Tag: Ruth Carter

  • 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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  • 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.

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  • No Copyright for AI-Generated Work

    Artificial intelligence by Wendelin Jacober

    During an evening event at Content Marketing World this year, I was talking with my fellow speakers, and I basically held court to field their questions about how copyright applies to content that’s created with artificial intelligence (AI). This led to an invitation from the brilliant Christopher Penn to do a more in-depth interview about this topic as a Fire Side Chat for Trust Insights.

    Only Humans Can Create Copyrightable Works

    This issue was largely settled by the infamous Monkey Selfie case. Here’s what happened:

    Photographer David Slater was taking pictures in Tangkoko reserve in Indonesia. At one point, Naruto, a macaque monkey, picked up Slater’s camera and took several pictures, including the infamous selfie.

    Slater wanted to register the copyright in the photo, but People for the Ethical Treatment of Animals (PETA) sued Slater on behalf of Naruto, arguing that Naruto should own the copyright since he took the photo.

    The judge ruled that only humans can create copyright-protected works. Since Naruto took the photo, not the photographer, the photographer doesn’t own the copyright.

    In fact, no one owns the copyright in this photo. Since it was taken without a human author, there is no copyright in this selfie. Anyone can use it for any purpose without needing permission.

    Owning an AI Machine Does Not Give You a Copyright in the Machine’s Output

    This came up in a different copyright matter. Steven Thaler owned a machine that created the work entitled, “Entrance to Paradise.” When he tried to register the copyright for this work, he listed the machine, Creativity Machine, as the author, and himself as an author merely as the machine’s owner. The Copyright Office rejected the application, saying that owning the machine isn’t enough to make you an author of the machine’s output.

    If you write software code for an AI machine or product, there’s copyright protection for the code assuming it qualifies as an original work of authorship. However, even when software code is protected by copyright, the results of running the code are not necessarily protected by copyright. Remember there is no copyright protection for facts.

    Artificial Intelligence by Wendelin Jacober

    AI-Generated Content Might be a Derivative Work

    Whoever owns a copyright, get to control how that work is copied and distributed as well as what derivative works can be made from it.

    If you put someone else’s copyright-protected work into an AI machine or software, the resulting AI-generated content would be a derivative work of the original. If you do this without a license, then that’s likely copyright infringement.

    This is similar to using Google Translate to create unauthorized translations of someone else’s work.

    Could the Creator of AI Software be a Copyright Owner of the AI-Generated Work?

    I would not be surprised if this question is revisited by the court in the future.

    This question was touched on briefly in the Torah Soft case. An author wanted to use printouts from the Torah Soft software in their book and the software’s creator said this was an unauthorized use of his copyright in the software code.

    The judge ultimately held that that the code was not an original work of authorship, therefore, not copyrightable, and there was no copyright in the printouts because both the code and the printouts merely contained an unoriginal arrangement of facts. (This is also why there’s no copyright protection for phonebooks.)

    Might the outcome have been different if the input was not protected by copyright but the software code that created the output is? Maybe. This is an issue that hasn’t been taken up by the courts yet. The owner of the copyright in the code would have to prove that the output from the code is a derivative work.

    There’s also the question of whether the method used to create the output is original enough to be worthy of a patent. The court may have to consider whether this is a situation involving patent rights or copyright rights, or both.

    This is a gray area of the law. I don’t have high expectations that the owner of the code will successfully assert rights in the output of their code, but I think these types of questions will come up moving forward.

    What If Your Content is 100% AI-Generated?

    For now, AI-generated content isn’t worth consuming. To be blunt. It’s usually crap. Remember when AI studied pick up lines and was tasked with writing its own?

    However, if you’re using AI-generated content, or perhaps just AI-generated images, this comes with a risk. Assuming the AI-generated content is not a derivative work of someone else’s copyright protected work, it’s content that is not created by a human; therefore, cannot be protected by copyright and will automatically be in the public domain. Anyone, including your competition, could use it without penalty, at least from a copyright perspective.

    Otherwise, it’s imperative to keep a human substantially involved in creating your original works to retain its copyright and associated rights. For now, the best use of AI-generated content seems to be as a tool for exploring ideas for content and creating inconsequential images where you don’t care if anyone uses them.

    Will Certified Artisan Content Become a Real Thing?

    Chris and I joked that in the future, content made my humans will be labeled as “certified organic content” or “handcrafted artisanal content.”

    While we said this in jest, if the quality of AI-generated content improves, this could be how some content creators differentiate themselves from marketers who solely use AI without engaging a human to create original copyright-protected work(s) as part of the creation process.

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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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  • Registered Trade Name vs Registered Trademark: Who Wins?

    “Kum & Go,” photo by Dustin Murrell Broadcast Journalist (Creative Commons License)

    Last week, I wrote about intellectual property disputes where one side had the website domain and the other side has the registered trademark. Someone asked me how do registered trade names factor into these situations.

    What’s a Trade Name?

    In general, a trade name is something you register with your state. This is different than registering a trademark with the U.S. Patent and Trademark Office (USPTO). This is a way to register the name of your company or your product with your state. It typically takes only a matter of days to get and is cheap. In Arizona, the filing fee for a trade name is $10.00, whereas the minimum filing fee to register a trademark with the USPTO is $250, and it takes months (if not longer) for the USPTO to process your application. Your state may also give you the ability to register a state-level slogan or logo.

    Value of Registering a Trade Name

    To be honest, there’s little value in registering a trade name at the state level. It could be helpful in situations where the name of your legal entity is different than the company or product name. For example, if your entity was XYZ Company LLC and your did business as Green Ice Marketing, if you registered Green Ice Marketing as your trade name, your state might not let another company use the same name and compete with you ask Green Ice Marketing LLC.

    Even if you have a state-level trade name, it does not automatically give you statewide common law trademark rights. Common law trademark rights are based on your established geographic market, based on where you’re using the mark in commerce. Thus, if you register a trade name with your state, but you’re only using it commerce in your county, your common law trademark rights may only be that county, not the whole state.

    Registering a trade name creates a third-party record of when you started using a trademark, which may be helpful in a trademark dispute, but there are other ways to demonstrate when you began using a particular trademark in commerce.

    Trade Name vs Trademark

    In a trademark dispute, timing is often a deciding factor when two companies are selling similar products using the same or confusingly similar trademarks. In a trade name vs trademark dispute, there are two ways it could go down.

    Option #1: You Registered a Trade Name Before They Registered the Trademark.

    As stated above, when you only register a trade name with your state, there are no associated federal trademark rights that come with that registration. You only get common law trademark rights based on the established geographic market where you’re using your trade name in commerce.

    The moment your competition registered the trademark with the USPTO, you become “frozen” in your established geographic market. The registrant gets the exclusive right to use the trademark everywhere else in the United States except within the geographic market you established prior to their registration.

    It’s like a snow globe dropped over your area at that moment. They can’t go into your area, and you can’t expand beyond that invisible barrier unless you rebrand. This is what happened in the Burger King situation.

    Option #2: You Registered a Trade Name After They Registered the Trademark.

    Once someone registered a trademark with the USPTO, they have the right to keep competitors from entering the marketplace in the U.S. while using their trademark or one that is confusingly similar to it.

    Once they get their trademark, you can’t start using it too for a similar product or service.

    Here’s the rub. You state probably will not cross-check the USPTO database if you try to register the same mark as a trade name. They will deny your trade name application only if it matches something in their database of registered trade names in that state. Similar to the web domain situation, a lot people get a false sense of security when they can get a state-level trade name, but it won’t provide any protection from an accusation of trademark infringement in this situation.

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    Ruth Carter

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  • You Have the Domain. They Have the Trademark. Who Wins in the IP Dispute?

    “Stone Stacks – Lindisfarne” by Linton Snapper from Flickr (Creative Common License)

    I saw this scenario come through my Reddit feed. Two U.S. companies are in the same industry and using the same name for their brand. One has the dot-com web domain. The other has registered the brand as a trademark with the U.S. Patent and Trademark Office (USPTO). Which company should get to use the brand and force the other to change their name?

    Timing Matters: Who Was First

    The answer to every legal question starts with “It depends,” and here it depends on which company was using the mark in commerce first. By “use” I mean which company made the first bona fide offer for sale to the public, not who came up with the idea for the brand first.

    Option #1: You Started Using the Domain Before They Registered the Trademark

    If two companies in the same industry the U.S. are using the same trademark, but not one has registered it with the USPTO, then each one can establish what are called common law rights in the mark in the geographic areas where they are respectively using the trademark. They can co-exist peaceful as long as one doesn’t try to infiltrate the other’s established geographic market.

    Here’s what happens when they register the trademark with the USPTO – they get the exclusive right to use the trademark everywhere in the U.S., except within your established geographic area at that time. It’s like a snow globe drops over your geographic market. They can’t go into your area, but you can’t expand your market beyond that boundary. This is what happened when the chain Burger King registered their trademark and there was a mom-and-pop restaurant with the same name already in existence. If you want to expand your geographic market beyond that invisible boundary, you have to rebrand.

    These rules are easier to follow when businesses were brick and mortar establishments. Now that commerce is largely internet-based, a company is likely to naturally expand merely by being online. You probably can’t add any new social media platforms using the trademark without them claiming your infringing on their intellectual property rights.

    If you come to me with this situation, unless you’ve established nationwide common law rights before they registered the trademark, it’s often best to save your money on litigation and rebrand instead.

    Option #2: They Registered the Trademark Before You Start Using the Domain

    Remember, when they registered their trademark with the USPTO, they got the exclusive right to use their trademark everywhere in the U.S. except any geographic area where you established your market for the same mark prior to that date. If they registered before you started using the mark at all, you can’t enter the marketplace using that trademark in that industry. They win. You lose. You have to rebrand.

    What if it’s the same situation, but you were using the mark before they registered but you hadn’t created the website yet? Publishing the website after they registered, even if you were already selling the product using that brand, would be an act that would expand your market beyond your now-limited established geographic area, which is not allowed. I would expect them to send you a cease and desist letter demanding that you take down the website.

    Getting the Domain is Not Proof to Trademark Availability

    A lot of people make the mistake of thinking that if they can get the dot com domain they want that there aren’t any trademark issues that they need to worry about. There are many reasons why a company might not get the dot com of the trademark, even if it was available:

    • They are using another type of domain, like .org.
    • They are only use companyname.com for their website and not get separate domains for each of their brands or other trademarks used by the company.
    • You and they have trademarks that sound the same but spelled slightly different.
    • You and they have slightly different domains, such as XYZ.com and TheXYZ.com.

    When I’m working with a client on selecting a company name, product name, or other trademark, I encourage them to search for their prospective trademark on the internet as well as on the USPTO database. What’s tricky about this is that even if you don’t find an exact match to the trademark you want to use, there could be one out there that is confusingly similar to the one you want to use. It’s best to do as thorough of a search as possible before investing your time and money into your brand.

    Can the Trademark Owner Force You to Give Them the Domain?

    There are lots of reasons why a person or company would have a domain that matches your registered trademark that don’t violate your intellectual property rights. If it’s a situation where your website infringes on their rights, they can demand that you remove the website. It doesn’t mean they can force you to give them the domain, though that is something you can try to leverage. They can always offer to buy it off you. (I often advise my clients wait for them to offer to buy it first so as to avoid looking like a cybersquatter.)

    If they are willing to fight you for the domain, there is a risk that they may file a claim against you in court or under the Uniform Domain-Name Dispute-Resolution Policy (UDRP). If you find yourself in a trademark dispute where you have the coveted domain, it’s best to consult a trademark attorney who can examine your specific situation, explain your options, and advocate on your behalf.

    Question of the Day: Two Companies Using the Same Trademark 

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  • Cost to Move a Business from California to Arizona

    “Arizona Welcomes You” by AlmightyWorm, public domain

    Frequently, I receive emails from people who need help moving their business from California to Arizona. They typically find me after reading my post about how challenging it is to move a company from California to Arizona, particularly a corporation. One of the most common questions they have is, “What will this cost?”

    Cost to Move a Corporation from CA to AZ

    Moving a corporation from California to Arizona is complicated because it requires forming a new business entity in Arizona and then merging with the California entity where the Arizona entity is the surviving business. This requires extra steps and extra fees. Here is the process if the surviving entity is an Arizona corporation, with all filing expedited.

    • File the Articles of Incorporation with the Arizona Corporation Commission (ACC): $95
    • File the ACC Statement of Merger: $135
    • Once the Statement of Merger is approved, request and obtain a certified copy of Statement of Merger: $42
    • Send the notice of the merger to the California Secretary of State: $100

    Total filing fees: $372

    In addition to these filing fees, you are required to publish notice of your Articles of Incorporation and Statement of Merger in a local newspaper if your Arizona business is located outside of Maricopa or Pima County: Each approved newspaper sets its own prices, which I’ve seen range from less than $40 to over $400. In my experience, the fewer approved newspapers in the county, the higher the publication fee.

    All of this does not include attorneys’ fees. I tell my prospective clients to expect this total process to take 3-4 hours of my time. (My current rate is $275/hour, so up to $1,100.)

    UPDATE (1/10/2023): The process to move a corporation from CA to AZ recently changed! It’s now easier, faster, and more cost-effective.

    Cost to Move an LLC from CA to AZ

    Moving a limited liability company from California to Arizona is much less complicated than moving a corporation. Thankfully, this does not require a merger.

    • File the Statement of Conversion with the ACC: $85
    • Along with the Statement of Conversion, file the Articles of Organization: $85
    • Once these filings are approved, file a Statement of Conversion with the California Secretary of State: $30

    Total filing fees: $200

    The form for each Statement of Conversion is provided by their respective states. Like a corporation, if your Arizona LLC is not located in Maricopa or Pima County, you must publish a notice of your Arizona LLC in an approved newspaper. As stated above, each publication sets its own prices and they can vary greatly, so it’s often worthwhile to call all the approved newspapers in your county, unless you have your heart set on publishing in a particular one.

    Of course, there is also the fee for your attorney’s time. I tell my prospective clients to expect this process to take 2-3 hours of my time (so at my current rate is $275/hour, it would be up to $825.)

    Moving an Entity from California to Arizona Without an Attorney

    You are not required to use an attorney to move your business entity from California to Arizona. You can submit these filings yourself. However, I strongly recommend that you consult with an attorney along the way. I’m working with a client right now who is doing their own merger. Each step of the way, he checks in with me via email, and I helped him write the notice of the merger to the California Secretary of State.

    I have another client who came to me after trying to move their entity themselves and it backfired. He tried to move his California corporation to Arizona using a Statement of Conversion. The ACC approved it, but the California Secretary of State won’t accept a Statement of Conversion as a way to move the entity out of the state. He essentially wasted his money and time filing the Statement of Conversion in Arizona, because I still have to file the Statement of Merger and the subsequent notice to California to achieve his goal of moving the entity out California. It probably cost him more trying to do it himself, because I also called the Secretary of State’s Office to see if I could untangle this mess and merely send a notice of the conversion – which they said is not permitted.

    I frequently say it’s easier and cheaper to avoid problems than to fix them. If you’re preparing to move your business to Arizona, please contact me if you need help – whether you want me to do everything for you or be available to help you do it yourself.

    If you want to regularly receive information about how you can run your business more effectively and keep up to date on other legal issues related to business, intellectual property, and internet law, please add yourself to my email list.

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    Ruth Carter

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