| 
Legitimizing Your Side Hustle
Few people haven’t had the thought cross their mind: a side hustle. Whether it’s something you enjoy, or something you’re good at, an income generating activity to fill the hours left in the day is an attractive idea. Side hustles will also typically involve minimal initial investment, and plenty of flexibility, lending further to their appeal.
That said, it’s not completely uncommon for what was once a side hustle to evolve into a business venture so profitable it takes the place of the entrepreneur’s day job. Whether you’re already there, or looking ahead, you may want to consider taking steps toward legitimizing your side business. In doing so, you’re ensuring that, among other things, the investment you make into your business is safe and is more likely to be profitable in the long term. You’re facilitating customer retention, you’re protecting your business’ unique value proposition, and you’re acquiring saleable assets.
If you’re an entrepreneur looking to legitimize your side business, consider doing the following:
- Register Your Trademark
Your trademark is what identifies your goods and services as originating from you and not someone else. It may be a logo, a word, a phrase, it may even be something like a texture, scent or sound. It is critical to making the most out of the reputation you’re building in a market.
Protecting your trademark gives you enforceable rights to its exclusive use in Canada in association with a set list of goods and services offered by your business. Therefore, if and when your side hustle gains traction, and you start to see customers coming back and new customers searching for your business, you are able to ensure that your name is exclusively yours. Customers looking to buy from you or work with you will find your business rather than a copycat piggybacking on the reputation and good name you’ve built.
You probably see it happening to other businesses regularly. Think about the last time you saw a LOUIS VUITON (one “T”) handbag, or a pair of AIR JORDIN sneakers. Counterfeiting is a perfect example of individuals trying to profit from the reputation someone else has built. Keep it from happening to you. It may seem like a big step to take in the early stages of your business, however, obtaining a trademark registration is also a long process. Taking steps to register your trademark today can mean being prepared when your business takes off.
Another reason to begin the registration process early is to prevent your trademark from being registered by someone else. In Canada, an applicant does not have to demonstrate use of the trademark in order to obtain registration. This means that someone else, like a competitor or a “trademark troll” (that is, someone that registers marks with no intent of using them, their primary purpose for registration is extracting money from individuals or business who would like to register the mark) could obtain registration for an identical or confusingly similar trademark. While you could challenge the validity of their registration, this can be a lengthy and onerous process. By registering your trademark early, you are effectively notifying the public of your ownership of the trademark and ensuring that your trademark remains yours.
Starting to think about registration can also help you to choose a strategic, effective trademark if you’re still in a position to change the name of your business. The Canadian Trademarks Act sets out a number of requirements for a registrable trademark. For example, to be registrable, a trademark may not be clearly descriptive of the goods and/or services in association with which it is used (i.e., you likely wouldn’t be allowed to register COLD CREAM in association with artisanal ice cream). Becoming familiar with this and other requirements can help you settle on a name that is likely to be eligible for registered trademark protection in the future. Conducting a trademark search can also flag similar names which might prevent you from obtaining a registration for your trademark, or worse, which may make you liable for trademark infringement and vulnerable to a lawsuit.
- Consider Whether You Have a Patentable Invention or Industrial Design
Is there something new and inventive about your business? Have you developed a better way to keep coffee hot longer? Are you selling a shoe that has caught the eyes of even the biggest sneakerheads? If so, you may have a patentable invention, or a registrable industrial design. If your business depends on the uniqueness and novelty of a product, you want to make sure that only you are legally allowed to sell that product. Otherwise, and this is especially true for small businesses, you’re likely to see yourself undercut by businesses derail your sales.
A patent helps to prevent this from happening by giving you exclusive rights in your patented invention for a period of up to 20 years (from the date of filing of the application). These include the right to make, use and sell your invention throughout Canada. In Canada, patents protect arts, processes, machines, manufactures and compositions of matter. For an invention to be patentable, it must be new, useful, and inventive – in other words, it should be something more than an obvious improvement to an existing product.
There are also business advantages to applying for patent protection, even if ultimately, no patents are granted. After filing for patent protection, you may use “patent pending” in your marketing materials for your product to notify potential investors and consumers that your product is inventive and deter potential competitors from copying your product. See our dedicated articles for more information on patentability and the patenting process and the benefits of using patent pending.
An industrial design differs from a patent in that it protects a product’s aesthetic features rather than its utility. Industrial designs are used to protect shoes, chairs, purses and cars among many other things. In the United States, industrial designs are referred to as design patents. To learn more, visit our industrial design basics resource.
- The Value of Keeping Secrets
Your side hustle may involve business information that derives its value from secrecy. For example, methods, processes, data, formulas and recipes are often the subject of trade secrets. Even a client list or an algorithm may be a trade secret. If one of these things is at the centre of your business, it may be wise to know how trade secrets are protected from the get-go. Trade secrets are not registered, and instead, their protection and enforcement relies entirely on the measures you take to protect them. For example, requiring staff or customers to sign non-disclosure agreements, using passwords or encryption to protect online resources and messaging, or even using a lock and key to protect physical documents or facilities. It’s important to know if you have business information that may constitute a trade secret, so that you take appropriate steps to protect it throughout the lifetime of your business.
- Understand Your Own Rights and the Rights of Third Parties under Copyright Law
As your business grows, you will find yourself in the spotlight. While that is undoubtedly a good thing overall, with it comes greater scrutiny of your public activity. One step you can take toward the legitimization of your side hustle is to become aware of the copyright laws that affect your content and dictate what you can do with content belonging to others.
Copyright affects your everyday business activities. It is implicated in your marketing, and it may be implicated in the goods or services your business offers. Being aware of it can help you protect your own content, and help you avoid liability to third parties.
Copyright protects original works of authorship, for example, books, paintings, illustrations, songs and website designs. Typically, the author of a work is the first owner of copyright. This means content you generate for your website, for example, subject to it being original – i.e. both not copied and resulting from something more than a mechanical exercise – is protected by copyright. Understanding your own copyright can give you the confidence and knowledge to protect your works, to spot infringement, and to enforce your rights.
Another reason to be aware of copyright is that it may affect your business relationships. Consider, for example, the independent contractor you hired to create your website or logo. As the author of these works, the independent contractor is also the first owner of copyright. As a business owner planning to use these works, you will want to make sure you have the requisite rights to the works by obtaining an assignment from the contractor.
Finally, just as you’re likely to own copyright in your own work, remember that the same applies to the creative works of others. Always be conscious of the ownership of photos, videos and other content you share on your website and social media channels and incorporate into your marketing and other materials. Giving credit to the author does not protect you from liability for copyright infringement. If you can’t generate your own images, consider downloading licensed photos from sites like Shutterstock and Pexels so you can be confident your use is safe from copyright claims.
- Assess Your Remaining Legal Needs and Responsibilities
Intellectual property strategy is a big part of legitimizing your business, however, while you’re thinking about growth and planning for the future of your business, you should also turn your mind to other legal requirements which may impact your business as it grows, or legal needs you may develop. For example, you may want to consider incorporating your business, making it easier for your business to access and raise capital. Often, incorporating your business means drafting a shareholder agreement, a document that sets out, among other things, the rights of shareholders, when a corporation can issue more shares in a company, and management’s duties. Implementing provisions in the shareholder agreement detailing ownership of intellectual property and, for example, what happens to the intellectual property upon the corporation’s dissolution, can help you protect your intellectual property if, for instance, disputes arise within your business.
Finally, keep in mind that all of these steps serve not only to protect your business and your bottom line, but also add value to your business and leave you with saleable assets. If you find yourself looking for investors to help you grow, being able to say you’ve protected some of your most valuable assets is a huge advantage. Further, if there comes a time when you want to sell your business, for example, your intellectual property assets are likely to contribute substantially to the valuation of your business.
Thus, while the desire to take a care-free, present-oriented approach to your side-hustle may be readily understood, the benefits of taking even small steps to legitimize a side business should not be overlooked. Taking small steps today can set your business up for lasting growth and success. Contact us now for a complimentary and confidential initial telephone appointment with a member of our team to help get you started.
