Budget proposals offer start-ups an opportunity to get their legal house in order from the start
The Federal Government announced new measures in its budget this week that will no doubt be welcome to new ‘start-up’ businesses. New businesses will be able to deduct start-up costs such as professional, legal and accounting services from the 2015/2016 income year. This will replace the current situation, known as “black hole expenditure”, where some of the professional costs associated with a new start-up business are capitalised and deducted over a five year period. This measure will result in an immediate tax saving for profitable businesses.
The proposed changes will help new start-up businesses off-set the cost of seeking professional advice in respect of their new operation. This includes establishing the entity through which the business will operate, as well as any terms and conditions under which the business will be trading.
Now is also the perfect time for new start-up businesses to consider developing and protecting one of their most valuable assets – their intellectual property including the brand, products, systems and information of the business.
Registered trade marks
A trade mark is a distinctive sign used in business to distinguish goods or services of one trader from other traders’ goods and services. It can be a letter, name (including a business name or domain name), signature, word, number, brand, heading, label, aspect of packaging or shape, and even a scent or sound. However, it must be distinctive — it cannot be directly descriptive of the character or quality of the goods or services, or something that another trader will use legitimately to describe their similar goods or services.
Registration of a trade mark gives exclusive rights to use that trade mark on or in connection with the registered services. Trade marks in Australia must be registered for specific goods or services. In Australia all goods and services must be grouped into at least 1 of 45 classes. It is important that the statement of goods and services is properly drafted as a narrow specification will limit the protection provided for the registered trade mark. On the other hand, if it is worded too broadly, there may be good grounds for attacking the application or registration including on the basis of ‘non-use’ of the mark in the future.
A registration will initially last for 10 years and may be renewed for further ten year terms indefinitely by paying the renewal fees within the permitted time.
It is possible to register, and protect, a design in Australia. A design being the overall appearance of a product resulting from one or more visual features of the product. It may include the shape, configuration, pattern or ornamentation, but it must give a product a unique appearance – for example a piece of furniture, a storage container or a piece of clothing. A design can be registered in Australia provided it is ‘new’ and ‘distinctive’. It must be new insofar as it must not be identical to any design previously disclosed anywhere in Australia or the world. It must also be distinctive meaning its overall impression must not be substantially similar to any design previously disclosed anywhere in Australia or the world. If your business will trade in a new and distinctive design you may wish to consider registering the design. Registration in Australia will allow you to take action to prevent anyone else using, selling, offering for sale, manufacturing or importing any identical or substantially similar item in Australia.
A design may be registered to allow the owner to exclusively exploit their work for an initial period of 5 years, with an option to renew for a further 5 years.
In Australia there are two types of patents – a standard patent and an innovation patent. A standard patent grants exclusive rights to commercially exploit a novel, inventive and industrially applicable advance in forms or uses of technology for usually a period of up to 20 years. An innovation patent only lasts for 8 years but grants exclusive rights for a novel and ‘innovative’ advance or use of technology, being a lower threshold than an ‘inventive’ idea. It is important to ensure that the idea remains confidential when discussing it with employees or business partners. If you discuss, demonstrate or sell your invention in public prior to filing a patent application, you risk losing its ability to be granted a patent.
Getting on with business
The changes proposed in the budget will allow fledgling businesses to take advice early on and ensure they are supported by a solid foundation of suitable trading terms and corporate structure, and appropriate intellectual property protections. Swaab Attorneys has significant experience advising clients in relation to establishing new businesses and commercialising intellectual property rights, and are well placed to ensure your new start-up business has the best possible foundation for future success.