Chapter 6 – Chapter 6 – Legal Issues for the Legal Issues for the

EntrepreneursEntrepreneurs

Business Law Business Law Wide range of decisions and issues Wide range of decisions and issues

for the entrepreneur to considerfor the entrepreneur to consider Typically underrated and Typically underrated and

underestimated by entrepreneursunderestimated by entrepreneurs None of them can be glossed overNone of them can be glossed over Issues increase in importance and Issues increase in importance and

complexity as a new venture growscomplexity as a new venture grows

Basic Legal Issues to ConsiderBasic Legal Issues to Consider Identifying and engaging good legal Identifying and engaging good legal

helphelp• Cost-effectivenessCost-effectiveness• Attorney-client confidentialityAttorney-client confidentiality

Employment and Employee agreementsEmployment and Employee agreements• Employment restrictionsEmployment restrictions• Post-employment restrictionsPost-employment restrictions• Trade secrets, invention assignments, Trade secrets, invention assignments,

copyrights, etccopyrights, etc• Leaving on good termsLeaving on good terms

Basic Legal Issues to considerBasic Legal Issues to consider Incorporation and Legal FormIncorporation and Legal Form

• Forms of Business EntityForms of Business Entity• Corporations(companies), Partnerships, Corporations(companies), Partnerships,

Limited Liability companies, othersLimited Liability companies, others• Conducting business in other states, Conducting business in other states,

countriescountries• Licenses, Insurance,etc.Licenses, Insurance,etc.• Selecting and protecting a nameSelecting and protecting a name

Basic Legal Issues to considerBasic Legal Issues to consider Structuring OwnershipStructuring Ownership

• ““Splitting the pie”Splitting the pie”• Equity, Consideration, VestingEquity, Consideration, Vesting• Transfer of sharesTransfer of shares• Shareholder voting agreementsShareholder voting agreements• Proprietary Information and Inventions, Proprietary Information and Inventions,

Employment and non-compete Employment and non-compete agreementsagreements

Basic Legal Issues to considerBasic Legal Issues to consider Forming and working with the boardForming and working with the board

• Having an independent boardHaving an independent board• Representation in the boardRepresentation in the board• Resonsibilities of the boardResonsibilities of the board

Contracts and LeasesContracts and Leases• Elements of a contractElements of a contract• Oral AgreementsOral Agreements• General contract termsGeneral contract terms• RemediesRemedies

Basic Legal Issues to considerBasic Legal Issues to consider Sale of goods and servicesSale of goods and services Human ResourcesHuman Resources

• Employees Vs Independent ContractorsEmployees Vs Independent Contractors• Employee PrivacyEmployee Privacy• Employment Agreement and DisputesEmployment Agreement and Disputes• Employment DisputesEmployment Disputes• Liability for Employee ActsLiability for Employee Acts• Putting it all in practicePutting it all in practice

Basic Legal Issues to considerBasic Legal Issues to consider Operational Liabilities and InsuranceOperational Liabilities and Insurance Creditors Rights and BankruptcyCreditors Rights and Bankruptcy Venture CapitalVenture Capital Intellectual Property and CyberlawIntellectual Property and Cyberlaw

• Trade Secrets, Copyrights, Patents, Trade Secrets, Copyrights, Patents, Trademarks, Domain NamesTrademarks, Domain Names

• Licensing Agreements and other Licensing Agreements and other transfers of intellectual propertytransfers of intellectual property

Basic Legal Issues to considerBasic Legal Issues to consider Going GlobalGoing Global

• Tax PlanningTax Planning• Selecting from Representative Office, Selecting from Representative Office,

Branch and SubsidiaryBranch and Subsidiary• Establishing a Legal PresenceEstablishing a Legal Presence• Hiring and Employment OverseasHiring and Employment Overseas• Distributors, Value-added Resellers, and Distributors, Value-added Resellers, and

Sales AgentsSales Agents• Intellectual Property, Funding, OperationsIntellectual Property, Funding, Operations

Basic Legal Issues to considerBasic Legal Issues to consider Buying and selling a businessBuying and selling a business

• M&A M&A • IPOIPO• Forms of Business CombinationsForms of Business Combinations• Stock Purchase and SaleStock Purchase and Sale• Pricing Issue and forms of considerationPricing Issue and forms of consideration• Tax treatmentTax treatment• Shareholder Approval, Due Diligence, Shareholder Approval, Due Diligence,

Board Approval, Fiduciary DutiesBoard Approval, Fiduciary Duties

Basic Legal Issues to considerBasic Legal Issues to consider Going PublicGoing Public

• IPO processIPO process• RestrictionsRestrictions• ProspectusProspectus• Misstatements and LiabilityMisstatements and Liability• Insider tradingInsider trading• Post-IPO disclosures, Communications Post-IPO disclosures, Communications

with Analysts, Regulationwith Analysts, Regulation

Intellectual Property Intellectual Property IP includes patents, trademarks, IP includes patents, trademarks,

copyrights, and trade secrets copyrights, and trade secrets represents important assets to the represents important assets to the entrepreneur.entrepreneur.

What is a Patent?What is a Patent? A Patent is a contract between the A Patent is a contract between the

government and an inventorgovernment and an inventor Govt. grants the inventor exclusivity Govt. grants the inventor exclusivity

regarding the invention for a specific timeregarding the invention for a specific time It is “Property” right to exclude othersIt is “Property” right to exclude others It is “Territorial” provides protection only It is “Territorial” provides protection only

within the United States. No World Wide within the United States. No World Wide Patent.Patent.

The patentee must enforce the patent The patentee must enforce the patent once it is grantedonce it is granted

Provisional ApplicationsProvisional Applications UtilityUtility 20 years Term (from filling)20 years Term (from filling) DesignDesign 14 years Term (from filling)14 years Term (from filling) PlantPlant 20 years Term (from filling)20 years Term (from filling)

Utility PatentsUtility Patents It grants the owner protection from It grants the owner protection from

anyone else making using and selling the anyone else making using and selling the identified invention and generally reflects identified invention and generally reflects protection of new, useful, and unobvious protection of new, useful, and unobvious process such as film developing, machines process such as film developing, machines such as photocopier, composition of such as photocopier, composition of matter such as chemical compound or matter such as chemical compound or mixture of ingredients and articles of mixture of ingredients and articles of manufacture such as toothpaste pumpmanufacture such as toothpaste pump

Design PatentDesign Patent It covers new original ornamental It covers new original ornamental

and unobvious designs for articles of and unobvious designs for articles of manufacture, a design patent manufacture, a design patent reflects the appearance of an object.reflects the appearance of an object.

Plant PatentPlant Patent These are issued under the same These are issued under the same

provisions as utility patents and are provisions as utility patents and are for new varieties of plants. These for new varieties of plants. These patents represent a limit area of patents represent a limit area of interest, and thus very few of these interest, and thus very few of these types of patents are issuedtypes of patents are issued

TrademarksTrademarks A trademark may be a word, symbol, A trademark may be a word, symbol,

design, or some combination of such, design, or some combination of such, or it could be a slogan or even a or it could be a slogan or even a particular sound that identifies the particular sound that identifies the source or sponsorship or certain source or sponsorship or certain goods or services.goods or services.

TM is given an initially 20 year TM is given an initially 20 year registration with 20 years un-registration with 20 years un-renewable termsrenewable terms

CopyrightsCopyrights A copyright protects original works of A copyright protects original works of

authorship. The protection in a authorship. The protection in a copyright doesn't protect the idea copyright doesn't protect the idea itself.itself.

It allows someone else to use the It allows someone else to use the idea or concept in a different manneridea or concept in a different manner