hatch seminar

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Legal Issues for Legal Issues for Start-up Businesses: Start-up Businesses:

Securities Regulation and Securities Regulation and Intellectual Property ProtectionIntellectual Property Protection

Nicole J. Harrell, Esq.J. Britton Williston, Esq.

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Raising Money in a Raising Money in a Securities OfferingSecurities Offering

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Raising Money in a Raising Money in a Securities OfferingSecurities Offering

Two types of offerings:

•Registered (Public) Offering

•Offerings Exempt from Registration (Private)

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Unregistered OfferingsUnregistered Offerings

• Exempt from registration by federal securities laws

• Save time and expense• Limited disclosure requirements• No broad public demand

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Common Types of Common Types of Unregistered OfferingsUnregistered Offerings

• Offerings to founders• Offerings to early employees• “Friends and family” offerings• Regulation D: The Private Offering Exemption

– Most popular type of unregistered offering– Rule 504: $1 million in a 12 month period– Rule 505: $5 million in a 12 month period– Rule 506: unlimited amount

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Finding InvestorsFinding Investors

• Using “Associated Persons” to Find Investors• Using Placement Agents to Assist in Finding

Investors• Crowdfunding

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Qualifying Prospective Qualifying Prospective InvestorsInvestors

• Accredited Investors

• Confirming the Accredited Investor Definition

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Negotiating the Terms of the Negotiating the Terms of the OfferingOffering

• Type of security• Price of security• Voting rights • Registration rights • Right to designate board

members

• Conversion rights• Anti-dilution protections • Dividend preference• Liquidation preference• Redemption rights

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Anti-fraud Protection:Anti-fraud Protection:Preparing the Private Preparing the Private

Placement MemorandumPlacement Memorandum

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Offering the SecuritiesOffering the Securities

• Delivery of PPMs to Investors• Delivering Copies of PPMs to Advisors• Completing the Subscription Documents• Confirming Investor Status• Making necessary federal and state filings

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Intellectual Property Intellectual Property ProtectionProtection

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Types of IP ProtectionTypes of IP Protection

• Patents

• Trademarks

• Copyrights

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PatentsPatents

• Utility– Inventions, such as products, chemicals,

machines and technology• Design

– The unique way a manufactured object appears• Plants

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Patent ProsecutionPatent Prosecution

• Need an attorney licensed on the Patent Bar

• Lengthy and expensive process

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TrademarksTrademarks

• Names• Logos• Slogans or taglines• Other identifying marks

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Trademark RegistrationTrademark Registration• Application process can take 12-18 months• Application(s) filed by class• Examiner review• Office actions issued and response required• If approved by examiner, 30 day publication period

to allow for opposition• If no opposition, notice of allowance for registration• Maintenance requirements for registered marks

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Use of Trademark SymbolsUse of Trademark Symbols

• TM can be used with unregistered marks for goods

• SM can be used with unregistered marks for services

• ® can only be used with marks registered by the PTO

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CopyrightCopyright

• Original works• Written materials, such as manuscripts• Architectural designs and works• Music, lyrics and sound recordings• Photographs• Other works of art, such as jewelry designs

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Copyright RegistrationCopyright Registration• Registration is not required:

– To have copyright protection– To use the © symbol

• Registration gives certain rights not otherwise available– Right to be in federal court– Right to certain types of damages

• Application is not reviewed for substance• Registration can take 8-12 months

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Other Copyright MattersOther Copyright Matters• Notice is highly recommended

– © year of completion name of author– Example: © 2012 Kaufman & Canoles

• Works make for hire– Works created by employees within the scope of their

employment are owned by the employer, but consider having the employees acknowledge this in writing

– Works created by independent contractors are owned by the independent contractor unless the parties specifically agree in writing otherwise

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