If there is nothing else that should be stressed to those starting small businesses, it is this: make sure ownership of intellectual property and other business assets is clear. If and when employees leave the business they may think they own what they've created or own your clients, which usually leads to litigation.
Litigation, it's a deadly foe of small businesses.
This is what has happened between the former bandmates of NeedFire, a Dallas based Celtic Rock band, reports Courthouse News. NeedFire's founding member, Ed Walewski, claims that former member of the band, John Cleghorn, has now attempted to register the NeedFire name as his own trademark and registered NeedFire's recordings as his own copyrights.
If these allegations are true, it shows a worst-case scenario for a small business. Could this have been avoided?
Let's start with the trademark claim. A trade or service mark is a word, picture, symbol, or device that identifies the source of goods or services. For example, the Chevrolet bowtie badge represents that the truck is made by Chevy and not Ford.
Trademarks are protected by both State and Federal law. The clearest way to assure your trademark is yours alone is to register it with the Federal Patent and Trademark Office.
Here, the problem was that there was no registration of the mark by anyone. This allowed the former partner/employee Cleghorn to register it with the PTO because there was no record of registration. However, this does not mean all is lost for Walewski. Because of his continuous use of the trademark, he may have what is called a common law mark. However, that usually means litigation is necessary to show who used the mark first and who the owner is.
Copyright is a protection that attaches automatically to any permanently fixed expression of an idea. For example, a painting of the capital building in Austin is a fixed expression.
While you don't need to register a copyright to protect your rights, registration makes it easier to protect them when a problem arises. Here, the largest problem is that NeedFire did not register the copyrights to the recordings that the band made. Now, Cleghorn has registered the copyrights and named himself and his brother as the sole authors and owners of the copyright to the recordings.
Had the recordings been registered earlier, there would be a record of the authors and owners that would support Walewski's current claim.
Further, there are no contracts or licenses showing who allowed whom to use what. Nor did Walewski require his bandmates to sign "work for hire" contracts that would have kept the copyright with NeedFire and not the songs' authors. This would have again been excellent evidence to support Walewski's claim, but instead it seems there are only verbal contracts --legal, but difficult to prove.
Needless to say, if the IP that Ed Walewski claims to own now had been properly documented, he would not be in the difficult position he is in now. And don't assume this is a problem only a band would face, because IP appropriation by an employee or former partner can happen in any business.