised according to your business plan. If your business plan is going to change in the very short term the paid legal advice you receive becomes obsolete.
- Budget. You need capital to start a business. You will not be making the revenue to exceed the costs of your outgoings including legal fees. Remember everything will cost more than you expected. Website projects drag on. Last minute changes happen in almost every project costing more money than you anticipated.
- Get legal advice earlier on rather than later. Even setting up your company correctly, with the right articles and memorandum of association, is important.
- It is very useful to have some experience of the internet business you are setting up already. It is not essential but it really helps if, for example, you are a pharmacist setting up an online medical procurement hub for pharmaceutical companies, not least because you would be aware of specific regulations with respect to the marketing of medicine.
- Think of a brand name that is unique even if it has nothing to do with your idea. Don’t use a brand name that sounds like an existing well-known brand name. Even if you don’t get resistance from the owner of that brand name your brand will be impossible to find on the internet as everyone will be using it or its variation already. Additionally, a unique name is more likely to be accepted by the intellectual property office and registered.
- Make sure you have contracts in place before doing anything. These include website terms and conditions. If you have a lot of contracts, say more than 5, you could ask your solicitor to agree a special rate for all of them.
- Don’t assume everything will be okay with any other party even if you know them well. Make sure you have website development agreements, shareholder agreements and consultancy agreements. It’s for your protection and theirs.
Peter Adediran leads the team at PAIL® Solicitors specialising as digital media, intellectual property and entertainment start-up solicitors. PAIL® focuses on providing a quick service delivered within budget enabling clients to focus on growing their business. PAIL® works with new business start-ups and all forms of small to medium sized enterprises advising on regulations, registration (including IP) and commercial contracts.