Touraj Parang explains possibly legal challenges for startups and provides guidance for budding entrepreneurs. Parang covers all sorts of legal myths and prepares founders to approach legal challenges in an informed, strategic manner and properly protect their new company and product. This content was produced for the 2013 summer semester of the Founder Institute by Founder Institute mentor Touraj Parang, COO of Upcounsel. Follow him on Twitter to learn more: https://twitter.com/touraj

1. Startup Legal & IP
Touraj Parang
COO, UpCounsel
July 22, 2013

2. Litigators
v Business / Commercial
v Employment
v IP
v Tax
v Antitrust
v Plaintiffs Attorneys
Not All Lawyers Are the Same
Transactional Lawyers
v General Corporate
v Employment
v Immigration
v IP
— Patent
— Trademark & Copyright
— Licensing
v Real Estate
v Tax
v M&A
v Bankruptcy
v Regulatory (by industry)

3. Law & Startup Lifecycle
Startup Stage
$ Avg
Legal Fees
$5K
$50K
$250K
$1M+

4. Top “Founder” Legal Concerns
— Ownership of IP (previous work; transfer by others)
— Freedom to operate (Non-competes / NDAs, regulatory
environment, blocking patents, etc)
— Entity formation (Timing, LLC vs S- vs C-Corp, Location (DE or
CA, Name))
— Capital structure (% ownership, voting rights, vesting schedules)
— Employment (contractors vs employees, visas, stock options)
— Initial funding (solicitations; accreditations, filings)
— Protection of IP (patent and TM filings; trade secrets, ToS)

5. Top 7 Things that Scare
Lawyers (and Investors)
1) Having done all legal work through DIY forms
2) Being represented by the “wrong” lawyer
3) Ignorance of basic startup law (e.g.,
disclosure & fiduciary obligations, stock
pricing matters)
4) Lack of a basic IP strategy/framework
5) Unfamiliarity with regulations in your industry
(e.g., in healthcare, life sciences, financial)
6) Ignoring threats by former employers, co-
founders, contractors, users, competitors, etc.
7) Lack of visibility into user feedback on
product

6. Startup IP Overview
Sources of IP Types of IP
Founders
Contractors
Advisors
Board
Employees
Interns
Licensors
Partners
Users

7. Patents
— “First to file” (or even publish) regime since March 16
— Filings typically start with a Provisional Application,
followed within 12 months by the full application
— Expect 3 to 4 years until a patent is granted (can
expedite under new rules to 1 year)
— Full “prosecution” costs typically $15-20K / patent
— Could save some money by working with Patent Agents
and qualifying under USPTO small business rules

8. Trademarks & Copyrights
— Putting proper notices first step to protection: © TM SM
— Trademark search & monitoring critical to avoid confusion
— Registration broadens protection
— Trademark filing costs typically $2,000 (including search);
copyright filing is much less expensive
— Copyrights by default held by creator è critical to include
proper language in contracts with content creators
— Could save money by using boutique firms or solo
practitioners instead of bigger law firms. Also, there are free
tools such as Markify for doing your search.

9. Trade Secrets
— Covers intellectual property you consider confidential
— Internal organization and processes key to maintaining
protection
— Key to be mindful of disclosures in investor decks, in
recruiting, on website, social profiles, etc.
— NDA’s and contractual provisions very important for
legal enforcement

10. Popular IP Myths
q You don’t need to worry about IP until Series A
q Filing a patent is a valuation multiplier
q Getting a patent is a valuation multiplier
q You can build an IP portfolio cheaply
q Investors require exhaustive patent searches
q You don’t need to worry about trademarks if you get the domain
name
q Investors will sign an NDA
q Only big companies get into IP lawsuits

11. Some Harsh Realities

12. IP Strategy Learnings
— Think of IP protection as a “shield”, and rely on
execution as your competitive edge
— The goals of an IP Strategy are typically:
1) Protecting your investment (time & $) against theft
2) Defense against accusations of infringement
3) Protecting brand/products against market confusion
4) Providing baseline comfort to investors and partners
5) Creating licensing revenue stream (longer term)
— Murphy’s Law also applies here; be prepared

13. Finding The “Right” Lawyer
— Approach it as you approach recruiting any advisor
Ø Look for trusted referrals and references
Ø Check relevant legal area expertise
Ø Check relevant industry/startup experience
Ø Pay attention to cultural fit
Ø Consider networking and competitive dynamics
— Leverage technology
Ø LinkedIn (conduct free profile searches)
Ø UpCounsel (post legal requests for free proposals by
a distributed, virtual legal workforce)

14. Tips on Effective Attorney
Management
— Hire the lawyer with the right fit for the task (i.e., you
don’t need the world’s leading expert to do a simple
incorporation)
— Do some self-learning prior to calling your attorney
— Make sure your attorney explains your options and
expected cost / benefits for each option, upfront
— If you choose to hire a big law firm for corporate work,
ask that they defer their fee until you raise $500K+
— Be selective about work you give to big law firms; there
are increasing alternatives.

15. Founder Legal Action Items
— Recruit your legal advisors, with someone in:
— General Corporate
— Patents
— Trademarks
— Technology Transactions
— Make a list and prioritize among:
— Clean-up tasks (missing assignments, signatures,
minutes)
— Maintenance tasks (forms needed, minutes, filings)
— IP Strategy Tasks (patents, trademarks, copyrights,
trade secrets)
— Keep informed of hot topics in startup law
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16. Final Note
This presentation is not legal advice. For evaluation of your specific
situation and legal needs, contact an attorney. While UpCounsel is not a
law firm or legal service provider, you can post your legal request and
find startup attorneys at http://upcounsel.com.

17. Q&A
Contact Info:
touraj@upcounsel.com
@touraj