Presentation on theme: "Innovation and Entrepreneurship Institute"— Presentation transcript:
1 Innovation and Entrepreneurship Institute Temple University, Fox School of BusinessFebruary 21, 2013Starting A Business/Legal IssuesPresented by:Inna Zaltsman, Associate Business GroupMatthew Homyk, Associate Intellectual Property Group
2 CONSIDERATIONSStructuring the CompanyLegal Pitfalls to AvoidIntellectual Property IssuesTips About Business Plans
3 STRUCTURING THE COMPANY Choice of Entity:Corporation – “S” vs. “C” corporationLimited Liability Company (LLC)Limited Partnership or General PartnershipSole Proprietorship
4 STRUCTURING THE COMPANY (cont’d) Considerations:Size/ComplexityLiabilityTaxFunding NeedsCosts (initial and ongoing)Exit Strategy
5 STRUCTURING THE COMPANY (cont’d) State of Organization:PADE
6 STRUCTURING THE COMPANY (cont’d) Capital Structure:Classes/Series of StockCommon, Preferred, Convertible Preferred, Convertible DebtWarrants/OptionsBalance Sheet
7 STRUCTURING THE COMPANY (cont’d) Constituencies:Shareholders/Stockholders or MembersBoard of Directors vs. Board of AdvisorsBylaws/Operating AgreementAdvisory Boards
8 STRUCTURING THE COMPANY (cont’d) Important Agreements:Shareholders Operating AgreementsEmployment/Consulting AgreementsLicense AgreementsCustomer Contracts
9 FINANCING THE BUSINESS Founder, Family and FriendsAngel InvestorsVenture FundsValuation/Performance MeasuresLoans (Bridge Loans/Bank Loans)
10 OTHER IMPORTANT CONSIDERATIONS InsuranceEmployees:ConfidentialityNon-CompeteNon-SolicitationLicensing Issues:ZoningPermitsCorporate Governance
13 TRADEMARKSMust be a distinctive indicia of source of goods or servicesOwnership vests upon use in U.S.; vests upon use and registration in other countries
14 TRADEMARKS (cont’d) Examples Trademarks Service Marks Trade Names LogosSlogansDomain NamesTrade Dress
15 TRADEMARKS (cont’d)BIG MAC® is a trademark for sandwiches:
16 TRADEMARKS (cont’d)MCDONALDS® is a service mark for restaurant services:
17 THE APPLICATION PROCESS A federal registration is obtained by filing an application with the U.S. Patent and Trademark Office.There is a government filing fee of $325 for each class of goods or services protected filed electronically; $375 for paper filing.The process typically takes about one year.
18 SELECTING THE FORM OF THE MARK Registration in block form provides the broadest protection and is the easiest to maintain – any use of the mark will support the Affidavit of Use required to maintain the registration.Registration in stylized form can be easier to obtain, because the applicant can rely on the distinctiveness of the stylized format.
19 WHAT CAN BE A MARK?Words, such as COCA-COLA®, and also symbols such as the word COCA-COLA in its distinctive script:
20 WHAT CAN BE A MARK? (cont’d) Reg. No. 2,418,340 protects the domain name OLDNAVY.COM for computerized retail services:OLDNAVY.COM ®
21 WHAT CAN BE A MARK? (cont’d) Reg. No. 925,609 protects the colors orange, brown and yellow as used on Reese’s peanut butter cups:
22 Proper use of a mark is also important to maintaining the mark. PROPER USE OF THE MARKProper use of a mark is also important to maintaining the mark.Use marks distinctivelyUse marks consistentlyUse marks as adjectives (not nouns, i.e. “Xerox”)Use helper words such as “brand”
23 COPYRIGHTSProtects works of authorship including literary, dramatic, musical and artistic worksCopyrights vests in author upon creation of workProvides protection for the life of the author plus 70 years, or if author is unknown or it was a work made for hire, 95 years from publication or 120 years from creation (whichever is first)
24 COPYRIGHTS (cont’d) Examples Software Documentation and training manualsAdvertising materialsModels/PrototypesMusicWebsites
25 MARK VERSUS COPYRIGHTCopyright does not protect useful articles, and thus copyright protection was denied for this bicycle rack:Although it is possible to claim trademark protection in the non-functional configuration of a useful article (i.e., as trade dress)
26 PATENTSProtects new and useful inventionsTitle vests initially in inventorThe patent “claims” outline the boundaries of the invention – the claims are what is protected by the patent
27 There are three types of patents: PATENTS (cont’d)There are three types of patents:Utility patents, which protect machines, products, methods or processes, and compositionsDesign patents, which protect the aesthetic appearance of productsPlant patents, which protect plants
28 Utility Patent examples PATENTS (cont’d)Utility Patent examplesCompositions of matterDevicesMethods or processesNew uses or applicationsDesign Patent example
29 MARKS VERSUS PATENTSUtility patents protect the way something is constructed or how it functions, so there is little overlap with trademarks, which must be primarily non-functional.Design patents protect the appearance of a product, which can also be a trademark or service mark.
30 COST COMPARISON Government fees for: Copyright application = $30Trademark application = $325 minimum (depending on number of classes)Patent application = $300 - $800 (depending on number of claims, type of entity)While costs vary greatly, copyright protection typically costs less than trademark and patent, with patent protection generally being the most involved and expensive.
31 TRADE SECRETSProprietary information that is the subject of reasonable efforts to preserve secrecy and has value because it is not generally known.
33 Trade Secrets (con’t)“Reasonable efforts” to preserve secrecy include:Limiting access to the trade secret to key employees who have a need to knowRequiring employees to sign a confidentiality agreementStamping the word “confidential” on the documents and keeping them in a secure locationEmploying computer access passwords and physical barriers
34 TRADE SECRETS (cont’d) Inadvertent disclosure destroys trade secret protection:Inadvertent trade show discussions/disclosuresDiscussions with vendors and/or competitorsPresentations and PublicationsConfidential discussions overheard in public environmentBlogging, work discussions with friends, at dinner, etc.Interviews with Media, Analysts, Commentators
35 Oral Agreements (ownership and obligations unclear) TYPICAL IP PROBLEMSOral Agreements (ownership and obligations unclear)Ownership (vs. license)Joint OwnershipWork for HireOnline AgreementsChain of TitleInadequate Security
36 TIPS ABOUT BUSINESS PLANS Lack of Good Executive SummaryLingo/Buzzwords/ IncomprehensibilityFluff About Customers, Partners and Key Contracts
37 TIPS ABOUT BUSINESS PLANS (cont’d) Wild Statements About the Market, Market Size or CompetitionBad Financials or ProjectionsEvidence of Sloppy Records, Legal Arrangements, Sloppy Plans, Typos
38 TIPS ABOUT BUSINESS PLANS (cont’d) Hedging Bets on Revenue Model or Channels of Distribution or Some Other Essential ElementSources and Uses Unclear. What Do You Do? What Do You Want? How Will You Spend It?