172: The Great Debate: To Trademark or Not?

Foreign. Hi there.

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And my special guest today is Braden Drake. Braiding is with not your average law firm and I am super excited about our discussion today. I am. I've been working with Braden to do some trademarks and I've been in his contract club for many, many years. So whenever I need a contract or anything for my business that's legal related, I will go to his contract club and I can tell you, every single time I've gone there, I have found exactly what I've needed. So, Brayden, thank you so much for joining me. I worked with you just this last week to do several different trademarks in my business and quite frankly, I think I waited too long. So I'm glad that I, you know, took the step to work with you on that. But before we get into all the questions I have for you, can you tell the good audience just a little bit more about you and how you help people?

Sure. So, hello everyone. Super excited to be here. My name is Braden Drake and I am a California licensed attorney. I also have a master's degree in tax law. And what that means is that we do both legal and tax work for our creative small business clients through my law firm, which you already mentioned. And yeah, that's, that's pretty much the, the broad scope of it.

So Brayden, I, you know, and I just wanted to give you a little plug there because I do think that you have a ton of resources for online entrepreneurs, online business owners, and the folks who are, you know, listening in or tuning in today, a lot of them have, you know, courses in their businesses or memberships, and obviously they have an online business that they're, they're marketing and want to, wanted to bring you on just to kind of give us the lay of the land. There's a lot of places that we need legal type help in our business. And I know that you have what we call this legal layer of protection. So I want you to kind of walk us through and I'm going to ask you. I have tons of questions for you, but kind of walk us through kind of your framework and how you work with online business owners like us.

Sure. Well, we have a few different frameworks. So what we're talking about today, though, on this podcast is just really the legal aspect. So when we zoom into the legal part of the business and protecting ourselves, which is important because we don't want to get sued, we don't want to get in trouble from the state or the IRS or the federal government or any of these things. And we use this framework called the legal layers of protection. And I say they're like layers of clothing. Like, the number of layers you need is going to be based on, like where you are geographically, the time of year. Like, there's variables. And the same is true for your business. The number of legal layers you need is variable based on how long you've been in business, how much revenue you make, what you do, how high risk your business is. You get the picture. So we start there.

Okay, so let's say that somebody is just starting their online business. Where do you suggest they start? What do they need initially in their business?

Yeah, so the most important thing in my opinion are I call them the essential layers of protection. And those are the first two. And my brain, I always picture this like a pyramid, if you're familiar with Maslow's hierarchy of needs. So we have like the bottom two things, which are contracts, usually, and then insurance. So contracts are typically your first layer of defense because if you run into any legal issues, it's typically going to be governed by your contract with whomever you're having that legal issue with. And then insurance, always a great idea because if you're in contract isn't valid, or someone sues you for something outside of your contract, or you have an issue where you didn't even have a contract to begin with, then ideally your insurance is going to step in and defend you in that case. So if you have those two things, you're typically fairly well covered as a newbie, assuming you're not in a super high risk business or doing like really high dollar transactions.

So let's talk a little bit more about that insurance because I just want to make sure I understand it. So what kind of insurance would you generally recommend for somebody who like a course business or a membership or they're selling digital products?

Well, the main thing is just to find an insurance agent that's familiar with your business model. I used to talk a lot about the types of insurance that were available out there. But then in working with my insurance agent, I learned that I was often describing those incorrectly. And the reason, the reason why is because the language that insurance, the insurance industry uses, a lot of the times it's contradictory to what lawyers are taught. And that's not to say that we disagree on things. It's just that one word has one meaning in context and a different meaning in a different context. But we both tend to agree, like what you need to be covered for. So the main thing is you want to be covered. Make sure that you're covered for things like copyright infringement is one that we actually see a lot. I had a client who bought a business off someone in like 2015, and then just this past year, someone came after them for a demand letter for a stock photo that was taken off of Google, not through a stock photography company, and was on the website when she bought the company. So there's like weird stuff like that that pops up. And then obviously if you have clients that sue you for breach of contract, saying that they didn't get what was delivered and they want refunds, like you want to make sure that all that kind of stuff is covered as well. So really think about anything that kind of could go wrong within your industry or business model and that's what you want to make sure you're covered for. And then your insurance agent should be able to match the policies to those concerns.

And where do you recommend that we find an insurance agent that would understand the intricacies of online business, you know, this course business or this membership business. Because I'm not even sure that I'm aware of where to go for something like that.

Yeah, I would say ask a friend. So I don't have a specific company recommendation. They're all a little bit different. But I always recommend like post in a Facebook group. I'm really active on threads now. Share on there and get some referrals from folks who have had good luck getting insurance. And people want to send me a DM on Instagram @not.notav, short for average, not avg law. I can always refer you to my insurance agent. She's a broker, so she will be able to connect you with different companies based on what works best for you.

Okay, so you talk about the contracts and, you know, I guess the next question would be from a business entity standpoint, what would you suggest that we need there?

Okay, so that's our third. That's our third layer. So.

Okay, so I'm jumping ahead a little, a little bit.

You gave the answer for us on our third layer of protection. And this is where it gets like a little bit dicey because 3, 4, and 5, they're all kind of. They're all kind of equal in footing in terms of importance, especially number five, because we, we can't ignore that one. But we'll get there. The third one is your business entity. So if your contracts don't hold, your insurance doesn't cover you, then as the owner of your company, if you're a sole proprietorship, then your personal assets are on the line. If you were to have a lawsuit. So if someone sued you for $100,000 and you don't have $100,000 in the bank and your insurance isn't going to cover it, then you might need a liquidate assets in order to satisfy that judgment or demand. Now, the reality is this is very, very unlikely to happen. Lawsuits don't usually. I shouldn't say they're very, very unlikely, but lawsuits rarely get that far, especially in our industry. Destiny, because most of our, most of our programs are like a couple thousand dollars. So that tends to be like the highest limit of our legal risk. But still, it's something that we want to protect ourselves from. And that's what an LLC can do. So when you form an llc, it separates you from the business. So then that way if someone sues the business, they are only able to really get at the assets that the business owns and not the assets that you personally own.

Okay. And I know that some people form an llc, some people do an S Corp. What are your recommendations there? Because I know you're into tax too, so I'm sure you have thoughts there.

So the main thing is people. You'll hear a lot about S Corps all online, especially if you follow me, I talk about them a lot. But an S Corp is not actually a type of entity. It's just a tax status. So what you're doing is you're going to form an LLC or a corporation, one of the two, for liability protection, and then you can make a tax election to the irs. So your tax election says, I want my entity to either be taxed as a sole prop. Taxed as an S Corp or taxed as a C corp. And you can make that election on both LLC and C corporations. So what we do is we form the LLC by default. LLCs are taxed the same as sole props. So nothing changes from a tax perspective when you form it unless you elect for it to get S Corp tax status. And then that changes the taxation of the entity, which can make a lot of sense for some business owners.

And you do this right, you help people like us go through and do all of that. So you know exactly what you're talking about there. All right, so take us to the next layer of legal protection.

Okay, so I'm gonna swap 4 and 5 from what I normally do, because I did say that they're kind of interchangeable because I think you're gonna have more questions about number five. So we'll get four out of the way. And four is just. I just call it legal compliance, which is just, you know, a lawyer way of saying don't break the law, because obviously you're not very legally protected if you're, like, not complying with the law. So we have to hit our compliance needs. So these are things like data privacy, having a privacy policy on your website. If you sell in Europe, which pretty much everyone does, because websites are accessible worldwide. You need to know about the GDPR rules. We have similar laws here in California that's starting to crack down when it comes to, like, income claims and other things. We also have independent contractor classification, so misclassifying employees as contractors is a really big issue. So it's staying on top of those things and making sure that you're not breaking any of the rules and the laws. I could also add here, complying with company policies, like if you use stripe, Complying with their policies. But that's not really law. That's really just. Well, it kind of is, but that's contract law between you and the company. So you're not going to get into, like, legal trouble with the federal government if you break those. But you might lose your ability to use that platform.

So I just want to delve into one thing that you just said, and it was related to the income claims. And I been teaching this summer as a University professor. And that's one of the things that we've been kind of delving into what, what's changing there with the ftc. And I want to bring this up because I know all of us, as you know, online courses, membership owners, we have these testimonials on our website. So what are you seeing from a legal perspective that's changing there and what do we need to know about?

Yeah, so full disclosure for you and your audience. This is not something that I have very much knowledge on. As you can see in our fir, we cover a lot of air, a lot of areas. So I've let our associate attorney kind of wear their primary hat when it comes to keeping up with all these new rules and regulations. So they'd be able to advise better than I would. So caveat there. We are putting out new information on this all the time on my podcast and things. But just to give you kind of like a general, like a general principle is your income claim shouldn't be deceiving. Like they need to be true. Like they have to be true. They can't be deceiving. And then when it comes to testimonials, one thing that I've heard about, and I'm not sure exactly to what degree this is enforced, but they're starting to look negatively upon you. I call them using testimonials only from your A plus students. So if you sell it, let's say like, I don't know, let's say you're a realtor and you create a course that's how to make $300,000 a year as a realtor and you have had a hundred students and three of them like hit that. If you're only using their three testimonials and then you're making all these income claims that like our, if you say something like our students have made like make $3,000, that makes it sound, sound like all of them do. So be careful with that. One thing I have seen something I've seen that someone's done really well is as you know, I follow Amy Porterfield. I've taken all of her programs. I've been in like inside of her Facebook groups and she does a lot of testimonials from people who have made multi six figure courses down to people who've had success in terms of like a 1 to $2,000 first launch, which I think is a really good variety and it shows people like how to set reasonable expectations. So that's kind of the gist I've also seen and read that it's good to have disclaimers for your testimonials that say that this may not be like the average use case. So that's a good starting point, I think.

Yeah. And I think all of those are good, good points. And some of the research that we've been doing in the summer and the classes that we've been kind of reviewing, what's changing is, you know, really at some point in the future, we might, as business owners might be required to verify those results. So if some, one of our students says, well, I made, you know, $50,000 by following your framework or whatever, we couldn't use that until we actually were able to verif, you know, going and seeing the income statements and all the details there that we use.

That sounds like a huge pain in the ass, doesn't it?

Right? It does. I'm like, well, would I even go through the, you know, go through the process to do that? Would it, would it even be worth it using that testimonials? But I don't think the FTC is there yet, but it seems like based on some of the research, we might be getting there in the future.

See, I would hope, like we have a testimonial release agreement template in our contract club and I would, I would think if we just added a paragraph that says that like they agree that any income claims they've made are true and accurate and we have them sign that, that that would be sufficient. But, you know. Yeah, you never know.

The world is changing, so we don't know. But anyway, so what's the next layer of protection there?

Yeah, so the last layer that we have inside of our layers of protection framework is intellectual property. So that's your patents, your copyrights and your trademarks. But Prim trademark, and really it just comes down to A, making sure that you're not infringing on anyone else's trademark sir ip, and then B, making sure that you are protecting your own and enforcing it so that other people aren't watering down your own brand and using your trademark.

So when would you suggest that we as business owners either work on trademarking a brand name or maybe the names of one of our programs or courses or memberships?

Yeah. So I. Okay, first of all, it's always good to do a search as soon as you name something, because the search, even if you're not going to file the trademark, the search tells you that you're not infringing on someone else's trademark. So that's important. Right. Then the second part is when do we actually file to register our trademark to actually get it registered with the US and for that answer, I usually say whenever. Whenever you would tell yourself, it's worth me not having to potentially have to change this name in the future. So if you're going to name something and put the time and energy into doing the design for it, marketing it, creating it, and then someone came to you a year later and told you, oh, you have to change that, then I would ask myself, would it have been worth the one to two thousand dollars it would have cost me to get my trademark on that, to prevent me from having to redo all of this and lose all the, like, the brand equity is. That's really, really hard to value. But we changed the name of the contract club over a. I think it was over a year ago. It used to be the contract vault. And I still have people googling contract vault all the time. So think about, like, how many potential lost sales you can have once you do a brand change.

Yeah, I think that's a good point. And quite frankly, I feel like I waited longer than what I should have. And just so everybody knows who's listening here, last week Braden helped me file three different trademarks. We did one for hobby school, we did one for hello Content, and we also did one for the podcast, which also have some courses under which is creators mba. And I probably should have done all three of those, quite frankly, a lot sooner than what I did. And I feel like I did.

Yeah, I say how painless was that? We did it. What, like on 12 hour was like two hour call.

We did. We filed them all in one of your VIP days and we knocked them out, did all three. And quite frankly, I feel like I need to go, go back and do some more for some of my flagship courses that I've been selling since 2018. So I feel like I still have some more work to do there. I feel like I've waited too long on all of them. But I agree with you. Extremely painless. But I think it's gonna, you know, save me a lot of heartache, you know, years down the road, because I do feel like those brand names are going to be out there for, you know, ever. I'm not going to be changing them to your point of when we should consider kind of going through that process.

Yeah, it also, it also makes your brand a lot more valuable. If you ever go to sell your company or even just like a program, then having those trademarks makes your, your brand a lot more valuable as well. So there's like, lots of. Lots of positive reasons to make sure you're trademarked. For sure.

Yeah. And that's one of the reasons why I kind of started going down that process is eventually I want to sell Hobby School. We're not there yet, and I have a lot more work to do on it. So I was like, you know what? If I'm going to sell it, I've got to trademark it. Because to your point, it does make it a lot more valuable in the industry.

So I was like, could you imagine, I always think, put yourselves in the shoes of the potential buyer. Could you imagine going to buy a company and the company being like, well, we've been using the name and we haven't really had any issues, but it's not. It's not trademarked. And then you're like, okay, well, I.

Don'T think they would buy it. I mean, I wouldn't. You know, the risk is you might have to stop using it and you build up, up that brand equity and over those years. So I agree with you. Any last minute tips for the audience? And I think we went through every layer, right?

Yeah, yeah, we went through all of them. My. No, no, I think we covered all the main things. So if anyone has any questions, though, they feel free to ask. And we have lots and lots of, lots of resources.

So, Brayden, before we wrap it up here, can you tell them where they can find you?

Sure. I forgot to. Can we swear on your podcast?

Oh, we might have little kids listening, so.

Okay. Okay. Well, my podcast has a potty word in it. It's un. And then like f, you can kind of fill in the blank from there. There's an asterisk for that Val in there. Your biz with Braden. I'm sure Destiny will put that in the show notes, but you all can search it and find it. And then my website is not AVG Law, so you can go check out all of our resources there and then not AVG Law, of our social handles, the ones that are ran by the company. And then my own social handle is Braden Adam Drake on Instagram.

And I'm going to make sure that all of those links are in the show notes. And I definitely want you guys to check out his contract club. I use it. Honestly, I probably use it almost monthly because I'm constantly looking for contracts because we're entering contracts with a lot of different things that we're doing in all three of our brands. So thank you for putting that together. I think it's a great resource for online entrepreneurs like us.

Love it. Thank you. Thanks for having me.

Thanks for listening all the way to the end. I hope you enjoyed this episode today. If you love the show, I'd appreciate a review on Apple Podcasts or your favorite podcast platform.

Have a great rest of your day.

And bye for now.