Copyright Lessons from Shark Tank

I have a great deal of admiration for the entrepreneurs who venture into the Shark Tank. It takes a lot of courage, preparation, and thick skin to present a fledgling business to a group of seasoned entrepreneurs looking for a deal. You have to be ready to take the good (money and an investor partner) with the bad (learning your idea has a high risk of failure). Many of the things that an entrepreneur learns on Shark Tank are doses of hard reality.

In a recent episode, one that aired earlier this season, a young mom came onto the show seeking funding for her company that sells creatively designed T-shirts for kids. All of her designs, designs that are printed on the garment and therefore protectable by copyright, are original and striking.

The Classic Tale of Creative Rip-Off

While she was on the show, she told a story about how a friend saw one of her designs in a local Target store. Sure enough, when the business owner went to her local Target, she found that her design had been ripped off.

She took a photograph of the offending T-shirt as it was hanging on the rack in Target and she posted it on her Facebook page to share with her followers.

This entrepreneur had been focusing on social media marketing to get the word out about her company and apparently had quite a following. Her followers, in support of her David v. Goliath tale of woe, shared her post widely among their friends and followers. And, as she says in the clip below, her company went viral.

That viral post resulted in a one-time spike of sales for her company. Ultimately, she went to Target and told them about the infringement. Target, acting as a responsible commercial entity, pulled the offending T-shirts which they had bought from a third-party out of their stores.

The viral spike in the sale of company's T-shirts was short-lived and the entrepreneur went back to selling T-shirts direct to consumer using social media marketing.

Let’s take a look at what the creative entrepreneur did right in this situation and what mistakes she made.

The Good

Well done point one: She recognizes that she has a talent for design and set out to build a business based on a solid skill that sets her apart from other T-shirt companies.

Well done point two: She did a good job building a social media presence and a tribe of loyal followers. Her tribe knew her work well enough to recognize it when they saw it. Building an audience of readers, customers, and followers is the single most reliable way to detect infringement of your creative work in both the analog world and in the digital world.

The Bad

Mistake number one: She did not protect her designs by filing applications for copyright registrations on them. If you don’t file an application for registration before the infringement occurs, you lose your right to recover statutory damages of up to $150,000 for willful infringement and attorney’s fees.

Mistake number two: Not realizing that even after the infringement she still could have filed an application for registration and gotten some protection benefits from the late filing. Filing an application for copyright registration after an infringement not only allows you to shut down the infringing activity, it also manifests your ownership rights in that creative work so that you can license them.

In the short clip, Kevin O’Leary suggests that because she failed to register her copyrights with the Copyright Office, “They really hadn’t broken any laws.” This is just plain wrong. The group of rights known as copyright exists in a creative work even if the work has not been registered with the Copyright Office. The company that knocked off her work broke the law even though the entrepreneur had not filed applications for registration. Kevin missed this point.

The Ugly

Mistake number three: The next thing the entrepreneur did was use the infringement as a marketing tool by creating a Facebook post that went “viral.” But it went viral because her design had been infringed, not because it was a fabulous design. Going viral is not a sustainable marketing strategy. While I don’t condemn her for using social media to generate sales, the methodology turned out to be short-lived.

After posting the story on Facebook, she went to Target and they pulled the offending T-shirts from the racks. The reaction of the Sharks to Target’s response is uniformly positive. But the fact is, if Target hadn’t pulled those infringing garments from their stores, Target could have been liable for copyright infringement for selling the knockoffs.

Mistake number four: It’s not clear from this short clip exactly what the entrepreneur asked Target to do. But an alternative scenario for her would have been not to go to Target immediately but to go to the third-party manufacturer who was infringing her design. That company already had a contract with Target selling her design into their stores. Had she gone to the third-party company she could have taken the position that unless they paid her a percentage of the Target sales, she would have those T-shirts pulled out of the stores (which is what she ultimately did but with no benefit to her). That would have been the more profitable solution.

Be Strategic as You Build Your Creative Business

Instead of rushing straight to Facebook with the post about the injustice of it all, she could have approached the enforcement of her rights more strategically. She could have potentially negotiated a license which would have resulted in a long term revenue stream. The third-party company clearly had the wherewithal to land the contract with Target, to manufacture the product, and deliver it. These were all things that she does not have the capability to do. In fact, although you won’t see it in this clip, she did not get a deal from the Sharks precisely because she lacked these basic components of a garment manufacturing business.

This entrepreneur’s skill set is in design — production of creative work. By the time she left the Shark Tank she should have learned that she had no business manufacturing clothing. What she should focus on is licensing her creative work to others who have the capacity to produce it and deliver it to mass-market. The ideal scenario is one in which she creates designs, she holds the rights, she licenses the rights, and the revenue flows to her in multiple income streams. Let someone else do the manufacturing.

Protect Your Work and You Can Profit from It.

In the end, it is the protection afforded by copyright that will turn this woman into a successful creative entrepreneur. As Lori Greiner points out − copyright protection is affordable, easy to do, and should be built into the workflow of all creative professionals.

The entrepreneur justified her reason for not having filed applications for registration on her creative work by saying, “We were so small at the time.” Unless she appreciates the power of protecting her designs and leveraging that protection to generate multiple revenue streams, she will remain small.

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8 thoughts on “Copyright Lessons from Shark Tank

  1. AC_K.

    Kathryn nicely summarizes SandiLake Clothing’s legal and marketing issues.

    My three observations from the Shark Tank episode and intellectual property rights:

    1) It’s shocking that these sharks, so-called business experts, don’t have a better grasp of FUNDAMENTAL intellectual property law.

    Addressed to Lori Greiner: Copyright is automatically secured upon creation. There’s no such thing as “copyrighting”; it’s called “registration”.

    e.g.: I just finished creating a new, cool-looking, original art design on my tablet. I’m thrilled that it’s immediately and automatically protected by COPYRIGHT! To better enforce my rights, later today I’m going to REGISTER it with the United States Copyright Office as an unpublished work. Next week, I’m going to share it with my social media network and make it available for licensing. However before doing so, I’m going to affix metadata and my business watermark logo (CIM) on to the design. All these actions I perform reinforce my creative and legal rights.

    Both Lori and Kevin O’Leary missed a big chance to educate their entrepreneurial TV fans about basic (and correct) copyright information and its registration process.

    2) > If you don’t file an application for registration
    > before
    > the infringement occurs, you lose your
    > right to recover statutory damages of up to
    > $150,000 for willful infringement and attorney’s fees.

    Register your copyrights before the infringement occurs (either published or unpublished) OR within three months of first publication. (17 U.S.C. section 412)

    3) This Shark Tank episode doesn’t include another infringing IP matter.

    Melissa Lay and her small business SandiLake Clothing have, allegedly, un-clean hands.

    According to a KATU’s “Woman who accused Target of copying design now on the defensive” report (http://katu.com/news/local/woman-who-accused-target-of-copying-design-now-on-the-defensive),

    “Images have appeared on social media and Lay’s own website, comparing a SandiLake design with a Native American boy and bow with a nearly identical image on the Tootsie Pop wrapper.”

    Tootsie Roll states: “All our images are registered trademarks and are not in the public domain.”

    Melissa wrote that “Candy is not apparel. No one should be confused into thinking that my apparel design originates from a candy company. I view my use of the Native American design as transformative, in the same way that Andy Warhol’s painting of a Campbell Soup can is transformative.”

    I don’t see Melissa’s use of a federally registered trademark as a (fair use) transformation. Warhol’s appropriation of Campbell Soup cans is an artwork (with commentary). Melissa’s reproduction of the Tootsie Roll character on t-shirts is a commercial use. Big difference.

    Melissa eventually pulled the Tootsie character design t-shirt from her website. That alone shows me her guilty conscious.

    I hate it when artists try and hide their infringements by disguising it as Fair Use.

    How would Melissa have responded had the Sharks asked her about using another business’ protected design without a license?

    Kathryn makes a great point about Melissa’s design skills. Melissa should (timely register and) license her designs rather than manufacture, distribute, or sell them through her company.

    Had Melissa invested a few hundred dollars to visit with an IP/licensing attorney before starting her t-shirt design business, she might have been in a more favorable legal position.

    1. AC_K.

      My post had a typo in the following sentence: “However before doing so, I’m going to affix metadata and my business watermark logo (CIM).” I meant to write “CMI” (Copyright Management Information).

  2. L'Tanya Leone

    Hi Kathryn,

    I am from Baltimore, but I now reside in California. I will be back in B’more July 19th for a week. By any chance are you available for a half hour? It would be a pleasure to meet you. Your information was definitely a great resource!

    1. Kathryn Goldman Post author

      L’Tanya,

      I’ll be around that week and look forward to meeting you. I’ll send you an email.

      Kathryn

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