Our fast-growing startup community has oftentimes seen companies that start from Greece expand overseas to the point where most of their revenue originates from the United States. Marathon hosted the Greek Tech Finance Network event with an agenda devoted to Greek startups entering the US, offering practical insights on US incorporation, tax and intellectual property matters.

1. Emerging Growth Companies
Entering the U.S.
October 10, 2019

2. Foley Attorneys
1
Dave Kantaros
Partner, Boston – Business Law, Private Equity, Venture Capital, M&A, Venture & Growth, Technology
617.342.4068
Email: Dkantaros@foley.com
Bio: https://www.foley.com/en/people/k/kantaros-david-w
Chris McKenna
Partner, Boston – Intellectual Property, Electronics, Venture & Growth, Cannabis, Technology
617.342.4057
Email: cmckenna@foley.com
Bio: https://www.foley.com/en/people/m/mckenna-christopher-j
Ashley May
Associate, Los Angeles – Business Law, Tax, Benefits & Estate Planning, Investment Management
213.972.4565
Email: Amay@foley.com
Bio: https://www.foley.com/en/people/m/may-ashley-e

3. Table of Contents
Structures for Foreign Companies with U.S. Presence 3
Setting up in the U.S.: General Considerations 14
Raising Capital: Options 24
Intellectual Property Considerations 29
About Foley 48
2

4. Structures for
Foreign Companies
with U.S. Presence

5. Structures for Foreign Companies with U.S.
Presence
 First, need to know:
– Tax issues need to be considered
– Choice of entity involves interplay
between tax laws of the countries
– U.S. asserts jurisdiction over all
trade or business income derived
from sources in its borders
4
 Common corporate structures:
– Foreign Parent – U.S. Subsidiary
– Foreign Company – U.S. Company
(brother/sister)
– U.S. Parent – Foreign Subsidiary
– Direct U.S. (DE) incorporation (no foreign
affiliate)
– U.S. Branch or Rep Office of Foreign
Corporation

6. Structures for Foreign Companies with U.S.
Presence (cont.)
 Foreign Parent – U.S. Subsidiary
– A separate U.S. entity is created as a separate C corporation owned by the foreign parent
– U.S. Sub. incurs corporate income tax, which under the newly revised tax laws is 21%
– Certain income tax rates may be reduced if treaty benefits are available. Under the current US-Greece treaty,* the
following rates apply:
 Dividends: 10%
 Interest: 0%
– Reporting Issues: Form 5472, Intercompany Agreements, Loans
5
* Convention Between the United States of America and the Kingdom of Greece for the Avoidance of Double Taxation and the Prevention of Fiscal
Evasion with Respect to Taxes on Income, signed on February 20, 1950, as amended by protocol.
Foreign Parent
Company
U.S. Subsidiary
C-Corporation

7. Structures for Foreign Companies with U.S.
Presence (cont.)
 Brother – Sister Structure
– Establish a new U.S. corporation, generally mirroring the same capitalization (shareholders and ownership percentages)
as in the ForeignCo
– USCo is neither a subsidiary of nor parent to the ForeignCo
– As a result of a complex tax regime, the ForeignCo may be considered a “controlled foreign corporation” of the USCo
 The USCo would be required to include in its gross income its share of certain earnings and profits of the ForeignCo
 However, under recent proposed US Treasury Regulations, this “deemed attribution” of ownership to the USCo may be
mitigated
– Reporting Issues: Forms 5472, Intercompany Agreements, Loans
6
Foreign Shareholders
Foreign
Corporation
U.S.“Shell”
Corporation

8. Structures for Foreign Companies with U.S.
Presence (cont.)
 U.S. Parent – Foreign Sub. (“Flip”)
– A U.S. parent is created as a separate C corporation from foreign Sub. Corporation; U.S. Parent is owned by the
foreign entrepreneurs/shareholders, and Foreign Sub is owned by U.S. Parent
– Treaty benefits may also be available for lower tax rates
– U.S. parent is taxed on its U.S.–sourced income, which under the newly revised tax laws is 21%
 However, Foreign Sub will be a “CFC” of the U.S. Parent; certain types of income of CFCs, though undistributed,
must be included in the gross income of the U.S. shareholder in the year the income is earned by the CFC
– Reporting Issues: Forms 5471, 926, FinCEN (Form 114), Intercompany Agreements, Loans, Pricings
7
U.S. Parent
Company
Foreign
Subsidiary
C-Corporation

9. Structures for Foreign Companies with U.S.
Presence (cont.)
 Direct U.S. (DE) corporation formation (no foreign entity)
– A U.S. C corporation is organized at the inception of the startup’s business and owned directly by the foreign
entrepreneurs/shareholders
– There is no separate foreign entity formed
– Advantages - corporate simplicity, ideally situated for US investment, etc.
– Disadvantages - not ideal if significant foreign source income, issues with US founder visas, unsure of US market
entry
8
Foreign
Shareholders
U.S. Entity
C-Corporation

10. Structures for Foreign Companies with U.S.
Presence (cont.)
 U.S. Branch or Representative Office of a Foreign Parent
– An extension of a foreign corporation, as opposed to a separate legal entity, so advantage of not having to establish a new US
company…however…
– As such, a branch…
 Subjects the foreign company directly to filing US tax returns, opening up liability of the foreign company to US Federal, state
and even local taxes and exposure to scrutiny from such US tax authorities.
 As a non-corporate entity, the branch cannot deduct payments for royalties, management fees, or interest to the foreign
corporation, and
 It also means that the foreign company can be a direct target of claims and lawsuits with no limited liability and litigation
exposure in the US is typically much greater than the foreign company may be accustomed in its home or even other non-US
jurisdictions.
9
Foreign
Company
U.S. Extension
Branch or
Representative Office

11. Structures for Foreign Companies with U.S.
Presence (cont.)
 U.S. Branch or Representative Office of a Foreign Parent cont…
– If the branch is “U.S. trade, business or permanent establishment”,
 U.S. branch income is still taxable as if it were an independent enterprise,
 Branch Profits Tax – net after tax profits (after taxing profits at 35%) are again taxed at 30% subject to
Treaty reduction, if at all. Branches can be very bad.
 Passive activities (dividends, interest, rent, etc.) can be subject to U.S. withholding tax if the income is
not connected to the U.S. business
 Capital gains on income not connected to U.S. business are generally not subject to tax
– A rep office, also means no separate legal entity formed in the US and no taxable presence in the US, so
long as very limited activities in the US such as ancillary and support activities such as advertising and
promotional activities, market research (but Tax Treaty is required). If no Treaty, then US presence will
likely create automatic tax nexus.
10

12. Structures for Foreign Companies with U.S.
Presence (cont.)
 Must establish contractual relationship b/t Foreign company and U.S. entity (if other than
branch)…an “intercompany” agreement
 Two basic models:
– Sales rep model
– Re-seller/Licensing model
Where is decision making authority? US or Foreign? Also, follow the customer dollars to
understand which model best applies…
 An evolving model for SaaS/Cloud companies…
– Services model: Where are the “services” actually being provided? On a server outside of the
US? Jurisdiction in which services deemed provided applies tax.
 “Transfer pricing” study (properly document relationship b/t affiliates are on “arms length” to
minimize risk of penalties on audit by tax authorities)
 Capitalizing the U.S. entity (equity vs. debt capital)
11

13. USCo - “C” Corporation or LLC?
“C” Corporation
– Most public companies are C Corps
– A business (and management) that is legally separate from its owners such that the personal
assets of owners are safe from the liabilities of the corporation
– C Corp pays income taxes on its profits; subject to “Subpart F” US tax rules, shareholders are
only taxed to extent the corporation distributes out any profits as dividends
– Can have a single or unlimited shareholders
– LLCs may be easily converted (but typically should do that well in advance of IPO or other
capital event to ensure tax-free conversion).
12

14. Limited Liability Corporation (LLC)
– As a default, start-up losses flow through to owners
– No limits to number of owners
– Similar to corporation in that owners not liable for debts of LLC
– So, why not an LLC?
 An LLC defaults to being a “pass through” tax entity, meaning that it does not pay US taxes, its owners do
(although it does still need to file a US and applicable state [income/informational] tax returns).
 A foreign owner of an LLC with a US based operating business will be directly liable for US tax compliance
obligations and tax, including Branch Profits Tax.
 As a general rule, foreign companies desire to avoid having to file US tax returns so that IRS won’t have
ability to review/audit the foreign company’s worldwide income, as explained in more detail below.
13

15. Setting up in the
U.S.: General
Considerations

16. Delaware: The State of Choice
 Most companies incorporate in Delaware
– Less than 1/3 of 1% of U.S. population resides in Delaware
– It is the legal home of more than 50% of all publicly-traded corporations, and 64% of
the Fortune 500 companies
– Comprehensive and stable corporate law
– Venture funds and foreign companies usually choose Delaware
15

17. Compliance
 Incorporation of the entity
 Appointment of the Board of Directors
 Appointment of Officers
 Opening a Bank Account
 Sale of Stock
 “Back-Office” Administration: Payroll, Insurance, Tax withholding, etc.
 Note (intercompany)
 Employment or contractor agreements (W-8 BEN or equivalent)
 Intercompany agreements (described earlier)
16
Mechanics of Incorporation
 Business License (city)
 Corporate tax return filings (Federal & state – due 3.15 for calendar year)
 Delaware annual report
 Estimated tax payments (e.g., MA $456 minimum - )
 Foreign information reporting (Forms 5471, 5472, FinCEN 114 (FBAR), 1120-F, 3520…)
 Sales and Use tax
 Business property tax returns

18. Ownership and Business Affairs of a Corporation
 Board of Directors
– The business and affairs of the company are managed by the board of directors
– Must appoint a board of directors, but can be just one individual, and need not be a US citizen or even US resident; the
shareholder(s) elect the board member(s); for a wholly owned subsidiary, commonly do this pursuant to a written consent
of the stockholder(s); the business and affairs of a corporation are managed by its board of directors, but only as the
entire constituted and by action of the entire board; individual board members, if more than one, do not typically have any
authority to act or bind the corporation as individual board members.
– Each director has a fiduciary duty to protect the interests of the corporation and to act in the best interests of the
corporation’s stockholders.
– Directors can be held liable for breach of fiduciary duty, but typically NOT issue in Foreign parent - US Sub structure b/c
liability to shareholders and shareholder is foreign co and often only a single director.
 Officers
– Manage the day to day operations of the company
– The directors designate officers to manage day-to-day operations. Must appoint certain officer positions including a
[President, Treasurer and Secretary], depending on Bylaws adopted; officers are appointed by the Board and need not be
US citizens or residents. Common for US startups and tech companies to have other officer positions as well, but not
required, such as a Chief Executive Officer, one or more Vice Presidents (Sales, Finance, Technology, Information, etc.),
Chief Technology Officer, Chief Financial Officer, etc.
– A single individual can be the sole director (member of the Board) and also hold all required officer positions.
17

19. Ownership and Business Affairs of a Corporation
(continued)
 Shareholders
– Owners of the company
– Note that a corporation is not legally active until it has issued shares of stock!
– Unless the certificate of incorporation specifies otherwise, stockholders do not manage the corporation (as
opposed to an LLC, where members can often manage the company). Stockholders elect directors
annually and have the power to decide whether or not to approve major corporate actions such as
amendments to the certificate of incorporation (to create a new class of preferred stock to raise money for
instance), sales of all or substantially all of the corporation’s assets, mergers and winding up of the
company. Typically, stockholders decide by a majority approval, unless a higher voting requirement is
specified in the certificate of incorporation (which may be implemented in a preferred stock financing).
– Issuances of stock must comply with federal and state securities laws. If a wholly owned sub (i.e., single
stockholder) or only a few stockholders, the issuance typically qualifies for an exemption to registration
under the federal securities laws. The issuance of stock is also regulated at the state level by each state's
securities laws (commonly referred to as blue sky laws). US legal counsel will review the securities
statutes and regulations of each state in which the stock will be offered or sold and comply with all
applicable filing and fee requirements.
 With typical, US sub - foreign parent structure, this is not much of an issue. Corporation issues stock to
its stockholders after, or at, the first meeting, or typically with unanimous written consent of the board of
directors.
18

20. Other Considerations at Incorporation
 Engaging U.S. Employees or Contractors / Immigration
 Naming the Company
 Intellectual Property
 Export / Import
 Other - FDA, etc.
19

21. Applicable law…
 Federal, state and local laws regulate employment matters. Employment contract matters are regulated at the state level.
 A written employment agreement is not required unless the employee is represented by a union. For unionized employers,
collective bargaining agreements are written. Other terms may be imposed by statute.
 Many states are “at-will” employment jurisdictions meaning that an employee based in such a state may be terminated at
any time for no reason, subject to any employment or similar agreement providing for contractual rights and to certain anti-
discrimination laws and regulations and payment of owed wages, etc.
 Companies entering the U.S. often desire to engage their first “workers” here as independent contractors, instead of
employees.
 Independent contractors are self-employed individuals, not company employees.
 Benefit is that many complications and costs associated with employees (for example, payroll taxes, workers' compensation
insurance and employee benefits costs) are avoided.
 However, because independent contractor arrangements avoid many of the tax and other employment law requirements of
an employment relationship, the Internal Revenue Service (IRS), state government agencies and courts construe
independent contractor status narrowly and impose large penalties for improper classification. Penalties can include back
payment of wages (including overtime), Benefits, Unpaid taxes and other significant monetary penalties.
20
Employee or contractor?
Engaging (as) U.S. employees or consultants

22.  B-1 Visitors for Business (gainful employment NOT permitted and can’t receive salary from US source; ok
for setting up US office, meeting potential customers/investors, startup accelerator program)
 E-1 Treaty Trader (demonstrate substantial investment [e.g., a sizable and continuing volume of trade
(exchange of goods, services & tech)]; majority of stock must be held by nationals of treaty country so US
investor dilution can be a problem; spouse can work)
 EB-5 Investor Visa for Permanent Residence ($1mm,* new biz, ≥ 10 US Citz, involved day to day)
 F-1 Student (OPT – 12 months post grad, related to your degree, can extend up to 24 months if STEM;
equity only ok)
 H-1B Specialty (temporary) Worker (must be able to support employee and numbers limitations; annual
cap of 65k; exemption if had H-1B in last 6 years or get job with US university)
 L-1– Intra company Transfer (foreign company abroad with affiliation with US company; 1 year
employment as manager, exec or specialized skill employee; spouse can work)
 O-1 Extraordinary ability (very top of your field in the world; regs list 10 examples and must generally
meet at least 3)
21
Immigration – Common Non-Immigrant U.S. Visas
* Increased to $1.8mm if petition filing date is on or after 11/21/2019

23. Nonimmigrant Visa Options
22
E1– Treaty Trader Visa
EB-5 – Investor Visa
H-1B – Specialty
Occupation Worker
L1 - Company Transfer
L Blanket – Co. Transfer
(pre-approved)
O – Extraordinary Ability
B1 – Temporary Visitor
F – Student
DualIntentNonimmigrantVisas
TemporaryNonimmigrantVisas

24. Employment-Based Nonimmigrant Visa Types
23
• National of a treaty country
• Engage in substantial trade with a U.S. enterprise
• At least 50% ownership or managerial control
• Available to Principals & Essential Employees
• Renewable in 2 year increments
• Spouse employment authorized
E1 Visa
• Available to Manager, Executive or Specialized Employee
• Relationship exists between foreign entity & U.S. company
• Must have been employed by the foreign entity for 1 year
in last 3 yrs
• Valid for 5-7 years (depending on role)
• Spouse employment authorized
• Dependent children may study in U.S.
L1A/L1B or L
Blanket

25. Raising Capital:
Options

26. Sources of Investment Capital
 Inter-company funding (debt or equity? Don’t’ forget “thin cap” rules)
 Friends and Family (be careful, in the US, still must be “accredited” if they are US residents)
 Angel Money
– High Net-Worth Individuals (can be unsophisticated or “super angels”)
– Angel Groups
– Incubators; Accelerators
 Institutional Capital
– Micro/seed funds
– Venture capital funds
– Corporate (strategic) investors (may also include customer advance; grew tremendously in 2014 with nearly 18% of all
venture deals (strongest since 2000 ) and strong performance continued in 2015)
 Crowdfunding platform?
– Equity crowdfunding (e.g., angelist)
– Product development (e.g., kickstarter)
 Issue: US/3P investors considering investing in USCo (vs. ForeignCo) rightly reluctant to do so in USCo if “flip”
has not been effected or USCo is not otherwise owning, directly or indirectly, the business assets (IP,
customers/revenue, etc.).
25

27. Types/Structure of Investment
 Foreign lenders need special provisions in their loan documents to avoid interest withholding tax
 Straight loan
– Intercompany loan: Typically just simple loan (term or revolver) if just an inter-company investment from
ForeignCo, but must not all be debt; “thin cap” rules)
– Commercial bank loan: very unlikely to obtain, as will require substantial collateral – corporate assets,
more likely AR, or perhaps personal guarantee(s)
– “Venture debt”: Loans made by “venture debt” funds, but typically only invest alongside tier 1 equity
venture investors
 Convertible loan*
– Convertible debt: convertible note that converts the investment initially structured as a loan into preferred
stock at a later “qualified financing” …still popular with U.S. startups, but a US investor won’t provide
convertible debt to USCo if it’s not the parent or otherwise owns the business
– *Convertible security: Not debt, so no interest accruing or maturity date, but not considered outstanding
stock until “if and when” converted at a qualified financing into preferred stock; see e.g., “SAFE”
investment (Y Combinator)
 Preferred stock
– Seed preferred
– Traditional venture preferred (Series A, Series B, etc.)
26

28. 27
Raising Capital: Trends
2019 (first half):
• 1H 2019 total US VC deal value reached $66 bn across 4,868 deals.
• VC funds closed on $20.6 bn in total commitments in 1H 2019.
• 123 Mega-deals closed, accounting for 44.6% of total VC investment. However stabilization may follow the period of
heightened VC activity: Deal sizes and valuations in aggregate have plateaued for the first half of 2019.
• Impact of global market forces on the US VC industry; new CFIUS regulations could complicate the deal making
process and have a damaging effect on IPOs: The expanded authority of the Committee on Foreign Investment in the
United States (CFIUS) on foreign investment into the startup ecosystem continues to be an area of policy focus. The new
CFIUS regulations are in early days, however investors from trading partners in Europe and elsewhere are now getting
pulled into the CFIUS process, which convolutes deal making and poses a variety of major hurdles, especially for life
sciences companies.
2018 US VC activity (full year):
• Unicorns raised an aggregate of $44.5 billion in funding, which accounted for 33.9% of total VC investment in 2018.
• Capital invested into life sciences companies reached a decade high: US VC investments reached $23.3 bn across
1,308 deals. US life sciences represented 14.6% of US VC deal value in 2018, up from 13.4% in 2017.
• 85 IPOs were completed in 2018, up from 58 IPOs in 2017 and the highest count since 2014. In 2018, IPOs represented
greater than 50% of exit value for the second straight year.
• 2018 VC reached $130.9 billion invested across 8,948 US venture deals, the first time annual capital investment
eclipsed the $100 billion watermark set at the height of the dot-com boom in 2000. The year closed with a ~5.5%
decline in completed financings, despite the record aggregate capital invested figure.
• 61.9% of total capital invested originated from deals sized $50 million or larger. Large round sizes and high
valuations dominated the deal-making environment in 2018.

29. 28
Raising Capital: Trends (continued)
2018 US VC activity (full year) continued:
• Venture funds closed on $55.5 billion across 256 vehicles, the fifth consecutive year that at least $34 billion was
raised. The fundraising dollar amount in 2018 was fueled by the continued rise of VC mega-funds as vehicles raising at
least $500 million accounted for 57.0% of all capital raised last year.
• $7.5 bn invested in angel & seed funding in 2018, setting a near decade high. Strong activity in Q4 18 helped mitigate
a downward trend; lower activity in angel & seed funding is anticipated as investors continue to focus on fewer, larger
deals. See also line graph on p9, angel & seed pre-money valuations climbed 11.1% in 2018.
• $41.1 bn was invested in early stage VC across 700 transactions. Nearly half of US early-stage deals were sized at
least $5M.
• $82.5 bn was invested in late stage VC across 500 transactions (this includes the $12.8bn funding of Juul in Q4 18).
• Mega-deals had unprecedented investment levels in 2018, with nearly $62 bn invested across 200 mega-
transactions (i.e. value of $100 mn and up). Mega-deals reflected an 81.7% YoY increase over the previous record set
in 2015. See also bar chart on mega-round counts on p5.
• Corporate and PE investors continued to have significant participation in venture deals: in 2018, corporate
venture capital was involved in 1,443 deals and PE participation in 792 deals.
• The West Coast continued to dominate as a VC hub, contributing 61.7% of 2018 deal value and 39.5% of 2018 deal
count. The next largest contributor was the Mid-Atlantic region, contributing 14.9% of 2018 deal value and 20.1% of
2018 deal count.
• Pharma & biotech and software continued to dominate VC deals in 2018; software had record levels of capital
investment with software deals accounting for 41.8% of US VC deals and 35.8% of capital investment in 2018 (per
bar charts).

30. Intellectual
Property
Considerations
29

31. IP Considerations and the US
 Agenda
– Protection Strategies
– Best Practices and Operational Considerations
– Investor/M&A Due Diligence Perspective
 US General Perspective
– Bigger and Denser IP landscape
– Higher volume of IP related activity
 Investment, M&A, Litigation
– Higher IP Expectations, Scrutiny and Risk
30

32. What is Intellectual Property?
 Every company has it, even if not registered
n Confidential/Proprietary Information
– Know-how and unregistered ideas
– Trade Secrets
– Processes, methods and algorithms
– Technology Infrastructure/Computer Programs
– Functional/Technical specifications
– Designs, drawings
– Analysis, research
– Licenses
– Business information
n Sales and marketing research, materials, plans,
customer lists
n Registered IP
– Patents and patent applications
– Copyrights
– Trademarks and trademark applications
– Service marks
– Trade names
– Domain NamesIntentional

33. Patent Copyright Trademark Trade Secret Contracts
Right to
exclude
others
Right to make
copies
Right to use mark in
commerce
Right to be free from
industrial espionage
Right to enforce an
obligation
Protects new
and useful
ideas
Protects
creative
expressions
Protects source
indicators
Protects secrets Protects
transactions/
relationships
Requires
disclosure
Requires
originality
Requires mental
connection to
manufacturer
Requires secrecy Requires
consideration and
agreement
20 years Lifetime plus
70 years
Forever, as long as
there’s a mental
connection
Forever, as long as
it’s a secret
Depends on the
contract
$$$$ Free-¢ $$ Free…? Depends on the
contract
32
IP Protection Tools

34. Different Types of IP Can Overlap
Can Use All IP Protection Types For Same Product/Service
– Can have overlapping IP protection
–Can protect same product via copyright, patent protection, trade marks,
contract (licensing)
Trade Secrets Mutually Exclusive with Patenting
–In order to get patent, need to disclose details of the invention – cannot
keep a secret
–May block out trade secrets from copyright registration
–Be careful: is it really a trade secret?

35. Patents versus Trade Secret Strategy
Maintain as Trade Secret Consider Patent Protection
Competitors will independently create feature
LessLikely
MoreLikely
Feature is determinable from use of product
Infringement of patent would be detectable

36. Patentability Legal Framework
New functionality
And features
Existing Building Blocks
(Prior Art/Known)
IPandValue
New Implementation On
Top of Existing Stack
New hardware and
firmware
New Interfaces and
integration
Useful
Minimal demonstration of some utility
Novelty (“New”)
Not already described or patented elsewhere, or
known, used or available to others in the US
Non-obvious/Inventive
Even if combined two or more prior art references
would not suggest the invention
Existing technologies, products and software can license,
buy off the shell or open source but still does not provide
the functionality of the product or service you are selling

37. Strategic Patentability Approach
New
Do not know of any competitors who have such
features
Do not know of any products with these functions
Competitive Differentiator (“Value”)
Strategic value
Would not want “copy-cat” companies copying such
features
 Develop Innovation Strategy to Protect
Existing technologies, products and software can license,
buy off the shell or open source but still does not provide
the functionality of the product or service you are selling
Existing Application and
Hardware Stack
IPandValue
“Your White Space”
The new functionality
that the Company
implemented on top of the
existing stack to
meet the desired and
Designed functionality,
capabilities and
behavior of product or
service, including any
Competitive
Differentiators

38. Data : New Form of IP Currency
First Data Layer Second Data Layer Third Data Layer
Operation
Data
Digital Exhaust
Aggregate
Data
System Generated
Data
Scalable Infrastructure Actionable Insights
Analytics and
Report
Data
App Generated
Data
Customer
Data
Who owns
the originating
data?
Device mfg. vs
Device owner
Customer Data
Use License:
- Limitations?
- Derivatives?
Who owns
the aggregate
data? Is it explicit?
Can system operator
monetize data?
Can operator monetize
data generated
from app resulting
from customer data?
Multiple Data Flows: Data Merging, Aggregating and Changing

39. IP Strategy
38
 First: Have one!
–Making IP decisions intentional
–Make it part of corporate resume: Tie to competitive differentiators
and align with business strategy and increase value
 Developing an IP Strategy
–Understand the “toolbox” of tools that may be used to protect IP
–Gain a perspective on how to identify innovations that may be
patent protectable
 Continuously Review Product Roadmap
–Consider primary/core features
– Intentionally determine if and how going to protect

40. Best Practices and Operational
Considerations
39
 Ownership of IP
 Joint development/partnerships
 Bar dates for patents
 NDA Practice
 IP Related Agreements
 Make IP Intentional

41. IP Ownership
40
 Key Issue For Company, Investors and M&A
– Want all IP in company and to avoid IP leakage
– US investors want IP in primary/US company they are investing in
– Requires written assignment of IP rights from individual/3rd parties to company
 Employees:
– Proprietary Information and Inventions Agreement (PIIA): assign IP
 Contractors/Service Providers:
– Work for hire: if not explicitly assigned in writing, contractor owns IP
 Customers:
– Service related work to be owned by Company
– How about customer feedback or product/enhancement requests?

42. Partnerships/Joint Efforts
41
 Company looking for 3rd party resources (money, market, sales
channels etc.) to further develop products and services
– IP will play significant role
 Issues:
– Joint IP is Bad!
– Partner investing considerable amount of resources will want to treat you
as work for hire: they paid for development and get IP
– As product company, you will want to own your entire product regardless
of how and who paid for it
– Future partners, investors, M&A will want to make sure no else has use of
product in competitive way or way that dilutes value
 Solution: Careful strategy and license terms in term sheet, definitive
agreements

43. Important Patent Dates (“Bar Dates”)
n Date of first public use
n Date of first sale or offer for sale
n Date of first publication
– 1 year grace period if derived from
inventor
n Now First to File
n March 16, 2012 Switch from First to
Conceive to First to File
– Filing date is constructive priority
date but can swear behind
reference or gain rights over same
invention but made by another via
conception date
InternationalUnited States
n Date of first public use
n Date of first sale or offer for sale
n Date of first publication
– No grace period, but trigger only
occurs upon divulging invention
– Exception: Some countries like
Canada have a 12 months grace
period also; others may have 6
months
n First to File

44. Non-Disclosure Agreements (NDA)
 Good Practice with 3rd Parties
– No license to IP and no disclosure of confidential
information and trade secrets
– Balance of when to execute in relationship: always need
to have dialogue with 3rd party before getting to NDA
stage
– Even under NDA, should still be careful of what you
share and when your share it
 Avoid IP Public Disclosure
– NDA should prevent public disclosure bar date
– Large Beta release under NDA may not
 Does not protect collaborative inventorship
– Working Under NDA with another company
– Will keep inventions confidential
– But does not stop other company employees
from being inventors

45. Commercialization of IP
 IP integrated into many commercial agreements
 Software license and SaaS license agreements
 Terms of Use/Service Agreements
 Proof of Concepts, beta, demo agreements
 Services and Solution agreements
 Product/Purchase Order
 Reseller/Distributor agreements
 Term Considerations
– Scope of license (contractually control use of IP)
 Scope of use, field of use, exclusivity, sublicenseable, assignable, etc.
– Respective Parties’ Background IP – get license to extent incorporated
– Service or Feedback Related IP back going back into the product
– Data governance and use, privacy and security
– Indemnification for infringement
44

46. Making IP Intentional
Reduce IP Leakage
–Written agreements, NDAs, etc. to make clear ownership
–Public disclosure dates for patentability
Review commercial agreements with IP focus
–Consider scope, use and down stream implications
–Controlling access and us of IP to intended ways
Approach strategic and partner relationships with IP
strategy formed
–Know what is important before negotiations/term sheet
–Consider company’s future paths and exit strategies
45

47. IP Due Diligence for Funding/Exit
 Investor Side/M&A Due Diligence Perspective on target company
– Identify/Status of IP Assets
• Does Company have registered IP in good standing?
• Does Company own IP?
• Appropriate IP Assignment clauses in Agreements?
– Analyze Scope and Strength of IP
• What is Company’s IP Strategy?
• What is the scope of coverage of protection to current product?
• Contractual strength (Confidentiality, non-compete, licenses, etc.)
– Asses Third Party IP Risk
• Risk from competitive patent/IP landscape
• Competitive patent benchmarking
• Freedom to operate considerations
46

48. IP Diligence Readiness
 Top 5 IP Considerations
1. What is your IP Strategy?
 Do you even have one?
2. Do you own your IP?
 Employees or contractors? What about interns?
 Also consider your data, which may be the new IP currency
3. What are your product/service functional differentiators and how well does your IP
strategy protect them?
 Is your IP strategy tied to and protecting your core differentiators
4. Who are your competitors and how are you differentiated in an IP defensible way?
 Why are you not a “copy-cat” company and how can you protect against “companies doing what you do?
5. Are there any 3rd party/landscape IP risks?
 Will investment deployment be at risk from potential expensive IP litigation?
47

49. About Foley

50. Who We Are…
49
Foley & Lardner lawyers are business advisors combining legal knowledge with
market experience. We are dedicated to operating in an inclusive environment.
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51. Industry Focus to Deliver Legal Solutions…
50
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Foley looks beyond the law to focus on the constantly evolving demands facing
our clients and their industries. 60 Practice groups providing business solutions including...

52. 51
More than just lawyers, we leverage the knowledge earned from time spent
working in senior positions in both business and government.
For clients, the benefit is our legal guidance has the unique perspective
gained from being on both sides of the matter and the result is
unparalleled counsel, driving toward the best outcome.
By the Numbers

53. ATTORNEY ADVERTISEMENT. The contents of this document, current at the date of publication, are for reference purposes only and
do not constitute legal advice. Where previous cases are included, prior results do not guarantee a similar outcome. Images of people
may not be Foley personnel. © 2019 Foley & Lardner LLP
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