Lately I have been thinking a lot about ways a business owner can make more money and diversify their risk at the same time.  And, the thought that keeps coming back to me is licensing.

Licensing is the magic secret sauce to most any software company.  It allows them to create their software product once and create scalable income streams by licensing the product through different channels.  As a lawyer who spent most of my professional life earning money through a model that is not scalable (fee per hour) without a lot of complexity, I was always amazed at how quickly a software company could build value through licensing.  Many times, my clients have done this without having to deal with other complexities of business growth such as the requirements for more money, employees and systems.

As a business owner, you may think that licensing only applies to business models such as software or music and entertainment.  But this is a big mistake that is causing you to lose out.  And, in times like these where businesses are struggling, I encourage you to think about how licensing might be your ticket to more revenue and more stability.

Licensing is I can speak to almost anyone who runs a business or has developed expertise or a special skill set in his or her profession and find several licensing opportunities.

For example, I met a local restaurant owner in my hometown the other day.  He owns three restaurants and we started discussing how the current economy has changed his business.

Throughout just our conversation, I determined that he was an expert at three things: (i)  how to cost effectively launch a restaurant; (ii) pitfalls that cause other restaurants to fail during tough times; and (iii) an advertising campaign he has perfected over the past ten years that still brings customers in even in difficult times like this.  I figured this out from just a 30 minute conversation with a guy I just met.  I am sure he could add at least 10-20 other areas.

Other restaurant owners would pay money to gain his expertise. For example, he could license his advertising campaign process to other restaurants in different cities. There are several revenue models he can use.  Given that the process has proven successful, he can charge a flat fee for it and even charge a premium if a restaurant owner wants an exclusive in his territory.  Or, he can create an ongoing revenue stream by allowing a business to license its use on an annual basis.  Another way to take some risk out of a licensing deal and more upside for him is to license it where his payments are based on the # of customers who come into the restaurant as a result of the process (use a coupon ID for tracking).  He could get an ongoing income for years. . . and think about how many restaurant owners there are in the US that could benefit from this.  It is a true win win for all involved.

I know of another business owner that has perfected a business for selling language translation services.  In order to grow, he considered raising money to fund advertising, public relations and other sale activity.  But, the avenue of a licensing model had more appeal to him. He is now licensing his marketing material to others to sell the same services.  In fact, he even provides his licensees with access to his translators at a wholesale rate.  In essence, he has licensed his entire business model to an army of representatives and will likely triple his income leveraging expertise he already has.

Through licensing, you will find ways not just to increase your income but to also diversify your income which is really important to any business.  In fact, it is certainly possible to create income streams that beat your current income level because licensing creates such scalable opportunities.

About 5 years ago, I started creating other income streams in my own life through licensing and other similar business models and I am now happy to say that the profit streams I created allows me the flexibility of not having to practice law if I do not want to.

Copyright protection arises when you create an ORIGINAL WORK OF AUTHORSHIP and fix it in a tangible medium of expression.

So, while copyright does not protect plain ideas or concepts, it will protect the content you create on a webpage or in an eBook.  Also, software can be protected by copyright laws.

This protection actually is created automatically as soon as the work is created and fixed into a medium fo the first time.  What this means is that once you place your content into a web site program or on our computer. . . or once you write your eBook content and save it into a computer file, your work has US copyright protection.

WHY AND WHEN SHOULD YOU REGISTER COPYRIGHTS (IF REGISTRATION IS NOT NECESSARY TO RECEIVES THE RIGHTS OF COPYRIGHT)?

While copyright registration is not required to obtain protection for your website content and ebooks, it is required before you can sue anyone to enforce those rights. In other words, if you find that someone else is unlawfully copying and using your content or distributing your eBooks, you cannot file a lawsuit against them unless your copyright is registered.

There are additional benefits for registering your copyright early.  If you register a work within 3 months of the time you make it available to the public, you will have the right to statutory damages, legal costs and attorneys fees.  This is a huge benefit as statutory damages can be very high especially if the infringing party is acting intentionally (known as willful infringement) and as we all know, attorneys fees can become very expensive.

Practically, having a registration is very powerful as a preventative weapon.  You can likely get an infringing party to stop immediately by delivering a strong letter letting them know that your content is copyright registered which means that their action are willful due and they will be liable for significant statutory damages and you legal fees to enforce it.

BOTTOM LINE

Copyright registration is not expensive and for written content, it is a fairly straightforward process.  You can go to www.copyright.gov for more details.

While it is not necessary to copyright register every single work of authorship you have in your business, you should consider registration for those works that bring or are related to bringing in significant income into you business.

If you are involved in online marketing, you have likely heard of Google’s newest addition to its Toolbar- the Google Sidewiki.  This feature allows anyone to make comments and provide any information that shows up when others (using the Google toolbar) pull up your website.

Just as with any wiki, there is some good intention here in that it is providing more social media and community elements to the Internet.  However, it is also an invitation for competitors, spammers and unscrupulous visitors to harm your business. . . and you have no control over what content will show up alongside your website.

Many feel like this feature goes a little too far since the comments show up right alongside your site when someone pulls up your website. This is very different from third party comments showing up on another independent site.

While I have had discussions with lawyers about the legal implications which could arise, I think the best solution to help your business avoid this fate is to use technology.  There are several Google Sidewiki “blockers” out there and I think it is well worth reviewing them for an appropriate solution if you run a website where others can exploit the Google Sidewiki to hurt your business.

My team is in the process of testing some of these blockers but you can learn about them by just googling “Google Sidewiki blocker”.

Child related businesses are extremely lucrative on the Internet. Companies make millions of dollars selling many different products and publications related to kids.

The flip side to running any business related to children is that they are a protected constituency and, especially when it comes to information, any business owner must keep up with the regulations and be sure they are in compliance with all the privacy regulations.

I just read an interesting article about a web monitoring company that sells a service to help parents monitor their kid’s activities in private chats using instant messaging software.  This company sells information revealed in these chats to other businesses and it is now getting some bad publicity about this practice.

While they claim they get this permission in the agreements with parents (likely hidden in the fine text of legal terms), it is pretty clear that parents are not aware of this.

As a lawyer, I advise based on the laws that do exist to protect children interests from the negative vices of the Internet. . . but as a parent, I believe that all of us, including the capitalists inside of us, has an ethical obligation to restraint from doing anything that could harm or exploit children.

Here is the link to the article:

http://www.msnbc.msn.com/id/32694224/ns/technology_and_science-security/

Because the Internet is known as the “unknown” wild west at times when it comes to determining legal obligations and potential for lawsuits and legal trouble, it is strongly recommended that every website have legal terms and conditions governing privacy, the use of information, the use of the site and the sale of any services and products.

Many online entrepreneurs balk at having “legalese” on their sites in fear that it will reduce sales on their site.  This is definitely a legitimate concern.  In marketing, you do not want to add anything in your sales process that will cause a prospect to be confused, feel overwhelmed and “legalese” can overwhelm most anyone.

However, is it worth risking potentially significant liability?  I can tell you that after representing many clients in dealing with potential lawsuits and problems, the stress, uncertainty and the amount you can lose makes it most certainly not work it.

Plus, if you speak to any successful online entrepreneur (ones doing over a million dollars in annual sales) you will likely hear a story or two about some legal problems faced in their businesses.  And, they will likely emphasize to you the importance of having your legal agreements in place. In other words, if you plan on running an online business for the long term, you MUST have legal and risk planning as part of your business.  Do not wait until you are making hundreds of thousands of dollars to be shocked by risks and problems that could have been avoided.

When it comes to legal protection v. sales and marketing- there is a balance.  Keep your legal terms on a separate page and just link to them in the sales process. One really effective method used is to start your legal terms with a statement like “There are the terms that our attorneys require we include. . . ”

In your terms and conditions, avoid using unknown and legalese terms- have you lawyer write them so that they are easy to read and understand.

In your regular marketing copy, you can use the persuasive techniques taught by successful copywriters but be sure you are truthful and never deceptive.

I started learning about how to make money via Internet Marketing back in 2004. A good friend of mine also started learning with me.  However, we both chose totally different online paths.

I stuck with the traditional method of finding a market need, building a site to build relationships and provide value and to sell both my own products and products of others which I tested and felt comfortable recommending.

My friend chose the “black hat” route which consisted of launching websites, finding loop holes in the different web site places where you can get traffic and sometimes even exploiting aggressive marketing and technology methods to earn income.

I must admit I was amazed at what black hat marketers come up with and do- They truly are extremely creative and innovative when it comes to finding effective search placement and marketing methods.

In our first year in business, I made very little money from my online ventures but my friend was making pretty good money.  He would find ways to promote something and it sometimes brought in thousands of dollars with just a few hours or work and dollars in investment.  In addition, his activity was limited to being an anonymous conduit for other marketers which meant he did not have to deal with customer service or product support issues, etc.

He grew his black hat business into quite an operation which involved setting up thousands of email accounts and web pages.  But a few years ago, something started happening.  The Internet companies started to combat against black hat methods.  Many of his web pages were shut down overnight.  Sites like Google and Craigslist came up with ways to find and nullify black hat marketers.  And his income stream became very unwieldy.

Even recently, Google came up with a cell phone verification for setting up gmail accounts and Twitter implemented some anti-spam measures. So, my friend is once again trying to stay ahead and work with his black hat buddies to find new black hat ways- they love this stuff and sometimes thrive on the challenges that come up.

But, what is happening is that his income has hit a plateau and sometimes he loses a lot of it overnight.  He needs to keep coming up with a new bag of tricks which might or might not work.

In the last two years, my online properties have become more established using traditional marketing methods and I now have significant income coming in every month that for the most part I can rely on (in business, you can never ever rely on anything 100%).  In the meantime, I am developing brands that can only build more value and create more income streams over time.

So, I think the decision really depends on your personality but I personally feel that the long standing internet businesses apply the same success principles as any business.  Focus on providing REAL VALUE to their customers and developing relationships over time.

The Internet is evolving into a social media format where transparency and relationships will prove to be most profitable for online business owners.  I think black hat methods and other similar forms of internet marketing that proved extremely profitable before will become less effective as the technology to identify these methods advance and the customers who use the internet become more educated about them.

The Digital Millennium Copyright Act (DMCA) is the law that provides copyright owners with remedies if their works/content are being used unlawfully on an Internet site.  While there are some administrative requirements to exercising remedies, the main requirement is that the copyright owner believe in good faith that its content is being misappropriated.

In a recent United States district court, an additional requirements has been added before a copyright owner can utilize the DMCA. Basically, the court ruling states that under the DMCA, a copyright owner must first evaluate whether the use of the material is a fair use of the copyright PRIOR to demanding that copyrighted material be removed from an Internet site. The court held that a copyright owner acted in bad faith by issuing a takedown notice without proper consideration of the fair use doctrine.

Unfortunately, fair use is a fact based inquiry and so it is not always easy to determine whether or not a use is fair use (even for a trained intellectual property lawyer).  In this case, the court acknowledged that there is no bright-line rule with respect to what constitutes “fair use” of copyrighted material.  Factors to consider in making this determination include (1) how much of the original work was reproduced; (2) whether the new use is commercial in nature; (3) whether the market for the original work was harmed; and (4) whether the new work is a parody.

Copyright infringement on the Internet is a rapidly growing problem because it is so easy to copy and publish material.  This case clearly adds another hurdle to enforcement which can be costly if a copyright owner needs to hire a lawyer to assess fair use.  However, the court ruling makes sense given that fair use is an established and protected use of copyright material in the US.

Online fraud is growing rampantly without any end in sight.  While the Internet has become a lucrative channel for conducting business and selling goods and services, it also created a lucrative avenue for scammers and thieves.

Today, anyone can put up a professional website for very little costs.  A domain only costs $8, hosting can be free in some cases, and you can buy pre-made professional web templates that can rival the looks of the most established businesses.  Ecommerce functionality is likewise getting cheaper so anyone can set up a cheap way to extract money from unsuspecting web customers.

The technology and laws that have arisen to protect privacy on the Internet can be manipulated to protect revealing the identity of the scam artists.  Some of the most famous scams have extracted billions of dollars and the law enforcement agencies cannot trace the criminals.

The legal system has always been one of the slowest institutions in society to act to address new legal problems that arise due to an evolving society.  And, the law will never catch up.  Arguably, the minds behind criminal schemes are clever and even more innovative than the entrepreneurs with legimitate business models.

Technology will always outpace the law and even when the law does address a new problem, enforcement and real remedies are just not practical to a single person who has been defrauded.

We have gotten to a point where online commerce has become accepted and mainstream, but the concerns of online fraud are only now becoming a matter of significant concern to the average person.  Online fraud cases are showing up more and more in the news. The average business and consumer is becoming aware of the problems and the increasing chances that they could become a victim.

No longer will any security or trust certification seals work to alleviate the concerns. The public is becoming more savvy and understands that MOST (not all) of those certification programs are just another way someone is making a quick buck to sell a nice looking seal.

This issue will be elevated in the next few years and as a result- online buyers have started and will start to change their buying habits online based on these concerns.  They will want to only do business with companies that they KNOW are legitimate.

Even more, customers will come to realize that just because a website looks professional does not mean it is legimitate.  And, just because it posseses certifications or seals, does not mean it is a trustworthy business.  Customers will do more diligence seeking independent evidence of credibility.

This trend will make it more challenging for the new and small businesses to be successful and compete with the larger and more established businesses.  The best way to address this in your business is to focus on building your branding and establishing a presence in your industry.

Don’t look for shortcuts but think about what any real, legitimate company does over time to build their brand presence. Branding activity can be expensive but with new Internet based tools such as social media to help spread the word, a business can build a brand quickly with the right focus and approach.

One of the most effective methods of advertising on the Internet is known as Pay Per Click (PPC). Google Adwords is the largest and most used PPC ad network but there are many others (Yahoo Search Marketing and MSN) that are based on the same concept.

PPC networks allow you to bid on specific keywords that when searched in a search engine will trigger advertisements that link to the advertiser’s websites.

One question that has arisen lately is whether it is legally permissible to bid on your competitor’s trademarks and trade names as keywords or whether such use in in violation of the trademark laws?

Interestingly, courts have come down on both sides when it comes to this issue.  The matter comes down to whether this practice results in a sufficient “use in commerce” of the trademark to constitute an illegal trademark use.

There is a 2004 federal case (Eastern District, Virginia) that concluded that simply purchasing these keywords as part of a PPC network does not rise to the necessary use in commerce.  On the other hand, there is a 2006 case in Minnesota that went the other way because the court found that the advertiser was commercially benefiting.

In the law, the law of your jurisdiction (or the jurisdiction where a case is heard) governs your situation.  So for now, the issue is open.  What does this mean?

Well, if you are an advertiser there is a reasonable basis for using this practice and if you are a trademark owner and want to stop competitors from using your trademark in PPC programs, there is a reasonable basis for sending cease and desist letters.

Now, if you get a cease and desist letter, you should cease using another’s marks in your PPC or consult an attorney to better understand your risks in your specific jurisdiction if you want to continue the use of another’s marks and names in your PPC campaign.

PS- This post goes to show that there are a lot of legal uncertainties in the business world.  If you are not operating your business through an asset protection vehicle such as a limited liablity company (LLC), you should be!  If you look at any of the more successful online businesses, you will see they are operated through an LLC or corporation.  Learn about LLC Formation so you can protect yourself and your assets.

Social networking websites have become the latest rage on the Internet. Many traditional websites have been surpassed in traffic by social sites such as Facebook, YouTube and MySpace.

While viable business models behind the social networking sites themselves are still playing out, the benefit of social media to any business is definitely proving itself.

The fundamental premise behind social networking is nothing new- it allows people to connect with and communicate with each other. The reason for the incredible growth of social networking on the Internet is the result of a combination between (i) the evolving technology that allows the average person to post content easily and instantly; and (ii) the viral nature of these networks.

Just as the need to have an Internet presence with a static website became a necessity for any business (offline or online) in the past decade, the clear benefits of having social interaction on business websites are becoming the next step for any business to leverage the Internet to do more business.

So now, there are bowling alleys using Flickr to allow customers to show off their bowling skills and interact with other customers.  And then you have your local Mexican restaurant owner wanting to add social features to their sites where customers can review their food or atmosphere.  And some services based businesses are even going so far as to enable a chat amongst visitors on their sites and in their forums to discuss the company.

Social media really comes down to “user generated content” which can come in many forms such as customer or user reviews, blogs, instant messaging, comments, videos, and any other communications taking place on your site.

First, adding a social element to your site does have some business risk because the medium allows comments that can both help and hurt your business.  Social media gives power back to the people but this also means that competitors, unscrupulous customers and anyone else can use it to your detriment.

Second, by allowing user generated content on a site that you own, a myriad of legal issues come into play including privacy and intellectual property laws.

Given the unbelievable developments in technlogy (which will only continue) and the nature of the Internet where any content can spread like wildfire, the laws will never be able to keep up.

So, it is important that your terms of service or user policies be well drafted to give you the business flexibility and ownership over content to address both the business issues and the legal issues that may come up.

There will always be some risk to using social media elements in your business but the rewards will likely far outweigh the risks.  Even so, there is a lot you can do to minimize these risks by having well drafted terms of use, user policies and privacy policies governing any user generated content contributed to your website.