By Charles C. Weller, Esq.

hile most people actually do learn from their mistakes, many people often repeat the mistakes of others to their own detriment. One reason why many businesses fail is due to improper planning. While life is full of shortcuts, when it comes to business, if you want to be successful, the easiest path is usually not the smartest path. Ignoring the power of protecting ones intellectual property not only limits growth opportunity, but ultimately it could prove fatal to the success of your business. The new drivers of wealth in todays society are knowledge-based assets.1 Throughout the history of human civilization, wealth was based on the possession of physical assets. Today, knowledge has become the new wealth. With the growing realization of the hidden value of intellectual property (or IP), companies are increasingly managing and wielding their IP, not just as defensive protection against intellectual theft, but as an active and powerful tool to sharpen their competitive edge, increase their sector influence, and enhance their reputation as market innovators.2 With todays competitive environment, many smaller businesses are emulating the success of big business by utilizing IP. Companies in the fitness industry are no exception.

The MultiBillion Dollar Fitness Industry

The health & fitness industry is a multi-billion dollar money-making machine. Because of this, there is a vast amount of money to be made. Have you ever wondered why you see so many new businesses appear one year and disappear the next? Of course there are scam businesses trying to make a quick buck, fly-by-night supplement companies, and other bad apples with shady business practices who often get quickly devoured by our capitalism system through the market powers of shred and discerning consumers. But, there are also those legitimate, honest individuals who create and market a good or service and get wiped out in a lawsuit within their first few years of business due to improper planning and business structuring. (Business structuring includes entity selection and formation which is outside the scope of this article.) An often overlooked yet critical part of business planning is the development, identification and protection of ones intellectual property.

What Is Intellectual Property?

To many people the term intellectual property remains a mystery some obscure legal concept of little relevance to everyday life. Lack of awareness about IP is understandable because, in the past, it was an esoteric field of law often reserved for discussions between technical specialists and corporate lawyers. Times have changed. The information technology revolution, and the increasing pace, impact, and importance of invention and innovation, linked to rapid globalization, have brought www.alrindustries.com | 1

How To Make $ With Intellectual Property

IP onto center stage. As a result, IP is now a key factor in corporate strategic planning and should be an important factor in your business. Intellectual property (IP) are legal property rights over creations of the mind, both artistic and commercial, and the corresponding fields of law. Under IP law, owners are granted certain exclusive rights to a variety of intangible assets including the following: 1. Literary, artistic and scientific works; 2. Performances of performing artists, phonograms, and broadcasts; 3. Inventions in all fields of human endeavor; 4. Scientific discoveries; 5. Industrial designs; 6. Marks and commercial names and designations; 7. Protection against unfair competition; and 8. All other rights resulting from intellectual activity in the industrial, scientific, literary, and artistic fields.3 The government protects these property rights because they know safeguarding these rights fosters economic growth, provides incentives for technological innovation, and attracts investment that creates new jobs and opportunities for all. In essence, the government grants you a legal monopoly to grow your business. Economists estimate that two-thirds of the value of large businesses in the U.S. can be traced to intangible assets.4

revenue. This concept applies to large business and small alike, even if it is a one-person business. The key forms of intellectual property are patents, copyrights, trademarks, and trade secrets. Patents provide rights for up to 20 years for inventions; copyrights protect works of authorship, such as writings, music, and works of art that have been tangibly expressed; trademarks protect words, names, symbols, sounds or colors that distinguish goods and services; and trade secrets are information that companies keep secret to give them an advantage over their competitors. While each of these plays a role for businesses in the fitness industry, this article will focus more on trademarks and how they can make your business more valuable, generate income, and offer greater protection against competition.

How Can My Business Benefit From Trademarks?

A trademark or mark is a distinctive name, logo or sign5 identifying the source of goods or services. Trademarks help consumers distinguish a product or service from one source to those produced by another source. A mark provides protection to its owner by preventing confusion as to source in connection with the distribution of goods or services. Trademarks allow you to market and brand your business against your competition and generate revenues through the sale, use, and licensing of your intellectual property. Trademark licensing is a multi-billion dollar activity that pervades the ways in which goods and services are distributed, marketed and sold, both domestically and internationally. One study concluded that over $50 billion worth of licensed consumer goods were sold at the retail level in the United States in one year alone.6 www.alrindustries.com | 2

Why Do I Need To Know About Intellectual Property?

The development, identification, and protection of your companys intellectual property can significantly improve your companys ability to generate How To Make $ With Intellectual Property

Brand recognition becomes a valuable and tangible asset through the use of trademarks (such as the name Golds Gym, the famous Golds Gym logo itself, or the Nike symbol among many other examples.) As you build your business with trademarks, you can build the business goodwill and create additional value if you choose to later sell your business, franchise it, or simply have more leverage in negotiating business deals. Trademarks are also used to: increase product sales, cement customer loyalty, increase revenues and profitability, expand and maintain market share, differentiate products, help introduce new product lines, gain royalties through licensing programs, and establish strategic alliances.

Why Should I Have A Registered Trademark?

To take advantage of the power and protection of a trademark, it should be registered with the United States Patent and Trademark Offices (USPTO). The legal benefits of a federal registration are substantial. Some of these benefits include: Evidence of ownership of the trademark The exclusive right to use the mark throughout the United States The ability to sue infringers in Federal Court for an injunction and damages

If you do not register your trademark then your rights to use the mark only extend to the areas in which your business has established a market presence by making sufficient sales under the mark. In other words, if you are selling a product in a local area under a certain trademark (lets the trademark The main purpose assume happens to be the behind registering your name of your product) competitor can then intellectual property a sell the exact same is to protect your product with the exact name to the rest business. However, same of the country and typically one of the theres nothing you do about it! Too benefits of being can bad, so sad. If only proactive with IP you had the foresight have registered protection is the to your trademark.

supplement company While life is full of business under shortcuts, when it the name of ACME Supplements. You comes to business, if you put in a few years want to be successful, of hard work to get good formulations, the easiest path is develop products usually not the smartest consumers actually want to purchase, path. Ignoring the obtain a distribution power of protecting network, spend large amounts of ones intellectual money on marketing property not only limits & advertising, and ultimately become growth opportunity, but rather successful. ultimately it could prove Then one day you get served a lawsuit fatal to the success requiring you to of your business. immediately cease and desist from Charles C. Weller, Esq. using the name ACME as it infringes upon someone elses registered trademark with the USPTO. What are your options? Going out of business is not even the worst option because that third party may still sue for extensive monetary damages for the unauthorized use of its trademark for the past several years. Well, now you really have a problem. That is a tough lesson to learn, but it serves as a strong reminder that trademarks are also part of proper business planning. Its smart to have an experienced attorney help you setup your business to avoid such pitfalls.

How Can I Generate Income With Intellectual Property?

The main purpose behind registering your intellectual property is to protect your business. However, typically one of the benefits of being proactive with IP protection is the ability to generate additional income. First off, your fitness business will look more professional by owning intellectual property. This allows the opportunity to attract investors by building a strong brand presence and protecting your business from competition. The risk to the investor is lower and the overall value of the business may be increased. If your business owns IP that it does not need to exclusively use, you have the option to license the use of the IP to others. The licensing agreement can be constructed numerous ways depending on the www.alrindustries.com | 3

ability to generate additional income.

Charles C. Weller, Esq.

If you think thats bad, try this one: Lets assume you start a

How To Make $ With Intellectual Property

use and compensation arrangement. Another option is to sell or buy IP. Owning IP that you do not need is sometimes a good thing as someone else may have the need for it and might be willing to pay more than you think. And, finally, when the time comes to retire or sell your business, it will hold a higher value due to the IP and goodwill built up over prior years. Whether you own a large or small fitness business, training facility, on-line store, supplement company, or even just a one-person consulting business, its a wise investment to protect your intellectual property. Start by hiring a lawyer to perform a comprehensive trademark search to make sure that youre not starting off on the wrong foot by selecting a company name which infringes upon anothers trademark. Be sure to register all your trademarks with the USPTO including the name of your business, logos, designs, slogans, images, and other symbols that you want to protect.

to advise you regarding the formation of your business, the planning and growth of the business, and the protection of your intellectual property. Its best to find a lawyer who has experience working with companies like yours so that the wheel does not need to be reinvented. This will allow you to benefit from the mistakes of others while giving your business the best chance for success. When working with a lawyer remember the old adage, an ounce of prevention is worth a pound of cure. Dont wait until theres a problem and its too late to get professional help. Be proactive and leave the headaches for your competition to worry about.

Some Final Thoughts

Intellectual property is something that should not be an afterthought in your business. Being proactive with IP can not only prevent pitfalls in the growth and operation of your business, but can allow you to maximize your growth potential and increase your business valuation. Intellectual property is an asset which protects your business from competition, increases revenue and profitability, and differentiates your company from the rest of the competitive marketplace. For more information, visit www.fitnesslawyer.com. 2009 FitnessLawyer.Com. All Rights Reserved. Reproduction without permission prohibited.

What Steps Do I Need To Take To Protect My Intellectual Property?

All good businesses have strong teams behind them. Without a team of professionals, a business in todays environment and economy is at a distinct disadvantage. One of these professionals should be a good business lawyer who is qualified

FOOTNOTES 1Steven M. H. Wallman, In Pursuit of Intellectual Capital, foreword to Hidden Value: Profiting From the Intellectual Property Economy, ed. Bruce Berman. 2The accounting firm, PricewaterhouseCoopers, estimates that two thirds of the US $7 trillion market value of all US public companies is not reflected on their balance sheets because it lies in their intangible assets, such as intellectual property. 3The Convention Establishing the World Intellectual Property Organization (signed at Stockholm, July 14, 1967 and amended on September 28, 1979). 4According to a July 2007 report entitled Economic Effects of Intellectual Property. 5Its origin dates back to ancient times, when craftsmen reproduced their signatures, or marks, on their artistic or utilitarian products. Over the years the practice of using these marks evolved into todays system of trademark registration and protection. 6Bryer, Sublicensing Intellectual Property Rights in the United States, The Licensing Journal, March 1989, p.4.

Charles C. Weller, Esq., Chief Legal Counsel for ALR Industries As an athlete, bodybuilder, and business owner himself, Mr. Weller carries his life-long passion and understanding of the fitness industry into his professional life in the the practice of law.

How To Make $ With Intellectual Property

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