This document discusses legal issues for start-up businesses, including securities regulation and intellectual property protection. It covers raising money through registered public offerings and unregistered private offerings exempt from registration under Regulation D. It also discusses finding investors, qualifying them as accredited, and negotiating the terms of the offering. Finally, it outlines different types of intellectual property protection including patents, trademarks, copyrights, and registration processes.

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Legal Issues forLegal Issues for
Start-up Businesses:Start-up Businesses:
Securities Regulation andSecurities Regulation and
Intellectual Property ProtectionIntellectual Property Protection
Nicole J. Harrell, Esq.
J. Britton Williston, Esq.

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Raising Money in aRaising Money in a
Securities OfferingSecurities Offering

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Raising Money in aRaising 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 ofCommon 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 ProspectiveQualifying Prospective
InvestorsInvestors
• Accredited Investors
• Confirming the Accredited Investor Definition

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Negotiating the Terms of theNegotiating 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 PrivatePreparing 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 PropertyIntellectual 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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QuestionsQuestions