California | Illinois | Michigan | Washington, D.C. People Aspects of Entrepreneurs Benjamin W. Jeffers

Challenges In A World Of Employee Mobility  Immigration issues impacting ability to hire personnel with specialized knowledge  Protecting a venture’s trade secrets when employees leave  Executive compensation

Immigration – The H-IB Visa Shortage Example  U.S. businesses use H-1B visa for foreign workers in specialty occupations: Theoretical and practical application of highly specialized knowledge; and At least a B.A. degree in the specific specialty Mainstay where other visas do not apply (e.g., TN or L-1A intracompany transferee of manager or executive)  Annual limit (“cap”) of 65,000 new H-1B visas for B.A. applicants, plus 20,000 who have a U.S. Master’s degree or above

Immigration – The H-IB Visa  May file petitions starting April 1 st for next fiscal year (Oct. 1 – Sept. 30).  The “rush” to file: Date this year was April 2, 2007 The U.S. Citizenship and Immigration Services (USCIS) announced that the cap had been reached the same day

Immigration – The H-IB Visa Over 130,000 H-1B petitions Cap reached on first day of filing Random selection process to determine which cases will be accepted Everyone else must wait another year

Immigration – The H-IB Visa “[T]he terrible shortfall in our visa supply for the highly skilled stems not from security concerns, but from visa policies that have not been updated in over a decade and a half.” “I personally witness the ill effects of these policies on an almost daily basis at Microsoft.” “We are essentially asking top talent to leave the U.S.” William H. Gates, before the Senate Comm. on Health, Educ., Labor and Pensions, March 7, 2007

Immigration – The H-IB Visa  Potential Reform: Security Through Regularized Immigration and a Vibrant Economy (“STRIVE”) Act of 2007 (H.R. 1645), introduced March 22, 2007 –Raise cap from 65,000 to 115,000, with potential increases to 180,000 –Eliminate 20,000 cap for persons with advanced degrees from U.S. universities  Other potential reforms: Backlog of green card applications Interview requirement for visa applicants Discretion of USCIS officers

Company Secrets: Why Is This An Issue?  Increasingly mobile workforce  The reality of the digital workforce  Be careful when hiring

Company Secrets: Multiple Layers of Protection  Covenants Not to Compete  Confidentiality Agreements  Nonsolicitation Agreements  Statutory Protection Uniform Trade Secrets Act Economic Espionage Act of 1996 Computer Fraud and Abuse Act

Company Secrets: Who Should Be Subject To Restrictive Covenants?  Other shareholders  Key employees  Sales Representatives/Distributors  Suppliers  Not the janitor

Company Secrets: Restrictive Covenants  Generally are enforceable, but: Must protect a reasonable competitive interest Must be reasonable as to: –Duration –Geography –Scope/type of business Not a general restraint on trade  One-size does not fit all  Need consideration

Company Secrets: Take Care When Hiring  Uniform Trade Secrets Act adopted in nearly all states  What Is A Trade Secret? Trade secret is information, including a formula, pattern, compilation, program, device, method, technique or process that both: –Derives independent economic value, actual or potential, from not being known or ascertainable by proper means by others who could gain value from it; and –Is subject to reasonable efforts to maintain its secrecy

Company Secrets: Take Care When Hiring  Economic Espionage Act of 1996  Criminal violation to steal trade secrets

Company Secrets: Take Care When Hiring  Computer Fraud and Abuse Act  Unauthorized access to computer information Plaintiff fraudulently or intentionally accessed a protected computer without authorization, and Caused damages of at least 5K Not limited to “trade secrets”  Can bring action in federal court  Arguably lower pleading standard than UTSA

Executive Compensation - Trends  Sarbanes-Oxley disclosure and accountability  Enron – deferred compensation and timing  SEC proxy rules – disclosure of perks  Accounting rules  Addition of Section 409A as part of the American Jobs Creation Act of 2004