Technically speaking, Colorado consumers are supposed to report and calculate the value of goods purchased from out-of-state business and pay the state government the appropriate tax. Of course, no one does this, and the state has no way of knowing how much each taxpayer purchases and how much tax is owed.

In an attempt to capture all of these unpaid taxes, the state passed what became known as the Amazon Tax in 2010. The Amazon tax required internet retailers to collect the sales tax from Colorado consumers, or in the alternative, notify each Colorado customer and the State in writing that they owed sales tax on their purchases and provide the customer with a list of all goods purchased by the customer and the amounts spent.

The Amazon Tax poses many issues for large and small online businesses alike. In the case of a large retailer such as Amazon, the task of complying with Colorado’s law is mammoth, due to the enormous volume of transactions the company processes. It would force Amazon to specifically set up unique systems just for Colorado customers.

If every state enacted differing laws concerning the collection of sales tax with differing requirements, it could be a nightmare for large nationwide retailers. Likewise, for smaller online retailers, the Amazon Tax potentially poses a large cost burden in acquiring the systems that would allow the collection of the tax, or complying with the notice requirements.

Enter the U.S. Constitution and the commerce clause. The commerce clause is getting a lot of press these days because of “Obamacare,” but it is also intimately connected to online commerce. In this instance, we are concerned with what is called the reverse commerce clause – basically the theory that state laws cannot place an undue burden on interstate commerce (commerce between states).

In March, Federal District Court Judge Robert Blackburn tossed out the law, stating, “I conclude that the veil provided by the words of the act and the regulation is too thin to support the conclusion that the act and the regulations regulate in-state and out-of-state retailers even-handedly,” and that the law and regulations “impose an undue burden on interstate commerce.”

This ruling confirms what scholars and commentators have said for a long time – any sort of taxation on internet sales has to come from a national level. Given the plethora of issues already being debated at the national level, I think online retailers are safe from any additional government involvement – at least for a little while.

When launching a new company or adding a new product or service, a name must be determined to brand the company, product or service. In the legal field, we refer to brand names and logos identifying a good as a trademark; and brand names and logos referring to services as service marks. However, the term “trademark” is often used generically to refer to either trademarks or service marks.

Hopefully, your chosen trademarks help your company capitalize on the marketing, advertising and goodwill generated by providing a desirable product or service in the marketplace. Trademarks identify your company, its products and services. Those customers who have positive impressions will seek you out and fuel your company’s economic well being — and the trademark helps sell all of that economic vibrancy.

Picking an ideal name or mark is usually hard, but it needn’t and shouldn’t be. There is no perfect name or brand. Rather, the value of the brand is developed over time by providing a quality service or product that cements a favorable association in the mind of the consumer with the trademark.

Would Amazon.com be less successful and prominent today if its name was Gigantous.com? How would a branding expert have critiqued Jeff Bezos’ Amazon moniker?  The expert might have cautioned Bezos that the name was too gender specific and would run the risk of alienating some men: Amazon refers to a mythological nation of warrior women. Perhaps the expert would have been concerned that the term would cause a negative association with the Amazon river and the famous man-eating fish that inhabit it: To most of us the thought of falling into the Amazon river and being devoured by a ravenous school of piranha is not a good one.

Yet Amazon.com is the name of the company and despite the potential negative associations the company has become for many the go-to internet locale for books and all matter of goods. Be honest: When you think about the term, “Amazon,” the association that first pops into your head isn’t warrior women or the South American river. The reality is that if Amazon.com was Gigantous.com instead, it would have made little difference. We would just associate Gigantous.com as the “go-to internet locale for books and all matter of goods.”

The most important consideration in choosing a name is simple: make it unique and different from all others in your company’s field or space. The more unique and different your mark is the better. In most cases, you want to stand out from the competition so that the goodwill derived from your marketing and advertising efforts, your customer service, your unique and superior products and/ or services accrue to you alone and not to the competitor down the street. Some of the best brand names provide no suggestion as to the associated goods and services offered under the brand.

An alien flying in from Mars that has a perfect grasp of the English language but no knowledge of our commerce wouldn’t correctly associate particular goods or services with trademarks like Google, Apple, Xerox, McDonalds and Amazon yet I am certain you would. The values in these trademarks aren’t the names themselves but the goodwill developed over the years. For example, Apple in a few short years through savvy marketing and promotion has convinced all of use to associate the brand with cell phones.

On the other hand ubiquitous trademarks can be extremely problematic especially if the adopter of a largely descriptive mark is a newcomer or smaller market player. Years ago, Homebase was a home improvement store that had a significant presence in Colorado and some other states, but it was no match for the much larger Home Depot. In my part of town, the two stores were located a mere couple of miles apart.  Even though I knew the two apart and favored one over the other, I still had to stop and think when talking to neighbors and friends about where I purchased a new piece of lawn care equipment. And I am certain that more than once I got it wrong. How much of Homebase’s advertising and marketing actually drove confused consumers to Home Depot and how did this confusion ultimately contribute to Homebase’s demise?

Finally and perhaps most important: Your company’s marks should be Google friendly.  Today, a consumer is more likely to consult a search engine to find a company or a particular product instead of the phonebook or even an online directory. If your trademarks are comprised of common descriptive words, chances are your product name may not even pop up on the first page of search results. Ideally, any trademark name you choose should be unique and different enough that when the mark is typed into a search engine relevant information appears prominently on the first page of results.

It’s ultimately not really the perfect name or trademark that scores the big recognition; it’s excellent products and services, coupled with strategic advertising, superior experience — all delivered over time.

This column is also available at Colorado Business Magazine.

The same holds true for legal services and, in particular, trademark search services. In the past few years internet sites offering discount trademark filing services, including cut-rate trademark searching services, have populated the internet. While utilizing the services may be an attractive option to cut costs, business owners should be very careful when using these services because they could jeopardize their trademark rights in their brand, which could lead to future liability or litigation. 

With the cost of your average trademark litigation running well into the six figures, the choice to go with a cut-rate clearance search — or forgo one altogether — can literally cost a business hundreds of thousands of dollars down the line.

While not the most glamorous aspect of the trademarking process, trademark clearance searches are quite possibly the most important step. This is due to the nature of trademarks themselves. In general, the individual or company that used a mark to identify its goods or services first is the rightful owner of the mark. The trademark holder doesn’t have to file any sort of registration for their rights to be valid — it just has to be used in commerce to identify their goods or services. 

Unregistered marks are referred to as Common Law marks. The goal of a trademark clearance search is to provide the potential applicant with data to make an informed decision about their branding strategy. The search should determine whether or not there is anyone else out there with a better right to the mark than the individual or company seeking to potentially adopt and register the mark. If there is a user that has a better right to the mark and you use the mark anyway, this could cause legal issues down the road, resulting in you having to change your brand sometime in the future (losing all of the goodwill and name recognition you have built). That’s in the best case scenario; in the worst case, you could be sued by the trademark owner.

The problem with cut-rate clearance searches is that they generally only search the records at the United States Patent and Trademark Office (USPTO). These searches do not look for any common law marks. If an applicant only does a USPTO search, they are essentially only examining a small slice of the universe of potential mark holders. It would be similar to driving in the center lane of an eight-lane highway with a helmet on that only allowed you to see your lane. You would be completely oblivious that there are cars next to you that could cause an accident. A comprehensive clearance search on the other hand, would allow you to see all eight lanes of traffic, and make adjustments as necessary to avoid an accident.  

A quality, comprehensive search will examine not only the records at the USPTO, but also all fifty state trademark and corporate records, industry and trade publications, phone directories and a comprehensive internet search.

Truth be told, the vast majority of the time that I counsel clients to change or revamp their trademarks, it is generally not due to a registered trademark, but due to a strong common law mark that was picked up by our clearance search. Often times these common law marks are not on our client’s radar and almost certainly would have resulted in an expensive confrontation down the road. By having the commercial intelligence to make an informed decision, our clients are able to adjust course and adopt a mark that not only is protectable, but one that won’t cost them a small fortune down the line. 

As with most things in life, you get what you pay for. However, with cut-rate trademark clearance searches it’s what you don’t get that might come back to haunt you.

[This column can also be viewed on ColoradoBiz Magazine's web site.]

Our forefathers were also “lemonade-stand” immigrants, pioneers, and refugees, and most all of them succeeded, in some fashion, in creating a better life for themselves and their families. We were a nation of adventurers willing to strike out into the unknown and take chances on an uncertain future with dreams of prosperity. This came naturally to us: Our ancestors risked death on the high seas crammed into the bowels of often barely ocean worthy craft — all for the dream of a better life away from the rigid class structures ofEurope. They were of a different sort or breed compared with those who stayed behind. They were adventurers who were willing to take big risks, even facing death, on the hope of future rewards even if uncertain, improbable or unknown.

Over the last sixty or seventy years as we have reveled in our prosperity, we have largely lost it: the drive, determination, grit and tolerance for uncertainty that propelled us here. We go to college, get a degree and hope to find employment at a large corporation that will pay us well and give us a nice benefits package. If we get laid off, we look to the government for an unemployment check. Most of us don’t even know how to be self sufficient. To be fair, our technologically complex society has at least something to do with it: Many of us have specialized professions that do not easily translate into a skill or vocation outside of a bureaucratic company or the government.

At the start of and well into the 19^th Century our forefathers and mothers moved West in search of a better life. And as it is with all who strike out from the comfortable and familiar, many failed. But some succeeded. Collectively, they built new towns, cities and states, and created wealth and prosperity where there was none before. In the East, a merchant class arose, following in the footsteps of renegade entrepreneurs like John Hancock who helped free the nation from rigid and stifling constraints of stuffy oldEngland. Our eastern cities began to rival those ofEurope and a new class was created: a large and prosperous middle class.

Around the turn of the last century, entrepreneurship exploded in this country as the industrial revolution spurred economic growth. And we invited in the people of the world who were fleeing economic desperation and political strife in their homelands. The immigrants didn’t just work for the corporations, they started new businesses: restaurants, ethnic delis, service stations and so many others that served the growing populace. My grandfather was among them: He leftGermanyin the 1920s. He started a nursery lost it and then started another business. As a kid, I remember him and several of his employees loading into a landscaping truck filled with rakes, lawn mowers and shovels and driving off to preen the manicured lawns ofLong Island.

Solving our country’s economic problems may well be within that lemonade stand. The way we grow our economy and as a society depends upon our ability to innovate and move forward. And for this we need people who think outside of the box and are willing to risk failure for the reward of self-determination. In the sixteenth century, they were called explorers. In the  seventeenth and eighteenth centuries they were called colonists. In the nineteenth century, they were pioneers, and for the last hundred years we have known them as entrepreneurs. Perhaps the lemonade stand will help my kids realize that they do not need the safety of a regular paycheck to survive and prosper but that all they need is a belief in themselves and their abilities.

And perhaps it is never too late for all of us to realize, explore and, once again, embrace these lessons.

[This column can also be viewed on ColoradoBiz Magazine's web site.]

A few days ago, a glorious 60 degree February day in Colorado allowed me to run outside in shorts and a short sleeved shirt. This brief respite from winter reminded me that spring is around the corner and with it the traditional spring cleaning at our house. Springtime is also a good time for business owners to take stock of their venture from a legal perspective to make sure that they are doing the things that will increase and protect the value of their company. A lot of us spend our time in the trenches, concerned with the day-to-day. However, it is beneficial to take a break once and a while and look at the bigger picture, what your goals for the company are, and whether or not you are taking the actions that will help you achieve your desired result. A yearly spring cleaning for your business can help you be in a better position to act and capitalize on unexpected opportunities in the future.

From my experience, one of the biggest items that most small business owners do not spend enough time considering is their exit strategy. Do you want to run the company for a few years and then sell it? Are you positioning the company for an IPO? Are you planning on running the company until you reach retirement age and then turn it over to your children? I have seen many clients that walk in our door because out of the blue someone is interested in buying their business. A lot of times they receive substantially lower values than they potentially could have due to the fact that the business was not in a condition ripe for sale. Unfortunately, these owners were all-consumed in the day-to-day operation of the company and didn’t take the time to do what was necessary to preserve the value of their company. Contracts with key third parties were expired or didn’t exist, sweetheart exclusive deals they granted to third party suppliers or venders lurk in the background or the owners could not provide a clear written title to inventions, products, technology or trademarks. In some cases, these issues scuttled potential deals as the buyers were scared off. In these situations, business owners are leaving tens of thousands, if not hundreds of thousands of dollars on the table, because they never took a look at the big picture and never placed an emphasis on growing and protecting the value of the company.

Ultimately, whatever exit strategy you choose, your legal check list will pretty much look the same. The overall goal is to build a company whose intrinsic value or worth is not tied or dependent on the owners or founders of the company. In these companies relationships with third parties are clearly documented. They have identified “crown jewel” assets and have taken steps to protect them as much as possible. The company books and records are in order and are easily understandable. This will allow the business owner to maximize the value of any sale of the business later on or will ensure that a proper foundation is in place for a transfer of power. Some of the things to look at include:

• What are the critical third-party relationships in the business (suppliers, distributors, retailers, consultants, etc.)? Do contracts clearly set forth the relationship?
• Do existing contracts allow for flexibility if business circumstances change?
• Are relationships with key third parties dependent on the owner or the owner’s participation in the company?
• Are agreements with employees in place and designed to protect the value that is created in the company (proprietary information and invention agreements, non-competes, confidentiality agreements)?
• Are processes in place to identify and protect the intellectual assets (Patent, Copyright, Trademark, Trade Secrets) the company creates?
• Is the company in the right form (sole proprietor, partnership, corporation, LLC etc.) for desired goals?
• Have business records been kept in a proper manner and consistent with the form of entity in which the business exists?

Truthfully answering the above questions will help identify areas of a business that may need special attention. Making sure that these areas are addressed and properly dealt with will put business owners in the best position to maximize the value of a company upon exit.

If a business owner fails to do this, all of their hard work may be for naught as they are not able to realize the maximum value of their business.

Peter Lemire is a founding member of the intellectual property law boutique, Leyendecker & Lemire. Leyendecker & Lemire specialize in patents, trademarks and related complex civil litigation. Peter Lemire can be reached directly at 303.768.0641 or peter@coloradoiplaw.com.

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