News and Articles

Legal Update - June 2017

Yogi Patel - Thursday, June 08, 2017

Dear valued clients and supporters: This month's newsletter will focus on three significant updates to New York City Law: (1) the Fair Work Week legislation; (2) the Freelance Isn't Free Act; and (3) the ban on asking prospective employees about their salary histories. A more in-depth article on all three of these topics will be posted on our website next month.

Fair Work Week Legislation

At the end of last month, the New York City Counsel passed the comprehensive Fair Work Week legislation into law, which provides additional protections and rights to fast food and retail industry employees. The legislative package consists of five bills that aim to give low-wage fast food and retail workers greater predictability around their schedules and their weekly pay. For example, one of the laws requires fast-food employers to provide at least 2-weeks' notice to employees of any schedule changes and to compensate workers for any last-minute alterations. Additionally, employers must also provide good faith estimates of weekly hours to new employees and offer any shifts that open up to current employees before making any hires. Overall, the new legislation is keeping pace with other major cities, like Seattle and San Francisco, aiming to protect its more vulnerable workers. Employees and employers are advised to fully understand their rights and obligations before the new law goes into effect later this year.

Freelance Isn't Free

On May 15, 2015, the Freelance Ins't Free Act, which provides enhanced protections and rights for freelance workers, went into effect. Specifically, freelancers are now entitled to insist on working pursuant to a written contract, receive additional damages from clients who do not pay, and are better protected from being retaliated against for enforcing their rights. The law allows for freelancers to file a complaint with the Office of Labor Policy Standards or to file private suit against individuals and businesses who violate their rights. Overall, particularly by allowing freelancers to recover attorney's fees if they file in court, the new law creates meaningful remedies for freelancers who might not otherwise have had the resources to pursue claims on their own. Freelancers and businesses that engage freelancers are advised to fully understand their rights and obligations under this new law.

Employee Salary Histories

On May 4, 2017, a bill that prohibits New York City employers from asking prospective employees about their salary histories was signed into law. The law now makes it an unlawful discriminatory practice for an employer to ask about an applicant's prior pay during the hiring process or to consider the prospective employee's salary history at all in determining how much to compensate the employee. The law, titled Intro. 1253, provides for penalties of up to $250,000 against employers in the most malicious instances and for compensation to aggrieved individuals. The law is set to go into effect in October of this year. Employees and employers alike are advised to fully understand the legislation's requirements and impact prior to its effective date.


Readers are encouraged to follow us on Twitter (@lloydpatelllp) and Facebook to receive updates on these and other issues throughout the month.


Legal Update - April 2017 Newsletter

Yogi Patel - Tuesday, April 04, 2017

Dear valued clients and supporters: This month's newsletter will focus on: (1) challenges to digital arbitration agreements; (2) a payroll scam alert; and (3) the Defend Trade Secrets Act of 2016.

Digital Arbitration Agreements

When two parties enter into a contract, they may decide to agree to arbitrate, rather than litigate their claims. Parties do this because arbitration can be faster, cheaper, and private. While this practice has long-been commonplace, it is a somewhat recent phenomenon that companies have been seeking to insert arbitration clauses into contracts with their customers on digital platforms (websites). However, in addition to precluding an aggrieved customers access to the courts, an arbitration agreement can also seek to require that each customer bring his or her complaint individually, thereby eliminating the possibility of a class action suit. Because of these potential consequences and nature of consumer agreements, the majority of which are non-negotiable and go unread by the customer, advocates are now asking courts to place limits on arbitration language when it comes to consumer contracts. In one recent decision, a Federal District Court in New York sided with consumer advocates in finding that the arbitration language contained in Uber's customer agreement was unenforceable. The judge reasoned that because the arbitration clause was not readily apparent within the agreement and was not separately agreed to, that customers presumably were not aware of the rights they were waiving. Uber has now appealed to the U.S. Appeals Court for the Second Circuit.
In light of this decision, employers are cautioned to consider the design of their digital platforms, especially if the agreements relate to consumers and contain arbitration clauses.

Payroll Scam Alert

Employers should be on the lookout for an email scam in which hackers, posing as executives, send messages to payroll and HR professionals requesting personal information about employees. The emails can appear to be quite legitimate and are fooling employers into divulging the social security numbers, birth dates, full names, addresses, and W-2 Forms of employees. The information is then used to file fraudulent tax returns and collect refunds. If your company receives any emails requesting W-2 Forms and other personally identifiable information, do not transmit any such data without first confirming verbally with the requestor. If you do fall victim to one of these W-2 phishing scams, you should contact both the New York State Department of Taxation and Finance and the IRS so that they can identify suspect filings and implement additional measures to prevent paying out improper refunds.

Defend Trade Secrets Act of 2016 ("DTSA")

In May 2016, Congress enacted DTSA, which functionally expands the scope of federal intellectual property law. The DTSA provides for a private cause of action in Federal court by an owner of a trade secret that is misappropriated, provided that the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce. Under the DTSA, an owner of a trade secret can recover actual damages suffered by the plaintiff, unjust enrichment by wrongdoer, punitive damages and attorney fees. Punitive damages and attorney fees are only available to employers who are trade secret owners who assert a cause of action under the DTSA if they provide notice of immunity for whistleblowers that is also available under the Act to their employees. Furthermore, an action under DTSA can only be maintained if the owner of the trade secret took measures to protect the information they deem to be trade secrets from disclosure in the first place.

In light of this, employers are advised to update their polices and procedures to include reference to the DTSA whistleblower protections available in order to recover punitive damages and attorney fees and to take necessary measures to identify and protect their trade secrets to the extent they have not already.

Readers are encouraged to follow us on Twitter (@lloydpatelllp) and Facebook to receive updates on these and other issues throughout the month.

Legal Update - March 2017 Newsletter

Yogi Patel - Wednesday, March 01, 2017

Dear valued clients and supporters: This month's newsletter will focus on: (1) changes to New York State wage and overtime laws; (2) an update in Trademark Law; and (3) intellectual property insurance.

New York State Wage and Overtime Update

While the implementation of the changes to the FLSA were stayed by a federal court late last year, Employer's in New York should be advised that the minimum wage and overtime exemption thresholds have increased under New York State law. Across New York, all employees are entitled to be paid at least $9.70 per hour and must be paid overtime if they earn less than $727.50 per week. However, in certain cities and counties, these figures are higher. In New York City, employers with 11 or more employees must pay their workers at least $11.00 per hour and grant overtime to anyone making less than $825 per week. For smaller NYC employers, these figures amount to $10.50 hourly and $787.50 weekly; in Long Island and Westchester they are $10.00 and $750.00, respectively. Employers and employees alike should be further aware that all of these thresholds are scheduled to increase again at the end of 2017.

Trademark Law Update

The United States Patent & Trademark Office (USPTO) will begin randomly auditing approximately ten percent of all "declarations of use" filed in connection with trademarks that are registered in one or more class as of March 21, 2017. A declaration of use is a document filed by the owner of a trademark stating that the that the mark is still being used in commerce as registered. The declaration of use is required to be filed between the 5th and 6th year after a mark is registered. While owners are generally only required to submit one specimen for each class under which their marks are registered, owners whose declarations are subjected to an audit by the USPTO will be required to provide additional evidence. Owners who supply insufficient evidence will find their marks subject to cancellation. As such, all trademark owners are encouraged to maintain records, including photographs, demonstrating a consistent use of their marks for all their registered purposes in order to best secure their rights in the event of an audit.

IP Insurance

Although intellectual property (trademarks, patents, and copyrights) may represent a significant source of value for a company, business owners often fail to property protect themselves in the event they are faced with an infringement lawsuit. Defensive measures, such as obtaining insurance to cover the cost of any such lawsuit, should be seen as a necessary precaution for any business that places significant value on its intellectual property. Generally, policies that are typically carried by businesses (Comprehensive General Liability or Commercial General Liability Insurance) may offer coverage for claims related to infringement, however, businesses are advised to understand whether their existing policies do in fact offer coverage related to IP infringement and are advised to seek explicit endorsements in the absence of clear language.

Readers are encouraged to follow us on Twitter (@lloydpatelllp) and Facebook to receive updates on these and other issues throughout the month.


 

Legal Update - January 2017 Newsletter

Yogi Patel - Friday, January 06, 2017

Dear valued clients and supporters: Happy new year! This month's newsletter will focus on: (1) advertising of short-term rentals on Airbnb; (2) rethinking employment contracts and (3) firm announcements. 

Advertising Short-Term Rentals

Recently, Governor Andrew Cuomo signed legislation that makes it illegal to advertise the rental of an entire apartment for a period of less than 30 days. This legislation comes as part of an effort by lawmakers to crack down on the illegal rental of apartments through online platforms, such as Airbnb. Almost immediately after the bill became law, Airbnb filed suit against the City and the State in protest. While you may have heard that part of that lawsuit has been settled, Airbnb is continuing to press forward with its suit against New York City. A more in-depth article on the new law and contested legislation can be found here on our website

Rethinking Employment Contracts

In our newsletter last month, we briefly suggested reasons why employers should rethink the ways their current employment contracts are structured based on the groundbreaking work of Professor Oliver Hart of Harvard University and Professor Bengt Holmstrom of the Massachusetts Institute of Technology. Now, a more in-depth article on why employers should rethink their employment contracts and some practical suggestions as to how can be found on our website.

Firm announcements

We are pleased to announce the birth of Nigel P. Carraro, who is our associate Kyle Carraro's most recent addition to his growing family. We look forward to Nigel joining the Lloyd Patel roster of attorneys in a couple of decades. Finally, we are pleased to announce that partner Yogi Patel will be returning to his alma mater CUNY School of Law this coming semester as an adjunct professor of law where he will be teaching a course on the Uniform Commercial Code (UCC) and Secured Transactions. 

Readers are encouraged to follow us on Twitter (@lloydpatelllp) and Facebook to receive updates on these and other issues throughout the month.

 

STATE OF NEW YORK PASSES LEGISLATION IMPOSING FINES FOR THE ADVERTISEMENT OF ILLEGAL APARTMENT RENTALS

Erin Lloyd - Friday, December 16, 2016

Recently, the New York state legislature passed a law that imposes significant fines on those who advertise the renting of apartments in ways that violate certain New York City and state laws. Specifically, any print, television, radio, mail, text, or online advertisement, such as one through Airbnb, which solicits an illegal rental of an entire residential apartment, is punishable by up to $1,000 for a first offence, as much as $5,000 for a second offense, and $7,500 for a third and subsequent violations.

Almost immediately, and as previously promised, Airbnb filed a lawsuit to contest the law, which included asking the Southern District of New York to grant a temporary injunction blocking the enforcement of the new law. Both state Attorney General Eric Schneiderman and attorneys for the city agreed not to enforce the law until the request for a preliminary injunction was resolved, but as of the end of November, Airbnb agreed to withdraw its lawsuit against New York State entirely. The company appears poised to continue its battle with New York City, challenging its legal jurisdiction to impose the fines. This battle is sure to come with many more twists and turns in the coming months and we will surely revisit it.

For years now lawmakers and proponents of home sharing, like Airbnb, have been at odds over the legality and regulation of short-term rentals. The combination of rising rents and costs of living, along with the increased convenience of home sharing online through Airbnb has led to a spike in short-term rentals statewide as a means of generating much-needed supplemental income. As the number of short-term rentals has grown exponentially, lawmakers and officials have been scrambling to figure out how to best address the home sharing economy.

On the one hand, many residents feel that they should be allowed to generate extra income through home sharing. Often, monies paid by transient guests is absolutely necessary for tenants to pay their monthly rents. By participating in the home sharing economy, people are able to stay in their homes and make ends meet. Home sharing proponents say that their actions are beneficial overall and claim that the real motivation behind “anti-Airbnb” legislation is to protect the hotel industry, which has been declining with the rise of the share economy.

On the other hand, the government does have an interest in insuring that rentals are safe and properly equipped to handle numerous transient guests. A rotating set of strangers in a residential building can cause a plethora of safety issues and skirts the various tax and other requirements imposed on commercial spaces, such as hotels. When individuals or landlords rent out apartments on a short-term basis with such a frequency that they are essentially operating illegal hotels, this becomes contrary to the residential purpose of the buildings and is more akin to a commercial operation.

Also at issue is the effect that Airbnb and other short-term rental platforms are having on affordable housing as a whole. A 2014 report by the Attorney General’s office revealed that almost three-fourths of local Airbnb advertisements between 2010 and 2014 were illegal hotels that violated state and city laws. What’s more concerning is that even though a small percentage of Airbnb hosts have multiple listings, these hosts account for more than one-third of Airbnb’s business in New York. In effect, this means that at least one-third of all New York listings on Airbnb are being managed not by people renting out part or all of their own homes, but by those who are acting as de facto illegal hotel operators.

Politicians and some tenants’ rights groups argue that this study supports their claims that Airbnb is worsening New York City’s housing crisis by making affordable housing unavailable to its residents. Their argument is that apartments that are occupied entirely or mostly by transient guests by definition reduce the number of apartments available for full-time residents. A reduced housing stock skews the level of demand, which is already out of control, which in turn causes rents to go up. Also, because the amounts transient guests pay per week or per day add up to significantly more than what monthly tenants typically pay, there is a disincentive to lease apartments to permanent residents. The overall effect is skyrocketing rents and fewer affordable apartments for rent for residents.

What makes the most current legislation different is that for the first time, lawmakers are going after the advertisement of an illegal rental as a stand-alone offence – whether or not the apartment is ultimately rented in a manner that violates the law.

We will be following any developments in this case carefully, so check back for updates. Our office can help individuals navigate the laws and regulations specific to your situation. For questions about Airbnb, contact Kyle Carraro (kc@lloydpatel.com) or Erin Lloyd (el@lloydpatel.com).

 

NOBEL PRIZE WINNERS OFFER CRITICAL INSIGHT INTO DRAFTING EMPLOYMENT CONTRACTS

Yogi Patel - Friday, December 16, 2016

The groundbreaking work of Oliver Hart of Harvard University and Bengt Holmstrom of the Massachusetts Institute of Technology, which includes providing invaluable insight into how employment contracts should be structured, recently earned the two professors the 2016 Nobel Memorial Prize in Economic Science. Hart and Holmstrom’s research offers a variety of theoretical models and frameworks through which they analyze the competing interests of employees, managers, CEOs, shareholders, and others, and attempt to reconcile them via contracts.

Over the past few decades, Homstrom and Hart’s findings have been used to evaluate whether particular contracts accurately measure the performance and value of employees and other agents to companies while offering the right amount of incentive. Specific factors that the research contemplates in its assessment of employment contracts include ownership, control, the measurability of an agent’s performance, risk sharing, and the motivations of the parties involved.

Rather than simply pay an individual a fixed salary or reward a manager for the performance of a company in a vacuum, the professors suggest considering alternative compensation structures and contracting terms, including:

Deferred Compensation

In order to ensure that a company’s interests are aligned with those of an employee, it may make sense to tie an individual’s compensation to performance rather than pay her a set amount. By withholding a portion of an employee’s compensation, the company can provide incentives for the individual to earn the full amount by meeting certain goals. Whether or not this type of arrangement makes sense will depend in great part on the measurability of an employee’s performance and the stability of the business environment.

Performance Evaluation based on the Overall Market

Another metric for evaluating an employee’s value, particularly one who is in a decision-making position, is the overall performance of the company. One common mistake businesses make is setting goals or targets based solely on the absolute performance of the company, rather than taking into account the performance of the company as compared to other similarly situated businesses. If a company does well in a thriving market or suffers during a market collapse, the employee should not be rewarded for good luck or punished for misfortune. A company performing well relative to others is a far superior measurement of employee value.

Designation of a Main Decision-Maker

Most contracts cannot contemplate the exact outcome of every situation that may arise in a given relationship. Companies recognize that it is impossible to list specific instructions for every job responsibility, and this in turn may actually be counterproductive. In such cases, the parties should determine who has the power to decide what to do in situations where they cannot reach an agreement. In this manner, the parties are able to avoid having to anticipate every possible future event while entering into a relationship that allows them to move forward with their main, general purpose, i.e. employment.

While Hart and Holmstrom’s work is highly theoretical and informative, it is essential to use their tools in conjunction with a business’s specific needs. Depending on the business type, number of employees, and variety of other factors, businesses may have widely different terms and compensation structures that work best for them. Notwithstanding this, business owners are advised to consider the research finds of Professor Hart and Holstrom’s when making decisions about their own employees and businesses.

This article was prepared with the assistance of Julie Lee, 3L (CUNY School of Law).

 

Legal Update - November 2016 Newsletter

David Lloyd - Friday, December 16, 2016

Dear valued clients and supporters: This month's newsletter will focus on significant and immediate changes to state and federal employment laws.

 

Update to Federal Law

Under the Fair Labor Standards Act (FLSA), significant changes to the Act were poised to go into effect in a matter of days (Dec 1, 2016). We covered these changes in detail in a previous article, but in short, unless an employee meets certain job performance requirements (the duties test) and earns at least $47,476.00 per year, that employee was going to be entitled to overtime pay for each week they worked in excess of 40 hours. The existing law sets that monetary threshold at $23,600 per year.

However, a federal court in Texas issued a nation-wide injunction yesterday that now temporarily prevents these changes from going into effect on December 1, 2016. Thus, for the time being, the threshold remains at $23,600. Notwithstanding this, employers are still advised to consider whether they are complying with the "duties" test under FLSA - irrespective of the uncertainty regarding the salary level. The "duties" test functionally looks at the day-to-day responsibilities given to an employee. As a general principal under FLSA, an employee who meets the salary level and the salary basis tests is exempt only if s/he also performs exempt job duties. Whether the duties of a particular job qualify as exempt depends on what they truly are - job titles or position descriptions are of limited usefulness in this determination. It is the actual job tasks that must be evaluated, along with how that particular job task "fits" into the employer's overall operations.

 

Update to State Law

As of December 31, 2016 the minimum wage in New York State is set to change. The changes vary depending on the industry, number of employees and location. For example, the minimum wage is different if you are in the fast food industry. It is different if you employee more than 11 people and different again depending on whether your business is located in NYC vs. Nassau/Suffolk County vs. Upstate NY - as in all three have different rates with different effective dates. We covered these changes in detail in a previous newsletter.

Employers should likewise be aware that the Wage Theft Prevention Act (WTPA) requires them to give employees written notification of these pay changes at least seven (7) days in advance of the effective date. Alternatively, an employer may issue a new paystub that contains the notice of wage increase. The written notice must be in English and also in the employee’s primary language if it is not English. Employers must obtain a signed and dated written acknowledgement of the pay change from the employee following the same language guidelines. Employers who violate these requirements may be subject to civil penalties of up to $50 per day, per employee.

Readers are encouraged to follow us on Twitter (@lloydpatelllp) and Facebook to receive updates on these and other issues throughout the month.

 

Legal Update - October 2016 Newsletter

Yogi Patel - Tuesday, October 18, 2016

Dear valued clients and supporters: This month's newsletter will focus on: (1) trademarking website domain names; (2) impact on a business in the event of a divorce; and (3) rethinking employment contracts in light of the recent award of the Nobel Prize in Economic Science.

Trademarks and Website Domain Names
Contrary to the assumption of many, simply registering the name of a business as a domain name does not give the same protections as trademarking the name itself. Domain name registrants lease, rather than own their website domain names, whereas a trademark grants exclusive use of a particular domain name in commerce nationwide. Thus, businesses who fail to trademark their domain names are much more susceptible to infringement and customer confusion due to another entity using the same or similar name. And many businesses that spend countless resources on their brand (often tied to their websites) could find themselves in a position where they lose their ability to use that domain name resulting from their failure to seek federal trademark protection. For further details on the differences between registering a domain name and a trademark and why businesses should strongly consider the latter, an in-depth article can be found here on our website.

Protecting a Business from Divorce (Updated)
In our newsletter last month, we briefly discussed the need for business owners to prepare themselves in the event of a divorce. A more in-depth article on what steps owners should take to protect their businesses from a divorce is now posted here on our website.

Rethinking Employment Contracts

The most recent Nobel Prize in Economic Science was awarded to two professors for their work on improving the design of employment contracts. At the core of Dr. Oliver Hart and Dr. Bengt Homstrom's study were findings that suggested new ways in which businesses should value their employees' contributions and provide incentives to maximize performance. By restructuring its contracts based upon the professors' research, business can more accurately measure and incentivize their employees' performance and provide compensation accordingly. A more in-depth article on this topic will be posted next month here on our website.

Readers are encouraged to follow us on Twitter (@lloydpatelllp) and Facebook to receive updates on these and other issues throughout the month.

Protecting Your Business in a Divorce

Yogi Patel - Tuesday, October 11, 2016

Approximately 50% of marriages do not end in a “happily ever after” and while the relationship is still civil, you should take steps to protect your business and prepare your finances in the case that your relationship ends in a divorce.

Equitable distribution is the process by which the court divides martial assets between spouses who are soon to be divorced. Generally, when you open a business before your marriage, the increase in value of your business during your marriage is considered marital asset and is subject to equitable distribution. If you opened a business during your marriage, the business is typically marital asset and subject to equitable distribution.

The key issues that arise are the valuation of the business and how much of the business your spouse is entitled to receive. The amount your spouse will receive is dependent on your circumstances. Even if your spouse had nothing to do with your business, the court will take into consideration numerous factors including how many children you have and who takes care of them. Your spouse may be the one who takes the children to school and attend all the student-teacher conferences so you could work extra hours at the office. The court will also consider who takes care of the home, does the grocery shopping, and ensures the bills are paid. Sometimes, marital responsibilities are distributed so that one partner could dedicate all their time to the business while the other takes care of essential home needs. Often times while a spouse runs the business and makes the big decisions, the other spouse supports the business through administrative work or financial contributions.

If your business existed before your marriage, the best course of action is to plan ahead with a prenuptial agreement. A prenuptial agreement is a contract between two people who are about to be married that addresses how assets owned and earned by each person will be distributed in the event of a divorce, whether alimony (maintenance support) will be required in the event of a divorce and how to calculate it, and how assets will be disposed of in the case of death.

If you’re already married, you can enter into a postnuptial agreement. This is a contract that addresses the same rights as the prenuptial agreement. However courts tend to view postnups less favorably. If a business was started during the marriage, the spouse that was not involved is less likely to want to exclude the business from equitable distribution.

You also have the option to place the business in a trust. Meaning you no longer personally own it, but the trust owns it. Generally, this will protect the value of the company and keep the business from being counted as a marital asset.

Dividing assets during a divorce becomes more complicated when there are numerous business partners involved or you are a shareholder of a corporation. Because a business is legally its own separate entity, the question is whether a court could compel your partners to hand over private business information for the purpose of valuation.

Several interests are at play such as the rights of the business entity, the rights of your business partners, and the rights of your spouse. It is a balancing act that will require legal strategies chosen by your attorney. To protect the interest of the business as a whole and the partners, the partnership or shareholder agreement should include a provision that would protect everyone’s rights in the event of a partner’s divorce. Specifically, the provision would appear in a buy-sell agreement between the partners and would address how each partners’ share of the company should be valued, and a requirement that partners either enter into a prenup before marriage or a postnup if already married and also include a waiver or limitation of the spouse’s interest in the business through a stock restriction agreement executed by the spouse.

It is essential to divorce-proof your business, whether you are about to get married or are already married. Because the valuation and distribution of a business depends on your personal situation, it is important to consult with an experienced attorney to ensure your business rights are protected.

This article was prepared with the assistance of Julie Lee, (J.D. Candidate, 2017, CUNY School of Law).

 

Trademark and Website Domain Names

Yogi Patel - Monday, October 10, 2016

Coming to America (1988)

Cleo McDowell:

“Look... me and the McDonald's people got this little misunderstanding. See, they're McDonald's... I'm McDowell's. They got the Golden Arches, mine is the Golden Arcs. They got the Big Mac, I got the Big Mick. We both got two all-beef patties, special sauce, lettuce, cheese, pickles and onions, but their buns have sesame seeds. My buns have no seeds.”

Most businesses, at some point or the other, hope to establish a unique brand with the aim of distinguishing themselves from others within their respective industries. Businesses spend countless resources to establish a brand and once they do, they should protect it at all costs. While only a parody, the scene from Coming to America quoted above illustrates the issue well: What if you managed to come up with something that catches on in the market place and becomes entrenched in your ability to generate business. What would you do to protect it? McDonald’s would likely go after McDowell’s to prevent him from creating confusion and diluting its brand.

The point of this article is to discuss how domain names, which should be thought of as your “brand” can be protected using trademark laws. There is little doubt that most businesses view online presence as essential. A website, is generally the portal through which the business makes its presence known. Whether it is marketing with the intention of providing business owners opportunities to expand their services or whether it is actually providing the service using the website itself – website are here to stay and are poised to become increasingly more essential to businesses.

To make the website more readily identifiable to their customer-base, business owners frequently use their business name as the domain name. A common assumption is that registering a domain name is enough to safeguard the name from being used by others. Simply put, signing up with a registrar and paying a small annual fee only gives the business a license to use the domain name for a certain period of time. Additionally, this right could be revoked at any time. So most domain names are not owned by the business, they are simply on lease. Imagine spending a significant amount of time and resources into building your website and driving traffic to it, only to have to start all over again because someone owns the trademark that is your domain name.

Registering or licensing a domain name will not protect business owners from others who actually trademark the same name or a similar domain name. This could lead to customer confusion, particularly where others with a similar domain name are also selling similar products. Online businesses are especially vulnerable to infringement, because the website is its sole identity. In most cases, trademarking the domain name is an important step towards protecting a business’ online identity and will provide business owners with legal recourse in the case of infringement. Trademarking a domain name essentially declares that the business owner has legal rights to that name.

A business owner who registers a trademark has an exclusive legal right to use the mark in commerce. For example, a business owner who trademarks a domain name will have the exclusive right to use that domain name in relation to its goods and services. Trademarking a domain name is subject to the same rules and standards as trademarking a business name or logo.

While choosing a domain name may be simple, not every word is protected by trademark law. A business owner who wants to trademark a domain name will have to consider a few factors. The name must identify products or services in that business, and it must be distinctive. For example, using common words such as coffee.com or juiceshop.com are most likely ineligible for trademark protection. The more unique the name is, the more likely it will qualify as a trademark. A diligent search should be performed to avoid the potential of any future legal liability as well as to ensure that an application for trademarking the domain name is not rejected.

This article was prepared with the help of Julie Lee, J.D. candidate (2017), CUNY School of Law.

 


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