CALL NOW FOR CONSULTATION
212-960-8890

Business

Social Media Giveaways: A Few Legalities You Need to Know Before Starting Your Next Sweepstakes or Contest

People love free stuff. Thus, it only makes sense that a company trying to drum up some business would use its social media platform to start a giveaway with the hopes of entising new customers. However, before a business decides to start a giveaway, it is important to be aware of the legalities that surround it.

Understanding the Role of the Independent Contractor and the Independent Contractor Agreement

What is an independent contractor? The answer might be more difficult than you think. In this article, Cordero Law LLC will explore the role of the independent contractor and the independent contractor agreement.

What is an independent contractor?

An independent contractor is a person contracting to do work for another person, and in doing so, does such work according to his or her own processes and methods while not being subject to the control of another, but remains subject to what is specified in a mutually binding agreement. Simple right? Just kidding, we know it isn't. 

In fact, the Internal Revenue Service has about 20 different factors that they consider when determining whether someone is acting as an independent contractor or an employee, despite being labeled as an independent contractor.   

The bottom line is, figuring out what qualifies as an independent contractor is not as easy as it sounds. However, because each one of these 20 factors fits into one of three main categories, by understanding these categories, you can better determine whether someone can be classified as an independent contractor. The categories these 20 factors fall into are behavioral control, financial control, and type of relationship between the parties. 

Behavioral Control

Does the person that hired the worker have control over how the worker does his or her job and what he or she does while working? If the worker gets his or her direction from the person that hired him or her, it is more likely that an employee-employer relationship exists instead of an independent contractor relationship. If the person contracted to do the work has more of a role where he or she is not supervised, it is more likely that an independent contractor relationship exists. 

Financial Control

Does the person that hired the worker have financial and/or business control over the worker? Factors indicating that the person who hired the worker has a significant investment in the work accomplished,  is reimbursing the worker for all or some of his or her business expenses, or has the ability to incur a profit or loss of his own in having the person do the work, lean towards an understanding that the worker is an employee rather than an independent contractor.

Type of Relationship

How do the parties perceive their relationship? If the worker receives employee benefits,  such as insurance for example, the individual is likely to be classified as an employee. 

The Independent Contractor Agreement 

Upon being hired as an independent contractor, an individual or entity will generally have those independent contractors sign an independent contractor agreement

Having an agreement in place can help establish whether the worker will be classified as an independent contractor or an employee. Going through the process of having an independent contractor agreement sets the inference that the parties had the intention to create an independent contractor relationship, rather than an employee-employer relationship. While having an independent contractor agreement doesn't guarantee that the worker will be classified as an independent contractor rather than an employee, it is nevertheless essential to have to protect the parties involved. 
 
An independent contractor agreement governs the working relationship between the independent contractor and the individual or entity who has hired them. Because independent contractor agreements can be very complex, detailing the full scope of the relationship between the parties, it is extremely important to have a business lawyer review your independent contractor agreement before you sign it, regardless of whether you are the worker or person hiring the worker. 

--- 
Julian Cordero is an Attorney, Business Strategist, and Music Producer. Oh and he blogs too!  Julian is licensed to practice law in New York and is the Managing Attorney of Cordero Law LLC, a New York City based law firm focusing on Business Law, Entertainment Law, and Intellectual Property Law.

Forming a Business in New York vs Delaware - Why forming a Delaware LLC is a Mistake

Forming a business in Delaware used to always be the way to go. However, times have changed. Many people wonder whether forming a business in Delaware is more advantageous than forming a business in New York. In this article, the examination will be done with regards to Forming a Business in New York vs Delaware and why Delaware might not be the place to go. 

Usually, when a new client is looking to start a business, he or she will call me and tell me something along the lines of: "I would like to start an LLC in Delaware. Can you help me with that?"  And while I could easily agree and be on my way with my fees in hand - doing so would make me a bad business lawyer.

Is the Customer Really Always Right? 

A good business lawyer is not merely going to do everything his or her client wants (sorry clients)... at least not right away. While forming an LLC in Delaware might be the right option, it might very also well be the wrong, sometimes disastrous, option. A good business lawyer will ask questions, evaluate the situation, and offer advice as to what the best course of action should be.

But let me get off my soap box and get back to my original scenario. After getting this request to form a Delaware LLC, I usually ask two questions. The first is "Why do you want to form an LLC?" and the second is "Why do you want to do it in Delaware?". We will get into the LLC issues on a later blog post, but with regards to the Delaware question, I will usually get a response along the lines of "I don't know" or a variation of it.

Delaware Isn't What it Used to Be - The New General Rule for Where to Form a Business

The truth is, forming a business in Delaware used to be the way to go. However, a lot has changed. Now, hopeful business owners have many options to choose from and aren't as restricted as they used to be. 

As a general rule, I recommend that all new businesses or startups form a business in the state where they are operating. While forming in Delaware might be a good option, there are a lot of factors that need to be taken into account before being able to come up with that conclusion. For example, if your business is located in New York and you registered it as a Delaware LLC, your business does not have the authority to do business in New York. You would need to register that Delaware LLC as a foreign LLC in New York in order to be permitted to do business in New York. Essentially, the business would be paying double the registration costs when they didn't need to do so. And even worse, if they don't register as a NY foreign LLC, years down the line, the business will be responsible for years of back taxes and penalties it should have been paying as a NY foreign LLC. 

Advice Going Forward

This is not to say that there are no advantages to starting a business in Delaware. There are many reasons why starting a business in Delaware still makes sense, especially if you are not starting a run of the mill small business- however these reasons are rare and I only primarily see them in large scale businesses, not small businesses. The only way to know for sure whether it would be a good idea to form a business in Delaware would be to hire an attorney to help you make that decision. While hiring an attorney is by no means, a cheap undertaking, hiring a experienced business attorney to help you make the best decision for your future business is a invaluable investment. Consider hiring one to help you make this decision, among many others, in your next business undertaking.  

--- 
Julian Cordero is an Attorney, Business Strategist, and Music Producer. Oh and he blogs too!  Julian is licensed to practice law in New York and is the Managing Attorney of Cordero Law LLC, a New York City based law firm focusing on Business Law, Entertainment Law, and Intellectual Property Law.  

Apple's New Headphone Plug and the Problems It Just Created

appleheadphonepatent.jpg

Apple has shrunken down the headphone connector, deviating from the standard 3.5mm headphone plug most smartphone users know and love.  

Before I go any further, let me start out by giving a small disclaimer (as a lawyer, I am trained to give disclaimers a lot).  I am writing this on my Apple MacBook Air, after finding out about this on my beautiful Apple iPhone.  In short, I am trying to say that I love Apple.  From the time I bought my very first Apple product, I never looked back.  I loved everything.  However, today I am a bit confused.  I am confused because Apple is about to change everything... again.  

In the smartphone world, there is a race to build the thinnest possible smartphone.  Apple, along with all of the other smartphone companies, are limited to the size of the inner components that make up the phone.  One of these components, is the headphone connector.  Having a headphone plug has become a standard in modern smartphones. And while the 3.5mm headphone plug has been the standard, it is clear that Apple now views this as an inconvenience - hindering their ability to create a thinner smartphone.  Should Apple decide to use this new headphone plug on their future releases, Apple could drastically affect millions of companies and consumers.  

Why is this change so big? 

To understand why, it helps to understand a little bit of patent law (i'm sorry... I don't like patent law either).  Under US intellectual property law, a patent is a right granted to the inventor of a process, machine, article of manufacture, or composition of matter.  When an inventor holds a patent, the patent owner can exclude anyone else from, among many other things, making or selling the invention.  Patents are designed to encourage inventors to continue inventing technology that would benefit the world by giving the owner an incentive to keep creating and sharing.  This incentive is a monopoly.  The earliest a patent monopoly can last in the US is 20 years from the date of application, however, this date can be extended.  

So, in short, no one else can make this new headphone plug for a very long time.    

NO Seriously, this Is a big deal

In Apple's last quarter, it shipped 47.5 million smartphone units, occupying 14.1% of the smart phone market share.  In recent trends, this number has been steadily increasing.  If Apple implements this new headphone plug, at least 47.5 million smartphones will eventually ship, unable to use the standard headphone plug.  

Audio companies selling headphones are thus left with a few options when the new headphone plug comes out: ignore, license, or buy.  

Ignoring the Change

Audio companies cannot ignore the change.  Well, at least the major ones can't.  Apple will likely create an adapter that will assist in the transition of this new headphone plug.  The problem with this is that the plug will likely cost money (not to mention that it will be big and bulky compared to the phone).  Smaller headphone companies, unable to handle any of the other options (as discussed below) without having their profit share crippled, will be forced to depend on users to get the headphone connector.  However, from a practical standpoint, this doesn't work.  The people likely to shell out money for these headphone connectors are people who are particular about the headphones they use.  These same people are thus, likely to purchase headphones from some of the bigger audio companies.  So what happens to the people who are using these smaller headphone companies?  Well, I can't say for sure, but my best guess is that these people will likely just use the standard Apple headphones that will be released to go with the phone.    

Licensing and Buying

 An audio company that is well known and recognized for the quality of their products will likely not ignore this change in headphone plugs.  Several of these companies have benefited over the large number of smartphones sold because of the double function these smartphones serve as a music player.  This makes the iPhone market share too large to ignore.  Thus, these companies will be left with two options.  License or buy.  

Apple will likely license the ability for companies to make their new headphone plug, should they decide to make it the iPhone standard.  Companies would then be able to make their own version of the redesigned headphone plug to incorporate them in their products.  This will likely be at a heavy cost to these companies.  

Another option these companies could explore would be buying pre-made headphone plugs from Apple (or similar companies that licensed the ability to make them).  The audio companies would then incorporate these purchased headphone plugs into their products.  We know Apple will likely do this because they did just that when Apple rolled out the lightening plug over their old iPhone charging/sync connector.  Remember that big annoying plug?  Me either. (Just kidding I still have like 50 of them around my house somewhere).  

Conclusion

Whether a company licenses or buys these new headphone plugs to use with their products, due to small margins, the cost is likely to be passed onto the consumer.  

However, there is no need to panic yet.  Apple has a lot of patents.  Many of which, are never going to be used and were merely designed in anticipation of possible directions Apple could take.  It is possible Apple will not implement this change on their iPhones.  Only time is going to tell what route Apple will take.  

--- 
Julian Cordero is an Attorney, Music Producer, and Entrepreneur.  Oh and he blogs too!  Julian is licensed to practice law in New York and is the Managing Member of Cordero Law LLC, a New York City based law firm focusing on Business Law, Entertainment Law, and Intellectual Property.

Trademarks 101: The Basics of Trademarks

What’s a Trademark? 

Trademarks are a form of intellectual property. A trademark is used to identify and distinguish the source of the goods or services that are being represented by the trademark.  We get it, this is confusing.  In the simplest of terms, a trademark is your brand.  

Trademarks can be letters and words, logos, pictures, a combination of words and a logo, slogans, colors, product shapes, and even sounds.  

Do I have to Register? 

Trademark registration is not mandatory.  (Cue Dramatic Music).  In fact, depending on what state you live in, you may have some rights in your trademarks even if you do not register.  Trademarks that are not registered receive what is known as “common law” protection.  This form of protection varies depending on what state you live in, but in general, the protection will be limited to the areas where you are currently using the trademark.  So for example, if you are selling paper under the name Dunder Mifflin in Scranton, Pennsylvania and do not have a federal trademark registration for the name Dunder Mifflin, another company in Florida can start selling paper under the same name.  

While federal registration is not mandatory, it has several advantages and is almost always recommended.  

Benefits of Registration

Registering your trademark with the United States Patent and Trademark Office (or USPTO as the cool kids call it) has many benefits.  Among these benefits are national protection and and increase in the overal strength of your brand.

Nationwide Protection

Registering your trademark with the USPTO gives you the exclusive right to use your trademark nationwide.  So for example, if our friends at Dunder Mifflin had great lawyers advising them to register their trademark with the USPTO, they could prevent that other paper company in Florida from stealing their name and benefiting from it.

Stronger Brand, Less Problems

While not necessarily a legal consideration, from a business standpoint, unless you plan on being a small mom and pop business that caters to a small selection of people, it doesn’t make sense to not protect and strengthen your brand from the start.  Think about it, you are going to be spending valuable time and resources to promote your brand.  Do you really want to spend all that time and money only to be told years down the line that you need to change your brand?  This is a huge waste and in some cases, can cripple a business.  Trust me, it happens way more than you think.  

Strength of Trademarks

All trademarks are not created equally.  In the trademark world, there are a few categories to describe different trademarks.  The categories are (in order of strength: fanciful, arbitrary, suggestive, descriptive, and generic.  

Fanciful

Fanciful trademarks are the (insert the name of your favorite signer or band here, because you clearly think they are the best) of the trademark world.  A trademark is fanciful if it was invented for the sole purpose of being a trademark, such that it has no other meaning whatsoever.  

Examples of fanciful trademarks are: Exxon, Kodak, and Xerox.  

Arbitrary

An arbitrary trademark generally has some type of dictionary definition before being adopted as a trademark.  However, the trademarks is used in connection with products or services unrelated to that meaning.  Because of this secondary meaning, arbitrary trademarks are very strong marks.  

Examples of arbitrary trademarks are: Apple (for computers) and Shell (for gas stations).  

Suggestive Marks

Suggestive trademarks are marks that suggest a quality or characteristic of the goods and services. While these marks are not as strong as fanciful or arbitrary marks, suggestive marks are one of the most common form of trademarks registered.  The reason for this is due to the marketing advantage of being able to associate a trademark with a particular good or service.  

Examples of suggestive marks are: Microsoft (for computers), Blu-ray (for disks), and PlayStation (for video game counsels).   

Descriptive Marks

Descriptive trademarks are used to merely describe the services or goods where the mark is being used.  A descriptive trademark cannot, by itself, be registered as a trademark because it is inherently weak.  It is possible to register descriptive trademarks if you can achieve a secondary meaning for the trademark.  Secondary meaning means that although the mark is descriptive on its face, consumers are able to recognize the mark as being able to indicate a source of goods or services.  

Examples of descriptive trademarks are: Sharp (for televisions), Digital (for computers), and International Business Machines (for computers).

Generic Marks 

Generic trademarks are not trademarks at all.  The reason for this is because a generic mark is a common name for products or services.  Giving this generic mark any type of protection would essentially create a monopoly, such that the public would suffer greatly if only one person or company would be able to use that mark.  

Examples of generic marks are: salt, smartphone, and social network.  

How Much Does it Cost? 

Trademark registration fees depend on a variety of different factors.  For an updated fee schedule, visit the USPTO Website.

Advice Going Forward

At first glance, the trademark application looks simple.  However, trademark applications are ridiculously complicated.  (Yes, ridiculously complicated is fancy legal term).  Once you start to get into the specifics of the application, it is easy to get lost, confused, or discouraged.  Because of this, the MAJORITY of trademark applications become abandoned or get denied.  

Having an attorney can greatly minimize the risk of your application getting denied.  While results cannot be guaranteed (and if an attorney is guaranteeing results, you should probably run away), having an attorney is your best bet.  

If this is not possible (we get legal costs can be expensive sometimes) it is important to educate yourself as much as possible before going through with the application.  

Trademark fees are nonrefundable.  Don’t make the mistake of randomly submitting a trademark application without either hiring an attorney or educating yourself on the process first.  The USPTO provides numerous sources of information on the trademark application process and should be the first website you visit when deciding to apply for a trademark without an attorney.

--- 
Julian Cordero is an Attorney, Music Producer, and Entrepreneur.  Oh and he blogs too!  Julian is licensed to practice law in New York and is the Managing Member of Cordero Law LLC, a New York City based law firm focusing on Business Law, Entertainment Law, and Intellectual Property.  

 

 

 

New Business Checklist | A Comprehensive Checklist on Starting A Business in NY

Thinking about starting a business in New York? Reguardless of whether you are thinking about starting the next big startup that turns into a fortune 500 company or a small business, the legal implications of starting a business can be complex. As a result, Cordero Law is happy to provide you its "starting a business checklist" as a guide to help you along the way.