Technology-Business-Legal Some Critical Intersections Getting Started Legally IP Protection Licensing Mark J. Sever, Jr., Esquire Deborah A. Hays, Esquire Archer & Greiner, P.C.

Getting Started Great idea, technology, products, marketing, and management team are key ingredients for success. Establishing your venture as a distinct legal entity is also important.

3 Major Types of For-Profit Organizations  S Corporation  Limited Liability Company (LLC)  C Corporation The C-Corp structure is the usual choice for those that aspire to be large, high-growth businesses (e.g. more than 100 shareholders) or to attract VC funding.

Obtain All Necessary Licenses, Permits and Approvals  Entity formation  Tax (employer ID no., sales and use tax, S-status, etc.)  Qualification to do business in appropriate jurisdictions  Environmental

Properly Document All Key Relationships  Equity owners  Start-up funding –Gift ? –Loan ? –Equity ?  Employees  Vendors  Customers No. 1 mistake made by all new business owners

Intellectual Property (Creations of the Mind)  Inventions  Literary and artistic works  Company and product names  Product designs  Commercially valuable, secret business information

Types of Intellectual Property  Patents  Trade secrets  Copyrights  Trademarks

What is a Patent? In the U.S., a registration granted to the owner of an invention that meets the following requirements:  Useful  Novelty / New  Non-obvious A U.S. patent grants the inventor the right to exclude others from making, using, offering for sale or selling the invention in the U.S. or importing the invention to the U.S. Examples of patentable subject matter:  Machines/devices  Business methods

Common Patent Mistake  Patents must be applied for in the United States within one year of publication (i.e., public disclosure)  Patents must be applied for in most other countries prior to publication Solution: Provisional patent applications  Inexpensive  Preserve rights for up to one year, after which must be converted

What is a Trade Secret? Any formula, pattern, physical device, idea, process or compilation of information that both:  Provides a competitive advantage in the market place  Is treated by the owner in a way that can reasonably be expected to prevent the public or competitors from learning about it Examples of information protectable as trade secrets:  Engineering technology  Customer lists  Novel laboratory processes

Common Trade Secret Mistake  Failure to take precautions to ensure secrecy Solutions:  Confidentiality agreements –Business partners –Employees/consultants  Physical measures to ensure secrecy –Computer system security –Segregation of secret information –Limited disclosure of secret information

What is a Copyright? Protects certain works that meet the following requirements:  Original  Sufficiently creative  “Fixed in a tangible medium of expression” Grants “author” of the work the exclusive right to: –Make copies –Make changes to –Distribute –Publicly perform (e.g., choreographic works) –Publicly display (e.g., sculptural works) Examples of copyrightable works include:  Literary works, musical works, sound recordings, motion pictures, sculptures, paintings

Common Copyright Mistake “Work for Hire” Doctrine - Absent agreement to the contrary:  Copyright in work created by an employee within scope of employment is owned by employer  Copyright in work created by a third party is owned by the third party Solution: Written agreements confirming copyright ownership  Website developers  Marketing/PR Agency  Software/technology developers

What is a Trademark? An indicator of the source of goods (trademarks) or services (service mark)  “Any word, name, symbol, or device, or any combination that is used to identify and distinguish the goods of one seller from goods manufactured or sold by others, and to indicate the source of the goods.” Examples of trademarks:  Archer & Greiner  Coca-Cola  ExxonMobil

Common Trademark Mistakes  Registration of a corporate name or domain name does not mean the name does not infringe a third party’s trademark rights  Existence of third party using same trademark in connection with different goods and services does not necessarily preclude use of trademark Solutions:.  Trademark availability search. –Review of registered and unregistered marks  Trademark registration. –Helpful but not necessary for protection. (like copyrights).

Licensing  Powerful strategic tool  Outward licensing –Source of income –Ability to exploit unfamiliar markets  Inward licensing –Source of technology –Ability to expand within your market faster and/or more thoroughly than you could on your own

Key Terms in License Agreements  License Grant (what is being licensed) –Exclusive/non-exclusive –Specific rights/uses –Territory –Duration –Sublicense –Transferable/non-transferable

Key Terms in License Agreements  Payment terms –Initial payment –Royalties/fixed fee –Minimums  Confidentiality provision  Ownership of developments  Representations/warranties/disclaimers –How will the licensed material perform –Non-infringement  Liability limitations (remedies in the event of a dispute)  Indemnities  Termination provisions –For convenience –For breach/failure to meet royalty minimums

Conclusion Questions? Thank you.