Tag: Geek Law Firm

  • The Corporate Transparency Act: What Small Businesses Need to Know

    Image from FinCen Facebook Page.

    If you have a business in the U.S. with less than 20 full-time employees, add the term “Corporate Transparency Act” (CTA) to your vocabulary. This new law requires small businesses in the U.S. to submit a report about the company and its Beneficial Owners (BO) to the Financial Crimes Enforcement Network (FinCEN). 

    This federal law was likely created to prevent people committing crimes through shell companies and identify those who are doing this.

    I’ve filed the Beneficial Ownership Information Report (BOIR) for my two companies and filed BOIRs for a few others. It’s not hard, but the penalties for not doing it or not keeping your BOIR up-to-date are steep.

    Which Companies Need to File a BOIR?

    If you had to file documents with your state in order to create your business entity, such as with the Secretary of State or the Corporation Commission, you need to file a BOIR with FinCEN.

    In Arizona, this means corporations, LLCs, LPs, PCs, PLLCs, and LLLPs. Sole proprietorships and general partnerships don’t need to file anything to be formed in Arizona, so they are not required to file a BOIR. However, running a business as a sole proprietorship or general partnership is a problem waiting to happen, so don’t do it.

    Aren’t Some Companies Exempt?

    Yes.

    Some industries are already regulated by the federal government, like banks and insurance companies, so they don’t have to file a BOIR. FinCEN provides a list of the types of companies that are exempt from filing a BOIR.

    The binary code spells “fincen.”

    What About 501(c)(3) Entities?

    You are exempt if the company has its approval letter from the IRS. If you’re waiting on IRS approval, you’ll need to file a BOIR if you don’t receive it by the end of the year. Once the company’s 501(c)(3) status is approved, you can re-submit the BOIR to FinCEN and indicate that the company is not exempt.

    Who Counts as a Full-Time Employee?

    A full-time employee is someone who works an average of 30 hours per week.

    That means a person might not be full-time according to your company’s policies, but they are for the purposes of the CTA.

    What Information Does FinCEN Need About the Company?

    The company needs to provide the following information on its BOIR:

    • Its legal name,
    • All d/b/as (doing business as),
    • Its employer identification number (EIN) or tax identification number (TIN),
    • The state where the company was initially formed, and
    • The primary address from which it operates in the U.S.

    The company’s primary address must be a street address, not a mailbox. So, if your company’s official address is a box at a UPS Store or at virtual office, but you actually work from your home office, the company’s primary address is your home address.

    If you’re the only owner of your company and you’re using your Social Security number (SSN) as the company’s EIN, use your SSN as the company’s EIN or TIN for its BOIR.

    Who Can Be a BO?

    Only humans can be BOs.

    A BO is someone who owns at least 25% of the company OR has substantial control over the company.

    A person who has substantial control over the company could include, but is not limited to, the company’s senior officers (e.g., anyone whose title starts with “Chief”), board of directors, and the company’s internal general counsel.

    Ooohhh … this just got a lot more complicated.

    If no one in the company owns at least 25% of the business, but there are company decisions that require unanimous approval by all the owners, then every owner is a BO.

    FInCEN has useful information that could help you determine who is a BO of your company and you can also consult your lawyer to assist you with determining who are the company’s BOs.

    There’s no penalty for claiming someone as a BO who turns out not to be one, but penalties can apply if you don’t include someone who is a BO on your BOIR. When in doubt, include the person on your BOIR.

    What If the Company’s Owners are Other Business Entities?

    Work backwards until you identify the humans who have at least 25% ownership interest in the business or who have substantial control over the company.

    What If the Company is Owned by a Trust?

    If the owner is a living revocable trust, list the trustees as the BOs in addition to the people who have substantial control over the business. If the owner is an irrevocable trust, you only need to list the people who have substantial control over the company as the BOs. 

    What If the Company has a Subsidiary Company?

    If both companies meet the requirements set in the CTA, then each entity needs to file a separate BOIR. A person can be a BO for multiple companies.

    (Image by Vantes duke, Creative Commons)

    What Information Does FinCEN Need About Each BO?

    Here’s what you need to provide for each BO:

    • Their legal name,
    • Date of birth,
    • Residential address, and
    • A copy of their unexpired driver’s license, passport, or state-issued ID.

    How is this not an invasion of privacy?

    Don’t worry, this is information the federal government already has about you. BOIR information is not kept on a publicly accessible database.

    Pro Tip: Check the expiration date on your license and passport and use the one that expires the latest.

    How Much Is the Filing Fee to Submit a BOIR?

    $0

    Do You Need a Lawyer to File a BOIR?

    No. You can absolutely file it yourself. Here’s the video I used when I filed the BOIR for my first company, to make sure I was doing everything correctly:

    Here’s the Video I USed to make sure I Filed my first BOIR correctly.

    If You Live in a Community Property State, Is Your Spouse also a BO?

    This is a good question to take to your lawyer. If the company’s primary address is in one of the 9 community property states (including Arizona), if you are a BO because you own at least 25% of the company, and you’re legally married, you should name your spouse as a BO as well.

    This assumes you don’t have a prenup or post-nup that excludes your ownership interest in the company from the marital estate.

    Geez, this is starting to sound like a question on a bar exam.

    What’s the Deadline for Filing Your Company’s BOIR?

    If your company was created before January 1, 2024, you have to file it by January 1, 2025. If your company was created in 2024, you have 90 days after the date your articles were approved to file your BOIR.

    At a recent training about CTA, the instructor reported that only 3 million of the expected 33 million companies that need to comply with CTA had filed their BOIR. She expects the FinCEN website will crash during the week between Christmas and New Year’s when everyone who waited until the last minute it trying to submit their BOIRs.

    Unless there’s a BO in your company whose information will change before the end of the year, it’s better to file your BOIR sooner than later.

    What Are the Penalties If You Don’t Comply with CTA?

    The civil penalty is $591/day, and there’s no upper limit for this fine.

    The criminal penalty is a fine of up to $10,000 and up to 2 years in prison.

    These penalties will apply to the BOs personally, not to the company.  

    Oooohhh … that could be bad.

    When Do You Need to File an Updated BOIR?

    Once you’ve filed your BOIR, if the company’s or a BO’s information changes, you have to file an updated BOIR within 30 days. This means if the company moves, gets a new BO or a BO leaves, a BO moves to a new residence, or the driver’s license or passport a BO used for the BOI is expired or renewed, you have 30 days to update FinCEN.

    Oh sh*t!

    And that’s 30 calendar days, not business days. If your due date falls on a weekend or holiday, that’s the latest your can file the updated BOIR without risk of penalty.

    Pro Tip: Amend your company’s operating agreement and/or bylaws to include that all BOs must update the company when their residence changes and provide a copy of their driver’s license or passport when it’s renewed. Ditto for the employment contracts for anyone whose role gives them substantial control over the company.

    Does the Company Need to Update the Information that Changed or File a New BOIR?

    You have to submit a new BOIR with all the pertinent information about the company and all its BOs. The only difference is you’ll be checking a box indicating that it’s an updated report instead of the initial filing.

    Unsolicited Advice: Figure out a system for checking in with your BOs on a monthly basis to see if any information has changed, so you can file the updated BOIR with FinCEN in a timely manner if needed.

    For my clients for whom I’ve submitted their BOIR, I created a spreadsheet with the company’s and each BOs information. When I reported to the client that the BOIR was filed, I informed them of which BO’s ID was going to expire first and provided the corresponding month and year. 

    Who is the Company Applicant?

    The company applicant is the person who files the BOIR for the company, meaning the human being who put fingers to keyboard to submit the report.

    image created by dall-e

    What If You Have a Company That’s No Longer in Business?

    If you have an established business entity, but the company’s gone out of business, the best thing you can do, from a CTA perspective, is to shut the entity down. File the appropriate articles of dissolution or termination with the Secretary of State or Corporation Commission that oversees such things in the state where the entity exists.

    FinCEN amended its rules and added that “inactive” entities are exempt from filing a BOIR, but your company has to meet all 6 of the following requirements:

    1. The entity must have existed prior to January 1, 2022.
    2. The entity is not currently engaged in business.
    3. The entity has no foreign owners.
    4. The entity has had no change in ownership in the last 12 months.
    5. The entity has not received funds in excess of $1,000 in the last 12 months.
    6. The entity does not hold any assets. (I suspect this includes intellectual property.)

    I’m telling all my clients if they have any entities that they’re not using anymore, they should shut them down. An entity that does not exist anymore does not need to file a BOIR.

    What If the Company’s Information Doesn’t Match What’s Filed with the State?

    The company information you file with FinCEN should match what’s on file with your state’s Secretary of State’s Office or Corporation Commission, wherever businesses are filed.

    In Arizona, LLCs are somewhat set-it-and-forget-it entities. Unlike corporations, LLCs don’t have to file an annual report, so it’s not uncommon for LLCs to have outdated information on file with the Arizona Corporation Commission (ACC).

    Before you file your company’s BOIR, check the information in your state’s records. If  anything isn’t accurate, file an Articles of Amendment (or its equivalent) so the information on file with your state and FinCEN will match.

    There is one exception to this recommendation: If your state allows it, it’s ok to use a box at the UPS Store or a virtual office as the company’s address and the owners’ addresses for your state-level filing. You only need to report the address from which the company conducts its business and the BOs residential addresses on your BOIR.

    In Arizona, company filings with the ACC are public. This is why many companies use a mailbox or virtual office for the address for the company and its owners, officers, and directors. Conversely, BOIR information is not public.

    Final Thoughts

    Complying with the Corporate Transparency Act is not hard to do, but it’s part of having a small business in the U.S. The main challenge I’ve run into so far is getting copies of all the BOs’ driver’s licenses or passports. Given that many people take off the last week of the year, this is another reason to file your company’s BOIR sooner than later.

    If you need help determining who are the BOs for your company or if you want to outsource your BOIR filing, please contact a lawyer who is knowledgeable about this subject to assist you. (Many lawyers do not know about this new law or are not doing these filings for clients.)

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    Ruth Carter

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  • ChatGPT: What’s in the Fine Print

    Everyone seems to be going crazy about ChatGPT – using it to write everything from social media posts to books, worry about if kids are using it to cheat at school, and wondering if this is our new robot overlord that will ultimately replace all professional writers.

    Ok, maybe I’m exaggerating with that last one.

    But how many people have read the terms of service and its privacy policy?

    I have.  😉

    Photo by Barney Moss (Creative Commons)

    OpenAI is Winning the Internet

    Did you know that the same company that created ChatGPT also created DALL-E? I’m not usually one who makes predictions, but so far, OpenAI is winning this year. They are creating the standard against which other AI will be compared.

    As long as they don’t fuck it up, OpenAI is going to kick ass this year.

    OpenAI’s terms and privacy policy are the same for all its services, including ChatGPT and DALL-E, so plan accordingly.

    What Can’t You Make with ChatGPT

    OpenAI has a policy that you can’t use its services to create content related to:

    • Political campaigns
    • Adult content
    • Spam
    • Hateful content
    • Content that incites violence
    • Uses that may cause social harm

    Hat tip to OpenAI for acting with integrity from the start. I understand why it doesn’t want to be connected with these activities. Use AI for good not evil.

    Yes, some of my clients are porn companies. I see nothing wrong with consenting adults creating adult content. (Yes, that means sometimes I get paid to look at porn.) However, I understand why OpenAI made a blanket rule against using AI to make adult content because you know some sicko will use it to try to make virtual kiddie porn. It’s just easier to prohibit the entire category.

    Photo by James Lee (Creative Commons)

    You Can’t Claim You Made the AI-Generated Content

    The terms of services clear say that when you use OpenAI’s services, you cannot “represent that output from the Services was human-generated when it is not.”

    They obviously wanted to get ahead of suspected problems like students using ChatGPT to do their homework. That also means if you’re a marketing agency, you can’t claim the content created by ChatGPT was made by your staff.

    Previously, I predicted that “handcrafted artisanal content” would become a real label in content marketing. I think this could be the beginning of it.

    Photo by Torley (Creative Commons)

    You Own the IP – or Do You?

    The terms say “OpenAI hereby assigns to you all its right, title and interest in and to Output.” This might make you think that you’ll own the copyright in everything ChatGPT creates for you.

    But that’s not true.

    It’s well-established that copyright only exist in works created by humans. The output from AI-software can be copyrightable in only two situations:

    1. The software code was written by a human and it original enough to be by copyright. If this is true, then the output would be a derivative work of the software code.
    2. What you input into the software was protected by copyright, and therefore, the output is a derivative work of the input. If the input was something you owned the copyright in, you don’t need OpenAI’s assignment to own the rights in the output.

    However, if the input is merely facts or ideas (no copyright) and there’s no copyright in the software code, there’s no copyright in the output. OpenAI can assign you the rights in the output, but those rights won’t include copyright.

    Photo by Levork (Creative Commons)

    Warning: Two Users May Get the Same Output

    Heads up: the OpenAI’s terms say its “Services may generate the same or similar output for OpenAI or a third party.”

    So, there’s a risk that two users could get the same output from ChatGPT, think they own the copyright in it, and then accuse each other of copyright infringement when neither one owned a copyright in the output to begin with.

    That’s also another strike against ChatGPT – if you ask it to create the ordinary, the output isn’t likely to differentiate your brand from your competition.

    And by the way, the terms also say that there’s no guarantee that the output from their software doesn’t infringe on another’s rights. (If you outsource your content creation to a third party, double check your contracts to make sure that if you’re accused of wrongdoing for what they created, that they’ll be responsible for your damages and attorneys’ fees.)

    OpenAI Can Use Your Content Too

    Did you also notice that the terms say OpenAI may get the same output as what it creates for you?

    They also say that OpenAI can use your input and output from its software to develop and improve its services.  

    Photo by Lorie Shaull (Creative Commons)

    Don’t be a Dick to OpenAI

    They already thought of this – you’re not allowed to create multiple accounts to take advantage of their free tier of services.

    If you want more than that, pay for it.

    Additionally, you’re not allowed to use their services in any way that infringes, misappropriates, or violates anyone’s rights.  

    Photo by Steve Spezz (Creative Commons)

    You Have to Protect OpenAI

    Just I said to double check your contract with your third-party creators, the same verbiage is in the OpenAI terms. You have to indemnify OpenAI against any “claims, losses, and expenses (including attorneys’ fees) arising from” your use of their services.

    This is actually a standard term I include in a lot of my clients’ contracts.

    Photo by Steven Depolo (Creative Commons)

    Cool Points to OpenAI

    Whenever you read a contract (terms of service are a contract), remember that whichever side wrote it, did so to protect their interests, not the other guy.

    However, if you are constrained to take OpenAI to arbitration to resolve a dispute, but you can’t pay your half of the arbitration fees, “OpenAI will pay them for you.”

    That’s a classy move. In most terms of service, including the ones I write for clients, if you can’t pay your half of the arbitration fees, you’re screwed and you have no other recourse.

    The terms also say, “OpenAI will not seek its attorneys’ fees and costs in arbitration unless the arbitrator determines that your claim is frivolous.”

    In many contract disputes, it’s a given that the winner will ask for attorneys’ fees and costs. That’s often one of the upsides to bringing a breach of contract claim.

    Photo by DonkeyHotey (Creative Commons)

    What’s OpenAI Doing with Your Personal Info?

    I’m not sure what OpenAI is doing with my personal information, but they can use it for research and make it generally available. That’s what their privacy policy says.

    This is separate from their policy about how they use aggregate information, which they can also use for research.

    OpenAI’s privacy policy also says, “We do not and will not sell your Personal Information. (CA users).” I don’t know if this means that the personal information of people who aren’t California users might be sold, of if this is a policy that applies to everyone, but was included to comply with the California privacy law.

    As always, buyer beware. If you’re not paying for a product, there’s a good chance you are the product.

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    Ruth Carter

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  • New Process to Move a California Corporation to Arizona

    Thanks to an update in California law, the process to move a corporation from California to Arizona is finally straightforward.

    Photo by Erik Wilde (Creative Commons)

    The Old Way to Move a Corporation from CA to AZ

    The old way to move a corporation from California to Arizona was a bureaucratic nightmare:

    1. File the Articles of Incorporation to form an Arizona corporation.
    2. File the Statement of Merger in Arizona.
    3. Send away for a certified copy of the approved Statement of Merger.
    4. Send the certified copy of the Statement of Merger to California with a letter that complies with California state law requirements, including a second page that merely stated the California corporation’s entity number. Even if you included the entity number in the letter, you still had to have it on a second page.

    This entire process took months, especially since most of it had to be done over snail mail! And if you made one minor mistake, the government would send it back and make you do it again.

    Photo by Rennett Stowe (Creative Commons)

    The New Way to Move a Corporation from CA to AZ

    The newly approved way to move a corporation out of California now mirrors the way every other state I’ve worked with lets you do it – with a conversion. Here’s how the new process works:

    1. File the Statement of Domestication in Arizona along with the Articles of Incorporation.
    2. File the Statement of Conversion in California.

    This is also the process for moving an limited liability company (LLC) from California to Arizona. You can also change your California corporation into an LLC while you’re moving it to Arizona.

    I think California realized that companies are going to move regardless of the process and putting red tape in the way is only going to waste government resources. There were times I called the California Secretary of State’s Office with a question, and hear that there were 46 callers ahead of me!

    Photo by Phil Whitehouse (Creative Commons)

    Is the New Process Cheaper?

    Yes.

    The total filing fees for the old process and the new one are about the same about $380 to convert a California corporation to an Arizona corporation with expedited processing.

    Where people are going to save money is on the attorneys’ time. Two steps is faster than four, and requiring the same process for all moves means there will be fewer mistakes (or alleged mistakes), and fewer re-dos.

    Can You File a Conversion by Yourself?

    Yes. You don’t need a lawyer to do it. The forms are available online, and you can do your California filings online.

    Currently, the Arizona Corporation Commission does not have the option to submit a Statement of Domestication online, and it has to be submitted with the Articles of Incorporation, so you have to do that one via snail mail or by going down to their location.

    The process to allow your lawyer to file documents on your company’s behalf through the California Secretary of State’s Office is asinine, so it’s faster for me to send it in via snail mail. You, however, can easily file documents for your company through their website.

    Photo by Alan Levine (Creative Commons)

    What If You Have an S-Corp?

    Let me pre-emptively address this issue because there’s a lot of confusion about it.

    An S-corp has do with how your company is taxed at the federal level. (The IRS really should have picked a designation that didn’t include the term “corp.”) It has no impact on whether your company is formed as a corporation or an LLC through your state.

    I tell all my clients to talk with their accountant about what type of entity they should form at the state level. Creating a corporation or an LLC in Arizona is easy; it’s just paperwork and money.

    Unlike California, it can be easier and more cost-effective to have an LLC in Arizona. If you have an Arizona corporation at the state level, you’re required to submit an annual report an pay an annual fee. It’s much less than the $700/year California charges, but it’s still a fee. And if you forget to submit your annual report, the AZ Corporation Commission can administratively dissolve the company.

    Conversely, Arizona LLCs don’t have any annual fees or reporting requirements. You only need to file an Articles of Amendment if there’s a change in the company’s ownership, name, location, or statutory agent. If you want a business entity that is more set-it-and-forget-it, and LLC may be the better choice for you.

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    Ruth Carter

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  • You Don’t Want A One-Page Operating Agreement

    At Content Marketing World last year, a fellow speaker asked, “Can you help me set up a new LLC?”

    “Sure. That’s easy.”

    “And can you write me a one-page partnership agreement?”

    <record scratch>

    (Speechless)

    Image created using dall-e

    Why a One-Page Operating Agreement is a Bad Idea

    If a client sent me a one-page contract to review, that would set off massive red flags. My first thought wouldn’t be “Let’s see what it says,” but rather, “Let’s see how many gaps are in it.”

    Because here’s the thing, unless your contract is written in tiny font that requires a magnifying glass to read a la Willy Wonka and the Chocolate Factory, the chances that your contract covering the scope of your needs is slim and none.

    “Good Day Sir!”

    Is that contract even valid since it was signed by an 11 year-old?

    Probably not, but that’s a different issue.

    Your operating agreement is the master document for your business. Its job is to put everyone one the same page about how you’re going to run the business, each owner’s rights and responsibilities, and how you’re going to resolve problems when they occur.

    And don’t forget the standard legal boilerplate verbiage that goes in almost every contract.

    When a client engages me to write their operating agreement, I start by sending them 31 questions that I recommend their operating agreement answer.

    What It Really Means When You Ask for a One-Page Agreement

    When a prospective client says they need a one-page agreement, I assume they want something that’s simple and cost-effective. They might be looking for whatever is one step above searching the internet for a free template. They don’t need something that’s complicated or expensive.

    Keeping this in mind, my brain grappled with the possibility to creating a one-page operating agreement:

    What if we kept it bare bones super simple?

    I could write a simple operating agreement that requires a unanimous vote for all decisions, but no one runs a business that way. Plus, there should be a mechanism to “vote someone off the island” if they’re not doing their job, or worse, hurting the business. That wouldn’t be possible if a unanimous vote was required.

    Could we make it a one-page agreement?

    Without committing malpractice? I doubt it.

    What if we made it almost like a template, where we provide the framework, but then they’d fill in the blanks? It might be more than one page, but it would be more cost-effective.

    Maybe to create, but we’d be doing them a disservice in the long run. What if they didn’t understand what information was needed to write an effective contract? You’ve seen the number of people who ask for help or suggestions when answering the usual 31 questions. If there ever was a dispute, they could end up spending more money on legal fees fixing a problem that we could have helped the avoid if we’d written them an effective operating agreement in the first place.

    What’s the minimum that an operating agreement needs to cover?

    Who are the owners of the LLC, the purpose of the business, each owner’s responsibilities, what decisions requires a unanimous vs majority vote, how deadlocked votes will be resolved, what happens if someone wants to leave the company or dies, what happens if the other owner(s) want to kick someone out of the company, how contract disputes will be resolved, plus the standard boilerplate terms that go into every contract.

    We can’t fit all that on one page.

    No, we can’t.

    If we can’t create a one-page operating agreement, what’s the most cost-effective way to write an operating agreement?

    Hmm…it might be to have them tell us everything they’ve already agreed on about how they want to run their business, and then draft the operating agreement, addressing the issues they haven’t mentioned based on what we think is in the company’s best interests, and let them suggest edits from there.

    Photo by tom hilton (creative commons)

    Your Operating Agreement is an Investment

    Your operating agreement is the master document for how you and your co-owner(s) are going to run your business. Too many people are so excited to start the business that they jump into running the business before they have their foundational pieces in place, and it bites them in the butt when things go sideways.

    Taking the time to create an effective operating agreement can be a litmus test to see how you are your co-owners handle difficult conversations. If you can’t come to a consensus on how to run your business, you shouldn’t be in business together.

    The best time to create your operating agreement is at the beginning of the business relationship, when everyone is optimistic and thinking about what’s best for the business. If you wait until there’s a problem to draft this, you and your co-owner(s) may be more interested in protecting your selfish interests or let your anger influence the agreement’s terms.

    Even though I make more money fixing problems, I prefer to help my clients prevent problems, or at least make them easier to navigate. A business divorce can be as stressful and expensive as a romantic divorce.

    This is not how you write an effective contract. Image courtesy of The Daily English Show.

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    Ruth Carter

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  • White Lives Matter Trademark Explained

    You’ve probably seen the news about how a certain celebrity can’t a get a trademark for apparel bearing the despicable phrase, “White Lives Matter.”

    Let’s breakdown what’s happened in this situation so far:

    • Everyone justifiably lost their minds when a celebrity wore a shirt that said “White Lives Matter” in a fashion show in Paris this fall.
    • The news reported that, even if this celebrity wanted to register a trademark for “White Lives Matter” for apparel in the U.S., he can’t because someone else already filed that trademark application with the U.S. Patent and Trademark Office (USPTO) on October 3, 2022.
    • The applicant for this trademark subsequently assigned this trademark to Civic Cipher, LLC, a syndicated black radio show on October 17, 2022.
    Photo courtesy of Courtesy of Candace Owens/Instagram

    How ITU Trademark Applications Work

    The trademark application in question is only an Intent To Use (ITU) application. A company or person can file an ITU application when they expect to bring a good or service to market within 6 months, and it’s a way to stake a claim in the desired trademark, so no one else takes it in the meantime.

    Once the USPTO issues a Notice of Acceptance for your ITU application, you have 6 months to either submit a Statement of Use, proving that you’re using the trademark in commerce, or you can request a 6-month extension. The USPTO will grant you up to 5 extensions, so essentially, you actually have up to 3 years to bring your product or service to market. If you don’t do it by then, that trademark application is “dead,” and you have to file a new trademark application and start over.

    The upside of filing an ITU application is that your federal rights date back to when you filed the application with the USPTO.

    That means Civic Cipher, a black radio show, will have to sell White Lives Matter branded apparel to get the registered trademark.

    Black Radio Show is Selling WLM Shirts (allegedly)

    As I was working on this post, I popped over to the USPTO trademark database (publicly available and free), to look up this trademark application. To my surprise, Civic Cipher submitted proof that they’re selling White Lives Matter branded apparel on November 8, 2022. Here’s the picture of their proof.

    Photo from white lives matter trademark application

    Civic Cipher did something very smart. They didn’t just take and submit a picture of a White Lives Matter t-shirt. This shirt has a tag that says, “White Lives Matter.” That’s the real branding and proof that they’re using the trademark.

    Here’s something important to know if you have or want to sell a brand of apparel:

    Phrases on T-shirts Aren’t Trademarks

    That’s right – putting a word, phrase, or logo on a shirt does not make it a trademark for apparel. The shirt is the product. The trademark is the branding on it, like on the tag inside the shirt, the paper tag attached to it at the store, and/or the bag or box it’s delivered in. That’s where the trademark for the product goes. The trademark goes on the product; it’s not the product itself.

    The purpose of a trademark is to prevent consumer confusion. They don’t want Company B to copy Company A’s branding so closely that consumers might buy Company B’s product, thinking it’s from Company A.

    Even though a phrase on a shirt isn’t a trademark, there’s still an argument that Civic Cipher could send cease and desist letters or takedown notices to prevent others from selling White Lives Matter t-shirts, asserting as the trademark owner, they have exclusive control over who sells apparel containing their brand in the U.S. – if the USPTO registers their trademark.

    Civic Cipher Hosts – Quinton Ward and Ramses Ja; photo courtesy of civic cipher

    Civic Cipher Doesn’t Have a Registered Trademark Yet

    The trademark application for White Lives Matter for apparel was filed on October 3, 2022. The USPTO’s backlog is so massive, it takes them more than 8 months to do the initial review of a new trademark application.

    That means the USPTO won’t weigh in on whether White Lives Matter is trademarkable until May 2023 at the earliest.

    Even if Civic Cipher did everything correct with their trademark application, the USPTO could refuse to register it on grounds that it contains “immoral, deceptive, or scandalous matter.”

    This is a gray area of the law. It’s ok to have a disparaging trademark (e.g., “The Slants” as a trademark for an Asian music group) and to use swear words in your trademarks; however, the Ku Klux Klan can’t register their organization’s name as trademark. I don’t know how the examining attorney assigned to this application will classify “White Lives Matter.”

    (Yes, whether your trademark complies with U.S. Trademark Law is determined by an individual, and different examining attorneys have come to different conclusions regarding the same trademark application.)

    Where is Civic Cipher Selling their WLM Apparel?

    One of the rules to get a trademark is, to be “in commerce,” you have to have a bona fide offer of sale to the public. You don’t have to make a sale, but your product or service has to be available to the public.

    For most of my clients, this means they have to have a website where they show or describe the product, with a price, and button that allows consumers to make a purchase.

    Since Civic Cipher has submitted proof that they’re using their mark “in commerce,” I wanted to see where it’s available for sale. Civic Cipher has a Redbubble online store where they sell Civic Cipher t-shirts, but the White Lives Matter shirt isn’t listed there.   

    When a simple Google search didn’t yield any useful results, I contacted Civic Cipher directly. (I haven’t heard back yet.) I would not be surprised if the price on this shirt is outrageously high or if all the profits go to a charity that helps black people.

    Did You Like This? Subscribe for More!

    If you liked this post and want more, please subscribe to Ruth & Consequences. This fortnightly newsletter gives you exclusive content and a behind-the-scenes look into my life as a non-binary lawyer and entrepreneur and the lessons I learn as the Evil Genius behind Geek Law Firm. (When you own the business, you get to pick your own title.)

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    Ruth Carter

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  • Legal Side of the Try Guys-Ned Fulmer Situation

    Photo courtesy of 2nd try llc

    I have a somewhat different perspective on the Try Guys/Ned Fulmer situation given that I’m a business and internet lawyer as well as someone who has built a business from scratch.

    Disclaimer: I am not at all involved in this situation. I’m just a person with legal knowledge who is watching from the sidelines. Also, I’m a fan of the Try Guys, so my analysis may be biased in their favor.

    Quick Overview of the Situation

    Eugene Lee Yang, Zach Kornfeld, Keith Habersberger, and Ned Fulmer were four guys who worked at Buzzfeed but then left to start their own business based on a YouTube channel called The Try Guys. The channel has millions of subscribers.

    A few weeks ago, it came out that Ned, who’s married, was having an affair with one of his employees, Alexandria Herring, after photos of the two kissing were posted online. Shortly thereafter, the Try Guys released a post that Ned was no longer with the company followed by a scripted video entitled “What Happened.”

    Some of the online reactions said the guys were acting like they were self-important and acting as if Ned cheated on them, not his wife.

    Now that we’re all on the same page, here’s my two cents:

    The “What Happened” Video Wasn’t as Self-Important as Some People Say.

    As YouTubers, the Try Guys put a lot of their personal lives and feelings on the internet. Sharing what happened and how they felt about it was on-brand for them.

    I also wondered if they’d been holding it together for weeks, keeping everything hush hush as they were investigating what happened and deciding what they were going to do, and this video was their first chance to vent how they really felt.

    Ned Cheated on The Try Guys as Business Partners.

    The Try Guys seemed to put their hearts and soul into this business without a Plan B if it didn’t work out. They based their professional futures and livelihoods on the belief that the Try Guys would be a successful business. Like many entrepreneurs, myself included, there is no differentiation between when their professional and personal lives.

    As Eugene, Zach, and Keith said in their video, Ned went against the values of the company that the four of them had created together. When they learned about Ned’s infidelity, they were rightfully worried about how this news would impact their company’s reputation and future opportunities. Not only were they worried about their company’s future, but also for their employees who rely on their jobs to provide for their families.

    Photo by Hooiserillusion from Flickr (Creative Commons)

    Ned Shit the Bed and the Remaining Try Guys are Left to Clean it Up.

    It’s important to remember that these guys weren’t just co-workers, they’re co-owners of a company. They’re creating content and running a business. It’s basically two full-time jobs in one.

    As the Try Guys said in their “What Happened” video, they felt they had found their cadence where their company was consistently creating content and they finally had enough time to explore other personal projects as well. Just as they had established this balance, Ned, through his actions, fucked all that up.

    The Try Guys had to drop everything and deal with hiring someone to do an HR investigation and talk to lawyers all day to figure out what they could and couldn’t do. Given what they do for a living and that they live in Los Angeles, I would not be surprised if their lawyers cost $500/hour. Dealing with this situation could have easily has cost them tens of $1000s so far. On top of that, The Try Guys had created weeks’, if not months’ worth of videos, that probably cost $1000s to make, and now have to be scrapped because there’s no way to edit around Ned. They also reduced their publication schedule from two videos a week to one, so that means less revenue coming in. So not only are they having to deal with substantial unexpected expenses, but they’ve also lost money on top of that that they’ll never recoup.

    Photo Courtesy of 2nd try llc

    The Try Guys Aren’t Done Dealing with the Ned Situation.

    While everyone else is moving on to the next internet drama de jour, the Try Guys are still dealing with this. I suspect they’re still having regular contact with their lawyers as they continue to clean up the figurative debris from this mess.

    Alexandria Herring was listed as an Associate Producer for the company until their latest video. It was clear from the responses from others in the company, it would not be a work environment for her to remain employed there. I bet she wasn’t terminated when Ned was voted out because they had to work with their legal team to give her a severance package that would allow them to terminate her employment without bringing a lawsuit onto themselves. 

    Additionally, even though they voted Ned out of the company, the remaining Try Guys are still dealing with him from a legal perspective. He may be gone as a creator, but he’s still an owner of the company. To get rid of him completely, somebody has to buy his ownership interest.

    Assuming each of the Try Guys owns 25% of the company, they have to determine what the entire company is worth, and negotiate a buy/sell agreement to purchase Ned’s 25%. Finding a company that performs business valuations and having it done can take weeks, and then there could be weeks of negotiations about the contract’s terms, including releases of liability. If I were a surviving owner, I’d want all the costs of having to deal with the Ned situation to be deducted from the purchase price of Ned’s share.

    The only way I can think that would prevent the Try Guys from having to buy Ned out would be if they had an operating agreement in place that said certain bad acts by an owner would result in that owner forfeiting their ownership interest in the company and getting kicked out with nothing. My gut says that didn’t happen in this situation because, as of October 28th, Ned (meaning Fulmer Media Inc.) was still listed as an owner of the company on the California business entity database.

    So, while Ned is doing his own thing, the other three guys have had to take a lot of time and energy away from what they want to be doing to clean up Ned’s mess, keep the company going in the interim, and probably will have to give him a lot of money to make him go away.

    Given all this, if I were Eugene, Zach, and Keith, I’d be pretty upset too.

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    Ruth Carter

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  • F*cking Up my Contract for Content Marketing World 

    I’m excited to go back to Cleveland for CMWorld!

    Content Marketing World (CMWorld) is one of my favorite events every year. They have the best of the best speaking about what’s working with content marketing.

    Like every year when I have the privilege of being a speaker, I’m required to sign a contract. They recently sent me a link to the speaker contract landing page where I signed with my electronic signature. I signed the contract as it was written, but it inspired me to create a revised version. Some of the provisions I added were meant to be humorous, and others were added to fill gaps in the contract’s verbiage. I sent the revised contract to CMWorld, and they thought it was funny.

    Re-writing my friends’ real contracts has become one of my new hobbies. I keep these documents in a folder on my computer entitled, “Let’s Fuck Up Contracts.”

    Below are some of the provisions in the original CMWorld contract I signed followed by how I revised them.

    It’s ironic that I mostly revised it in ways that would benefit the event. Historically, when I’ve revised a contract I’ve been asked to sign, I do so in ways that only benefit me – like when I revised the liability waiver for a race so I could sue the organizers if they ran me into oncoming traffic or something. As a lawyer, I draft contracts based on what’s in my client’s best interests, which again, is not this situation.

    Compensation

    In CMWorld’s Original Contract:

    For my participation, I will be provided:

    • (1) Pass to the main event including admission to all main conference sessions, networking functions, and workshops.
    • (1) Complimentary access to on demand videos for up to one year following the event.

    How I Revised It:

    For my participation, I will be provided:

    • One (1) Main Conference Pass allowing access to all sessions at the Event including all networking functions and conference workshops,
    • One (1) Complimentary Pass to all sessions on demand for twelve (12) months following the Event,
    • Copious amounts of hugs and high fives from the Event team, as long as I’m not creepy about it,
    • First dibs to pet the dogs at the Yappy Hour event where there will be no less than four (4) rescue dogs; and
    • Access to the Event speaker lounge that will be stocked with hot and cold caffeinated beverages; ice cold sparkling water with lime; a selection or orange-colored candies, including, but not limited to M&Ms, Reese’s Pieces, Skittles, Starburst, and Mike & Ikes, each in a separate container (because mixing them is gross); and at least thirty (30) power outlets. 

    Power outlets are in high demand in the speaker lounge. Also, CMWorld has not said whether or not they will have a Yappy Hour at this year’s event. And just so there’s no confusion, I = me, Event = CMWorld, and Informa is the company that owns the Event.

    Photo by 3V Photo (Creative Commons License)

    No Selling From the Stage

    In CMWorld’s Original Contract:

    The Event is an educational event, not a sales or marketing platform. Informa is retaining me to provide an objective presentation that meets the educational needs of the Event attendees.  Informa may revoke my speaker invitation at any time if in its sole judgement that is in the best interests of the Event.

    How I Revised It:

    I grant to Informa a worldwide, non-exclusive, royalty-free, perpetual license to copy, distribute, display, and make derivative works using all materials and recordings of and related to the speaking engagement, in whole or in part, in any Informa anthology, compilation, or educational publication of materials associated with the Event, including without limitation any format, including those that haven’t been invented yet. I acknowledge and agree that this license is assignable and sublicensable without any limitations.

    I also added in the following: Moreover, if Informa is accused of wrongdoing for using any rights licensed to it by me herein, I, or my employer where possible, will indemnify and reimburse all its legal costs, including associated damages, for resolving the matter.

    Photo by JD Hancock (Creative Commons License)

    Dispute Resolution

    In CMWorld’s Original Contract:

    This Agreement and Release is governed by California law. Choice of law rules do not apply, regardless of jurisdiction.

    How I Revised It:

    Even though Informa is a UK company and the Event is in Ohio, I acknowledge and agree that this Agreement and Release is governed by California law and all disputes regarding this contract will be resolved in a court located in Los Angeles County, California. Choice of law rules do not apply, regardless of jurisdiction. Furthermore, I acknowledge and agree that, in a dispute, the non-prevailing party will be responsible for the prevailing party’s attorneys’ fees and cost.

    Other Terms I Added

    Entire Agreement: This contract contains the entire agreement between myself and Informa regarding my participation as a speaker at the Event, regardless of any discussions to date or in the future. Any modification must be in writing and signed by both parties.

    Force Majeure: I acknowledge and agree that neither Informa nor the Event, their employees, contractors, directors, affiliates, or lawyers (because the lawyers always cover their asses as well as their clients’) shall not be liable for damages or any inability to perform under this agreement, which is directly, or indirectly, caused by circumstances beyond their control, including, but not limited to, natural disasters, inclement weather, acts of god, acts by other deities, illness, plague, fires, alien invasion or abduction, floods, riots, strikes, government orders or recommendations, if someone releases a kraken, or any other justifiable conditions outside of Informa’s or the Event’s control.

    I’d expect every event to have a force majeure provision, especially with the COVID pandemic. This is particularly true if the event is at a third-party venue where the event would likely need to be cancelled or rescheduled if the location were no longer available due to a catastrophic event like a fire or earthquake.

    Learn More About Contracts – for Free!

    Earlier this year, I created a mini course for The Tilt called What Content Creators Need to Know Now to Avoid Legal Trouble. It’s a quick 20-minute overview of what content entrepreneurs need to understand about contracts, including how to read a contract and suggested terms to include in your own contract templates.

    Stay Connected

    If you’re interested in reading insider information about my experiences as an entrepreneur and special features you won’t find on any of my blogs, please subscribe to Ruth and Consequences.

    To my fellow CMWorld speakers: If we have containers of different types of orange-colored candies at this year’s event, you’re welcome.

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    Ruth Carter

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  • What’s Up with the Disclaimers on Facebook?

    Avisados by Daniel Lobos, Ruth Carter
    Avisados by Daniel Lobos

    I’ve had multiple people ask for my take on the following disclaimer that lots of people are posting on their Facebook timelines:

    Warning: Any person and/or institution and/or Agent and/or Agency of any governmental structure including but not limited to the United States Federal Government also using or monitoring/using this website or any of its associated websites, you do NOT have my permission to utilize any of my profile information nor any of the content contained herein including, but not limited to my photographs, and/or the comments made about my photographs or any other “art” related posts on my profile. You are hereby notified that you are strictly prohibited from disclosing, copying, distributing, disseminating, or taking any other action against me with regard to this profile and the contents herein. The foregoing prohibitions also apply to your employee(s), agent(s), student(s) or any personnel under your direction or control. The contents of this profile are private and legally privileged and confidential information, and the violation of my personal privacy is punishable by law.

    UCC 1-103 1-308 ALL RIGHTS RESERVED WITHOUT PREJUDICE

    Apparently people think that rules regarding others’ use of their information and intellectual property changed when Facebook became publicly traded and that posting this disclaimer will prevent others from using their photos and other information contained in their profiles. I hate to burst your bubble, but it doesn’t.

    When you signed up for Facebook, you agreed to the terms of the site. The fact that Facebook is now publicly traded doesn’t change anything related to how Facebook can use your information that you willingly posted to your profile.

    The current Facebook terms state that you gave Facebook a “non-exclusive, transferable, sub-licensable, royalty-free, worldwide license to use any [intellectual property] content that you post on or in connection with Facebook.” This license ends when you delete the information from your profile. So if you don’t want Facebook to use any of your information or photographs, delete them.

    Posting this disclaimer will have no effect. By using Facebook, you continue to agree to abide by the terms of the site. If you read Facebook’s terms and conditions, you will notice that there’s no provision that says you can change the terms. Your options are to accept the terms and keep using the site or to delete everything on your profile and stop using Facebook. You can’t manipulate the terms to get what you want this time.

    If you want more information about this issue, check out the Snopes page on this topic.

    Feel free to connect with me on LinkedIn.
    Please visit my homepage for more information about Geek Law Firm.

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    Ruth Carter

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