Greg: 00:02 – Welcome everyone to Two-Brain Radio. It is our mission at Two-Brain to provide 1 million entrepreneurs the freedom to live the life that they choose. Join us every week as we discover the very best practices to achieve Perfect Fay and move you closer to wealth.
Chris: 00:26 – Debt is a tricky subject in our world. We’ve been taught by HQ to avoid debt, to accumulate cash and then when we’ve got enough money to spend it, but in the business world, the reality is that there’s good debt and there’s bad debt. Good debt creates an asset. There’s also something called opportunity cost. Meaning if you wait until you can afford something, you probably never will be able to afford it and you’ll be missing a ton of opportunity in the meantime. Let’s say for example that you were bursting at the seams and your clients couldn’t attend the 6-p.m. class anymore because there was a waiting list, so they started canceling their memberships. You’re missing an opportunity cost here. The opportunity to keep your current clients. Because if they’re paying for a membership and they can’t attend, they’re not going to keep that membership for long. So you’re looking to expand and so you’re going to have to take on some debt, or you’re going to wait until you have the $10,000 or whatever that amount is to buy the new equipment.
Chris: 01:23 – You can keep turning new clients away while you wait and try and accumulate this money or you can leverage the capital through guys like Rigquipment. Rigquipment is a partner that we chose at Two-Brain Business because their commitment to CrossFit and their commitment to helping first has been proven over several years. I got to admit, I shy away a lot from money people. It’s intimidating to work with people who understand money and finance better than I do. I’m sure you feel the same way, but these guys have shown up time and time again. They’ve offered free help. They’ve turned down business a lot of times because they aren’t sure if the person has a good working business model, and to be honest, they’ve sent people to us and let us turn them down for them because they wanted to know if this person’s plan was going to work. Before you expand, before you start out, it’s super important that you know what you’re getting into, that you have a plan to pay back the debt. You must have a plan to increase cash flow that you’re going to do based on new purchase. Rigquipment has a great tool. If you go to their site, rigquipment.com, you can figure out if you can afford that expansion, should you be buying that new rig or should you be investing in something else like mentorship. These guys will even finance the Two-Brain Business Incubator phase if you purchase it with your equipment because they understand that the Incubator makes your business more viable, it’s less of a risk for them. I love working with Clay and Joe from Rigquipment because these guys understand what our service in life is and that matches their service.
Greg: 02:59 – All right. I’m here with Rachel Brenke. She is an IP lawyer and has many, many amazing things to talk about and I can’t wait to dig in to them. Welcome to Two-Brain radio, Rachel.
Rachel: 03:10 – Thanks for having me.
Greg: 03:12 – Happy to. So let’s kind of start from the beginning. What kind of led you into wanting, I guess, wanting to become a lawyer and an attorney and kind of what has led you into the CrossFit realm or the gym realm of legal work.
Rachel: 03:26 – Yeah, so I always cringe when people start off calling me a lawyer because I’m afraid, you know, the audience is gonna be like, ah, boring, don’t want to listen to this. But, cause I didn’t come into entrepreneurship intending to be a lawyer. In fact, it was really interesting how it’s all taken a turn. But well there is a long story, but I’ll give you the short version of it, is that I kind of always knew that I didn’t fit into a box. As many entrepreneurs probably look back and go, ah, make sense, how I never really enjoyed X job or this in school and that. And so when I ended up being diagnosed with cancer at the age of 20, it really revealed to me—and I was in the midst of beginning entrepreneurship then, but it really was revealed to me that I didn’t want to work and do my life to fill someone else’s pockets and fulfill somebody else’s dreams.
Rachel: 04:16 – And so, I had major goals—two major goals that came out of having the cancer. And the first one wants to be as present for my family if I survived, right, to be as present for my family as much as I could. And then the other was to fulfill my own goals and dreams, and not somebody else’s. And so during that time I was doing a little bit of kind of business consulting on the side, if you will. Let me give you a little context. So I came in doing a online apparel store, which is so funny cause I’m not fashionable whatsoever, but it was kind of one of these print on demand companies. I knew enough of graphic design-type work and it was something I could do from home while I was recovering from the cancer and that sort of stuff.
Rachel: 04:59 – But people were asking me questions all the time about how do you set up a business? How do you do this? How do X, Y and Z? Because at the time that this was occurring, it’s going to date me a little bit. I’m not even sure that Myspace was really even fully off the ground. There was not this freemium model of information like we have these days. You know, you really, you had to pay to play, you had to pay to get information. And so as I threw myself into research, because it wasn’t readily available, people were starting to ask me questions and I thought, huh, there’s something here that I could also help others obtain the same goals as to what I’m doing, being able to fulfill my own goals and be around for their families, you know, be as present as possible.
Rachel: 05:38 – And so we just kind of evolved from there into working with other people, learning, you know, doing business consulting as my apparel store took off. I ended up moving into owning co-working spaces and a photography studio. And just through that whole process I realized, you know, I really enjoy the business side of things. I really enjoy helping people with their businesses and I guess going to law school would be a great way to add some value. And I came out the other side and that’s how I’ve created these legal niche blogs that I have now. I have a general podcast that talks to general entrepreneurs on legal marketing and business stuff. But I have found that there’s some very specific industries such as CrossFit or just fitness professionals and gyms that really needs specific niched help. And so that’s kind of how I have developed multiple very successful legal niche blogs in these very kind of, I won’t say small industries because the fitness industry is massive, but a very narrowed focus.
Rachel: 06:44 – So it’s not just like general legal information that’s out there. It’s very tailored to what you guys need to know. Full disclosure, I don’t own a gym. I go to a gym and I’m an athlete myself. I also compete with Team USA for triathlons and I am big into lifting weights as well. So I don’t necessarily have the perspective of the CrossFit gym, but I can combine my entrepreneurial approach, I know what entrepreneurs are going through. I can combine my business consulting and lawyer skills and also tell you kind of what the pushbacks or objections, the actions that you may take that you think are protecting your business, but kind of how they’d be perceived or how they would impact the athletes that are in your gym. And so I kind of combine all of that into a brand called FitLegally. And here we are.
Greg: 07:31 – Wow. I mean, I knew the end piece. I never got to dig in with you about, I mean the whole beginning. So I mean starting so many different businesses or owning so many different businesses and deciding that, hey, you want to go the legal route and start actually pursuing education side of that. What was that like? I mean, I can only imagine not only dealing with cancer and dealing with all these businesses and business decisions on top of that, but then after getting through all of that and it doesn’t even seem like you took a break.
Rachel: 08:05 – No. Well, you know what’s interesting is it sounds very overwhelming, but you have to consider this is like 14, 15 years in the making, right? I didn’t just wake up and have all of this one day. It’s been very incremental and I really, especially if you’re one of those that are listening, you’re thinking, oh, I would love to have multiple gyms, or maybe I also want to delve into other entrepreneurship. The only way that I’ve been able to do multiple things is to really nail down efficient and good workflows as automated as much as possible. And then recreating that again when you build the next business that you’re doing, you know, no need to start all over. And I think that is one of the things that once you kind of figure out your business style, what you need to do, the uphill climb, right? Learning what you need to do is a shorter trip. I’m trying to think what the phrase I’m trying to think of, but you essentially can take the same information and apply it across different types of businesses. And so learning curve, that’s what I’m looking for it. So your learning curve is relatively small and you can get new businesses and new ventures set up very quickly.
Greg: 09:13 – That makes sense. That makes complete sense. So it just allows you to streamline basically, like you said, with the learning curve, but streamlining it. So, I mean you have so many different things going on right now, and let’s kind of tailor this more towards the legal aspects of businesses, and is there any kind of specialties that you really kind of dive into for businesses or gym owners from a legal point of view?
Rachel: 09:36 – Yeah. One of the fears that I had myself, and I still have this as an entrepreneur, is what if I spend all my time and energy, because you do take time away from yourself. You take time away from your family and just away from life to build a business. But what if I spend all this time and energy doing that only for it to be ripped out from under me? Maybe one day I wake up and I don’t have customers or somebody else comes in and they monopolize, you know, they capitalize the market and take it away from me. Or, and this is how I really determined the type of business law that I wanted to go into, was what happens if someone comes in and they steal my ideas, they take my brand or they ride on my coattails. And so for me, intellectual property is the area of law that every single business owner has.
Rachel: 10:21 – If you have a business name, you have intellectual property, right? So if you’re sitting there thinking, oh I don’t know what IP or intellectual property is, you got a business name, you probably have a logo, you have marketing materials, all of that is your brand that you’re putting out. That is all intellectual property. It is property in your business that you want to be yours, that you are creating connections with your potential members through other businesses through. And so protecting that is super important. Knowing the differences between copyrights, trademarks, and then we can even drill that down into things such as how do I safeguard employees or coaches taking my ideas or customer list when they leave? You know, cause it’s not necessarily if they leave, it’s when they leave. Nothing is forever. And so it’s putting all these safeguards in place. Cause again, what’s the point in building at all if you’re not even going to protect it?
Greg: 11:13 – Agreed. And let’s kind of go down this road a little bit with, I mean I like what you said with that IP is really, I mean if you have a business, if you have a logo and those kinds of things. Now with that, I mean how can people protect themselves if they do—let’s say I have Unknown Element or CrossFit Unknown Element in Clovis, New Mexico, and somebody decides to open up another fitness chain, even in the same city or maybe a different city with the same name of Unknown Element in it. What are the things that I should probably take advantage of or take leverage on if that happens?
Rachel: 11:48 – Yeah, so before I dig into that, let me just say the analysis that I’m going to use and the recommendations is not taking into consideration the license of use for the name CrossFit that you guys have, right? That’s IP, right? They’re licensing IP to you, CrossFit headquarters is licensing that to you guys to use, but it’s those other parts of what you’re talking about here. If you have a name that’s appended to that so you can differentiate yourself from other CrossFit gyms. You know, drilling down into business names can be overwhelming and I hate when I see, and I use the word hate because I do have such a visceral reaction to the fear that someone may lose their brand simply because they used the wrong name. Let me give you an example. Let’s say you just pick a random name that you want to append to the end of the CrossFit.
Rachel: 12:37 – You set up a gym, you invest all this money into marketing and logo, et cetera. Well, if you haven’t taken the proper steps or anything to check to see if someone else has a same or substantially similar name, so it’s same or substantially similar, then you’re looking at potential trademark issues. Trademarks are typically business names, logos and slogans. It’s things like, when I say the phrase, “just do it.” What do you think of? Nike. It’s identifying a source indicator, which is why it’s really important that we check to make sure that we’re not using someone else’s name, i.e., you’re riding on their coattails or confusing consumers, or when you, like the example you gave me, if somebody moves into an area and he’s using something same or similar, you want to take the steps that you need to do, which I’ll walk through here in a second, but you want to take the steps to preserve your name that you’re using.
Rachel: 13:28 – So if you’re on the end where you’re looking at getting yourself set up, make sure you do the proper searches. Trademarks, that’s the key word here for a business name. These are typically done at the federal level. There is state level searching, but I always recommend that if you have a business name, you’re looking to moving into the area, you want to go do a search. I almost always recommend that you start with going to, it’s the US patent and Trademark Office, USPTO.gov, and searching there for anything same or similar, right? That they’re also offering the same or similar products or services as you. So if someone moves into town with a similar name but they offer something completely different than you do, it’s probably not going to be an infringing issue cause it’s not causing confusion.
Rachel: 14:11 – Let’s take for example like United Airlines, they provide airline services. Then you have United moving vans, they provide moving services. The consumer’s typically not going to get confused by those, so they both can use the term or the name United without there being a problem. Now, like in your example, well let me get back to that in a second. I kind of want to give you guys a couple of steps if you’re on this set up. Start with the uspto.gov. Also just start googling and check social media handles because where’s the first place that we go when we think, oh, I’ve have a great business name I want to use. You go to look to see if the social media handles or the URL are available. So that’s a good place and actually maybe that should be number one here on the list.
Rachel: 14:55 – Go there first because if somebody has been using it, even if they don’t have a trademark, they may have rights in that which in this situation you didn’t define to me whether or not this CrossFit gym has a trademark or not. The good thing is even if they haven’t taken the steps to trademark, they may still have rights to stop that other gym from using the same or similar name. So checking social media and Google, but don’t rely on Google because not everyone’s search engine optimization is good. A lot of people suck at it, right? So don’t rely on that. Check the USPTO. Then also check your local business formation systems, they’re typically through like secretary of state or something. You’re going to see like what their LLC or their corporation name is, but don’t rely upon that because those are only state specific.
Rachel: 15:37 – Not everyone even takes the steps to become an LLC or a corporation, but those are quick steps to make sure that you are not going to be infringing on someone else’s. Now in this case, obviously this gym didn’t take those steps, right? Or they just said whatever, we’re going to move into town with the same or similar name, offer also CrossFit, and then you’re going, ah, what do I do? Now it’s kind of like a choose your own path here. If you have a trademark, you are forced, not really forced, but you should want to do it anyways. You’re required to do what’s called policing. So you would want to send cease and desist and take the steps that you need to stop this person. But the way I look at is even if you haven’t taken the steps to trademark, which I know a lot of businesses haven’t done, and if we want to here in a bit, we can talk about at what point should someone consider doing that.
Rachel: 16:25 – But if you haven’t taken the steps to get a federal trademark, that’s OK. Don’t freak out. If you run into this problem where somebody comes into your town, you still can do a cease and desist because you may have priority rights. They are still priority common law rights that exist. You just don’t have the full backing of the trademark system behind you because you don’t have a registered trademark. So for me, now, this is where I’m probably a little different than most lawyers, is that I wouldn’t necessarily rush to all of a sudden getting a formal cease and desist. I would stop for a second, do what’s once called evidence gathering, you know, screenshots, take a look, is confusing people. What’s the deal? Right? Are they really the same or similar name? Are they really offering the same or similar products and services, are people being confused?
Rachel: 17:09 – What is the status of the situation? That sounds like common sense, right? But I’ll have people who come to me and go, oh my God, so and so is infringing, and then it’s an issue like between United Airlines and United moving vans, they’re not actually providing the same type of products or services. And that doesn’t really—there’s no sense in even going down that path. So do that evidence gathering and then you can determine—you still probably should go talk to a lawyer. The reason I’m kind of tripping over my words here is because I’m not one of those lawyers that rushes to let’s send a strong cease and desist, beat them over the head. And I think this is where my entrepreneur role comes in, is that I know there’s so many of you out there that don’t understand this. Some of are probably listening to this going, oh my God, I don’t know anything she just said, she talks really fast, which you guys can slow this down and re-listen to it.
Rachel: 17:57 – So don’t freak out if you don’t know what to do or you don’t know what we’re talking about here. And so because I have that mindset, that really might make a difference on how I would approach that other business in town. Maybe you can approach them and say, hey, did you know that I’m already in town? It really would be good for you to change so we’re not confused by consumers, blah, blah blah. Or you could just take the path of hiring a lawyer. I do think it’s always best to have a lawyer evaluate the situation and determine which is the best course of action. Because if someone comes out guns blazing, you know they’re gunning for your brand, you know, they’re gunning for your people, you’re probably gonna want to use a lawyer to be, you know, because once we get involved, people listen, right?
Rachel: 18:38 – It’s easier for someone to brush just a local business owner off. But I also don’t want you guys to jumping and hiring a lawyer, spending all the money and sending a letter. Cause once lawyers get involved, it puts gas on the fire and maybe you’ve potentially closed off a potential business network in town. Maybe you could have been a mentor to this other gym. So bottom line with that is always step back and see, OK, am I registered, then yes I have to do something about this here. I definitely need to talk to a lawyer. Actually talk to a lawyer either path, even if you’re registered or not with your trademark. And then talk to a lawyer and determine how do we want to approach this. Do we want to be total hard ass and send them a letter or do we want to take more of an education approach and that will just be a conversation needed to have with your attorney and just inwardly kind of consider what do I want to do for my business? Because also your brand’s on the line as well here, even when you are defending your brand, your brand’s on the line with how you interact with local business owners.
Greg: 19:36 – And that makes sense. I mean not trying to burn bridges prior to unless it’s necessary, basically. Unless it’s something that, as you said, if your trademark. Now should I be trademarking everything I make, I mean my not only my logo, but I mean what are the things that as a gym owner, as a business owner, I should be trademarking? And what’s kind of the process? What are the costs behind it? If you know of any of those. So that people out there that are listening that are like, you know what, I’m going to trademark my logo and my name. What are the things that they’re going to need to know?
Rachel: 20:09 – So I jumped the gun a little bit here, we kind of fell down into this path of talking about trademarks before we really defined intellectual property. And the two main types of intellectual property that are applicable to almost everyone that’s going to listen here are copyrights and trademarks. Copyrights protect the actual item itself. So if you guys are taking photographs to promote your gym, the blog posts and social media posts you’re writing, even your logo, can protect the actual creative expression that is fixed in a fixed tangible medium. That I think, well, I’ll come back to that. That’s one type. What we’ve been talking about so far is really protection of the brand itself as a source indicator. Term of art. Don’t really need to worry about that, but kind of think of it this way. When I gave you the example of “just do it,” I want you to mentally imagine that I tied a string around the Nike swoosh or the just do it phrase and take the string. What are you connecting it to? Nike, because that’s a source indicator. It’s letting consumers know when they see your logo or your business name or your slogan, and those are the typically the three types, what it’s connected to. So the difference between the copyright and trademark is that trademark is connecting the connection between your logo and your gym, or your business name and your gym. Whereas copyright, you’re protecting the actual design, the actual creative expression. Here’s total brain exploding. You could have copyright and trademark both on your logo. Again, it would be the protection of the actual logo design. And then the other one is the source indicator. So to answer your questions, I gave that little crash course in IP that actually, you know what, you guys know more than most lawyers that are out there because unless you really seek out intellectual property in law school, you’re not really taught it.
Rachel: 21:53 – It’s not one of the general core legal things that we’re required to learn because it’s not on any of the state bars that I’m aware of. So when should you be mindful of this? You guys should be mindful of knowing that you have all these things. Everything that I’ve listed, you have a logo, you have a business name, you have photographs, you have blog posts, you have all this stuff, right? And so what my suggestion would be on the trademark side of things, that is the source indicator, that’s your business name and your logos. I would pursue it fairly quickly in your business, at least within the first year, if not sooner, because we want to be able to have the full protection of the law that’s available to us. Now, trademarks themselves can be very costly. As you heard me use the terms of art throughout it’s same or substantially similar business name connected to a same or similar products or services.
Rachel: 22:49 – The threshold, again, like we mentioned before, is that we just want to make sure that consumers are not confused. Just like United moving vans, United Airlines, you’re not confused. I don’t think United Airlines is providing any moving services. Maybe, I mean, I guess you could make the argument they put stuff under the plane, but they’re not going to be driving an airplane down I 95. I just know that they’re not moving my household goods that way. All right. Now we’re going to see it on the news. But so my suggestion would be as quick as possible into your business to seek out getting a trademark, because you want to like in the example you gave, the second you gave me that example, I thought visually in my mind about the gym or the box and I had a radius in my mind. I don’t want somebody within a certain radius of me competing with me when I offer the same or similar products or services, especially if consumers are going to get confused by the name. Why is that? I don’t want to waste my time on marketing. I don’t want them to have a bad reputation and it get imparted upon me because maybe they’re unprofessional or their gym sucks or you know, you want to be you, you want to focus on you in the marketing cause then you can control the narrative. Well if you don’t have a trademark in place, it becomes a lot harder to control that narrative. So let’s take that mental image that I just gave. A pin in the map. Here’s your gym right here. We have a radius. If I don’t take a step to get a federal trademark registered, I really only have, and this is a gray area in the law right now, but I really only have common law rights within maybe that city.
Rachel: 24:29 – So that might work for the example that you gave me. I might be able to stop somebody from use of the same name, but let’s say that they’re in New Mexico and I’m up here in Virginia. I open up a gym, I’m offering the same products or services. I have a very similar logo, the exact same business name. What’s going to happen? Let’s circle back to what we talked about before. Where’s the number one place that people go when they’re looking to set up their business? Social media and Google. So let’s ask the question. Where’s the number one place that your potential members are going to go? Social media or a website, and you, just like the example that you don’t want somebody in town, their reputation being imparted on you or consumers getting confused, thinking that you’re owned by the same business and so no big deal.
Rachel: 25:15 – We’ll go to this other one. You don’t want the same thing from my Virginia one to your New Mexico gym. Maybe I’m up here doing some shady stuff. You don’t want it imparted upon you. So if you had a federal trademark, you can preserve your reputation, preserve your brand in New Mexico. But if you haven’t taken the steps to register it, you don’t really have much of any force in the law to stop me up in Virginia from tarnishing your reputation. And it’s not because I’m running around talking about you, I just may be using the same or similar name and I run a really bad business. Right? And that’s going to creep out onto the web. So that’s just one example of many why I find it really important that taking the steps to be federally registered and doing it as soon as possible because the benefits to that, just like I showed you, you can reach all across the United States.
Rachel: 26:02 – You also, when you have to take the steps to stop someone from infringing, you can potentially receive damages, which could be the amount of money that I made in memberships in the time that I used your mark. Right? Cause I’m riding on your coattail. I’m benefiting from it. So why should I as the infringing party benefit, monetarily benefit from that? One of the damages could be if you have a federal registered mark that I have to pay you any profits that I made during that time. You also can get injunctions to stop me. And also if it’s registered then there’s a high chance for attorney’s fees, so you’re not going at it. Whereas if you don’t have a registration, you’re kind of on your own, you gotta pay for attorneys. And I’m going to tell you right now, IP attorneys, because there’s not very many of us, we know it and we charge a pretty penny for it.
Rachel: 26:51 – So there’s so many benefits to federally registering that you should do it in the first year. Now I’m going to give you the numbers. I wanted to share all the benefits first before I gave the numbers on it because it can be a little bit of a sticker shock. But also I don’t want you guys to necessarily run out and DIY this simply because I’ve convinced you that this is a good step to take. Doing a federal mark, they do it by classifications. So like the example I just gave you, let’s take my business name and I want to connect it to a fitness gym. That would be one classification. Another classification, you can even narrow that down to like yoga-specific classes, weight-training classes, you know, they have a whole plethora of things that you can choose from. When you go to register, you have to pay per class.
Rachel: 27:34 – So the government themselves, right now it’s 2019 March, just in case you guys are listening to this later, I believe it’s $225 per class, which really is a nominal investment to be able to stop someone else from riding on your brand. Now, obviously it will cost more than that to have an attorney do it, but I definitely don’t recommend DIY-ing trademark applications because if you screw it up, they can reject you. They being the USPTO, and you either have to start all over or you can be stopped from ever getting a registration for it in the future. And all of these benefits I just mentioned, we don’t want to lose that. You guys have put the time and energy and effort into building a reputation. So, bottom line on that, do it as soon as you guys can when you get into business, even if, and this is the big objection, even if you don’t know if you’re going to make it. Because here’s the thing I’m going to tell you: I fell into that in the very beginning. I was like, oh, I don’t have a lot of money. I’d rather put that towards more marketing, more Facebook ads and I just don’t know if I’m going to hack at this thing. Guys. Ten years goes by like that and then all of a sudden you have somebody infringing. Well, you’re back to having to enforce it without any of those federal protections, it’s not worth it. The minimal investment is well, well worth the steps to get protected.
Greg: 28:52 – Oh, completely. And I’ll tell you right now, that is exactly what I’m going to do now for my business and brand because I’ve yet to trademark it. So by the time this comes out here, everyone will see that mine is definitely trademarked.
Rachel: 29:04 – And the process takes a while. So it’s not like you just go and register and you get it today. It can take up to nine months for them to approve it. Well, I say nine months, it depends on at the time that you listen to this because it’s the government, they take forever.
Greg: 29:18 – Very true. Very true. Now let’s say I’m running classes and I decide, hey, one of my members is a photographer or videographer. I have them come in and I have them take pictures. Is there any kind of legal documentation I should probably have? Now, not from the member side because anyone listening that has their members sign a waiver should definitely have a photo release and video release in there and always ask for them either way, say, hey, we’re going to do this and make sure people feel comfortable with it because I do have—I have a full class that doesn’t, or a full program better yet, that they just prefer not to. There’s only a few of them in it right now, but they just don’t want their pictures taken so it’s OK. But let’s say I bring somebody in. What kind of legal documentation or what kind of things should I hash out prior to them coming in and taking video or pictures to make sure that when I use them I’m in the free and clear.
Rachel: 30:09 – Yeah, so I’m glad you differentiated that. So the model release is what Greg was talking about and that’s just going to be the permission from your members giving permission to utilize their face, it’s their publicity rights and marketing. Now Greg’s asking me about, you either hire someone to come in or it can be members that take photographs while they’re in the gym themselves. Neither of those individuals probably works for the gym on a full-time or a W2 employee basis. Right? And that’s really important. Anytime you guys have intellectual property, like we’re talking about here, Greg is getting at photographs, it can be photographs, it can be your logo created, anything like that. Any time someone creates something for your business, you have to first ask yourself are they an independent contractor or do they work for me as an employee, and we can go down the path of talking about the differences of here in a minute, but the reason the status is important is because let’s say Greg works for me.
Rachel: 31:01 – You know he runs my front desk. Yeah, I have him on W2. He is my employee. By default, anything that he creates, I own. My gym owns. So I don’t have to worry about getting in trouble for a copyright infringement, which we touched on a little bit ago. I don’t have to worry about that. But if I just hire Greg to come in, he’s a photographer down the street and he’s coming in to photograph for me. He would then be an independent contractor to my business. By default, he retains the copyright ownership to the images that he photographs. It doesn’t matter if I’m in the photograph, it doesn’t matter if it’s in my gym. He under the law as it stands now, owns the copyright to those. So what do I need as the gym owner? One of two things. You either need to buy out the copyrights, which is have a copyright transfer from Greg to you, the business, which I can talk about the benefits to that here in a minute, but I’m going to tell you now one of my niche blogs in the photography industry, and you may run into a little resistance, which I’ll explain. The second document and you don’t need both of these, you need one or the other. So the first one is either a copyright transfer from Greg or the photographer to your gym, or the second one is a commercial license or a license of use. And it’s Greg licensing to my gym how I can utilize those photographs while he retains the ownership in them.
Rachel: 32:24 – Now, photography industry, commercial photography, which is what we’re talking about here, because the end result is going to be used commercially. You’re going to be using on your Instagram, your Facebook, Twitter, blah, blah, blah cause you’re trying to gain new members, right? It’s in your marketing. The photography industry as a whole is relatively resistant to selling of copyright. They’re creatives. They love their work. And remember, copyright protects the creative expression in this fixed tangible medium, right? So they really are tied into it. Commercial photography, it’s not unheard of that you transfer over copyright because the benefits to having Greg as the photographer transfer the copyrights to me is that I don’t have to worry about checking the license every single time and how I want to use it. I don’t have to worry about, and this is the big one a lot of people don’t think about, is that if somebody else takes that image. Let’s say we set up a whole session. Greg comes in, takes some killer photographs, does not transfer the copyright to me. And those images have become the prime branding images. They completely encapsulate what my gym’s about. You know, potential members can feel the sweat, they can feel everything, they want to be connected, they want to be part of this family. They’re so recognizable images. Let’s say somebody, another gym even, in another state or down the road, decides to start utilizing those images.
Rachel: 33:46 – I’m beholden to Greg if he is still the copyright owner and has not transferred it to me, I only have a license at this time, I have to wait and hope the Greg will pursue that other gym for copyright infringement. And if he doesn’t he could still potentially ruin my brand. Yes, if there’s any lawyers listening, I am aware we can put into the contract and documentation that Greg would be forced to help me if there’s ever an issue like that, if there’s ever a copyright infringement claim that comes up, but I can’t force Greg to file a copyright infringement suit or pursue that other third party from wrongfully using the images. And what can it do? Just like we talked about with the brand name earlier, if they’re utilizing the images maybe on some unsavory sites, I’ve seen it happen, if they’re utilizing it for their gym and their gym is just really crappy, that can be imparted upon my brand. So for me, you guys are probably thinking all right, bottom line, what do you recommend? It’s going to depend. I do think a full copyright transfer from photographer to the gym is the best course of action. For me personally, even in my non-legal businesses, that’s what I always negotiate and I pay for. You’re going to pay more for it. But in the end I want to know that my brand is preserved and that I own my brand and not some other photographer or somebody else.
Greg: 35:06 – So in those terms, is there anything out there that people, I mean maybe like a template or something like that that people would have to work off of if they were doing that copyright transfer, because I know, I mean, if I’ve had many members that are amateur photographers and they’ve asked, hey, can I come in and I say, OK, well we need to actually sign something that basically states that if I’m paying for you to come in and take these photos that you are giving me like a conditions of release, basically saying I can use these for my advertising. And I can basically monetarily gain from these photos. Is there anything out there that, like you said, the license of use or how I’ve done it with a conditional release or the copyright transfer that people can actually download or take up to contact you or whoever so that they could actually have these documents ready if something like this comes to them within their business or gym.
Rachel: 36:00 – Yeah, I know a really fabulous business attorney who has contract templates on her website. So I do have these at FitLegally.com. I also, if you want to peruse on Rachelbrenke.com there’s some similar documents. They’re not fitness specific. I recommend—so here’s why I am in a very peculiar position is that there’s not many lawyers out there. There’s good IP lawyers, but there’s not many lawyers out there that truly understand the needs of entrepreneurs and like pushback you guys might get, so that’s kind of where I come in and help to bridge the gap. So I have these templates, you can use them as is. I always recommend though they’re taken to a local lawyer to at least amend and make sure it’s good for within your state, which is very important. But it’s good because it can save you time because then they don’t have to draft from scratch. And also many of these lawyers don’t know these nuances of what we’re talking about. And so I can just help fill the gap there for them. And you guys now, since you are fricking IP rockstars from listening to this, can go in and school your lawyer a little bit too.
Greg: 37:09 – Perfect. And we’ll make sure that we link FitLegally in the show notes along with your services and stuff like that if people want to jump on your website and not just the FitLegally, so we’ll make sure we link all of that in there. Now let’s look at it from the other point of view. So, not only are we saying, hey, if you’re having somebody else come in, you’re using them for yours, or if you’re a photographer and then somebody’s taking those same photos or whatever that is, what happens when I jump onto Google or better yet one of my coaches decide to jump onto Google, pull a photo, and then we use that on social media? What are the legal, I guess, worries behind that and how can a lot of people out there protect them from that? I remember when I first originally talked with you I contacted one of my coaches that does a lot of our social media. I said, make sure you pull all photos that you’ve ever taken that were not having written, actual written consent from them from any reason. But anyone out there that is listening that has not done that, or don’t know if their coaches are doing it or not, what should they be looking out for?
Rachel: 38:09 – Yeah. So my heart starts beating really fast when you start talking about pulling from Google because you don’t know. That’s the fundamental thing. You don’t know who owns that image, and the fundamental question you have to ask yourself whether your coach has photographed it, whether a photographer has come in or you’ve pulled it off of Google or you’re buying a stock image, you have to ask yourself, do I really have permission to utilize this image? And this is huge. Copyright infringement is the number one thing that we do at the law firm because it’s so rampant for reasons that you’re talking about. People will just go and they’ll pull it off Instagram and they’ll use it. They will just go to Google and will not get permission. They’ll use it and they’ll think, oh well if I credit the person that got it from, that’s enough and it’s not, and there are defenses to copyright infringement, but I just want you guys to understand bottom line it relatively does not matter.
Rachel: 39:03 – You can still be liable and it’s strict liability. So if a coach gives it to you, you can still be on the hook. Yeah. Maybe you could go after that coach later to help. You have to pay off the damages to the person that you infringed upon, the person you stole the image from, but you’re still going to be on the hook. Even if a coach is the one that gave it to you or your assistant just snagged it off of Google. And here’s another thing, I’m just gonna throw out some numbers. Even if, let’s say that you think you’re in the right, this is where our justice system kind of sucks a little bit. You still have to show up in court to say I didn’t do anything wrong, but in order to do that, you have to spend a lot of money, and copyright specifically, are federal; you’re looking at 40 to $50,000 just on attorney’s fees to be able to stand up in court and say, I’m not actually liable for that. And then if you are, you’re looking at damages, you are looking at maybe how much money you made off it, maybe how much you damage the other party or even there are statutory damages amounts, and this is the numbers that I want you guys to remember. Ask yourself is this image that I’m pulling from Google without knowing where it’s coming from? Is it worth $150,000 that I could pay to the other side plus my attorney’s fees, 45 to 50, so we’re up to let’s say 200,000 plus their attorney’s fees. So let’s just round it up to say 250,000, is this image that fricking amazing that it’s worth 250,000? The answer is no. A, because if you pull it off of Google, other people probably have, too, so you’re not having anything unique on your website, and again, $250,000 for one image that’s probably only going to hit your website a few times, run through social media and be gone. Not worth it. So no, stay away from Google. Stay away from these free stock photography websites because what’s happening is they’re sourcing, right? They’re saying, hey, photographers come upload your images, we’ll give a creative commons license and these businesses can use it. Sounds great, but here’s what happens. You’re having people steal images, upload them, saying that they are their images when they’re not, you’re infringing. And what did I say earlier? It doesn’t really matter. I mean it does. I mean in the grand scheme of things, I don’t want to get any hate mail after this episode, but you’re still gonna be on the hook initially. OK? So just think, ask yourself, and I want you guys to hear it in my voice every single time. Is this image worth $250,000? No. Then go get an image you do have permission. You know what? Take it a step further. Invest in a local photographer. We’ve already given you guys the steps on what you need to do, whether you do a copyright buyout or a license, own your brand. Make your brand specific to you. Don’t use something everyone else has, especially with the potential price tag of 250,000.
Greg: 41:47 – Oh, agreed. Agreed 100% on that. And what happens now in that same case, if somebody, say I put this photo up there, I get a letter from somebody basically saying that they’re going to pursue legal action and I remove that so that it’s not on the site. I mean, it’s not on anything. What kind of happens next? I mean, I’m guessing the lawsuit doesn’t go away usually.
Rachel: 42:11 – Nope. You call me. So this kind of goes back around to what we talked about before, like with the trademark infringement stuff, and they depend on that intellectual property owner’s perspective. Maybe they just want to educate you, right? Maybe they just send you a notice on Facebook and say, hey, I see you’re using my image. Please take it down. And it can all go away. They may send you a letter and say, will you pay for use of the image? And you may pay it and it all goes away. I don’t recommend taking any steps until you at least have a lawyer look it over for you. Obviously that’s the CYA here. And I’m not saying that to fill lawyers’ pockets. I’m saying that to make sure that you don’t do something wrong, you don’t make an admission in a message, right?
Rachel: 42:49 – You want to really kind of protect yourself and let them walk you through the steps. I do recommend though, backing up the train a little bit here. If I get a notice that says that’s my photograph, take it down, take it down. Right. And then—back up. Screenshot. Evidence gather like we talked about before. Make sure we have all that documentation, take it down and then reach out to a local attorney. You can try to resolve it with others, but I just don’t want you to guys, like I said, make an admission or something, end like put throwing gas on the fire. So always have it evaluated because yes, you want to stop the infringing use because the longer it’s up, potentially the more damages you’d have to pay out. And so if you get a notice, take it down.
Greg: 43:32 – OK. And then like you said, if, let’s say they decide to still pursue legal action for this, that’s where calling you right away or a lawyer that they use, already have, is definitely the next step from there.
Rachel: 43:46 – Yeah. And here’s the thing, like you guys don’t want to ignore it because like the numbers I gave you before, you may think I’m inflating, I’m really not. One of the big things that I’ve seen that happens with copyright infringement is you’ll get these letters, you ignore ’em, then all of a sudden you get a copyright lawsuit filed against you. You call around to some lawyers and you’re like, well, I can’t afford to pay the retainer for them, so I’m just not gonna do anything. Well you get what’s called a default against you. And so you’re still looking at the same numbers even though you didn’t do anything and you have no fighting chance, and you just don’t want that against you. It’s just not worth it. And here’s the good news I’ll tell you. The majority of cases when it comes to this federal copyright stuff, we hardly actually ever get into court.
Rachel: 44:29 – So even though it’s filed, don’t freak out, reach out to me. We’ll talk through it, I’ll bear the burden. But majority of them actually settle, right? Because everyone does the cost benefit analysis of whether or not it’s really worth going through with it. That’s both sides and so you could relatively get it wrapped up fairly quickly. You would think this would go with him saying, don’t go start blasting someone who has your legal future in their hands on the internet. I’ve seen it. Defendants get pissed and they start posting about the other business that sent them the cease and desist. Just don’t. Just remove the infringing material, after you’ve documented it, reach out to a lawyer, get it taken care of because it won’t just go away.
Greg: 45:10 – So anybody out there that is facing that, make sure you do that without a doubt. Now let’s kind of talk about it from another point of view. I have employees or I have contractors and they decide to leave and let’s say they—now we can always debate the difference. I mean a 1099 and a W2 are completely separate, but let’s say even if the contractor, I mean in either case, they decide to go a mile down the road, open up their own gym and they’re using my same forms and documents and everything like that that I’ve created that would be my IP. Is there anything that we can do depending on whether if they were a contractor or a W2 employee, is there any differential between those?
Rachel: 45:53 – Yeah. My recommendation is anytime someone’s going to work for you, I don’t care if they fill in for one class, if they are going to full-time coach for you, if they’re just doing your social media, I don’t care if you’re going, oh they’re just a contractor. Oh they’re just an employee. Any time, and yes, this may be overbearing me coming out, but you’ll see why here in a second. Anytime anyone’s going to create or do anything for me in my business, I am going to have them sign a couple of documents. Let’s use the example of coaches cause that’s one of the most common ones here, right? You bring a coach in, whether they’re W2 or a 1099 contractor. And like we said earlier, it’s not if they leave, it’s going to be when they leave cause nothing is forever unless you happen to have one.
Rachel: 46:38 – Great, good for you. But we can’t put the cat back in the bag, the genie in the lamp, whatever. So anytime anyone comes in, we want them to sign a couple of things. You’re going to have the core document that’s going to control the actual relationship. Do we want to use employee here? Sure. Let’s make them an employee. For this example, they’re an employee where they’re going to sign an employment contract. And I’ll run through things. Like when you’re going to pay them, how many hours do they have to work? Do they have to wear anything specific? What are the responsibilities, what are your responsibilities to them as the employer, blah, blah, blah. That contract’s great, but it’s not really what we’re going to talk about right here. There are three other main documents that I want you guys to have in play and there’s a reason they’re broken out, which I’ll talk about in a little while.
Rachel: 47:21 – I mention it now. I don’t want them all folded into one because if one is ever rendered invalid or terminated and there’s not proper language, all of that can be terminated and that’ll make more sense here when I’m talking it through. So the other three main documents that we want to have in play are a non-solicitation agreement, an intellectual property acknowledgement and then a noncompete document. Keeping in mind if this example was an independent contractor a noncompete would probably not apply. OK, so since we’re talking about employees, we’re going to have employment contract, non-solicitation, the IPA, which I always think of beer when I say that, intellectual property acknowledgement and then the noncompete. The reason we want to have these documents in play is this. Let’s start with the intellectual property acknowledgement since we were just talking about IP. That is going to be the acknowledgement that anything that they create in the course of their employment with you is owned by you.
Rachel: 48:15 – Now recognizing I said earlier, if they’re an employee, it’s probably going to be owned by your gym anyways. So, but I still always have an employee and contractor sign this IPA document because statuses can change. Maybe your coach starts phasing out and they quit being such an employee and just start doing one or two classes a week. As they phase themselves out, they can then be considered a contractor or vice versa, it can also work both ways. So IPA, intellectual property acknowledgement, anything that they create in the course of the business is owned by you, your company. All right. The second document, and this is probably one of the most important ones is, well, let me preface this before I get into this, cause we kind of talked about this with the Facebook Live. The end goal is probably to keep your coaches from stealing your members, right?
Rachel: 49:08 – Or, and not even that they’re nefarious. That’s one of my favorite words. Even if they’re not nefarious and taking your members, members just may end up leaving or they just may tell the members, hey, I’m opening up a new gym. Do you want to come with me? And they may not even think about the repercussions of that. Typically many entrepreneurs think, oh, I just need to do a noncompete agreement and coaches can’t take my clients. That’s not actually true. Noncompetes are actually tied to the actual competition which can include your clients, in this case your members and also any potential members, anybody in the local community that they may be soliciting to. I’ll talk about it in a second. The non-solicitation is actually what is most important here because you’re wanting to preserve your member list, right? You’re wanting to keep your members from being solicited by any coach that may leave to open up their new gym.
Rachel: 50:02 – So you want to have them sign a non-solicitation agreement. This can be a blanket you can never solicit any of my members or you guys can narrow it down to say any members that you brought here on your own that coach can take with them or you can do it on a time that you know you can’t solicit any members for six months. Non-solicitations allow you to be very broad. Noncompetes have to be very narrow and I’ll mention that here in a second. But so non-solicitations are probably gonna be the best ways that you’re going to be able to protect your member list. Now I realize I forgot something in this list. Confidentiality, which is really exactly what you were talking about before. We can also put confidentiality in the non-solicitation. It’s probably most appropriate in like that core employment contract or that core independent contractor contract and that makes sure that they don’t divulge any of the information or use documents like things that have been created, whether it was created by the coach or somebody else in your gym.
Rachel: 51:03 – So confidentiality does need to be in here somewhere. People, sometimes will have them sign a full NDA. You can do that too. If you want to do a nondisclosure agreement, you can do that. I don’t know. I feel like sometimes NDAs are a bit—for like this type of relationship that we’re talking about here, it’s all going to be circumstance specific, you know, it’s going to depend how long has that coach been with you? What did you guys develop together? What were they privy to? Those sorts of things. So an NDA can be appropriate. I just don’t necessarily make it one of the standard first documents. I really just do more of like a confidentiality, and I guess we’re kind of tit for tat here. It really matters what’s included within that document. And I just typically put the confidentiality with the employment document.
Rachel: 51:50 – So employment document, IPA we talked about, the non-solicitation and then the last document is going to be like the noncompete. I’m going to tell you straight up: Courts don’t like noncompetes. They don’t like anything that’s going to infringe or cramp the style, they want free flow of commerce. And what does noncompete do? It stops competition. And so in order for a noncompete, and this is all going to vary by state, so you guys need to check in your specific state, these are narrow in focus. So like a non-solicitation agreement we talked about, you could say you can never solicit any of our members for the next 50 years. Watch now I’m going to get an email from someone who’s like in my state that’s not allowed, but for the most part that’s OK. A noncompete that would mirror that and say you can’t work in a gym for the next 20 years anywhere in the U.S., that ain’t going to hold up. I don’t know in any state it’s so over broad. It has to be very specific of things like zip code, the radius, how long it’s going to be. So you would want to do something like John Smith will not compete in zip code 22406 for six months after, specific to X, Y, Z services. Right? You want to be very specific in order for it to be enforceable. And the reason we want to have all these documents in place, I don’t want to sit back and while something feels wrong, doesn’t necessarily mean it’s wrong under the law. Right? In our mind we’re thinking, oh coach is taking our stuff and setting up their own gym on their own, including members. That feels wrong. The points to something in the law, right? You know there are business conspiracy acts out there and there is—there’s a whole bunch of things but you don’t want to rely on any existing laws to be applied. With us having these documents in place. You’re going to set the expectations and you’re also going to be able to have a breach of contract claim against a party that may break the contracts and give you some recourse and stop their behavior there. So I know that was probably a bit more than what you were asking then your initial question, but I felt like giving the full view of that. Once document is not enough. An NDA alone is not enough. And IPA, which is the transfer of the intellectual property rights is not enough. They all have their own place and they all need to be used.
Greg: 54:11 – No, and honestly that was perfect because we wanted to have enough information out there so that people would know exactly what they were getting themselves into and kind of what they needed to protect themselves. So that was perfect and I think we could go on and on about everything. I’m pretty sure I could ask you about a hundred different questions about legal advice and then eventually you’d probably just send me a bill instead.
Rachel: 54:35 – You guys heard me give permission.
Greg: 54:39 – So if somebody is trying to reach out, like if they’re listening this podcast and go, you know what I really liked the way Rachel does business. I think I want to get some legal advice from her. What’s the best way they can contact you?
Rachel: 54:52 – Yeah, you guys can reach out to me at rachelbrenke.com will take you to all of my websites. So FitLegally is the law firm and if you want to bypass that Connorsandbrenke.com I think we’ll link all of this with the episode as well. But if anything else, just Google Rachel Brenke. I’m the only one. It’s not hard to get ahold of me.
Greg: 55:12 – Yes, for sure. We’ll definitely make sure that we put everything in the show notes, all the links so that anybody out there can easily access the link and get to you. So Rachel, thank you so much for coming on Two-Brain Radio and giving us all this legal advice. We really appreciate it and I hope in the future I can definitely get you back on here for a whole other series of questions I’m sure I can come up with to kind of help our viewers and listeners and help anybody in the fitness industry.
Rachel: 55:38 – Sounds good. I look forward to it.
Chris: 55:40 – Hey everyone. Chris Cooper here; I’m really thrilled to see you this year in June in Chicago at the 2019 Two-Brain Summit. Every year we have two separate speaking tracks. There’s one for you, the business owner and there’s one for coaches that will help them make better, longer, more meaningful careers under the umbrella of your business. This year we’ve got some pretty amazing topics like the client success manager, how to change your life, organizational culture or the business owner’s life cycle, how to have breaks, how to have vacations, how to help your marriage survive, owning a business, motivation and leadership, how to convert more clients, how to create a GM position that runs your gym for you and leaves you free to grow your business, how to start a business owners group in your community and more. Point here is to do the right thing that will help gym owners create better businesses that will last them for the long term, get them to Tinker Phase, help them be more successful, create meaningful careers with their coaches and give their clients a meaningful path to long-term health. We only do one big seminar every year and that’s the Two-Brain Summit and the reason that we do that is because a big part of the benefit is getting the Two-Brain community together and welcoming strangers into our midst and showing them how amazing gym ownership really can be. We’ll have a link to the Two-Brain Summit, including a full list of all speakers and topics on both the owners and the coaches side in the show notes. I really hope to see you there.
Greg: 57:09 – As always, thank you so much for listening to this podcast. We greatly appreciate you and everyone that has subscribed to us. If you haven’t done that, please make sure you do. Drop a like to the episode, share with a friend, and if you haven’t already, please write us a review and rate us on what you think. If you hated it, let us know. If you loved it even better.