Brick city crowd funding presentation 1 8-14


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Brick city crowd funding presentation 1 8-14

  1. 1. Crowdfunding- The Questions? The Realities! © 2012 Day Pitney LLP
  2. 2. DEFINITIONS  Crowd Sourcing- Engagement process by which organizations seek input from people, to contribute ideas, solutions or support which are reinforced through social media.  Crowdfunding/crowd financing- the collective effort of individuals who network and pool their money to support efforts initiated by other people or organizations.  Equity crowdfunding- enables broad groups of investors to fund startup companies and small businesses in return for equity. Investors give money to a business and receive ownership of a small piece of that business (equity and / or debt). If the business succeeds, the value of that share of that business goes up The converse is also true. Page 2 | 01/15/14 | Crowd Funding Presentation
  3. 3. QUIRKY Pivot Power Invented by Jake Zien and 855 people •279,000 units sold at $30 each- $8.9 million •Jake Zien has made $300,000 to date! Mocubo Invented by Justin Giannone and 1437 people Broom Groomer Invented by Bill Ward and 772 people
  4. 4. KICKSTARTER REALITIES 52,140 Projects funded successfully! 12 Projects raised over $1Million in 2012 No Due Diligence on creators Not a Store- product can not be made Cant Cap Goals- too many preorders After Goal is met the relationship is over or so you think!  Price, Quantity and Timeline is Public  885 million Pledged       Page 4 | 01/15/14 | Crowd Funding Presentation
  5. 5. Reward Based Crowdfunding PROS  Unconventional Financing of Good Ideas  Validation of Good ideas  Public Traction = Even More Funding  Originator of Idea/Project retains operation control  Establish Personal Relationships with your Crowd/Customers  Making Change in your community/Support causes where you live Page 5 | 01/15/14 | Crowd Funding Presentation
  6. 6. Kickstarter Litigations  Quest v. Singh  Quest: Inventor of Hanfree- IPAD stand; raised $35,004 from 440 backers  Singh- Lawyer one of the 440 backers  11/28/12- Quest cancelled production of Hanfreeno Hanfree; money to be returned  Singh brought suit. Ticked Off! “Why he became a lawyer”  Quest- bankrupt from lawsuit; Public Failure!  Kickstarter not to blame if a product fails to deliver is someone isn't qualified to create the product Page 6 | 01/15/14 | Crowd Funding Presentation
  7. 7. Kickstarter Litigations cont. FORM 1: An affordable, professional 3D printer by Formlabs An affordable, high-resolution 3D printer for professional creators. •3D Systems v. Formlabs and Kickstarter •October 2012- 3D Systems seeking injunctive relief and damages for patent infringement of US Patent 5,597,520: Simultaneous multiple layer curing in stereolithography. •Patent Damages: Suit alleges that Kickstarter’s role as “facilitator of the record setting sales of the printer” is an aspect of the case. •Kickstarter: specific intent to infringe, willful blindness of patent, encouraging infringement: GUIDELINES: D.I.Y. We love projects from the hacker and maker communities (weekend experiments, 3D printers, CNC machines) and projects that are open source. Software projects should be run by the developers themselves. •Formlabs contends the patents are expired. •Printers have been shipped to backers all over the world. •Maker faires; training classes •11/2013- Form 1 and 3d Systems in settlement; Kickstarter on standby; Case removed to District of NY Page 7 | 01/15/14 | Crowd Funding Presentation
  8. 8. Kickstarter Litigations Cont.  IS CROWDFUNDING PATENTABLE?  Patent No. 7,885,887: Methods and apparatuses for financing and marketing a creative work granted to Fan Funded  Inventor: Brian Camelio, founder of ArtistShare; Assignee: Fan Funded  Kickstarter v. ArtistShare  2011: Fan Funded approached KS about licensing their platform and patent rights  2011: KS files claim asking for the ArtistShare patent to be invalidated and/or that KS is not liable for infringement.  2012: ArtistShare files a Motion to Dismiss which was Denied.  2013: ArtistShare filed a counterclaim for Patent Infringement.  Courts Response: “there is a sufficient controversy between the parties that is both immediate and real. Page 8 | 01/15/14 | Crowd Funding Presentation
  9. 9. Kickstarter Litigations Cont.  Aug 14, 2013- Ducotes d/b/a War Chest Publishing v. Kickstarter in NY Fed. Court  Breach of its own Terms of Use; Implied Covenant of Good faith and Fair Dealing; Tortious Interference with Prospective Business relations Defamation.  Kick starter- F rating at BBB- 6 unresponded to Complaints.  Kickstarter stopped their Campaign days after Approving it and days before a TV appearance.  Kickstarter Terms of Service: We reserve the right to change, suspend, discontinue at any time for any reason! Page 9 | 01/15/14 | Crowd Funding Presentation
  10. 10. IP Strategies-BEFORE YOU LAUNCH YOUR Crowdfunding Campaign  DO NOT RUSH!  Americas Invents Act- First to File as of March 16, 2013 not First to Invent- Your pitch cant prove invention  NOVELTY and COMMERCIAL SEARCH  File a provisional patent application  Provisional application -lower-cost ($400/$200/$100) -inventor can simply describe the inventive concept in the application -file it at PTO- preserve patent rights and stake claim to the filing date -PTO will not examine the application unless the applicant subsequently files a full, non-provisional patent application within one year. -Gives applicant time to refine the invention, assess the viability of the market, and raise the necessary funds to pursue the invention further.  Avoid disclosing technical details of your invention: TRADE SECRETS! Page 10 | 01/15/14 | Crowd Funding Presentation
  11. 11. STRATEGIES- PLANNING YOUR COMPAIGN  Marketing Plan-Build Your Crowd on Social Media before you Launch!  Business Plan- Plan Your Rewards!!  Investment Plan- Equity; Corporate Structure  Legal Plan: Who is your Competition? Their Legal History!  Examine the Way the Portal treats INTELLECTUAL PROPERTY! Terms of Use!  Pick the Right Portal- Each has its own audience. Page 11 | 01/15/14 | Crowd Funding Presentation
  12. 12. STRATEGIES- For Your Campaign      Make a cool Video- 3-4 minutes! Tell your Story! Use Heartstrings if applicable! Use WE! UPDATE!! UPDATE!! Your backers MAKE SURE YOUR IP IS PROPERLY MARKED AND ATTRIBUTED!  Trademark Protection  Copyright Protection- photos, drawings, DMCA Takedown- make sure you can use the images! Page 12 | 01/15/14 | Crowd Funding Presentation
  13. 13. IP Strategies- AFTER YOU LAUNCH  If you launched and didn’t file a Patent Application: Do not allow one year to pass after making a public disclosure-Forfeit: U.S. and International patent rights!  Foreign Internet Trolls- Be wary!  DISCOVERING YOUR IP BEING INFRINGED ON A PORTAL- Contact them ASAP!  IF SOMEBODY THINKS YOUR ARE AN INFRINGERCreate a reasonable licensing structure. Page 13 | 01/15/14 | Crowd Funding Presentation
  14. 14. Future of Reward Based Crowdfunding Fashion: Cut the Bias (US) and ZaoZao (China)- materials, style surveys Public Projects: NY City Council Page on Kickstarter: -Positive community change, civic engagement and urban renewal is limitless -Neighborhood urban farms, Public art installations, Co-ops, cafes -From East NY to the South Bronx. Gambitiious- Netherlands (independent game developers)  GOFUND ME: Take 2.9% of every transaction- money sent directly to your account. Altruistic Projects- funeral services; volunteer programs; education  Pubslush- books and authors CONSOLIDATION of Portals- 500+ worldwide! Page 14 | 01/15/14 | Crowd Funding Presentation
  15. 15. Jumpstart Our Business Startups (JOBS) ACT   Deadline was 12/31/2012 Proposed Rules- Nov/Dec 2014  CURRENT RULES: Rule 501- Regulation D: Securities can be Offered to Accredited Investors Only!  a bank, insurance company, registered investment company, business development company, or small business investment company;  a charitable organization, corporation, or partnership with assets exceeding $5 million;  a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person;  Individual- Income over $200,000 per year/$300,000 Joint  Net worth exceeding $1 million GATED COMMUNITY! Page 15 | 01/15/14 | Crowd Funding Presentation
  16. 16. I WANT TO OFFER EQUITY! Very Few Equity Funding Portals in the U.S.  RockThePost - Bendigo Securities d/b/a CrowdClear is their broker dealer  Must submit to the Portal: -Executive Summary -Term Sheet -Investor Relation Presentations -Pro Formal Financial Projections -Legal Representation -Corporate Governance documents RIGHT NOW: GATED COMMUNITY UNTIL REGULATIONS COME OUT!  Page 16 | 01/15/14 | Crowd Funding Presentation
  17. 17. EQUITY BASED PORTALS- AWAITING SCE APPROVAL  Fundable- $99 per month; 3.5% -For rewards: no equity is provided to backers -For equity: Capital investments minimums range from $1,000 to $50,000 and are only available to accredited investors and at the discretion of the startups in accordance with all State and Federal laws Circle Up- Food Products; Green Products; Microventures- Angel meets investor connecting $100 to apply; $250 if approved; 10% finders fee KIVA- Loan Based- up to $49,500; NOT FOR 1st World countries Page 17 | 01/15/14 | Crowd Funding Presentation
  18. 18. SEC-PROPOSED RULES- REGULATION CROWDFUNDING Individual/Entity can only raise up to $1M in 12 months. Investors can invest from $2,000 up to $100,000. Investments must be made through a registered Broker dealer or a Crowdfunding Portal as an intermediary! Intermediaries can not receive equity!  Issuers of Equity can do a limited kind of advertising, essentially a very short notice in print or electronic media that directs potential investors to the intermediary platform hosting the offering. Disclosure Requirements. Issuers will be required to provide certain information to both prospective investors and the intermediary that will be the conduit for their crowdfunding offering on a new filing form – Form C, which must be filed prior to the offering. Ongoing Reporting. Once the offering is completed, the issuer becomes subject to ongoing reporting requirements.  Investors may cancel within 48 hours.  Issuer Liable if made untrue or misleading statements    Page 18 | 01/15/14 | Crowd Funding Presentation
  19. 19. David Postolski One Jefferson Road Parsippany, NJ 07054-2891 T: (973) 966 8101 F: (973) 206 6611 PRACTICE AREAS Patent Prosecution and Counseling Trademark, Copyright and Advertising Life Sciences and Healthcare EDUCATION Nova Southeastern University Shepard Broad Law Center, J.D., 1999 Oregon State University, B.S. (equiv.), 2010 New York University, B.A., 1995   ADMISSIONS State of New York United States Patent and Trademark Office   Page 19 | Intellectual Property Primer
  20. 20. David D. Postolski Associate One Jefferson Road Parsippany, NJ 07054-2891 T: (973) 966 8101 F: (973) 206 6611 Practice Areas:  Patent Prosecution and Counseling  Trademark, Copyright and Advertising  Life Sciences and Healthcare Education:  Nova Southeastern University Shepard Broad Law Center, J.D., 1999  Oregon State University, B.S. (equiv.), 2010  New York University, B.A., 1995 Admissions:  State of New York  United States Patent and Trademark Office Page 20 | Intellectual Property Primer Professional Experience David Postolski is a registered patent attorney and intellectual property attorney in the Intellectual Property department at Day Pitney. His practice includes prosecuting patent and trademark applications both domestically and internationally. David’s patent practice encompasses various technological and scientific areas, including software development, financial transactions, gaming and business methods, as well as patents related to chemistry. He has experience managing patent and trademark portfolios and advising clients on prosecution strategies, as well as drafting replies to office actions and appeals briefs, and conducting interviews with examiners. In addition, David prepares instructions to foreign associates regarding prosecution in various countries and evaluates IP portfolios for potential licensing value, technical merit and patentability/validity. David also has experience in copyright, trade secret protection and corporate transactional matters including the drafting and negotiating of end user licenses, master service and terms of services agreements, security agreements, coexistence agreements, and non-disclosure agreements. David's life sciences industry experience includes counseling, drafting and prosecuting U.S. and Foreign patent applications in the fields of chemistry, biochemistry, physics and chemical engineering. He has prosecuted applications with subject matter including but not limited to thermodynamics, thermometry, paramagnetism, hyperpolarization, carbon dioxide emissions and effects, medical devices, a variety of healthcare products and pharmaceuticals. His experience also extends to the corresponding branding, trademark, business and corporate side of intellectual property, including drafting and negotiating licenses, product development, manufacturing and launch, FDA processes, ANDA procedures and consumer product safety commission processes.