There are a lot of factors that figure into whether an entrepreneur walks away with a deal on Shark Tank – the personality of the individual, the viability of the product, and if a market for it exists, to name a few. Whether the new company's creative assets are properly protected and the actions taken by the company to shut down an infringer are also important topics for the Sharks.
It's Shark Tank, Not Patty Cake
I have a great deal of admiration for the entrepreneurs who venture into the 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 one episode, 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.
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.
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.
Copyright Practice Tip
File copyright applications on your creative work even if you miss the three month window. Registration is good for more than enforcement. It is the basis for leveraging multiple revenue streams from your work.
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.
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.