legal handbook for early stage businesslegal handbook for early stage business albany law school has...

Legal Handbook for Early Stage Business

Albany Law School

Government Law Center

80 New Scotland Avenue

Albany, New York 12208-3494

www.albanylaw.edu/esb

Legal Handbook for Early Stage Business

Albany Law School has created this handbook as an educational tool to assist start-up companies and entrepreneurs with legal issues that may arise in the early stages of business formation. Because the Law School anticipates that it will continue to update the handbook, we would appreciate receiving your comments or suggestions for modifications and/or additions to the content. Please contact: Emily Ekland, J.D. Post Graduate Fellow Albany Law School 80 New Scotland Avenue Albany, NY 12208-3494 518-445-2345 [email protected]

DISCLAIMER: The information contained in this handbook is provided with the understanding that the authors and reviewers are not herein engaged in rendering legal or other professional advice and/or services. Accordingly, the information provided in this handbook is for educational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain legal counsel with respect to your particular legal needs. The opinions expressed in this handbook are the opinions of the individual authors and may not reflect the opinions of the law school or any other contributing author.

Copyright 2010 Albany Law School

Table of Contents (Please Note: You may click on the section

headings below to link directly to that section)

ACKNOWLEDGMENTS .......................................................................................................................................... 1

INTRODUCTION ...................................................................................................................................................... 2

CHAPTER 1 - FORMING YOUR BUSINESS ....................................................................................................... 4

I. Introduction ................................................................................................................................................... 4

II. Legal Structure .............................................................................................................................................. 4 A. Sole Proprietorships ................................................................................................................................................ 4

1. Formation, Transfer of Ownership and Dissolution ............................................................................. 5

2. Liability .................................................................................................................................................................... 5

3. Growth Potential .................................................................................................................................................. 6

4. Taxation ................................................................................................................................................................... 6

B. General Partnerships ............................................................................................................................................... 6


2. Liability .................................................................................................................................................................... 7

3. Management and Ownership .......................................................................................................................... 7

4. Growth Potential .................................................................................................................................................. 8

5. Taxation ................................................................................................................................................................... 8

C. Limited Partnerships ............................................................................................................................................... 9


2. Transfer ................................................................................................................................................................. 10

3. Dissolution ............................................................................................................................................................ 10

D. Corporations ............................................................................................................................................................. 10

1. Formation, Transfer of Interest and Dissolution .................................................................................. 11

2. Liability .................................................................................................................................................................. 11

3. Management and Ownership ........................................................................................................................ 12

4. Growth Potential ................................................................................................................................................ 14

5. Taxation ................................................................................................................................................................. 14

E. Limited Liability Company .................................................................................................................................. 15

1. Formation, Transfer of Interest and Dissolution .................................................................................. 15

2. Liability .................................................................................................................................................................. 15

3. Management and Ownership ........................................................................................................................ 16

4. Growth Potential ................................................................................................................................................ 16

5. Taxation ................................................................................................................................................................. 16

III. Selecting and Reserving a Name .......................................................................................................... 16 A. Overview ..................................................................................................................................................................... 16

B. Distinguishing Trade Names and Trademarks ........................................................................................... 17

IV. Licenses and Permits................................................................................................................................ 17

V. Insurance ...................................................................................................................................................... 18

A. Types of Business Insurance .............................................................................................................................. 18

1. General Liability Insurance ............................................................................................................................ 19

2. Products Liability Insurance ......................................................................................................................... 20

3. Professional Liability Insurance .................................................................................................................. 20

4. Commercial Property Insurance ................................................................................................................. 20

5. Directors and Officers Liability Insurance............................................................................................... 21

6. Home-Based Business Insurance ................................................................................................................ 21

7. Key Man Insurance ............................................................................................................................................ 22

B. Legally Required Insurance ................................................................................................................................ 22

1. Unemployment Insurance .............................................................................................................................. 22

a. To Register for Unemployment Insurance .......................................................................................... 23

b. Employees that Qualify for UI Benefits ................................................................................................ 23

c. Federal Unemployment Tax Act .............................................................................................................. 23

2. Workers’ Compensation Insurance ............................................................................................................ 24

a. Complying with the Law ............................................................................................................................. 24

b. Posting of Notice of Workers' Compensation Coverage ................................................................ 25

3. Disability Insurance .......................................................................................................................................... 25

a. Purchasing Workers’ Compensation and Disability Benefits Insurance ................................ 26

b. Workers Compensation and Disability Benefits Coverage Situations ..................................... 26

c. Failure to Obtain a Workers’ Compensation Insurance/Disability Insurance ..................... 28

C. Recommended Insurance .................................................................................................................................... 29

D. Optional Insurance ................................................................................................................................................. 29

Chapter 1 Resources .......................................................................................................................................... 29

CHAPTER 2 - FINANCING YOUR BUSINESS ................................................................................................. 31

I. Introduction ................................................................................................................................................ 31

II. Debt Financing ............................................................................................................................................ 31 A. Personal Loans ......................................................................................................................................................... 31

B. Commercial Loans .................................................................................................................................................. 32

III. Equity Financing ........................................................................................................................................ 32

IV. Classes of Investors ................................................................................................................................... 33 A. Founders, Friends and Family ........................................................................................................................... 33

1. Capital Investment ............................................................................................................................................ 33

2. IP as a Source of Investment ......................................................................................................................... 33

B. Angel Investors, Venture Capitalists, Institutional Investment ........................................................... 34

V. Securities Laws ........................................................................................................................................... 35 A. Publicly-Traded Companies................................................................................................................................ 35

B. Privately Held Companies ................................................................................................................................... 36

VI. Vesting of Stock .......................................................................................................................................... 37

VII. Business Plans and Prospectuses ........................................................................................................ 38

VIII. Exit Strategies ............................................................................................................................................. 38


CHAPTER 3 – WORKING WITH EMPLOYEES AND INDEPENDENT CONTRACTORS ...................... 40

I. Introduction ................................................................................................................................................ 40

II. Distinguishing Between Independent Contractors and Employees ........................................ 40 A. Overview ..................................................................................................................................................................... 40

B. IRS Classification of Employees vs. Independent Contractors ............................................................. 43

1. Behavioral Control ............................................................................................................................................ 43

2. Financial Control ................................................................................................................................................ 44

3. Relationship of the Parties ............................................................................................................................. 45

III. Working with Independent Contractors ........................................................................................... 46

IV. Independent Contractor Service Agreements ................................................................................. 47

V. Employees .................................................................................................................................................... 49 A. State laws that might apply to small businesses ........................................................................................ 49

1. New York State Human Rights Law............................................................................................................ 50

2. New York State Labor Law ............................................................................................................................. 50

a. New York’s Unemployment Insurance ................................................................................................. 50

b. New York’s Workers’ Compensation Program.................................................................................. 51

c. New York State Minimum Wage ............................................................................................................. 51

d. New York’s Safety and Health .................................................................................................................. 51

e. NYS WARN Act ................................................................................................................................................ 52

f. Negligent Hiring, Retention and Supervision .................................................................................... 54

g. Break Time ....................................................................................................................................................... 55

B. Federal Laws That Might Apply To Small Businesses .............................................................................. 56

1. Fair Labor Standards Act ................................................................................................................................ 56

2. Occupational Safety and Health Act ........................................................................................................... 57

3. Equal Employment Opportunity Commission/Title VII .................................................................... 58

4. Employee Retirement Income Security Act ............................................................................................ 59

5. Family and Medical Leave Act ...................................................................................................................... 60

C. FirstStep Employment Law Advisor ............................................................................................................... 61

D. Other Management Considerations ................................................................................................................. 62

1. Hiring Policies ..................................................................................................................................................... 62

2. Offer Letters ......................................................................................................................................................... 63

3. Employee Handbook ........................................................................................................................................ 64

4. Compensation...................................................................................................................................................... 65

5. Payroll System and Required Registrations ........................................................................................... 67

6. Employer Insurance.......................................................................................................................................... 67

7. Required Forms .................................................................................................................................................. 68

8. Required Notices ................................................................................................................................................ 68

VI. Hiring Foreign Citizens ............................................................................................................................ 69


CHAPTER 4 – UNDERSTANDING INTELLECTUAL PROPERTY .............................................................. 72

I. Introduction ................................................................................................................................................ 72

II. Patents ........................................................................................................................................................... 73 A. What may be patented? ........................................................................................................................................ 74

B. Patent Prosecution ................................................................................................................................................. 76

1. Patent Search ....................................................................................................................................................... 76

2. Provisional and Nonprovisional Patent Applications ......................................................................... 77

3. Preparing and Filing a Nonprovisional Patent Application .............................................................. 78

4. Cost of Patenting ................................................................................................................................................ 79

5. International Filing ........................................................................................................................................... 80

C. The Business Decision of Whether to Patent ............................................................................................... 81

D. Preparing to work with a Patent Attorney or Agent ................................................................................ 81

E. Patent Tips for Entrepreneurs ........................................................................................................................... 83

III. Trademarks ................................................................................................................................................. 85 A. Overview of Trademark Law .............................................................................................................................. 87

B. Selecting a Trademark .......................................................................................................................................... 87

1. Selection Overview ............................................................................................................................................ 87

2. Trademark Searches ......................................................................................................................................... 89

C. Obtaining a Federal Trademark Registration.............................................................................................. 90

1. Benefits of Federal Trademark Registration .......................................................................................... 90

2. Overview of the Trademark Registration Process ............................................................................... 90

3. Examination of a Trademark Application ................................................................................................ 92

4. Refusals to Register a Trademark ............................................................................................................... 92

5. Notice of Publication and Opposition Period ......................................................................................... 93

6. Registration .......................................................................................................................................................... 94

7. Using Trademark Symbols ............................................................................................................................. 94

8. Maintaining a Trademark Registration .................................................................................................... 94

9. Trademark Infringement ................................................................................................................................ 95

IV. Copyright ...................................................................................................................................................... 95 A. Copyright Law .......................................................................................................................................................... 96

1. Copyright Term................................................................................................................................................... 96

2. Special Note on Computer Programs ......................................................................................................... 97

3. Collaborative Projects and Joint Authorship .......................................................................................... 97

4. Works Made for Hire ........................................................................................................................................ 97

5. Copyright Notices .............................................................................................................................................. 98

6. Copyright Registration .................................................................................................................................... 99

7. Fair Use .................................................................................................................................................................. 99

V. Trade Secrets ............................................................................................................................................ 100 A. Maintaining the Confidentiality of Trade Secrets ................................................................................... 101

B. Trade Secret Misappropriation ...................................................................................................................... 101

C. Loss of Trade Secret Protection ..................................................................................................................... 102

D. Trade Secret Protection vs. Patent Protection ......................................................................................... 103

CHAPTER 5 – MANAGING AGREEMENTS ................................................................................................... 104

I. Introduction .............................................................................................................................................. 104

II. Non-Disclosure Agreements ................................................................................................................ 104 A. Components of an NDA ...................................................................................................................................... 106

1. Definition of Confidential Information .................................................................................................. 106

2. Use Rights........................................................................................................................................................... 107

3. Compelled Disclosure ................................................................................................................................... 107

4. Duration of Confidentiality Obligation ................................................................................................... 108

5. Warranties/Limitations of Liability ........................................................................................................ 108

III. Licensing Agreements/Product Licenses ....................................................................................... 109 A. Components of a License Agreement........................................................................................................... 109

1. Definition of licensed technology ............................................................................................................. 110

2. License Grant .................................................................................................................................................... 110

3. Use Restrictions ............................................................................................................................................... 111

4. Payment Terms ................................................................................................................................................ 111

5. Term of License ............................................................................................................................................... 111

6. Termination Generally .................................................................................................................................. 112

7. Termination Due to Breach ........................................................................................................................ 112

B. Representations, Warranties and Indemnification ................................................................................ 113

IV. Services Agreements .............................................................................................................................. 115 A. Components of a Services Agreement ......................................................................................................... 116

1. Ownership of IP ............................................................................................................................................... 116

2. Client Cooperation .......................................................................................................................................... 117

3. Fees/Payment .................................................................................................................................................. 117

4. Termination ...................................................................................................................................................... 118

V. Joint Development Agreements ......................................................................................................... 118 A. Ownership ............................................................................................................................................................... 118

B. Termination ............................................................................................................................................................ 119

C. Additional Components of a JDA .................................................................................................................... 120

VI. General Contract Provisions ................................................................................................................ 121 A. Importance of General Provisions ................................................................................................................ 121

B. Components ........................................................................................................................................................... 121

VII. Alternative Dispute Resolution .......................................................................................................... 123 A. Negotiation ............................................................................................................................................................. 123

B. Mediation ................................................................................................................................................................. 124

C. Arbitration .............................................................................................................................................................. 124

Chapter 5 Resources ........................................................................................................................................ 124

CHAPTER 6 – WORKING WITH UNIVERSITIES ....................................................................................... 125

I. Introduction .............................................................................................................................................. 125

II. Incubators and Technology Parks ..................................................................................................... 125 A. University-based Incubator Programs ........................................................................................................ 126

B. International Opportunities ............................................................................................................................ 127

C. Technology Parks ................................................................................................................................................. 128

III. Licensing Opportunities ........................................................................................................................ 129 A. University Licensing in the Wake of Bayh-Dole Act .............................................................................. 130

B. University-Created Intellectual Property ................................................................................................... 131

C. Faculty Start-ups and Spin-offs ...................................................................................................................... 132

D. Conflicts of Interest ............................................................................................................................................. 132

IV. Sponsored Research ............................................................................................................................... 132 A. Role of Sponsored Research ............................................................................................................................ 132

B. Ownership of Research Results ...................................................................................................................... 134

C. Publication Rights ................................................................................................................................................ 134


CHAPTER 7 – WORKING WITH GOVERNMENT ....................................................................................... 136

I. Introduction .............................................................................................................................................. 136

II. Navigating New York State Procurement........................................................................................ 136 A. OGS Centralized Contracts ............................................................................................................................... 137

1. Centralized Contracts for Commodities ................................................................................................ 137

2. Centralized Contracts for Services and Technology ......................................................................... 138

B. Competitive Procurement Bids ...................................................................................................................... 138

1. Invitation for Bid ............................................................................................................................................. 139

2. Request for Proposal ..................................................................................................................................... 139

3. Bidder Notification ......................................................................................................................................... 139

C. Discretionary Buying Thresholds .................................................................................................................. 140

D. Procurement Stewardship Act........................................................................................................................ 140

III. Additional Resources and Opportunities in New York State ................................................... 141 A. Small Businesses .................................................................................................................................................. 141

1. Who is Eligible?................................................................................................................................................ 141

2. Direct Sales Opportunities .......................................................................................................................... 142

3. Non-State Agency Opportunities .............................................................................................................. 142

4. New York State Contract Reporter .......................................................................................................... 142

B. Minority- or Women-Owned Businesses (MWBE) ................................................................................ 142

1. Who is Eligible?................................................................................................................................................ 143

2. Certification ....................................................................................................................................................... 143

C. Preferred Sources ................................................................................................................................................ 144

1. Who is Eligible?................................................................................................................................................ 144

2. When Must an Agency Use a Preferred Source? ................................................................................ 144

3. Priority ................................................................................................................................................................ 145

IV. New York State Grants ........................................................................................................................... 145 A. Potential Grants .................................................................................................................................................... 145

1. Department of Health.................................................................................................................................... 146

2. Office of Health Information Technology Transformation ............................................................ 146

3. NYSTEM .............................................................................................................................................................. 146

4. Department of Environmental Conservation ...................................................................................... 146

5. Department of Labor ..................................................................................................................................... 146

6. NYSERDA ............................................................................................................................................................ 147

7. NYSTAR ............................................................................................................................................................... 147

V. Navigating Federal Procurement ....................................................................................................... 147 A. Government Agencies ........................................................................................................................................ 147

1. Small Business Administration ................................................................................................................. 148

2. Office of Small and Disadvantaged Business Utilization................................................................. 148

3. General Services Administration .............................................................................................................. 148

B. Contracting Methods .......................................................................................................................................... 149

1. Central Contractor Registry ........................................................................................................................ 149

a. Registration .................................................................................................................................................. 149

b. Additional Business Opportunities ..................................................................................................... 150

2. Consolidated Purchasing Programs ........................................................................................................ 151

3. GSA Schedule .................................................................................................................................................... 151

a. Definition ....................................................................................................................................................... 151

b. Benefits of Using the GSA Schedule..................................................................................................... 152

c. GSA Solicitations ......................................................................................................................................... 152

d. Contractor Team Arrangements .......................................................................................................... 152

4. Simplified Procedures ................................................................................................................................... 153

5. Sealed Bidding .................................................................................................................................................. 153

6. RFPs AND Negotiated Contracts ............................................................................................................... 154

7. Subcontracting ................................................................................................................................................. 154

VI. Additional Resources and Opportunities in Federal Contracting .......................................... 155 A. Small Businesses .................................................................................................................................................. 155

1. Who is Eligible?................................................................................................................................................ 155

B. Minority-Owned/Women-Owned Businesses (M/WBE) .................................................................... 157

1. Who is Eligible?................................................................................................................................................ 157

C. DISADVANTAGED BUSINESSES ..................................................................................................................... 158

1. Who is Eligible?................................................................................................................................................ 158

2. 8(a) Designation .............................................................................................................................................. 158

D. Hubzone Businesses ........................................................................................................................................... 159

1. Who is Eligible?................................................................................................................................................ 159

E. Disabled Veteran Businesses .......................................................................................................................... 159

1. Who is Eligible?................................................................................................................................................ 159

VII. Federal Grants .......................................................................................................................................... 160


APPENDIX: EARLY STAGE BUSINESS SUPPORT FOR THE CLEANTECH SECTOR ........................ 164

SECTION 1: PURPOSE AND OVERVIEW OF APPENDIX ........................................................................ 164

I. Introduction .............................................................................................................................................. 164

II. Alternative Energy Projects in New York State ............................................................................ 166 A. Biomass Energy Projects ................................................................................................................................... 166

B. PV/Solar Energy Projects ................................................................................................................................. 166

C. Wind Turbine Projects ....................................................................................................................................... 167

SECTION 2: PERMITTING AND LAND USE ................................................................................................ 168

I. Introduction .............................................................................................................................................. 168

II. Municipal Land Use Requirements ................................................................................................... 169 A. Overview .................................................................................................................................................................. 169

B. Local Laws and Regulations ............................................................................................................................ 169

C. Zoning and Permitting ....................................................................................................................................... 170

D. Zoning Board of Appeals ................................................................................................................................... 173

E. Building Codes ....................................................................................................................................................... 174

1. Overview ............................................................................................................................................................ 174

2. New York State Uniform Fire Prevention and Building Code ...................................................... 175

3. Variance to Building Codes ......................................................................................................................... 177

F. Energy Code ........................................................................................................................................................... 177

1. Overview ............................................................................................................................................................ 177

2. Variance to Energy Code .............................................................................................................................. 178

III. New York State Requirements ............................................................................................................ 179 A. Overview .................................................................................................................................................................. 179

B. State Environmental Quality Review Act (SEQRA) ................................................................................ 179

1. Classifying the Action .................................................................................................................................... 180

2. Complete the Correct Environmental Assessment Form ............................................................... 181

3. Coordinate Review ......................................................................................................................................... 182

4. Determine Significance ................................................................................................................................. 182

5. Preparation of the Draft Environmental Impact Statement (EIS) .............................................. 182

6. Determine the Adequacy of the Draft EIS for Public Review ........................................................ 183

7. Publish Notice that an EIS is Accepted for Public Review ............................................................. 184

8. Public Comment .............................................................................................................................................. 184

9. Decide Whether to Hold a Public Hearing ............................................................................................ 184

10. Preparation of the Final EIS ........................................................................................................................ 184

11. SEQRA Findings ............................................................................................................................................... 184

C. Enforcement, Non-Compliance and Assistance for SEQRA ................................................................ 185

D. Related State Laws, Regulations and Agencies ........................................................................................ 186

1. NYS Department of Environmental Conservation (DEC) ............................................................... 186

i. Overview ........................................................................................................................................................ 186

ii. Freshwater Wetlands Permit ................................................................................................................ 186

iii. Use and Protection of Waters Permit ................................................................................................. 186

iv. Federal Clean Water Act Certificate .................................................................................................... 187

v. General Permit for Stormwater Discharges from Construction Activity ............................ 187

vi. General Stormwater Pollution Prevention Plan Components ................................................. 188

2. NYS Public Service Commission/Department of Public Service ................................................. 188

3. NYS Office of Parks, Recreation & Historic Preservation ............................................................... 189

4. NYS Department of Agriculture and Markets ..................................................................................... 190

IV. Federal Agencies and Related Regulatory Standards................................................................. 190 A. Overview .................................................................................................................................................................. 190

B. Environmental Protection Agency ................................................................................................................ 191

C. Department of Energy ........................................................................................................................................ 192

D. Federal Energy Regulation Commission .................................................................................................... 192

E. US Department of the Interior- Bureau of Land Management .......................................................... 193

F. US Fish & Wildlife Service ................................................................................................................................ 193

G. Army Corps of Engineers .................................................................................................................................. 194

H. Federal Aviation Administration ................................................................................................................... 194

SECTION 3: REGULATORY COMPLIANCE AND INTERCONNECTION ............................................... 195

I. Introduction .............................................................................................................................................. 195

II. Electric Power Grid ................................................................................................................................. 198 A. Overview .................................................................................................................................................................. 198

B. Radial distribution systems (RDS) ................................................................................................................ 200

C. Network Grid Distribution Systems ............................................................................................................. 200

D. Preventative and/or General Safety Requirements............................................................................... 201

III. NYS Standardized Interconnection Requirements (SIR) .......................................................... 202 A. SIR Design Requirements ................................................................................................................................. 203

1. Common Design Requirements ................................................................................................................ 203

2. Synchronous Generators ............................................................................................................................. 203

3. Induction Generators .................................................................................................................................... 203

4. Inverters ............................................................................................................................................................. 203

5. Minimum Protective Function Requirements .................................................................................... 204

6. Metering.............................................................................................................................................................. 205

a. Net Metering ................................................................................................................................................. 205

b. Cost ................................................................................................................................................................... 206

B. SIR Operating Requirements ........................................................................................................................... 206

1. General Requirements .................................................................................................................................. 206

2. Dedicated Transformer ................................................................................................................................ 207

3. Manual Disconnect Switch .......................................................................................................................... 207

4. Power Quality ................................................................................................................................................... 209

5. Power Factor..................................................................................................................................................... 209

6. Islanding ............................................................................................................................................................. 209

C. Application Process ............................................................................................................................................. 209

1. For Systems Generating Up To 25 kW of Electric Power - 6 Steps ............................................. 209

2. For Systems Generating Up To 2 MW Of Electric Power - 11 Steps ........................................... 211

IV. Additional Regulatory Requirements .............................................................................................. 216 A. Interconnection Inventory ............................................................................................................................... 216

B. NYISO Interconnection Procedures for Large Scale/Commercial Development ...................... 217

V. Equipment Testing and Certification ............................................................................................... 218 A. Equipment Standards ......................................................................................................................................... 218

B. Certification ............................................................................................................................................................ 220

C. Verification Testing ............................................................................................................................................. 221

REFERENCE GUIDE ........................................................................................................................................... 223

RESOURCE LIST ................................................................................................................................................. 233

Albany Law School (06/2010) 1

ACKNOWLEDGMENTS The completion of this handbook has been achieved through the hard work, dedication and support of a number of individuals and organizations. In addition to the staff at the law school that have been primarily responsible for the drafting and final editing of the handbook, Albany Law School would also like to thank the following for generously providing their time and assistance as subject matter experts.

Jeffrey R. Armstrong, Esq. (1954-2009) John Bagyi, Esq., Bond, Schoeneck & King, PLLC Susan Beaudoin, Esq., New York State CIO/Office for Technology William Dailey, Esq., Law Office of William Dailey Susan Farley, Esq., Heslin Rothenberg Farley & Mesiti P.C. Kellie Fredericks, Heslin Rothenberg Farley & Mesiti P.C. Alana Fuierer, Esq., Heslin Rothenberg Farley & Mesiti P.C. Jean Gerbini, Esq., Whiteman Osterman & Hanna Matthew Hoff, Esq., On2 Technologies Inc. Richard Honen, Esq., Phillips Lytle LLP Todd Mathes, Esq., Whiteman Osterman & Hanna Felix Neals, Manpower Professional Mark Poskanzer, Troy Web Consulting Chuck Rancourt, Rancourt Partnering 4 Innovation Clifford Rohde, Esq., Cooper Erving & Savage LLP Martin Ricciardi, Esq., Whiteman Osterman & Hanna Marc Schechter, Esq., IBM

Albany Law School would like to thank the following students, past and present, for their research and editing assistance.

Matt Berardino, ‘11 Yaron Deskalo, ‘07 Meg Doody, ‘11 John Durishan, ‘11 Peter Flora, ‘11 Nathaniel Gray, ‘08 Laura Hallar, ‘11 Danielle Podlucky, MS ‘09 Ken Podolny, ‘09

M. Ali Naquvi, ‘10 Richard Scheunemann, ‘09 HaoHao Song, ‘09 Jason Sosa, ‘10 Tanya Weller, MS ‘09 Thomas Wilder, ‘08 Andrew Wilson, ‘10 Andrew Zacher, ‘10

Although we have made our best effort to include all contributors in this acknowledgment, we apologize if we have inadvertently omitted anyone who contributed to the development of the handbook. Please contact us so that we may correct the error.


INTRODUCTION This handbook has been developed as a guide to assist entrepreneurs and start-up companies in navigating through the maze of legal issues that can arise during early stage business formation. While the main priority for an entrepreneur may be focusing on activities such as developing technological capability, writing a business plan, securing financing, and identifying customers, it is inevitable that legal issues will need to be addressed if a business is launched and intends to grow. As an example, a start-up may encounter many of the following types of issues:

Selecting a legal structure for business formation that is most appropriate and will minimize unnecessary liability and undesirable tax consequences;

Protecting the start-up’s own intellectual property while limiting the risk of unintentionally infringing on intellectual property held by a competitor;

Determining what kind of insurance is necessary or advisable for the business; Taking the right steps when hiring employees or retaining the services of

independent contractors to ensure compliance with federal and state laws; Understanding the terms and conditions of licensing and/or service agreements; Navigating through the state or federal procurement process; Leveraging resources provided by local universities while adhering to their policies

and contractual obligations that could impact IP ownership and business formation. Particularly during start-up, when resources are scarce and there are many competing priorities for a business’ limited time and capital, it is important to take steps that will minimize legal risk while maximizing the opportunity to increase operational credibility and encourage investment. The Legal Handbook for Early Stage Business is designed to help with that, by providing guidance that will assist entrepreneurs in spotting legal issues early-on, knowing where to find resources, and becoming better consumers of legal services. The information in this book has been organized into chapters that cover many of the traditional legal topics that are relevant to new businesses, particularly technology-based businesses. Chapter 1: Forming Your Business discusses issues that arise in the formation, transfer of ownership and dissolution of a business organization under New York State law. The chapter covers sole proprietorships, general partnerships, limited partnerships, corporations, and limited liability corporations. Chapter 2: Financing Your Business introduces the basics of financing a start-up through sources such as venture capital, angel investors, equity financing, and debt financing, and will identify some considerations that may impact financing decisions and exit strategies.


Chapter 3: Working with Employees and Independent Contractors addresses some of the issues that can arise as a small business expands its workforce by hiring employees or retaining the services of independent contractors. The chapter explains the legal distinction between the two categories, and provides an overview of state and federal laws. Chapter 4: Understanding Intellectual Property covers the basics of patent, copyright, trademark, and trade secret protection, as they relate to the small business enterprise. For many start-up companies, intellectual property (“IP”) represents a valuable asset and can serve as a foundation for financing and growth. It is important for a start-up to take the necessary steps to ensure protection of its own IP, and equally important to avoid infringing on the IP rights of others. Chapter 5: Managing Agreements reviews some of the legal agreements that a start-up business is likely to encounter, including an explanation of terminology and contractual provisions that commonly appear in these agreements, as well as a discussion of the obligations that are created and issues that should be considered when executing such documents. Chapter 6: Working with Universities focuses on the opportunities for entrepreneurs and small businesses to take advantage of business assistance services provided by university-sponsored incubators and technology parks, as well as opportunities for sponsored research and IP licensing arrangements. Chapter 7: Working with Government outlines some of the programs specifically designed for small businesses offered by New York State and the federal government. In addition, the chapter offers guidance on navigating state and federal procurement processes and finding available resources. Appendix: Early Stage Business Support for the Cleantech Sector provides industry-specific information and resources to assist start-ups in the alternative and clean energy technology sector. The Appendix addresses legal issues specifically related to development of large and small scale alternative energy projects in New York State, including the legal aspects of land use and zoning, building and energy codes, and equipment testing and certification related to regulatory compliance and interconnection. References and website links have been incorporated throughout each chapter to provide additional sources information. A Reference Guide, which provides a checklist of suggested forms, and a Resources section located at the end of the handbook provide important tips and a list of local resources in the NYS Tech Valley region. Please note that this handbook has been designed as an educational resource to support technology entrepreneurship in New York State. State and local law outside of New York may be different. None of the information in this handbook should be construed as legal advice or as a substitute for working with an attorney who will provide legal counsel based on the relevant facts and circumstances surrounding your business.

CHAPTER 1 - FORMING YOUR BUSINESS I. Introduction As an entrepreneur, it is important that you select the appropriate type of business structure in order to maximize your company’s potential and growth. In addition to protecting your intellectual property and obtaining financing – both of which will be discussed in further detail later in the handbook – business formation is one of the most significant steps for start-up companies in the early stages. Accordingly, in this chapter we will review some of the legal issues in early-stage business formation, including:

Choosing a legal structure for your business Selecting and reserving a name Permits and licenses Insurance

II. Legal Structure Overview In New York State, there are five legally-recognized forms of business organizations:

Sole Proprietorship General Partnership Limited Partnership Corporation Limited Liability Company

A number of considerations factor into the decision of which business organization is best suited for your company. Some of these factors include i) size of the business; ii) capital requirements; iii) personal risk tolerance; iv) taxes; v) control; vi) plans for growth; and vii) exit strategy. Each legal form has advantages and disadvantages. For example, while it is simple to set up and operate a sole proprietorship, the owner will be subject to unlimited personal liability for the business. On the other hand, the administration of a corporation can be cumbersome and corporate earnings can be subject to “double taxation.” However, the owners of a corporation have limited liability and shares are easily transferable. In this chapter, we will provide an overview of the various forms of business organization and highlight the potential advantages and disadvantages for your business. A. Sole Proprietorships Overview

Chapter 1 – Forming Your Business


The simplest form that a business can take is the sole proprietorship. According to MicroBizNY, a statewide association devoted to microenterprise development, it is also the most common business form in New York. In fact, more than 70% of businesses in New York are sole proprietorships. In a sole proprietorship, ownership is limited to a single individual. There is no legal distinction between the person and the business entity. A sole proprietor can hire employees or contractors to work in the business. However, the owner, alone, is legally responsible for all aspects of the business. An early-stage company may be started as a sole proprietorship and later be converted to a more complex business entity to allow additional owners to join the business or to manage and mitigate the personal risk of the owner. 1. Formation, Transfer of Ownership and Dissolution

Little formal documentation is required to form a sole proprietorship in the owner’s name. As a general rule, commencement of operations of a business is sufficient to start the process. However, to operate under any other name, the owner needs to file a Certificate of Assumed Name with the clerk of the county/counties where the business is conducted. This is referred to as a “DBA” (Doing Business As) filing. For more information, please refer to section 3 of this Chapter (“Choosing a Name”). The form required is called a Certificate of Conducting Business as a Sole Proprietor, which needs to be completed and notarized in each county where the business is located. In order to transfer ownership of a sole proprietorship, a sale of assets of the business, including intangible assets such as goodwill, is all that is required. There is no other action required to officially close a sole proprietorship, except to cease operations. However, a Certificate of Discontinuance of the DBA should be filed. A sole proprietorship is also terminated if the owner dies, retires, or is legally incapacitated. 2. Liability

The potential downside to the simplicity of a sole proprietorship is the financial and legal exposure to the owner. Because the owner and the business are legally indistinguishable, a sole proprietor has unlimited personal liability for the business: the debts of the business are the debts of the owner. Conversely, the debts of the owner are the debts of the business. Moreover, because an owner’s personal assets may be available to satisfy the debts of the sole proprietorship, a legal judgment against a sole proprietorship could be financially devastating to the sole proprietor. For an entrepreneur examining the possibility of operating as a sole proprietorship, due diligence should be conducted to determine if insurance is available to alleviate the risks associated with running a sole proprietorship.



3. Growth Potential

Legally, a sole proprietorship’s growth potential is unlimited. As a practical matter, the growth of a sole proprietorship is dependent on the resources available to the sole proprietor and the ability of the business to generate sales to support growth. Discussion of financing options for start-up companies is discussed in Chapter 2 – Financing Your Business. Most capital, however, comes from the proprietor’s own resources or loans that can be secured from banks or third parties. It can be difficult for a sole proprietorship to raise additional capital, and the sole proprietor remains personally liable for all the debts of the sole proprietorship, regardless of how large and sophisticated the business becomes. 4. Taxation

A sole proprietorship is a “Pass-Through” entity: taxation of the business is accomplished by passing the business’ income and expenses through the owner’s personal tax return. For both federal and state taxes, Schedule C (Profit or Loss from Business – Sole Proprietorship) is used in the preparation of the returns. Sole proprietors must file self-employment taxes, using IRS form SE (Self-Employment Tax). If employees are hired, the entity will need to establish a Taxpayer Identification Number that is different than the sole proprietor’s own social security number. This information is provided in more detail in Chapter 3 – Working with Employees and Independent Contractors. In addition, your business may be subject to other taxes from the city or county in which the sole proprietor resides, such as New York City’s city income tax and unincorporated business tax (UBT). An entrepreneur should consult at tax attorney, as needed, to determine what federal, state and local taxes may apply to the sole proprietorship. B. General Partnerships Overview A general partnership is a business with more than one owner, where each owner contributes resources, time, and effort to accomplish common business objectives. It allows for individuals to combine their talents and come together as partners to build a business. Business ventures with more than one principal may choose to begin as a general partnership because it is relatively simple and easy to administer. As the business grows, it is possible to evolve into a different form of business. However, due to the nature of joint and several liability in a general partnership model (described further below), general partnerships are not commonly chosen as the business model for technology ventures.



1. Formation, Transfer of Ownership and Dissolution

As with the sole proprietorship, a general partnership does not require formal formation documents. Generally, only a Certificate of Conducting Business as Partners needs to be filed with the county clerk in the county in which the business is located. However, as a practical matter, the terms governing a partnership should be contained in a written document, signed by the parties, and not simply left as a verbal agreement between individuals. A discussion of partnership agreements is presented below. If a trade name is adopted for the business, it is necessary to file a DBA in each county in which the general partnership will do business with an Assumed Name Certificate. For more information, please refer to section 3 of this Chapter (“Choosing a Name”). Barring any agreement to the contrary, partnerships are dissolved when partners die or otherwise withdraw from the partnership. Partnerships can also terminate in a period stipulated in any partnership agreement. In the event that an agreement can be reached, a partner may also be able to buy or sell his or her interest in the partnership. 2. Liability

Each partner is an agent of the general partnership, meaning that each partner has the ability to act on behalf of the general partnership and has unlimited personal liability with respect to the partnership. This form of liability is known as “joint and several,” meaning that each partner is both jointly liable with other partners, and individually liable. This creates a situation where each partner may have to contribute personal assets to pay damages that result from decisions or actions that other partners make with respect to the general partnership. For this reason, general partnerships are not usually selected as a business entity for technology enterprises. A corporation or limited liability company, discussed below, may act as a general partner, thus limiting the liability of the owners of the corporate partner - provided that the proper formalities are maintained. 3. Management and Ownership

Because there are multiple principals or partners involved, management of a general partnership is more complicated than a sole proprietorship. Each partner may have different interests and demands, bring different skills to the business, and have different expectations and roles. General partners have the ability to define the obligations and benefits for each partner in a written partnership agreement. Such an agreement can prevent conflicts before they arise, and provide a way to address them when they do. Absent a partnership agreement, and regardless of the contributions that each partner makes, each partner has: 1) an equal share in the management of the general partnership;



2) the ability to bind the general partnership contractually; and 3) the right to share in the profits and losses in equal proportion to the other partners. As mentioned, however, terms and conditions governing the partnership may be set forth in an agreement, thereby limiting conflicts and formalizing management. Partnership agreements can be fairly general, addressing only the most basic provisions of the partnership and laying out the basic processes for running the business. Alternatively, they can be detailed documents, addressing very specific issues, focusing on the partners’ needs, types and amounts of contributions, distribution of profits and debts, compensation, and elements of termination. A typical partnership agreement will usually address percentages of ownership, distributions, buyout provisions, compensation, dispute resolution, the ability to continue as a going concern following the withdrawal of a partner, and many other aspects of administering the business. In some instances, compensation issues such as salaries, vacation time and company benefits are also addressed. Regardless of whether a partnership agreement exists, partners stand in a fiduciary relationship with respect to all matters affecting the partnership. This fiduciary duty means that partners must act with loyalty, good faith, fairness and honesty in their dealings with the partnership. Partners are essentially expected to put the interests of the partnership ahead of their own personal interests, and avoid real or perceived conflicts of interest. Specifically, partners must not appropriate for their private benefit an opportunity that is within the scope of a partnership business without the consent of the other partners. This obligation, known as the Opportunity Doctrine, often referenced in the corporate context, is important because it prohibits partners from diverting business opportunities for their own gain, particularly in the instance where a partner in general partnerships is also a partner in other businesses. A partner who violates his/her fiduciary duties may have to account for – repay – the money gained. 4. Growth Potential

Because there are additional individuals involved, the growth potential for a general partnership is greater than for a sole proprietorship. However, some of the same limitations exist for partnerships; it can be difficult to buy or sell an interest in the partnership, financing may require that owners personally guarantee a loan, and it may be difficult to minimize personal liability for the owners of the business.

5. Taxation

As with a sole proprietorship, a general partnership is not taxed as a separate entity unless it elects to be so taxed. It is a Pass-Through entity, with profits and losses are ascribed in



proportion to the ownership percentage of each partner, avoiding double taxation. However, a general partnership must obtain a taxpayer identification number, and file an informational tax return every year for federal taxes using form 1065 and New York State form IT-204. In addition, a general partnership may be subject to other taxes from the city or county in which the partnership does business, such as New York City’s city income tax and unincorporated business tax. C. Limited Partnerships

Overview The rules of a general partnership, for the most part, also apply to limited partnerships. The fundamental difference is that in a limited partnership, there are two classes of partners: general partners, who have unlimited liability for the actions of the partnership; and limited partners, whose liability is limited to their capital contribution to the partnership. A second significant difference is that the limited partners do not have fiduciary duties to the partnership, though general partners do. As with general partnerships, a corporation may act as a general partner, or limited partner, for the partnership. 1. Formation, Transfer of Ownership and Dissolution

A limited partnership must file a Certificate of Limited Partnership with the New York Department of State, Division of Corporations. In addition, limited partnerships must also publish notification of their formation in each county in which they will do business. The publication must appear weekly in two newspapers in the county for six successive weeks detailing the limited partnership within 120 days of filing. A limited partnership is formed to allow an investor to put capitol into a partnership in exchange for a share of the profits without opening themselves up to liabilities that a general partner may be subjected to in a partnership. A limited partner is only liable for the actual investment, and their personal assets are protected. Because of this, a limited partner cannot write checks or sign contracts and usually is not involved in the management of the business or its operations. If a limited partner is more involved in the company’s activities, they may be seen as a general partner in the eyes of the law. A limited partnership, if it chooses, may also become a Limited Liability Partnership (LLP). In an LLP, there is no general partner and the limited partners have a right to manage the business directly and are not responsible for the misconduct of the other partners. Not all states allow LLPs, and in New York, they are only permitted for lawyers, accountants or architects.



2. Transfer

A limited partner’s interest is a security that can be transferred to a third party, but general and limited partners have the right of first refusal. So, in order for a limited partner to sell his/her interest in the business, he/she must first offer the same price to the general partner(s) and other limited partners before he/she is allowed to sell to the third party. 3. Dissolution

While a general partner can dissolve the partnership in the same manner as a regular partnership, unless the partnership agreement specifies otherwise, a limited partner cannot effect the dissolution of the limited partnership. Because limited partners do not take part in the management of the company, a leave can occur without dissolving the partnership. When a limited partner leaves, he/she usually must sign a dissolution form. The form may or may not require the signatures of the general partners, depending on the state and what the original agreement says. The limited partner can also end his partnership by selling his interest to a third party after right of first refusal to the general partner(s). D. Corporations Overview Unlike sole proprietorships and partnerships, corporations are legal entities that are entirely separate from their owners. Corporations were specifically created by state laws in order to facilitate business. Corporations can be divided into a finite number of membership interests known as shares, and the owners are known as shareholders. There is no minimum number of shareholders required to be a corporation, nor are there any minimum earnings requirements. With few exceptions, corporations have many of the same rights and obligations as individuals. They can own property, borrow money, enforce their rights in a court of law, be named as a defendant in a lawsuit, and are owed the protection of the law. However, unlike individuals, a corporation is an entity with the prospect of perpetual existence. It will continue despite the departure of shareholders. It will also continue even if the founders leave, or if a major shareholder divests his/her interest. Simply put, a corporation is the most formal form of business entity that can be founded. If operated properly, it provides a complete liability shield for the founders, and a structure that is ideal for raising capital for growth. However, formation and operation of a corporation typically requires legal and financial expertise from independent experts. If



you are considering incorporating your business, then it is advisable to work with these experts to ensure that the benefits of a corporation are fully realized.

1. Formation, Transfer of Interest and Dissolution

Formation of a corporation is a formal process in every state, including New York. A corporation is established by filing a Certificate of Incorporation (“COI”), or similar documents, with the Department of State along with a filing fee. A standard New York State form of COI is included in the Appendix and can be found at on the NYS Department of State website at http://www.dos.state.ny.us/corp. In addition to making the formal filings with the Department of State, a corporation is also required to obtain an Employer ID (“EIN”) from the Internal Revenue Service. Information on EINs is available on the IRS website at http://www.irs.gov/businesses. It is recommended that you work with an attorney during the corporate formation process. Once the documents have been filed, a corporation is considered formed. An organizational meeting must then be held to create the company by-laws. By-laws will be discussed later in this section. Shares in a corporation can be sold by the corporation or otherwise transferred by agreement, including the purchase and sale of shares in public markets. Shares can also be transferred by the shareholders to other individuals or institutions. The transfer of shares may be subject to state and federal securities laws and regulations, which can make such a transfer of shares complex and more difficult than selling other assets. Dissolution of a corporation is accomplished by filing a formal notice of dissolution with New York State, which should occur in the event of the sale or merger of a corporation if the corporation is not the surviving entity. 2. Liability

A corporation shields owners from the debts and liabilities of the corporation, so long as the business is run in a fashion that is consistent with the proper operation of a business. While some creditors may insist that shareholders personally pledge their own assets to ensure that they are repaid anything that is due to them if the business fails, this is a contractual arrangement between the individual shareholders rather than a characteristic of corporations. It is simply not possible for a creditor to reach through the corporation to pursue the assets of individual shareholders. Even if there is only one shareholder, their personal assets are not available to creditors of the corporation. This is known as the “corporate veil”. There are, however, two limits to the protection that the corporate entity provides: First, if a shareholder begins to treat a corporation as their own alter ego by ignoring the corporate formalities, commingling assets, failing to treat fellow shareholders fairly, or otherwise



abusing the corporate structure for their own benefit, then they lose the protection of the corporation, and their assets can be pursued. Assets of a passive shareholder, a shareholder not involved in illegal or inappropriate acts, are not attachable based on the actions of a fellow shareholder. Only the assets of a shareholder who does not abide by the corporate requirements are subject to seizure, thus “piercing the corporate veil.” Second, the existence of a corporation does not protect the managers and officers from criminal actions they commit in the course of running the corporation, even if such actions are taken for the benefit of the corporation. For example, an officer of a corporation who commits fraud can be criminally prosecuted as an individual even if the officer’s fraudulent actions were on behalf of the corporation.

3. Management and Ownership

Small corporations are largely managed by their shareholders, who may also be members of the board of directors (individuals elected by the shareholders to manage the strategy of a corporation) and officers (employees who are responsible for the day-to-day affairs of the corporation, and implement the directives of the board). Regardless of the composition of the board, certain decisions, such as the decision to sell the company, must be approved by the shareholders regardless of the disposition of the board. Corporations can have complex ownership structures. Where there is institutional outside investment, it is common to have different classes of stock with different rights and privileges within the same corporation. Typically, this occurs because investors may insist on the creation of a class of stock which carries with it the right to approve certain decisions such as the payment of dividends or the composition of a board of directors. In other cases, the stock may carry certain preferential rights, such as the right to receive dividends or the right to purchase additional shares in future financing, or the right not to have the value of the investment diluted. The power and rights of a corporation’s owners, managers and board members are defined and memorialized in the by-laws of the corporation. The corporation is required to operate using these by-laws, and cannot implement them selectively. By-laws are a private document and must be adopted by the shareholders of a corporation, and generally do not need to be filed with a public agency (unless the stock of the corporation becomes publicly traded or the corporation is a professional corporation). By-laws are important because they put into writing the rules for a business, provide comprehensive guidelines to keep things running smoothly and set forth the exact duties for the company’s Board of Directors. In addition, by-laws determine how those in charge are nominated and elected and can help settle any disputes. If a corporation’s by-laws do not cover the basic requirements, state statutes will act as the corporation’s by-laws by default. At a minimum, by-laws must cover:



the identity of the company and its mission; the types of members and who has the authority to sign checks and contracts; the membership selection process; the composition of the Board-of-Directors and how they are replaced, how long their

term of service can be and the required qualifications for being on the board; details of committees, how they are formed, what their duties are, who the

committees report to and how they are appointed; the duties powers and responsibilities of the officers and how they are selected; when meetings are held, who is required to attend, how many members need to be

on hand to vote on an issue and how the meeting are held; how conflicts are resolved; how the by-laws can be amended so that they stay current and accurately represent

the organization; what types of shares and stock can be issued, when meetings with stockholders take

place, and when the fiscal year of the corporation starts and ends; how the company keeps track of its records and the rules for preparation and

inspection of the records In New York State, there are rigid requirements surrounding the management of a corporation, and important requirements to protect minority shareholders. Conceptually, the formalities of founding and running a corporation are simple. In reality, maintaining corporate formalities is critical, and creates significant expense and stress. Working with a competent attorney may be, as a practical matter, a requirement for any company with an objective of sustained growth. For example, Section 602 of the New York Business Corporation Law requires that corporations must also have a minimum of one meeting held annually for the election of directors. Section 624 of the New York Business Corporation Law requires corporations to keep correct and complete books and records of account, the minutes of its proceedings, a record containing the names and addresses of all shareholders, the number and class of shares held by those shareholders, and when they became the owners of record. Records of account show how much money is owed by and to the business (debtors and creditors); and how much money has actually been received or paid out by the business. Pursuant to the Business Corporation Law, these documents do not need to be filed with a government agency. However, according to Section 404, a corporation is required to file a Biennial Statement every two years with the Department of State. The form is automatically mailed to the corporation by the Secretary of State and sets forth the name and respective business address of the company’s CEO, the street address of the company’s principle place of business, and the address that the Secretary of State will use to mail a copy of any service of process papers. This same form needs to be filled out when a company first file for



incorporation, and the Department of State is responsible for mailing the form to the company once it has been filed. If a corporation needs to update its Certificate of Incorporation, Section 805-A of the Business Corporation Law sets out how to make changes. A corporation must amend its Certificate if its name or principal place of business address changes, in order for the Secretary of State to facilitate the service of process, as well as when the corporation wants to change its county location, or make, revoke or change the designation of a registered agent. 4. Growth Potential

Most of the largest businesses in the world are corporations (or their foreign equivalents). The combination of the ability to sell shares to generate capital, to limit liability and to provide for a perpetual existence allows for significant growth and the ability to take on projects which have higher costs and longer payback periods. 5. Taxation

Corporations are subject to double taxation. The corporation is subject to income tax on its revenue, and the owners are subject to income tax on any distribution made by the corporation to them, which includes shareholders’ dividend-based income. Further, the corporation is subject to franchise taxes and may be subject to local taxes as well. As a result of this tax treatment, the owners of a corporation pay a higher tax rate with respect to the income earned and distributed by the corporation than they would for other sources of income. For small businesses, this high burden can be an unpleasant outcome. However, there are ways to legally manage the tax burden on a corporation and its shareholders. Some corporations may to elect for a different type of taxation by electing to be taxed as an “S” corporation, which prevents double taxation and makes that corporation a pass-through entity where profits and losses are taxed only at the individual level. The “S” designation is simply an election for tax treatment and does not change the requirements of the corporation. S-corporations must: 1) have less than 100 shareholders; 2) have only one class of stock; 3) distribute income in proportion to ownership; and 4) have only US citizens as stockholders. There are restrictions on tax deductions that the owners of an S-corporation can take, and regulations related to debt that an S-corporation can incur as well. However, for small corporations that meet all of the requirements for S-corporations, it provides tax relief without sacrificing the corporate liability shield. Despite more flexible tax treatment, the requirements of corporate formalities are not changed by the “S” election and the corporation is still subject to certain forms of franchise tax.



Tax rules and regulations change regularly, and are highly dependent on the facts surrounding the situation. Understanding the taxation issues of a corporation is critical, but takes time and expertise. Professional assistance in determining whether S-corporation status should be elected in this area is recommended. E. Limited Liability Company Overview A limited liability company (“LLC”) is a hybrid between a corporation and a partnership. LLCs are allowed by statute in every state, including New York. They were created in response to a demand for personal liability protection without the burden of double taxation that is associated with corporations. The result is a business form that is legally distinct from its owners, but which can be taxed as a “pass through entity” similar to a partnership. Owners are generally referred to as “members”, and an ownership interest is referred to as a “unit” or “membership interest.” These are analogous to a corporation’s “shareholders” and “shares.” It is a popular form of business entity, and is frequently a good option for a wide variety of businesses, including high technology ventures that do not anticipate a public offering of its shares. 1. Formation, Transfer of Interest and Dissolution

Formation of an LLC is similar to corporate formation in that it requires the organizers to file Articles of Organization with the Department of State, along with a filing fee. However, the organizer must also publish a notice that the LLC has been formed in two newspapers designated by the county clerk in which the LLC resides, and then file an Affidavit of Publication with the Department of State. Membership interests are personal property, and can be bought, sold, pledged or used in any way that the owner sees fit, provided that it is within the purview of the law. As with corporations, these interests are subject to New York and federal securities laws. Dissolution is handled by a simple filing, with a payment of a statutory fee. As with corporations, legally dismantling an LLC is an important step in its use, as it prevents the possibility of a dispute arising around the actions of the LLC. 2. Liability

The members of an LLC are not personally responsible for the debts of the LLC. The liability shield is identical to that in a corporation.



3. Management and Ownership

LLCs are required to have an operating agreement, which addresses many of the same concerns as partnership agreements and by-laws; management, ownership, classes of membership interests and the rights and obligations thereof, acknowledgement of contributions, and the like. LLCs must follow certain regulations that are analogous to corporations, with respect to keeping the members informed, and ensuring that the LLC’s members are not involved in self-dealing. However, the requirements for an LLC are usually less onerous to administer. The LLC has essentially been established to provide the combination of a liability shield with a pass-through tax treatment. This combination could, in large part, be established by setting up a limited partnership where the limited partner is a corporation. However, such formation can create an additional layer of complexity and expense for the owners. LLC’s do not have the same limitations on ownership as an S-corporation, and do not prevent the creation of multiple classes of ownership interest, making significant institutional investment or investment from a foreign entity possible. This flexibility is important when working to finance a company.

4. Growth Potential

With the exception of raising capital through a public offering, an LLC can be used to raise capital to fund growth. The ability to have a perpetual existence, along with tax treatment that is usually advantageous to the owners, makes it an attractive alternative for companies that do not wish to become publicly traded companies. LLCs are frequently used by very small entities who seek protection, as well as large, sophisticated businesses.

5. Taxation

LLCs are pass-through entities for tax purposes, though they can elect corporate treatment if they desire. Profits and losses are, as a default, attributed to the owners in proportion to the percentage of ownership. III. Selecting and Reserving a Name A. Overview In New York State, sole proprietorships, general partnerships, and limited liability partnerships must file a Certificate of Assumed Name directly with the county clerk in the county in which the entity conducts or transacts business.



Corporations, limited partnerships, and limited liability companies are required by statute to conduct activities under their true legal name. The “true legal name” is the name that is indicated on the filing receipt issued by the Department of State when the entity was formed or authorized to do business in NYS. If a corporation, limited partnership, or limited liability company desires to conduct activities under a trade name other than its true legal name, a Certificate of Assumed Name must be filed with the New York State Department of State. For most entities, a suffix that indicates what type of entity has been formed is required. For example, a limited partnership requires either “LP” or “Limited Partnership” at the end of the name. A corporation includes one of the following suffixes at the end of your business name: “Incorporated”, “Inc.”, “Corporation”, “Corp.”, “Limited” or “Ltd.”. If you plan on being a limited liability company, then you must add “Limited Liability Company” or “LLC” as a suffix. The New York Department of State, Division of Corporation, provides a web-based tool, the Corporation and Business Entity Database, which can be used to search the state’s records to determine whether or not a particular name has been taken or reserved. The database is available on the Department of State website. This tool checks all assumed names (DBAs) as well as corporations, LLCs, and other entities that have made a formal filing with New York State. B. Distinguishing Trade Names and Trademarks The legal name, or trade name, for a business entity reflects only the name under which the business legally operates. That name will not necessarily acquire trademark rights unless it is a mark that is also used for products or services marketed by the company. If a business wishes to use a name as both a trade name and a trademark for goods or services, a clearance search should be conducted to verify that the name would be available as a trademark. Federal trademark searches may be conducted on the US Patent and Trademark Office (USPTO) website, www.uspto.gov. Common law searches can be conducted with a standard search engine. More detailed information on trademarks is provided in Chapter 4. IV. Licenses and Permits In New York State, a permit may be needed to run a business, depending on the type and location of the business. Permits may encompass licenses, registration, or similar form of authorization. Specifically, government licensing from the city, county or State may have to be obtained in order to operate your business. Licenses such as a local business license or a business permit may be required. For local permits, it is important to contact the city

http://www.uspto.gov/



and county clerk where the business plans to locate. Examples of local considerations are zoning, parking, and occupational licenses. For state licensing, much of the information is provided online at New York State’s Online Permit Assistance and Licensing (OPAL) site. An excellent source of information on specific permit requirements is the NYS Governor’s Office of Regulatory Reform Business Permit Assistance Unit. The website for the Governor’s Office is www.gorr.state.ny.us or you may email the Office at [email protected]. V. Insurance Every business needs protection against risks that might threaten its profitability or its livelihood or existence. Because a small business may be more vulnerable to the consequences of incidents that might be alleviated by the presence of insurance, it is important to determine early on in the business formation process what insurance is required to run a business in New York State. It is also important to determine what insurance, although not required, should be carefully considered and discussed with an commercial insurance broker, agent or lawyer specializing in insurance law. There are several types of business insurance available, only some of which are required in New York State. This section will briefly discuss all types of insurance and then focus more specifically on the insurance required in New York, namely unemployment insurance, workers’ compensation insurance and disability insurance. A. Types of Business Insurance Insurance coverage is available for many fortuitous (unplanned) risks a business might face, from premises or products liability to liability arising from employment-related acts or omissions. As a general matter, insurance does not cover the intended result of an intentional wrong. Punitive damages are uninsurable in New York as a matter of public policy. Cost and amount of coverage of policies vary among insurers. A new company should discuss its business risks and the types of insurance available with an insurance agent, broker or lawyer to determine its specific insurance needs, set appropriate monetary limits and ensure that the various policies it purchases dovetail so as to avoid unintended gaps in coverage. The specific types of insurance include:

General Liability Insurance Products Liability Insurance Professional Liability Insurance Commercial Property Insurance Directors and Officers Liability Insurance

http://www.gorr.state.ny.us/

mailto:[email protected]



Home-based Business Insurance Key Man Insurance

1. General Liability Insurance

General liability insurance protects a business in case of bodily injury to a person, or damage to a person’s property, that occurs on or off the premises for which the business might be held legally responsible. For example, if a client fell and suffered an injury in the company’s office, the company’s liability insurance might cover his/her health care costs and expenses. Likewise, if an employee causes damage while on-site in a customer’s home or office, the cost of replacing the damaged item could be covered. This coverage can be invaluable if lawsuits arise from such mishaps. These policies are designed to indemnify the business for amounts the business may become liable to pay as the result of bodily injury or property damage caused by any type of act or omission, so long as the specific injury or damage itself was not intended. Such policies do not cover liability for purely economic loss, unless such loss arises from one of a narrowly defined list of “personal injury” and “advertising injury” offenses (such as business defamation). General liability policies typically exclude coverage for most forms of pollution, and general liability coverage for intellectual property liability and e-commerce liability is often quite limited. Businesses with significant exposure to such risks may wish to ask their insurance brokers to price coverage riders. In addition to its indemnity undertaking, a general liability insurer also agrees to defend its insured against any suit alleging a potentially covered bodily injury, property damage, personal injury or advertising injury, even if the allegations of the suit are groundless and even if the insurer ultimately has no obligation to pay indemnity under the policy. Defense coverage includes the assignment of defense counsel and the payment of settlement bonds or judgments required during an appeal procedure. General liability policies typically are written on an “occurrence” basis, meaning that they respond to claims made against the policyholder at any time, so long as the claimed injury or damage took place during the policy’s effective period. Note, however, that some policies are written on a “claims-made” basis, instead, and respond only to claims made against the policyholder during the policy’s effective period (or during an extended reporting period defined in the policy) and arising out of injury or damage that also occurred during the policy’s effective period (or retroactive period, if the policy provides for one). A claims-made policy thus has a shorter shelf-life than an occurrence policy has, and may not cover some progressive or latent injuries or damage. Care should be taken when replacing an expired or cancelled claims-made policy in order to avoid gaps in coverage.



2. Products Liability Insurance

Companies that manufacture, distribute, and/or retail a product may be liable for its safety. Products liability insurance typically provides defense and indemnity in connection with claims for bodily injury or property damage arising from defective products. The amount of insurance a company should purchase often depends on the products it sells or manufactures. For example, a clothing store may have less risk than a large appliance store. Products liability insurance coverage is typically furnished as part of a commercial general liability policy. Note that there may be exclusions for unfinished products that have not left the factory floor and for recall expenses. Note also that under some policies, a single “per occurrence” coverage limit may apply to multiple claims for multiple injuries arising out of a single product line. 3. Professional Liability Insurance

Professional liability insurance, also known as errors and omissions (“E&O”) or malpractice insurance, provides coverage for defense and indemnity in connection with suits arising from negligence in the provision of certain of the insured’s services, defined in the policy. This insurance may be mandatory in some professions such as medicine, law, accounting, and financial services. It is now more common among management and computer consulting firms as well as engineering and design professionals. A professional liability policy is in a sense the converse of a general liability policy. While a general liability policy covers a narrow set of injuries (excluding most economic loss) arising out of a broad set of wrongs, professional liability insurance coverage covers a broad set of injuries (often including economic loss) arising out of a narrow set of wrongs (services in the performance of the insured’s specifically defined “profession” or “services”). Care should be taken to define the insured’s services accurately in the policy. Professional liability policies are usually written on a “claims-made” basis (described in the General Liability section, above).

4. Commercial Property Insurance

Property insurance covers the business for its own loss arising from accidental damage to or destruction of buildings and personal property it owns or controls. Depending upon the terms of the policy, the business’s covered loss may include the actual cash value or replacement cost of the covered real or personal property, as well as lost income and extra expense incurred for a defined period as a result of the accidental damage or destruction of that property. “Property” may include equipment, company papers and money. A rider may be purchased to cover certain narrowly defined types of loss to electronic media as



well. A rider may be purchased to cover losses due to employee crime or dishonesty, as well. Property insurance policies differ significantly as to their definition of a covered cause of such loss. Property insurance policies come in two basic forms: (1) all-risk policies covering a wide-range of incidents and perils except those noted in the policy; (2) peril-specific policies that cover losses from only those perils specifically listed in the policy. Note, however, that damage caused by certain types of natural disasters—such as floods, earthquakes or tornadoes—is often excluded. A new business should check to see if its policy also covers computers and communication systems because they may be considered “special property” requiring extra or specialized equipment coverage. If a company occupies a rental space, it is important to review the landlord’s insurance policy and check its range of protection, with the understanding that supplemental insurance may be necessary. 5. Directors and Officers Liability Insurance

A company’s directors and officers can be sued personally over an increasingly wide range of business matters—and the personal liability of a director can be unlimited. Legally, the directors of a company and the company itself are separate entities, so both may be defendants in any legal action, separately or jointly. To protect the personal assets of individuals and, most importantly, to cover the costs of their defense, directors and officers insurance—D&O, as it’s called—is often used. Directors and officers insurance can often be extended to protect the company, too, rather than leaving it to fund its own defense. Employment -related practices liability insurance may be added to a D&O policy to cover the business’ liability for wrongful termination of employment and its liability for employment discrimination or sexual harassment, where such discrimination or harassment was not intended by the business itself. The scope of D&O coverage is quite different from the scope of general liability coverage. D&O policies typically cover liability for economic loss to third parties arising from acts and omissions by directors and officers in their capacities as such. Bodily injury, property damage, personal injury and advertising injury typically are excluded from D&O coverage. While general liability policies typically require the insurer to defend groundless suits that contain potentially-covered allegations, D&O policies usually only reimburse defense costs—and then only if the insured’s liability, as finally determined in the suit, actually falls within the policy’s terms. Further, D&O policies are offered only on a claims-made basis, and so their shelf lives are very short. 6. Home-Based Business Insurance

Contrary to popular belief, homeowners' insurance policies generally do not cover home-based business losses. Depending on risks to the business, an owner may add riders to



his/her homeowner's policy to cover normal business risks such as property damage. However, homeowners’ policies tend to limit coverage to losses and liability arising in connection with the use of the home itself, and it may be necessary to purchase additional policies to cover other risks, such as general and professional liability.

7. Key Man Insurance

Because a business, particularly a start-up business, often relies on one or more key employees to make it successful, the company may elect to insure itself against the death or extended incapacity of that key employee. B. Legally Required Insurance There are generally three types of insurance that are legally required in New York State. These are:

Unemployment Insurance Worker’s Compensation Insurance Disability Insurance

Note: If a business in New York State has a mortgage or owns a vehicle(s), it may also be required to maintain insurance. Unemployment insurance helps ease the transition for employees who are in between jobs. Workers’ compensation insurance covers lost wages and medical expenses for employees who suffer work-related injuries or illnesses. Disability insurance provides partial wage replacement to eligible employees for non-work related sickness or injury. 1. Unemployment Insurance

Unemployment insurance (“UI”) is temporary income for eligible workers who become unemployed through no fault of their own and who are ready, willing, and able to work. In New York State, a business is required to have unemployment insurance for its employees. The money for unemployment insurance benefits in this state comes from taxes paid by employers. No deductions are made from a worker's paycheck for unemployment insurance. The Department of Labor determines whether an unemployed worker qualifies for unemployment. To determine if an individual is qualified for unemployment, it must first be determined if that worker was “employed” by the company. Employment is defined as any service performed under a contract of hire, either written or oral. An employee is a worker who performs services for compensation under the supervision, direction and



control of an employer. Unless specifically excluded by law, all employment performed for a liable employer is covered whether it is on a part-time, full-time, temporary, seasonal, or on a casual basis. Employees may perform services on or off the employer's premises or in their own homes. The services of certain employees, however, are not covered under the Unemployment Insurance Law. Their earnings are not taxable, and they are not entitled to unemployment benefits based on such services. Information on these exceptions is available at http://www.labor.state.ny.us/ui/dande/covered1.shtm. a. To Register for Unemployment Insurance To register for unemployment insurance, a company must complete an employer registration form with New York State’s Department of Labor, http://www.labor.state.ny.us/ui/dande/register1.shtm, in order to determine if the company is liable under New York State Unemployment Insurance Law. If the company is determined liable, the Department will send quarterly combined withholding, wage reporting and unemployment insurance returns for reporting wages paid to employees. Before a company can register, it must obtain a Federal Employer Identification Number (“FEIN”) from the Internal Revenue Service. If a FEIN is needed, the company can download an application, Form SS4, or apply on-line at the I.R.S. website. It may also obtain an application by calling the I.R.S. at 1-800-829-3676. For general information about the Internal Revenue Service, visit www.irs.gov. b. Employees that Qualify for UI Benefits In order to qualify for benefits, an employee must have:

worked and been paid wages for employment in at least two calendar quarters in the employee's base period, and

been paid at least $1600 in wages in one of the calendar quarters in the employee's base period, and

the total wages paid to the employee in his/her base period must be one and one-half times their high quarter wages.

The amount of high quarter earnings used to determine if the employee meets this requirement will not be greater than $8,910. Earnings in the other base period quarters must total at least one-half of $8,910, or $4,455. c. Federal Unemployment Tax Act

http://www.labor.state.ny.us/ui/dande/covered1.shtm

http://www.labor.state.ny.us/ui/dande/register1.shtm

http://www.irs.gov/



A company can take advantage of the Federal Unemployment Tax Act (“FUTA”) credit by paying its New York State Unemployment Insurance Tax in a timely manner. It can obtain a 5.4% credit against the annual Federal Unemployment Tax, using Form 940 or 940EZ, if it pays the state tax for the year by the 31st of the January following the close of the taxable year. This is the date the FUTA return is due. If the business pays the state tax after January 31, the credit will be limited to 90% of the amount the business could have received if it had paid on time. If the business does not pay the state tax, it cannot take credit against its federal tax, and it will be required to pay the full FUTA tax of 6.2%. Employers often assume that once they pay the FUTA tax at 6.2%, they don't have to pay the State tax. However, this is not true, as the state tax must also be paid. If a company’s payments are late, the IRS will require it to obtain a Proof of Credit, Form 940C, from the state to show that the state taxes have been paid. At that time, the company may apply to the IRS for the FUTA credit. 2. Workers’ Compensation Insurance

New York State workers’ compensation insurance covers employees for work-related accidents, injuries or illness. If a business has one or more employees working in New York State, it is required to obtain NYS workers’ compensation insurance coverage. The workers’ compensation insurance policy must be effective no later than the first day the company has employees. Businesses can obtain Workers' Compensation Insurance coverage through a commercial carrier, on a self-insured basis, or through the state Workers' Compensation Insurance program. a. Complying with the Law The Workers' Compensation Law requires that employers obtain and continuously keep in effect workers' compensation coverage for all their employees. Businesses meet this requirement of the law by:

Obtaining and maintaining a workers' compensation insurance policy; Obtaining self-insurance or group self-insurance for workers' compensation; or Being legally exempt from the requirement to provide workers' compensation

coverage. There are only very limited situations where for-profit businesses are exempt from providing workers' compensation coverage, including:

The business is owned by one individual with no employees, no leased employees, no borrowed employees, no part-time employees, no unpaid volunteers (including family members) and no subcontractors and is not a corporation;



The business is a partnership under the laws of New York State, and there are no employees, no leased employees, no borrowed employees, no part-time employees, no unpaid volunteers (including family members) and no subcontractors; OR

The business is a one-or-two person owned corporation, with those individuals owning all of the stock and holding all offices of the corporation and there are no employees, no leased employees, no borrowed employees, no part-time employees, no unpaid volunteers (including family members) and no subcontractors. Specifically, if two people own the corporation, each person must own at least one share of stock and between them own all the shares of stock in the corporation. In addition, they both must be corporate officers and between the two of them hold all the offices of the corporation.

b. Posting of Notice of Workers' Compensation Coverage According to Section 51 of the Workers' Compensation Law, employers must post a Form Notice of Compliance - Workers' Compensation Law (C-105). Most employers obtain this form from their workers' compensation insurance carrier. Employers that are approved by the Board as self-insurers may contact the Self-Insurance Office for copies of this form, while employers that are participating in Group Self-Insurance may contact their Group Administrator. The Workers' Compensation Board prescribes Form C-105 and requires that the form include the name, address and phone number of the insurer and the policy number of the employer. It must be posted in a conspicuous place in the employer's place of business. Violations of this requirement can result in a fine of up to $250 per violation.

3. Disability Insurance

Disability (or loss of income) insurance plans cover employees in the event of long-term sickness, paying a percentage of their salaries during the period of incapacity. The benefit is paid tax-free after a deferred period selected by the policyholder and is paid until retirement, recovery, or death. This type of insurance is available to sole practitioners, too, and can be especially important to them. If an individual is self-employed, he/she should confirm coverage if illness or incapacity prevents him/her from doing the work normally done, since many policies only cover the worker if he/she cannot work at all. NYS statutory disability benefits insurance coverage is totally different from and is not included in NYS workers' compensation insurance coverage. Statutory NYS disability benefits insurance covers employees for off-the-job accident, injury or illness. If a business has one or more employees for 30 days in a calendar year, it is required to obtain NYS disability benefits insurance coverage. Such insurance must be effective no later than four weeks after the 30th day the company has employees. However, if the company has



purchased a business whose employees had already been covered by the Disability Benefits Law, the effective date of coverage must be no later than the day it purchased the business. a. Purchasing Workers’ Compensation and Disability Benefits Insurance Both workers’ compensation and disability benefits coverage can be obtained through private insurance carriers authorized to write such coverage in NYS, the New York State Insurance Fund, or Board-approved self-insurance or group self-insurance. (Special note regarding disability benefits insurance: A company should check with its broker, agent or carrier to ensure that its disability benefits policy complies with Disability Benefits Law requirements since many typical long-term and short-term policies are not statutory.) b. Workers Compensation and Disability Benefits Coverage Situations Workers’ compensation and disability benefits are required in most cases in New York State. However, in some situations, coverage is not required. 1. Corporate Officers - For Profit Corporations Workers’ compensation and disability benefits coverage is required for corporate officers with the following exceptions:

A single corporate officer, who owns all shares of the corporation and holds all the offices; OR

Two corporate officers, who between them own all shares and hold all the offices of the corporation. Each officer must own at least one share of stock.

Other employees of a corporation must be covered by a workers’ compensation and disability benefits policy. If there are three or more corporate officers and/or three or more stockholders, all corporate officers in a for-profit corporation must be covered by a workers’ compensation and disability benefits policy. There are no exceptions. 2. Not-for-Profits Unsalaried executive officer(s) of a not-for-profit unincorporated association or not-for-profit corporation may be excluded from workers’ compensation coverage if the corporation or association elects to exclude that person from the coverage. Moreover, the following officers are automatically excluded from disability benefits coverage:

Religious, Educational or Charitable not-for-profits according to IRS guidelines 501(c)(3):



Teachers (and other employees engaged in a non-manual capacity) do not have to be covered by a workers’ compensation policy. All other employees must be covered by a workers’ compensation policy.

Employees in a teaching or religious capacity do not have to be covered by a disability benefits policy. All other employees must be covered by a disability benefits policy, if the nonprofit has employees for 30 or more days in a calendar year.

If the 501(c)(3) organization is not a religious, educational or charitable 501(c)(3) organization, all employees must be covered by both a workers’ compensation insurance policy and a disability benefits insurance policy. 3. Legal Partnerships Partners in a legal partnership do not need to be covered by a workers’ compensation or disability benefits policy. However, coverage is required for employees of the partnership. 4. Limited Liability Companies (LLC) and Limited Liability Partnerships (LLP) Members of an LLC and LLP are considered partners of a partnership and do not need to be covered by a workers’ compensation or disability benefits policy. However, coverage is required for employees of the LLC or LLP. 5. Part-time Employees Part-time employees must be covered by a workers’ compensation and disability benefits policy with one exception for disability benefits coverage. Any person in regular attendance during the day time as a student in an elementary or secondary school who works during all or any part of the school year or regular vacation periods is automatically excluded from disability benefits coverage. 6. Out of State Employers Employers located out of state who have employees working within New York State must obtain a New York State workers’ compensation insurance policy and must also obtain a New York State Statutory disability benefits insurance policy if the employer has employees working in NYS for 30 or more days in a calendar year. 7. Family Members Family members, who work for the business, including spouses, are considered employees (even if they do not receive a salary). Therefore, they must be covered by a workers’ compensation and disability benefits policy with the following exceptions:



Spouses of sole proprietors and legal partnerships may be excluded from disability benefits coverage (workers’ compensation coverage is still required). Notice of Election to Voluntarily Exclude Spouse from Coverage (Form DB-212.5) must be filed with the appropriate entity.

Minor children of the employer may be excluded from disability benefits coverage. However, workers’ compensation coverage is required.

Spouses and minor children of farmers are not required to be covered for workers compensation or disability benefits.

Corporate officers – one or two officers of a corporation who between them own all of the stock and hold all of the offices, and there are no other employees.

Legal Partnerships – those family members who are partners in a legal partnership (including LLCs and LLPs).

8. Independent contractors and subcontractors New York State’s Workers’ Compensation Board recommends that all general contractors carry a workers’ compensation insurance policy if they are hiring subcontractors. If an individual is truly independent, the individual works under his/her own operating permit, contract or authority. In many instances, individuals alleged to be subcontractors have been determined by the Board, acting in its adjudicatory capacity, to be employees when such individuals have been injured and have filed claims against the general contractor. A new business may want to consult an attorney to review its status. In addition, under Section 56 of the Workers’ Compensation Law, the general contractor is liable for payment of claims of all uninsured subcontractors. Therefore, without a policy, the general contractor would be personally liable for compensation and medical payments for the life of the claim. c. Failure to Obtain a Workers’ Compensation Insurance/Disability Insurance Failure to obtain a workers’ compensation policy when it is required constitutes a class E felony if a company has more than five employees. If a company has fewer than five employees, such failure shall constitute a misdemeanor. However, subsequent criminal violations may constitute a felony. If a work-related injury occurs while the company does not have workers’ compensation coverage, it may also be liable for the entire cost of the claim (compensation payments and medical costs), and penalties. Failure to obtain a disability benefits policy constitutes a misdemeanor. If a non-work-related disability occurs while the company does not have disability benefits coverage, it may also be liable for the cost of the claim and penalties.



C. Recommended Insurance Commercial general liability insurance, including products liability coverage, usually tops the list of recommended insurance for most small businesses. Its purpose is to insulate the business from defense costs and legal damages in the event of a lawsuit. A general liability policy with low limits may be bolstered by acquiring an umbrella policy, with coverage that is triggered either when the limits of the underlying general liability policy are exhausted or when the insured’s liability falls outside the general liability policy’s scope. Most of the other forms of recommended insurances relate to maintaining an uninterrupted flow of operations. Directors and officers liability insurance protects the company's decision-makers from lawsuits, while key man insurance protects the company from the loss of an integral employee. Business interruption insurance, on the other hand, insures against income loss that may occur as a result of fires or natural disasters, and may be available as a supplement to your property insurance policy. D. Optional Insurance While business owners are not legally required to provide the following types of insurance for their employees, these forms of insurance are commonly used to strengthen the company's fringe benefits package: Health insurance, dental insurance, life insurance, and vision insurance. The scope of coverage afforded by such policies is not the subject of this outline. You may wish to consult a human resources professional for further information on employee benefits packages. Chapter 1 Resources New York State Department of State http://www.dos.state.ny.us/ New York State Forms http://www.tax.state.ny.us/forms/ New York State Department of Labor General unemployment information http://www.labor.state.ny.us/ui/ui_index.shtm New York State Workers’ Compensation Board Coverage requirements http://www.wcb.state.ny.us/content/main/Employers/wclcompliance.jsp

http://www.gaebler.com/Insurance-Required-for-Small-Businesses.htm

http://www.gaebler.com/Insurance-Required-for-Small-Businesses.htm

http://www.dos.state.ny.us/

http://www.tax.state.ny.us/forms/

http://www.labor.state.ny.us/ui/ui_index.shtm

http://www.wcb.state.ny.us/content/main/Employers/wclcompliance.jsp



Disability insurance requirements http://www.wcb.state.ny.us/content/main/DisabilityBenefits/Employer/complyWithLaw.jsp

http://www.wcb.state.ny.us/content/main/DisabilityBenefits/Employer/complyWithLaw.jsp

Chapter 2 – Financing Your Business


CHAPTER 2 - FINANCING YOUR BUSINESS I. Introduction Most companies require capital in order to get off the ground, especially when the company’s product is still being developed. The amount of capital required to bring a business to market varies dramatically. Service businesses typically require less funding than product businesses. Developing the infrastructure for commercial scale manufacturing can take millions of dollars. A sustained, scientifically-based research and development effort is also an extremely expensive undertaking. Most technology companies do not generate sufficient cash to fully finance their own growth until they are at a relatively advanced stage. Often, these companies require multiple rounds of financing over time to reach their objectives. A business must carefully document the source of its investments in order to prevent disputes over ownership of the business and the rights of the investors. This is true whether funds are provided to the business as a loan or an investment, and is not dependent on the type of business that is formed. For new enterprises, financing generally falls into one of two categories:

Debt financing Equity financing

II. Debt Financing Debt financing is conceptually simple and very common for businesses of all sizes. It is a contractual relationship in which the lender has no ownership of the company. Rather, the lender provides the money, and over time, the borrower repays the lender. A lender and borrower agree on an amount, interest rate, and time period over which the loan will be repaid. The loans can be either secured or unsecured:

A secured loan is one that is made with specific assets pledged as collateral in the event that the loan is not repaid.

An unsecured loan is made without being tied to a specific asset. It is important to note that securing a loan generally decreases the fees that must be paid to the borrower. A. Personal Loans Founders of a business frequently are the lenders of first resort. This means that those individuals use their own assets to grow a business. It is not uncommon for businesses to



be started with savings, personal loans, credit cards, and/or home equity loans. Each of these funding methods is essentially a personal loan in which the proceeds are used by the entrepreneur to fund the business. An entrepreneur that borrows against his or her home is not taking out a business loan, rather he or she is taking a personal loan and using that capital to establish or build a business. Founders should ensure that these loans are properly documented and should be prepared to discuss such financial arrangements when new, outside money becomes available. B. Commercial Loans Beyond founder self-financing, there are many sources of debt financing for technology businesses. Many banks offer commercial loans for start-up companies. The Small Business Administration (www.sba.gov) of the federal government as well as various state agencies also offer loans to start-up as well as distressed businesses. These loans are made either directly to the start-up company by the government or through bank-lending programs. Information on government loans and assistance is provided in Chapter 7 of this handbook.

In addition, most banks offer a wide range of debt alternatives for businesses:

Traditional loans, in which a sum is borrowed and repaid over time with interest, are available in many configurations.

Lines of credit allow borrowers to access a specific amount of credit without having to complete the loan process each time they need to access the capital.

For an emerging business, the question of actually finding the loan is often more important than the terms of such loan when found. However, if a loan is available, the company must next decide whether that loan is the correct option. There are many factors that can influence the analysis of a loan:

Determination whether interest rates should be fixed or variable; Questions of whether additional fees should be due under certain circumstances; Whether a lender may require that the borrower take (or not take) certain actions

until the loan is repaid; Decisions regarding whether the borrower may elect to be repaid in equity.

Usually, the decision of which debt financing option to use is a financial, not legal, matter. III. Equity Financing In equity financing, the investor actually buys a piece of the company. Equity financing takes many different forms, including stock, options, warrants and other means by which

http://www.sba.gov/



ownership is acquired. By selling shares in a business, the owners are essentially expecting that the growth of the business that is enabled by the investment will more than offset the diminished ownership stake that results from the sale of the securities. The sale of equity in a business can be very complicated and may result in the founders losing control of the business, and/or the investors losing the sum of their investment. IV. Classes of Investors

Founders, Friends and Family Angel Investors, Venture Capitalist, and Institutional Investment

A. Founders, Friends and Family 1. Capital Investment

In many cases, early funding comes from friends and family. This funding is often an investment that shows support for the founders, rather than being motivated by an economic return from the business. Typically the amount invested is comparatively small to future rounds of investments. In many cases, the form of funding and its terms are not defined, nor are they memorialized since the investors may be more interested in the founders, rather than the investment. However, it is vital to carefully document these transactions. Proper documentation reduces the chance of future disputes and gives clarity to future investors. An uncertain ownership situation can make it very difficult to secure future rounds of funding. At the very least, the parties should determine if the funding is a loan or an investment in the business, and document the terms in writing. 2. IP as a Source of Investment

As discussed, founders of a business frequently use their own assets to grow a business. At the outset of a company’s existence, a founder may wish to contribute his/her intellectual property (“IP”) to the business rather than, or in addition to, contributing capital (see Chapter 4 for a more in depth discussion of intellectual property). Usually, founders will purchase stock for $0.01 or $0.001 per share with an aggregate price for the stock in the thousands of dollars. However, rather than investing such capital, an owner of IP may elect to receive company stock for the rights to that IP. While allowing a founder to assign IP in exchange for stock may reduce out of pocket investment for that founder, there can be challenges. These may include:

difficulty with accurately valuing the assets assigned, which could affect the company’s stock option pricing if the company’s auditors determine that the actual



value of the IP was significantly different than stated which, by correlation, could affect the fair market value of the common stock purchased;

difficulty with adequately defining the scope of what is being assigned or what the company needs or will need in this regard;

difficulty in ensuring the assignment is properly perfected; and potential tax ramifications (the contribution must be reviewed to make sure that the

transactions complies with § 351 of the Internal Revenue Code in order to be tax free).

If a founder elects to receive stock for his/her IP contribution, the founder will need to execute the documents necessary to effect the proper assignment so that title to the IP is clearly transferred to the company. In addition, the founder should generally include at least some cash consideration in order to ensure that the par value per share of the stock is paid in cash. B. Angel Investors, Venture Capitalists, Institutional Investment Angel investors (“Angels”) and Venture Capitalists (“VCs”) seek to maximize the return on their investment. Pursuant to this goal, these entities only support those businesses that they believe provide a good risk/return ratio. Angel investors are investors who invest their own money in startup companies. In many cases, these investors have started successful businesses, or have otherwise made businesses successful. Many Angels enjoy working in new areas of technology, and enjoy the process of mentoring promising businesses. They typically provide a range of funding, in amounts between $10,000 and $500,000, while bearing a high risk of loss. However, these values vary greatly depending on the individual investor. As such, Angels are paid a high rate of return on their investment. VCs manage money from a variety of sources, investing it in enterprises that offer potential for a high return. They have more capital available for investment than most Angels, and typically make larger investments than Angels – usually in amounts that exceed $1,000,0000. VCs and Angels usually offer more than just money. They can make connections, provide strategic and technical advice and otherwise facilitate the continued growth of the businesses in which they invest. In return, Angels and VCs usually retain certain rights to monitor and protect their investment. It is not uncommon for VCs or Angels to require that a new class of stock be created, with a series of special privileges. These privileges may include:

divided payments



preferred rights in the event of liquidation the right to approve certain decisions by the company (including the right to

approve management appointments, enter subsequent transactions, or spend more than a threshold amount on a transaction)

the right to demand that their securities be registered the ability to force the sale of a business in some circumstances

Having Angels and VCs work with a company is an endorsement of the company and its management, as well as a source of funding and support. In many cases, working with these investors also represents a significant loss of control for the founders. It is not easy to get the support of an Angel or a VC, but the rewards can be outstanding if the fit is a good one. Negotiating the proper arrangement with Angels and VCs can be a difficult task, and should be undertaken with great care. A “good” outcome varies with the situation, and may take many different forms. If a business is promising but requires even more funds to move to market, institutional investors may provide a source of funds. Institutional investors include banks, universities, other companies and financial houses. These transactions tend to be complicated because they may involve tens of millions of dollars, multiple investors, and negotiation of new rights for early stage investors. They can also include the purchase of the holdings of one or more investors or founders. The investment of Angels, VCs and institutional investors are usually facilitated by either a registration of securities, or are available under exemptions for sophisticated investors or “private placement” offerings (investments that are available to a limited number of investors who are very sophisticated). V. Securities Laws Whenever a company raises money, it must consider the application of a complex set of Federal and State laws and regulations known as “securities laws.” For legal purposes, corporate stock, LLC membership interests, options, warrants and even promissory notes (the documents which evidence a loan) are all known as “securities.” “Securities” in this context refers to any evidence of ownership or debt in an entity. This is not to be confused with the type of “security” that is given to a lender as collateral for a debt. In this context, a “security” is what is given to an investor in exchange for that investor’s money. A. Publicly-Traded Companies Federal securities laws are generally administered by the Securities and Exchange Commission (“SEC”). For more information on the SEC, go to www.sec.gov. In addition,

http://www.sec.gov/



every state has its own securities laws. State securities laws are also known as “Blue Sky Laws.” Federal and state securities laws address similar issues, but do so in different ways. A company must comply with both sets of securities laws. Failure to comply with securities laws subjects a company to penalties including fines and the possibility of imprisonment of the officers. The general rule is that securities cannot be sold until they are “registered” – that is, listed on one of several stock exchanges, making the stock publicly available to anyone who wishes to buy that stock. Companies that have completed and maintain the registration requirements are known as “public companies.” These include the household name companies you hear every day. The SEC and other oversight agencies require that these companies make all material information available to prospective investors. Registration generally calls for:

a description of the company’s properties and business; a description of the security to be offered for sale; information about the management of the company; financial statements certified by independent licensed accountants

Registration statements and prospectuses become public shortly after filing with the SEC. If filed by a U.S. domestic company, the statements are available on the EDGAR database accessible on the website at http://www.sec.gov/info/edgar.shtml. Registration statements are subject to examination by the SEC for compliance with disclosure requirements. B. Privately Held Companies Investments are also made in non-public companies, meaning those companies which do not have shares listed on any stock exchange. These investments are possible because there are many exemptions to the general rule that all securities be registered. The exemptions usually require either that the company to make certain information available or, essentially, require that the investor be rich enough to be able to lose their money, or both. Exemptions are primarily based on:

the amount of investment sought; the investor’s sophistication and ability to withstand a loss of their entire

investment; the number of investors; and the relationship between the investors and the business issuing the securities.

http://www.sec.gov/info/edgar.shtml



In addition, there may be restrictions on the securities that require the purchaser of securities to hold the securities for a minimum of one year before selling them. Securities laws are complex and the exemptions, while widely available, must be clearly understood. While a full discussion of securities laws is beyond the scope of this chapter, suffice it to say that companies raising money need to be aware of the existence of the laws and seek appropriate counsel. VI. Vesting of Stock

In a typical scenario, each member of a founding team brings a unique skill or asset to the business for which he or she receives a portion of the equity of the venture. As discussed above, one method for achieving this involves an exchange of company stock for ownership of IP. However, unless specifically agreed otherwise, each founder takes ownership of the stock that is issued to him or her at the time it is issued. Such arrangement can result in a scenario which might affect the growth and success of the venture. For example, if everyone who receives stock immediately gains ownership of such stock, free and clear with no specified future obligations or limitations, there can be a negative impact on the incentive structure. Specifically, the issuance of stock, free and clear, may not be appropriate or desirable where the continuing effort of the founder is expected and needed to grow the business. One method of handling the potential for a founder to leave and disrupt the relationship that other founders have with the start-up is the method of “vesting” the stock of the founders. Vesting can take many forms. For example, the founders might agree to a “calendar” vesting schedule (e.g., straight line vesting over X years) so that if a founder leaves the company after one year of employment or involvement then he or she would be entitled to keep only the 20% of his or her stock that would have vested at the end of Year 1. An alternative to calendar vesting is "milestone” vesting whereby stocks vest on the basis of the venture achieving identifiable milestones such as "development of prototype" or “first commercial sale.” One problem with this, however, is whether the milestones can be identified clearly, or at all, if the business plan or management team changes. Capping investors’ returns with a vesting structure may be initially unattractive to some investors. However, founders usually agree to such vesting structure for two main reasons:

If there is more than one founder, then each of the founders will want the company to be able to repurchase the unvested shares if one of the founders leaves (as discussed above); and



If the terms of such vesting are reasonable, there is some chance that the terms of the vesting will survive the venture financing.

With vesting, due to the important tax considerations that must be addressed early on to avoid adverse economic consequences, an experienced attorney should be consulted. Moreover, many of these decisions are tax-driven, and the tax analysis is often a function of the specific facts and circumstances. It is therefore recommended that the founders involve their accountant or tax advisor as early in the process as possible. VII. Business Plans and Prospectuses A business plan is a document that is used to articulate a plan for growing and forming a business. When soliciting investment, a business plan is usually necessary to provide information to the prospective investor. In this context, a business plan can also be referred to as a “Prospectus”. A prospectus must list all material information that is related to the business, including an assessment of the risks, financial statements and projected financial statements, information about competitors, and threats to the business. In order to comply with the securities laws, businesses typically list the risks of investing in the company, and paint a “worst case” scenario to make it clear that the investor could lose substantially all of their investment. When distributing information to prospective investors, an attorney should be engaged to ensure that the company complies with the appropriate securities laws. VIII. Exit Strategies At some point, founders and investors in successful businesses may wish to get out of a business to pursue other opportunities, or may simply wish to reap some of the benefits of what has been sown. The complexity of an exit strategy can vary depending on the value of the enterprise, and the contingencies that may be covered in the transaction. A venture can be sold to a third party for cash or for an interest in the surviving venture. This can be accomplished as either a sale of stock, or a sale of assets. The choice depends largely on the tax implications for the buyer and seller in the transaction. Similarly, it is possible to merge multiple companies for the benefit of all. Sales and mergers are simple conceptually, but valuation of the businesses is difficult, and coming to agreement on the terms and conditions can be a significant hurdle. Alternatively, an initial public offering, where the stock of the corporation is made available to the public can be arranged. The securities that are offered must be registered for this to occur, requiring a detailed prospectus, a demand for the shares of the company, and a great



deal of legal work. In many cases founders and early investors must agree not to sell their shares for a given period following the offering. This can be an extremely lucrative event for the shareholders, but usually results in the founders and early owners losing control of the business. Chapter 2 Resources Small Business Administration (SBA) www.sba.gov Securities and Exchange Commission (SEC) www.sec.gov NYS Office of Attorney General, Investor Protection Bureau (NYS Securities Law) http://www.oag.state.ny.us/bureaus/investor_protection/investors/investors.html

http://www.sba.gov/

http://www.sec.gov/

http://www.oag.state.ny.us/bureaus/investor_protection/investors/investors.html

Chapter 3 – Working with Employees and Independent Contractors


CHAPTER 3 – WORKING WITH EMPLOYEES AND INDEPENDENT CONTRACTORS

I. Introduction Many entrepreneurs launch their business ventures working alone or in conjunction with a small network of family, friends, and close associates in the field who are willing to volunteer time and talent to get the business started. This form of casual collaboration often occurs with a minimum of formalities in place to define the roles, responsibilities, and rights of those involved. As the business begins to grow, if there is sufficient funding to do so, it may become necessary to hire employees or engage the services of independent contractors who will perform at least some functions associated with running the business. At this juncture, it will be important to define and formalize the relationships of those working for the business and ensure compliance with the legal rules and requirements related to labor and employment. Even in the idea phase, before any business venture is formed, special issues can arise related to intellectual property ownership and confidentiality. Addressing IP rights and non-disclosure responsibilities as early as possible is highly recommended to avoid misunderstandings, unnecessary complications, and risk to the business. This chapter addresses the legal issues involved in hiring employees and engaging the services of independent contractors. Specifically, this chapter will focus on:

Distinguishing between independent contractors and employees Entering into independent contractor agreements Identifying key issues related to employment of workers, including an

overview of the federal and state laws and regulations that apply to labor and employment

Increasing awareness around special considerations such as hiring, compensation and employer insurance

A checklist is included at the end of the handbook, along with a list of additional resources at the end of the chapter, which can be consulted for further information. II. Distinguishing Between Independent Contractors and Employees A. Overview As an initial matter, it is important to understand that the classification of workers as employees or independent contractors cannot be arbitrarily made at the discretion of the business owner. The act of labeling an individual as an “independent contractor” or an



“employee” is not, on its own, determinative. Rather, there are specific rules set forth by a number of state and federal agencies. Because the Internal Revenue Service (“IRS”), the NYS Department of Labor (“NYSDOL”) and the NYS Workers’ Compensation Board (“WCB”) each have standards that govern the classification of workers, making a classification determination involves a fact-specific analysis. The accurate classification of workers is also crucial to insure compliance with other state and federal laws applicable to employers and to avoid liability for additional unemployment taxes and interest. These are discussed in later sections of this chapter. According to the NYSDOL, the question of whether the working relationship involves an employer-employee relationship will depend on the degree of supervision, direction and control that an employer has over the worker and the services provided by the worker. Moreover, the courts in New York have held that no single factor can define an employer-employee relationship. All factors must be examined to determine if the employer enjoys the degree of supervision, direction and control necessary to classify a worker as an employee. Indicators of control include the employer’s ability to determine when, where and how the work will be performed as well as the ability to directly supervise the completion of the work, evaluate the worker’s performance and terminate the worker for poor performance. In addition, an employer’s duty to provide facilities, equipment, tools and supplies necessary to complete the work is an indication of an employer-employee relationship. Finally, according to the DOL, an employer-employee relationship is generally found to exist if the worker is paid a salary, an hourly rate of pay or a draw against future commissions with no requirement for repayment of unearned commissions. An employment relationship is also likely to be found where the individual receives certain fringe benefits, including an allowance or reimbursement for business or travel expenses. Under the Workers’ Compensation Law in New York State, most workers providing services to a for-profit company are deemed an employee of that business for the purposes of workers’ compensation insurance. For workers’ compensation insurance purposes, employees generally include day laborers, leased employees, borrowed employees, part-time employees, and unpaid volunteers. According to the Workers’ Compensation Board (“WCB”), the factors that indicate an employer-employee relationship include the right to control and direct a person’s completion of a specific task in which the employer also controlled the time and manner in which the work was done. The WCB views a worker as an independent contractor if that individual completes work under his or her own operating permit, contract or authority. Finally, in addition to the factors discussed above, the WCB examines the character of the work being performed. For example, if the primary work performed by the individual is the same as work performed by the hiring business, then an employer-employee relationship usually exists. However, if the primary work of the person is different from



the primary work of the hiring business, this is often viewed as an indication that the individual is an independent contractor. To be identified as an independent contractor by the WCB, an individual must meet and maintain all of the following conditions:

Obtain a Federal Employer Identification Number from the Federal Internal Revenue Service (IRS) or have filed business or self-employment income tax returns with the IRS based on work or service performed the previous calendar year;

Maintain a separate business establishment; Perform work that is different than the primary work of the hiring business and

perform work for other businesses; Operate under a specific contract, and is responsible for satisfactory performance of

work and is subject to profit or loss in performing the specific work under such contract, and be in a position to succeed or fail if the business's expenses exceed income.

Obtain a liability insurance policy (and if appropriate, workers' compensation and disability benefits insurance policies) under its own legal business name and Federal Employer Identification Number;

Have recurring business liabilities and obligations; Have its own advertising such as commercials, listing in phone book and/or

business cards; Provide all equipment and materials necessary to fulfill the contract; Control the time and manner in which the work is to be done; and The individual works under his/her own operating permit, contract or authority.

Generally speaking, an independent contractor is a self-employed worker who has been retained by the company to perform services under a contractual relationship separate from the standard employment procedures of the company. Usually an independent contractor provides specialized expertise for specific projects or purposes on an “as needed” basis. They are able to offer their services to the general public and may be providing services to more than one client at the same time. Income for independent contractors is reported on IRS Form 1099 and taxes are paid by the individual, not deducted by the company paying for the work. Most importantly, an independent contractor has the right to control the manner in which his or her work is accomplished. By contrast, as discussed above, in an employment relationship the employer retains the ability to control and direct the work that is performed by employees. Employees are generally retained for extended, continuous periods with no specified end date, and are integrated into the overall business operations of the company. Such workers are generally eligible for the benefits offered to other employees. Income is reported on IRS Form W-2 and applicable taxes are withheld by the employer. It is important to note that if a



company incorrectly classifies workers as independent contractors rather than employees, officers and/or shareholders may be subject to IRS civil and criminal penalties for failure to collect and pay over withholding taxes. Engaging independent contractors can be beneficial to a company for a variety of reasons and can seem like an appealing option, especially to a small start-up company. Among the benefits, there are fewer administrative requirements, it provides a way to temporarily add extra resources or expertise without incurring long-term commitment and expense, the company does not necessarily have to provide a workspace or equipment, and payroll taxes do not need to be withheld. In addition, the use of properly characterized independent contractors limits exposure to Equal Employment Opportunity laws and employment-related obligations such as Fair Labor Standards Act and Family and Medical Leave Act requirements. However, despite these potential benefits, a company cannot simply designate employees as contractors. Primarily due to tax evasion concerns, and public policies relating to the provision of employee benefits, the government does not allow blanket designations of workers as independent contractors. Even if a worker and a company intend that the worker be an independent contractor, NYS agencies and/or the IRS could determine that an employer/employee relationship exists based on the facts and circumstances surrounding control over the work and the relationship between the parties. A discussion of the factors set forth by the IRS to determine if a worker is an employee or an independent contractor is included in the next section. B. IRS Classification of Employees vs. Independent Contractors The IRS uses three main factors as guidelines for determining whether an individual is an independent contractor or an employee. These considerations examine the level of control the hiring business has over the individual, and include:

behavioral control financial control relationship of the parties

1. Behavioral Control

The primary question to consider when determining behavioral control is to examine whether the company controls or has the right to control what the worker does and how the worker does his or her job. An individual is an employee when the business has the right to direct and control the way the work is done. For example, an employee is generally subject to the business’s instructions about when, where, and how to work. Also, the degree of instruction given by an employer to an individual might indicate whether an employee-employer relationship exists. Specifically, the more detailed the instructions, the



more control the business exercises over the worker. More detailed instructions indicate that the worker is an employee. Less detailed instructions reflect less control, indicating that the worker is more likely an independent contractor. It is important to note, however, that the amount of instruction needed varies among different jobs. Even if no instructions are given, sufficient behavioral control may exist if the employer has the right to control how the work results are achieved. A business may lack the knowledge to instruct some highly specialized professionals; in other cases, the task may require little or no instruction. The key consideration is whether the business has retained the right to control the details of a worker's daily performance or instead has given up that right. Another indication of an employee-employer relationship is the existence and use of an evaluation system. If a system exists that measures the details of how the work is performed, such a system would point to a determination that the individual is an employee. If the evaluation system measures just the end result, then this can point to either an independent contractor or an employee. Finally, if the business provides the worker with training on how to do the job, this indicates that the business wants the job done in a particular way. This is strong evidence that the worker is an employee. Periodic or on-going training about procedures and methods is even stronger evidence of an employer-employee relationship. In contrast, independent contractors ordinarily develop and use their own methods. 2. Financial Control

The primary question to consider when determining financial control is to examine whether the business aspects of the worker’s job are controlled by the payer. These may include things like how a worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc. Financial control usually refers to facts that indicate the business has the right to control the economic aspects of the worker’s job. An independent contractor often has a significant investment in the equipment he or she uses while working for someone else. However, in many occupations, such as construction, workers spend thousands of dollars on the tools and equipment they use and are still considered to be employees. There are, therefore, no precise dollar limits that must be met in order to have a “significant investment”. Furthermore, a significant investment is not always necessary for independent contractor status as some types of work simply do not require large expenditures. Finally, independent contractors are more likely to have unreimbursed expenses while employees are routinely reimbursed for expenses under an employer’s reimbursement plan.



The opportunity to make a profit or loss can also be another important factor in making a determination. If an individual has a significant investment in the tools and equipment used and has unreimbursed expenses, then the individual has a greater opportunity to lose money (i.e., their expenses will exceed their income from the work). The possibility of incurring a loss indicates that the worker is an independent contractor. An independent contractor is, however, generally free to seek out business opportunities in order to limit such loss. Independent contractors often advertise, maintain a visible business presence, and are available to work in the general market. An employee is generally guaranteed a regular wage for an hourly, weekly, or other period of time. This usually indicates that a worker is an employee, even when the wage or salary is supplemented by a commission. An independent contractor is usually paid a flat fee for the job. However, it is also common in some professions, such as law, to pay independent contractors hourly. 3. Relationship of the Parties

When determining the relationship of the parties, it is necessary to examine the existence of written contracts or employee-type benefits (i.e. pension plans, insurance, vacation pay, etc.). The primary questions to consider are whether the relationship will continue after performance of a specific job, and whether the work performed is a key aspect of the business. Although a contract may state that the worker is an employee or an independent contractor, this is not sufficient to determine the worker’s status. The IRS is not required to defer to a contract stating that the worker is an independent contractor, responsible for paying his or her own self-employment tax. Rather, the IRS will evaluate how the parties work together to determine whether the worker is an employee or an independent contractor. For example, employee benefits including health and life insurance, pension plans, paid vacation, sick days, and disability insurance generally are not granted to independent contractors. However, the lack of these types of benefits does not necessarily mean the worker is an independent contractor. If you hire a worker with the expectation that the relationship will continue indefinitely, rather than for a specific project or period, this is generally considered evidence that the intent was to create an employer-employee relationship. If a worker provides services that are a key aspect of the business, it is more likely that the business will have the right to direct and control his or her activities. For example, if a law firm hires an attorney, it is likely that it will present the attorney’s work as its own and would have the right to control or direct that work. This would indicate an employer-employee relationship.



If a business is unsure about the status of a worker, it is possible to submit a query to the IRS to assist in determining whether that individual is an independent contractor or an employee. The form to use for this purpose is IRS Form SS-8: Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. The SS-8 form can be found at: http://www.irs.gov/pub/irs-pdf/fss8.pdf. For more information on the IRS rules for independent contractors and employees, please visit: http://www.irs.gov/businesses/small/article/0,,id=99921,00.html or review IRS publication 1779: http://www.irs.gov/pub/irs-pdf/p1779.pdf. III. Working with Independent Contractors Overview As discussed above, independent contractors (“ICs”) are not employees of the business and should not be treated as employees of the business. Rather, they are individuals who supplement the employment workforce, often brought in to provide specialized expertise for limited periods of time, or to complete specific projects, under mutually agreed upon terms and conditions. When engaging the services of an independent contractor, it is important to keep in mind the following:

It is important to memorialize terms and conditions in a written Independent Contractor Services Agreement (discussed further below). However, a copy of the employee handbook or other policy manual should not be provided to independent contractors working for the employer.

Payments to ICs must be reported on IRS form 1099-MISC. Taxes are not withheld or paid by the business; the IC is individually responsible for payment of taxes. For more information, please visit: http://www.irs.gov/charities/article/0,,id=129272,00.html

ICs do not receive employee benefits such as insurance, pension, or paid leave.

Moreover, the default rules concerning intellectual property are different for independent contractors than for employees. If the business wishes to own the rights to patentable inventions and copyrightable work product developed by ICs (which it normally does), it should obtain a written assignment of IP rights from all contractors. Finally, it is important to differentiate between self-employed individuals with whom you are contracting directly, and those who are the employees or ICs of another company with whom you may have a contractual relationship. As mentioned, for self-employed individuals with whom you are contracting, an independent contractor agreement and an IRS form 1099-MISC are appropriate. If you engage another company to perform services

http://www.irs.gov/pub/irs-pdf/fss8.pdf

http://www.irs.gov/businesses/small/article/0,,id=99921,00.html

http://www.irs.gov/pub/irs-pdf/p1779.pdf

http://www.irs.gov/charities/article/0,,id=129272,00.html



on your behalf, such as a temporary agency or a company that provides qualified specialists for specific jobs, then individuals who are performing the work are usually considered employees or independent contractors of that company. They are generally not considered independent contractors of your company, although in certain situations such workers can be considered jointly employed by both entities. It will be important to enter into a contractual relationship with the other company in order to ensure that the necessary contractual provisions, including indemnification for violation of any employment law(s) by the other company, are included in the written agreement that governs the work to be performed by these individuals. More information on this topic is provided later in this chapter. IV. Independent Contractor Service Agreements When engaging the services of independent contractors, it is important to memorialize in a written agreement the terms and conditions that will govern the performance of the services. The following list identifies some of the key issues that could be important to include in the agreement. While this list is not inclusive of all the issues you will want to cover, it is a good place to start. A written agreement should include:

Description of the services to be performed, including any specific deliverables or milestones. This is sometimes covered in the main agreement or in an attachment to the agreement known as a “Statement of Work.” The Statement of Work should clearly explain the expectations of the parties and the specifications for the deliverables as well as the timeline for any delivery milestones and payments.

Expectations around work location, materials and equipment. Again, information on work location, materials and equipment should be covered in the main agreement between the company and the IC. Specifically, provisions should be included that address where the work will take place and what equipment and/or materials will be provided by the IC and what equipment and/or materials will be provided by the company.

Fees, expenses and payment terms. The agreement should address how much the IC will be paid and what method of payment is appropriate. It should also provide for 1099 reporting of payments. Usually, such provisions will address whether the IC should receive payments that are tied to specific deliverables and milestones or when the project is complete. The agreement should also address whether expenses are reimbursable and whether such items as travel are covered. If expenses are reimbursable, the agreement should set forth the process for such reimbursement. The agreement should also state that contractor is not eligible for benefits and contractor should explicitly waive participation.

Confidentiality. It is important that the agreement also specifically address issues of confidentiality. In addition to any standard terms contained in the independent contractor agreement with respect to non-disclosure, clauses pertaining to breaches



of confidentiality and remedies for such breaches should be set forth. Additional information on confidentiality agreements is contained in Chapter 5.

Intellectual Property Rights. When engaging independent contractors, it is particularly important to include a clear expression of rights to new works that are created under the agreement, particularly for patentable subject matter and copyrightable work products. Absent a written agreement to the contrary, the independent contractor will own the copyright to work products he or she develops, and will not necessarily be required to assign patent rights to inventions that are made under the agreement. For a business that wishes to own all IP rights to the work product that is developed, it is imperative to include a provision in the independent contractor agreement that specifically assigns all right, title and interest in the developed IP from the IC to the business. Further information on this topic is covered more thoroughly in Chapter 4 of the handbook.

Termination. Contract provisions dealing with termination of the agreement should address under what circumstances the agreement can or will be terminated. Such language could include termination on notice or for breach (e.g., a breach of contract) or upon completion of the deliverable(s) set forth in the Statement of Work. Language should also be incorporated that addresses which provisions will survive termination of the agreement, such as confidentiality or ownership requirements.

Representations, warranties, limitations of liability. See Chapter 5 – Managing Agreements for a complete discussion of those terms that should be included in every contract or agreement with respect to representations, warranties and limitations of liability.

Entire agreement language. This clause is necessary if the parties wish to reiterate that the agreement embodies the entire understanding of the parties and that it supersedes any previous understandings or commitments, oral or written.

Modification language. Most contracts have provisions that require amendments or modifications to the agreement to be in writing and signed by individuals with the authority to act on behalf of their company.

Freedom to work for others (or not). Consideration should be given to contract provisions in an agreement that can prohibit the independent contractor from performing the same or similar work for others. This is usually done in cases where a concern exists about the contractor performing similar work for a competitor. Likewise, the agreement can contain language that allows for the independent contractor to work for others, even companies that might be in a competitive position with the original company. Inclusion of this language bolsters the argument that the individual is, in fact, an IC.

Insurance. The agreement should include language regarding required insurance and set forth the independent contractor’s obligations with respect to insurance.

Assignability (if applicable). This clause is necessary if a party desires to limit the transfer of the contractor’s obligations under the agreement to a third party. In



most contract situations, there are three ways to limit, or restrict, assignment. First, an agreement may allow either or both parties to assign the agreement to a third party without any requirements whatsoever. In this case, assignment can occur upon the execution of a simple assignment agreement between the assigning party and the third party. A second, more limited, approach may be to provide the parties the right to assign the agreement without prior written consent of the non-assigning party in limited circumstances, usually in connection with a merger or acquisition. Finally, language may be included in an agreement that will allow for the transfer, or assignment, of the agreement – with its accompanying rights and obligations – to a third party with the prior, written consent of the non-assigning party. Usually, language voiding any transfer without such prior written consent is also included.

V. Employees Overview Before a company hires an individual, the company needs to answer a series of questions about that person’s potential role in the workplace as well as any obligations on the part of the company created by the employment of such an individual. The company must consider the function of the individual in the workplace, the physical placement of the individual, his or her ranking among fellow workers, and the salary of that particular individual. While these are not all the considerations that need to be addressed, it should be clear that before hiring a worker, the company must know the details of how that individual will fit into the framework of the company, and how that person’s employment will impact the duties of other employees with whom he or she works. A. State laws that might apply to small businesses New York State has numerous employment laws that could potentially impact a start-up company. While this section does not discuss all of the laws regarding employment, it will point out many of the more important laws a small business needs to take into consideration. Please note that the laws governing employment in other states may differ from New York’s laws and, while they will not be discussed in this section, it would be important to seek assistance before employing workers in those states. When hiring an employee in New York State, a small business owner has many laws to consider. Employment in New York State is overseen by various agencies including New York’s Division of Safety and Health, the New York State Division of Human Rights, and the New York State Department of Labor. Specifically, small business owners should consider the following:

New York State Human Rights Law New York State Labor Law



o New York’s Unemployment Insurance o New York’s Worker Compensation Program o New York State minimum wage o New York’s Safety and Health o NYS WARN Act o Negligent hiring, retention and supervision o Background checks o Break time

1. New York State Human Rights Law

New York State was the first state in the nation to enact a Human Rights Law. According to the New York State Executive Law, Article 15, known as the Human Rights Law, the purpose of the law is to make sure every individual has an equal opportunity for employment. This means individuals are protected from discrimination, prejudice, and intolerance in seeking education, training, or employment. In particular, an employer cannot discriminate because of age, race, creed, color, national origin, sexual orientation, military status, sex, disability, marital status, arrests and/or criminal convictions, genetic predisposition or carrier status. These are very important laws for a small business owner to understand. Examples of more specific sections are as follows:

Under Section 466.1, employers are required to post notices from the Division of Human Rights indicating their provisions and where complaints may be filed in an area frequented by employees.

Under Section 466.6, an employer may only retain records with personal information about their employees which is relevant and necessary.

More information on compliance with New York State Human Rights Law is available from the Division of Human Rights at http://www.dhr.state.ny.us/. 2. New York State Labor Law

The purpose of the New York State Labor Laws is to provide an equal opportunity to all citizens. The New York State Department of Labor’s purpose is to protect and assist employers and employees. There are many divisions in the Department of Labor to accomplish their goals, including an unemployment division, a safety and health division, and a worker’s compensation division. a. New York’s Unemployment Insurance Pursuant to Article 18 of New York State’s Unemployment Insurance Law, the State considers economic insecurity due to unemployment to be a serious menace to the health,

http://www.dhr.state.ny.us/



welfare, and morale of the people of the State. New York State has an unemployment compensation program which provides monetary compensation to workers who have been terminated without cause, through no fault of their own or who voluntarily terminate their employment for "good cause." These benefits are funded by taxes that are paid by employers only. Deductions are not made from workers' salaries. The New York Department of Labor is the agency that administers the program and determines whether a worker qualifies for unemployment payments. Specific information regarding the requirements under New York State law with respect to unemployment insurance can be found in Chapter 1. b. New York’s Workers’ Compensation Program Worker’s compensation is payable when an employee gets hurt on the job. New York State workers’ compensation covers employees for work-related accidents, injuries or illness. The cost of providing workers' compensation insurance is the responsibility of the employer exclusively. No deductions may be made from the employee's wages for worker’s compensation. For more information on workers’ compensation insurance requirements, please refer to Chapter 1 of the handbook. c. New York State Minimum Wage The New York State minimum wage is $7.15 per hour as of January 1, 2007, although some industries make allowances for tips and therefore have a lower hourly rate. New York State also has a required overtime hourly rate. For most occupations, employees must be paid at 1 ½ times their hourly rate of pay for overtime after 40 hours of work during one week. New York State also has requirements specifically for the employment of minors. Minors not yet 14 years of age may not be employed at any time, either after school or during vacations. Minors 14 and 15 years old may work after school hours and during vacations, but may not be employed doing factory work. Minors 16 and 17 years of age who are not attending school may work full time throughout the year. An employment certificate or permit is required for minors under age 18, including high school graduates, before they may begin work. d. New York’s Safety and Health New York's Division of Safety and Health (“DOSH”) is charged with protecting workers in their work environment. Ten separate programs and one licensing unit fall under the DOSH's authority. These programs include:

The Public Employee Safety and Health (PESH) Bureau - This program oversees workplace protection of public employees at the State and local level.



The Industry Inspection unit - This unit inspects and enforces safety and health provisions covering things like amusement devices, elevators, window cleaning, ski tows and others.

The License and Certification unit (L&C) - This unit issues licenses or certificates involving asbestos contractors and workers, crane operators, laser operators, blasters, and possession, storage and transportation of explosives, and companies involved in the manufacture of explosives.

The Radiological Health unit (RHU) - This unit helps protect people against the dangers of exposure to radioactive materials and hazards from laser energy. They enforce Code Rule 38 and Code Rule 50.

The Asbestos Control Bureau - Their responsibility is to protect the public against toxic hazards from asbestos fiber exposure associated with the demolition, rehabilitation and renovation of buildings and other structures containing asbestos.

The Boiler Safety unit - This unit inspects most of the boilers in New York State. The Mine Safety Training Program (MSHA) - Their duty is to provide safety and

health training for workers in mining industries in New York State. The Workplace Safety and Loss Prevention Program (also referred to as Industrial

Code Rule 59) - They monitor compliance with regulations and provide certification for private and public sector consultants who can perform required services.

The Hazard Abatement Board (HAB) - It consists of a five-member board appointed by the Governor. The board awards grants for programs that provide safety and health training for public and private employers, labor unions, educational institutions, non-profit organizations and trade associations. This Board administers the state's Capital Abatement Program.

The On-Site Consultation Services unit (21D) - The unit provides free on-site guidance to private employers to help businesses determine whether they are in compliance with Federal safety and health standards and show them how to eliminate hazards that are found.

The Engineering Services unit (ESU) - This unit is also involved in the consultation process. Staff engineers review plans and approve applications for places of public assembly, ski tows, tramways, etc.

e. NYS WARN Act Effective February 1, 2009, employers in New York State with fifty or more employees are required to give ninety days written notice of impending closings, mass layoffs, and relocations to affected employees, their collective bargaining representatives, the NYS Department of Labor and local workforce investment boards for the locality where the event will occur. This law is more stringent than the federal law, which requires employers with one hundred or more employees to provide sixty days notice of such impending events.



The Act is triggered, meaning the employer is required to give such notice, when twenty five or more full time employees, representing at least 33% percent of the entire work force, lose their jobs within thirty days; and due to a mass layoff; where a plant closing results in twenty five or more employees losing their jobs within thirty days; and where an employer relocates all or substantially all of its operations to a new location fifty miles or more from its current location. In the event that an employer does not provide the requisite notice, a violation of the Act has occurred. When this happens, the employer is liable to each affected employee for an amount equal to back pay and benefits for the duration of the violation up to sixty days. When calculating damages, any wages and benefits that were provided during the violation period will be deducted from those damages. The employer is also subject to a civil penalty of $500 for each day of the violation. Enforced by the NYS Department of Labor, the Act enables an affected employee and/or his or her representative to bring a private cause of action for a violation by his or her employer. Should the employee-plaintiff prevail, the court may award attorney’s fees to the employee along with any other damages. There are several exceptions to the notice requirements provided by the Act. First, if, at the time the notice would have been required, the employer is actively seeking business or capital that, if obtained, would prevent or postpone the termination or relocation the employer does not have to provide notice of the impending event so long as the employer reasonably, and in good faith, believed that providing the notice would prevent them from obtaining the business or capital. Another exception to the notice requirements is available when the need for notice was not reasonably foreseeable at the time the notice was required. In other words, when an employer does not reasonably know themselves about the impending event ninety days before it will occur, they are not required to give ninety days notice to affected employees. An exception to the notice requirements also applies when the affected employees were hired with the understanding that their employment was temporary. This is the case when the affected employees were hired knowing that their employment is limited to the duration of a facility, project or undertaking and the mass layoff or plant closing is of a temporary facility or due to the completion of a particular project. Under these circumstances, the employer is not required to provide the requisite ninety day notice. Lastly, an exception to the Act’s notice requirements applies when the plant closing or layoffs are due to a natural disaster, such as flood, earthquake or drought, or the closing or layoffs constitute a strike or lockout. In these cases, the employer is not required to provide the ninety day notice to his or her employees.



When a notice exception applies to an employer’s particular situation, the ninety day notice to affected employees is not required. However, the employer must still provide as much notice as is practicable along with a brief explanation as to why the ninety day notice was not provided. f. Negligent Hiring, Retention and Supervision Article 23-A of the Correction Law states that an applicant may not be denied employment based on a previous criminal conviction unless there is a direct relationship between the convicted offense and the job where the employment of the applicant will create an “unreasonable risk’ to safety or property. Section 296 of the Executive Law makes it unlawful for an employer to deny employment to an applicant based on the applicant’s having been previously convicted of a crime or due to a finding that the applicant ‘lacks moral character” based on his or her criminal history when that denial violates Article 23-A of the Correction Law. In other words, an employer may not deny employment to an applicant based on the applicant’s previous criminal conviction if the offense is not directly related to the duties of the job and there is no unreasonable risk to safety or property created by the applicant’s employment. When considering an applicant for employment, an employer must take several factors into account, including:

NYS public policy on encouraging employment of people with one or more previous criminal convictions;

The specific responsibilities and duties involved in the position sought; The effect, if any, the previous conviction/s will have on the applicant’s fitness or

ability to perform one or more of the position’s responsibilities or duties; How much time has passed since the most recent conviction; The age of the applicant at the time of the offense/s; The seriousness of the offense/s; Any information provided by the applicant or on the applicant’s behalf attesting to

his or her good conduct and rehabilitation; The employer’s legitimate interest in protecting property, safety and welfare of

specific individuals or the general public. With this in mind, Section 296 of the Executive Law has been amended, effective immediately, to provide some legal protection to employers who hire or retain employees with criminal records. In a case alleging that an employer was negligent in retaining or hiring an employee or applicant, or supervising a hiring manager, the amendment creates a rebuttable presumption in favor of excluding from evidence the prior conviction or incarceration of any person. The rebuttable presumption applies when, after learning about the employee or applicant’s past criminal history, the employer evaluated Article 23-A of the Correction Law and made a reasonable, good faith decision to retain or hire the individual. In other words, as long as the employer conducted a good faith evaluation of



the individual’s criminal history and reasonably decided to hire the individual based on that evaluation, the fact that the individual has a criminal history does not have to be entered into evidence to show that the employer was negligent in hiring the individual. g. Break Time For the past year, NYS has required employers to provide their employees who are nursing mothers with break time to express milk. In addition, employers must provide their employees with break time to donate blood. i. Nursing Mothers in the Workplace Regardless of the size of the workplace, employers must provide employees who are nursing mothers reasonable, unpaid break time, or permit the use of regular break time, to express milk. Breaks must be no less than 20 minutes, every three hours. This requirement is effective up to three years after the birth of the employee’s child. The employer must make reasonable efforts to provide a location in close proximity to the workplace for the employee to express milk in privacy. This location may not be a rest room or toilet stall. The employer must provide written notification of the law to employees returning to work following the birth of a child. Notice may be provided to affected employees individually or generally through the employee handbook or postings in a central location. Employees wishing to avail themselves of this right must give their employer advance notice to allow an opportunity for the employer to establish a schedule and location. An employer must not discriminate in any way, or encourage discrimination in any way, against any employee who wishes to avail themselves of this right. This law does not create a private cause of action. An employee can instead file a complaint with the NYS Department of Labor. In other words, an employee who feels they have been denied this right cannot bring a private lawsuit against her employer. Instead, her course of redress is to file a complaint with the Department of Labor. ii. Blood Donation Employers who have twenty or more employees must provide their employees with at least three hours leave every twelve months to donate blood. Employers must notify employees in writing using a method that will insure the employees will see it. Such methods may include postings in a central location, inclusions in paychecks, mailings, inclusion in the employee handbook, or other comparable methods. New employees must be notified upon being hired. Existing employees must be notified yearly by no later than January 15 of each year. Employers may require employees to provide two or three days notice before taking the leave and require proof of donation. Employers may provide paid



leave if the donation is part of a blood drive at the work place or scheduled by the employer. In all other circumstances, the employer may provide unpaid leave. B. Federal Laws That Might Apply To Small Businesses The U.S. Department of Labor administers and enforces more than 180 federal laws. While this chapter will not address all federal laws that may be applicable to each business, it will discuss those laws that could have a significant impact on the hiring and management of employees in a start-up company. These include the following:

Fair Labor Standards Act (“FLSA”) Occupational Safety and Health Act (“OSH Act”) Equal Employment Opportunity Commission/Title VII (“EEOC”) Employee Retirement Income Security Act (“ERISA”) Family and Medical Leave Act (“FMLA”)

1. Fair Labor Standards Act The FLSA was enacted to enforce and protect the rights and wages of non-exempt employees. The FLSA establishes a national minimum wage, guarantees overtime pay for certain jobs, and prohibits the employment of minors in “oppressive child labor”, as that term is defined in the statutes. The FLSA applies to certain employees who are engaged in interstate commerce or in the production of goods for commerce, or who are employed by an enterprise engaged in commerce or in the production of goods for commerce. Generally, an employer who does at least $500,000 of business or gross sales in a year satisfies the commerce requirements of the FLSA. The employees of such an employer are covered by the FLSA, provided, however, no exemptions to the Act apply. Employees of firms that do not meet the $500,000 annual dollar volume threshold may nevertheless be covered in any workweek when they are individually engaged in interstate commerce, the production of goods for interstate commerce, or an activity that is closely related and directly essential to the production of such goods. Application of the FLSA is not based on the number of employees, but the volume of interstate or foreign commerce business grossed by each employer each year. While the FLSA does apply to both part-time and full-time employees, it does not apply to independent contractors or volunteers because they are not considered "employees" under the Act. Some of the more relevant regulations of the FLSA include:

Applicable salary and overtime requirements set out by federal government (not less than 1 ½ times their regular rate of pay for any hours exceeding a 40-hour workweek)



Minimum Wage Increases: $6.55/hr (effective 7/24/08), to $7.25/hr (effective 7/24/09)

Youths under 20 years old must be paid no less than $4.25/hr during the first 90 consecutive calendar days of employment with an employer, and employers may not displace any employee to hire someone at the youth minimum wage.

For employees at least 16 years old, the act does not limit the number of hours in a day or week that an employer may require to work.

Several exemptions exist that relieve an employer from having to meet the statutory minimum wage, overtime, and record-keeping requirements. The largest exceptions apply to professional, administrative and executive employees. Exemptions are narrowly construed, and an employer must prove that the employees clearly fall within the exemption. To determine if an exemption exists, or for more information on FLSA generally, go to the Department of Labor website at www.dol.gov/compliance/guide/minwage.htm or the Agency’s Assistance, Wage and Hour Division at www.dol.gov/esa/whd/flsa/index.htm. Specific information on the Local Wage and Hour Division Office is available at www.dol.gov/esa/whd/america2.htm. The website also provides information on how to calculate wages and overtime, and to comply with record-keeping requirements at the Fair Labor Standards Act Advisor at www.dol.gov/elaws/esa/flsa/screen7.asp. 2. Occupational Safety and Health Act

The Act, which also led to the creation of the Occupational Safety and Health Administration (“OSHA”), was enacted to set standards that employers are required to follow in order to protect their employees from harmful or unsafe workplaces. The OSH Act calls for certain reasonably necessary practices to be adopted and for periodic inspections to be conducted to ensure that employers are providing safe and healthful workplaces according to specific standards applicable to their work group, as discussed below. OSHA’s mission is to prevent work-related injuries, illnesses and deaths by inspecting and enforcing the standards for workplace safety and health. The OSH Act standards are grouped into 4 major categories: general industry, construction, maritime (shipyards, longshoring, marine terminals, etc.), and agricultural. Some standards are specific to one industry, while others may apply across industries. All standards address access to medical and exposure records, personal protective equipment and adequate training, and hazard communication. If no specific standard is applicable to a workplace, employers must comply with section 5(a)(a) of the General Duty Clause to “furnish…a place of employment which is free from recognized hazards that are causing or are likely to cause death or serious physical harm” to employees.

http://www.dol.gov/compliance/guide/minwage.htm

http://www.dol.gov/esa/whd/flsa/index.htm

http://www.dol.gov/esa/whd/america2.htm

http://www.dol.gov/elaws/esa/flsa/screen7.asp



Every employer covered by the OSH Act with more than 10 employees, except for employers in certain low-hazard industries (retail, finance, insurance, real estate and service sector jobs) must maintain 3 types of OSHA-specified records of job-related injuries and illnesses. Every employer, regardless of industry category or number of employees, must advise the nearest OSHA office of any accident that occurs in one or more facilities or that leads to the hospitalization of three or more employees. The employer must notify OSHA within 8 hours of the accident for a (potential) investigation for violations of safety standards. The OSH Act covers all private sector employers and their employees in working conditions that are not addressed by safety and health regulations of another federal or state agency. Currently, however, 22 state and jurisdictions operate their own complete plans that cover both the state and private sector. Most of these plans are identical to the federal standards. Information about state plans, VPPs (Voluntary Protection Programs) for employees, consultation programs and inspections can be found under the “Additional Resources” section at the end of this chapter.

3. Equal Employment Opportunity Commission/Title VII

The U.S. Equal Employment Opportunity Commission (EEOC) is a federal agency that investigates discrimination complaints based on an employee’s race, color, national origin, religion, sex, age, disability, genetic information and retaliation for reporting and/or opposing discriminatory practices. The Commission is also tasked with filing suits on behalf of alleged victim(s) of discrimination against employers and is an adjudicatory for claims of discrimination brought against federal agencies. The EEOC's mandate is specified under Title VII of the Civil Rights Act of 1964 (“Title VII”), the Equal Pay Act, the Age Discrimination in Employment Act (ADEA), the Rehabilitation Act of 1973, the Americans with Disabilities Act (ADA) of 1990, the ADA Amendments Act of 2008 and the Genetic Information Nondiscrimination Act of 2008 (GINA). Title VII prohibits employers from discriminating against employees on the basis of race, color, national origin, religion or gender in all aspects of employment – from recruitment to termination. Title VII requires employers to make decisions on the basis of business necessity. All private employers, state and local governments, and educational institutions that employ 15 or more individuals must comply with Title VII. Private and public employment agencies, labor organizations, joint labor management committees controlling apprenticeship and training must also adhere to this Act. Although rarely used, there is an exception to complying with Title VII. An employer may discriminate against particular employees if there is a bona fide occupational qualification that requires an employee to possess a certain characteristic. EEO laws also require that all private and public employers that employ 15 or more individuals must comply with the Americans with Disabilities Act (“ADA”). In addition, all

http://en.wikipedia.org/wiki/Civil_Rights_Act_of_1964

http://en.wikipedia.org/wiki/Equal_Pay_Act

http://en.wikipedia.org/wiki/Age_Discrimination_in_Employment_Act

http://en.wikipedia.org/wiki/Age_Discrimination_in_Employment_Act

http://en.wikipedia.org/wiki/Rehabilitation_Act_of_1973

http://en.wikipedia.org/wiki/Americans_with_Disabilities_Act

http://en.wikipedia.org/wiki/Americans_with_Disabilities_Act

http://en.wikipedia.org/wiki/ADA_Amendments_Act_of_2008



private employers with 20 or more employees, all state and local governments (including school districts), all employment agencies and labor organizations must comply with the Age Discrimination in Employment Act (“ADEA”). Finally, all employers who are covered by the FLSA are also subject to the provisions of the Equal Pay Act (“EPA”). For more information on the EEOC or on the laws discussed above, go to the EEOC website at http://www.eeoc.gov/. Specific information on Title VII is available at http://www.eeoc.gov/policy/vii.html. The newest EEO law, the Genetic Information Nondiscrimination Act (“GINA”), prohibits employers, employment agencies, and labor unions from discriminating against employees based on genetic information. It also prohibits insurers from charging higher premiums based on genetic information or from using genetic information in underwriting decisions. The EEOC passed the Act in 2008 and began creating regulations to implement Title II of GINA, which is the section that prohibits the use of genetic information in employment, prohibits the intentional acquisition of genetic information about applicants and employees, and imposes strict confidentiality requirements. The EEOC published a Notice of Proposed Rulemaking (“NPRM”) and accepted comments from the public before finalizing the regulations. The regulations are set to be effective on November 21, 2009.

4. Employee Retirement Income Security Act

ERISA establishes minimum standards for pension plans and provides for extensive rules on the federal income tax effects of transactions associated with employee benefit plans. ERISA was enacted to protect the interests of employee benefit plan participants and their beneficiaries by requiring disclosure of financial and other information concerning benefit plans to the employees themselves. ERISA does not require employers to establish pension plans. Likewise, as a general rule, it does not require that plans provide a minimum level of benefits. Instead, it regulates the operation of a pension plan once it has been established. Those employers who do choose to establish plans must meet certain minimum standards of conduct, however, that are aimed at assuring that plan funds are protected and that participants who qualify receive their benefits. There are no requirements on the number of un-enrolled or enrolled employees, or on the size of the company, to require an employer’s compliance. Specifically, a company’s decision to offer a pension plan is not subject to any federal law. ERISA is only implicated if a company elects to offer a plan. Under ERISA, pension plans must provide for vesting of employees' pension benefits after a specified number of years and requires that the employers who sponsor plans satisfy certain minimum funding requirements. ERISA also regulates the manner in which a pension plan may pay benefits. Similarly, ERISA does not require that an employer provide health insurance to its employees or retirees, but does regulate the plan if an employer chooses to establish a health care plan. There have been several significant amendments to ERISA concerning health benefit plans, including COBRA and HIPAA. The Consolidated Omnibus Budget

http://www.eeoc.gov/

http://www.eeoc.gov/policy/vii.html

http://en.wikipedia.org/wiki/Income_tax_in_the_United_States

http://en.wikipedia.org/wiki/Vesting

http://en.wikipedia.org/wiki/Health_insurance

http://en.wikipedia.org/wiki/Consolidated_Omnibus_Budget_Reconciliation_Act_of_1985



Reconciliation Act of 1985 (“COBRA”) provides some employees and beneficiaries with the right to continue their coverage under a health benefit plan for a limited time after certain events, such as the loss of employment. The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) prohibits a health benefit plan from refusing to cover an employee's pre-existing medical conditions in some circumstances. It also bars health benefit plans from certain types of discrimination on the basis of health status, genetic information, or disability. 5. Family and Medical Leave Act

The FMLA was enacted to allow an employee to take unpaid leave for a serious health condition that affects the employee or a sick family member, or to care for a new child, whether through birth, adoption or foster care. It has been expanded to include unpaid leave for an employee whose family member is a member of the Armed Forces of the United States needing medical care. Specifically, the Act provides a means for employees to balance work and family responsibilities by taking unpaid leave for certain reasons. The FMLA provides entitlement of up to 12 weeks of job-protected, unpaid leave during any 12-month period for: the birth and care of the employee’s child or placement for adoption or foster care of a child with the employee; care of an immediate family member (spouse, child, parent) with a serious health condition; or care of the employee’s own serious health condition. On January 28, 2008, President Bush signed into law the National Defense Authorization Act for FY 2008 (NDAA). Among other things, section 585 of the NDAA amends the FMLA by permitting a "spouse, son, daughter, parent, or next of kin" to take up to 26 weeks of leave to care for a "member of the Armed Forces, including a member of the National Guard or Reserves, who is undergoing medical treatment, recuperation, or therapy, is otherwise in outpatient status, or is otherwise on the temporary disability retired list, for a serious injury or illness." The NDAA also permits an employee to take FMLA leave for "any qualifying exigency (as the Secretary of Labor shall, by regulation, determine) arising out of the fact that the spouse, or a son, daughter, or parent of the employee is on active duty (or has been notified of an impending call or order to active duty) in the Armed Forces in support of a contingency operation." The revised final rule became effective on January 16, 2009, and updates the regulations to implement the NDAA. The FMLA applies to any employer in the private sector who engages in commerce or any industry or activity affecting commerce. The FMLA applies to any employer who has 50 or more employees each working day during at least 20 calendar weeks in the current or preceding calendar year. The law also covers all public agencies, including state and local governments, and local education agencies, including schools, whether public or private. These employers do not need to meet the “50 employee” test for required compliance.

http://en.wikipedia.org/wiki/Consolidated_Omnibus_Budget_Reconciliation_Act_of_1985

http://en.wikipedia.org/wiki/Health_Insurance_Portability_and_Accountability_Act

http://en.wikipedia.org/wiki/Health_Insurance_Portability_and_Accountability_Act



To be eligible for FMLA leave, an employee must: a) be employed by a covered employer and work at a worksite within 75 miles of which that employer employs at least 50 people; b) have worked at least 12 months (which do not have to be consecutive) for the employer; and c) have worked at least 1,250 hours during the 12 months immediately before the date FMLA leave begins. Group health benefit levels must remain the same, as if the employee had continued to work, once the FMLA leave period begins and during the period of FMLA leave. Usually an employee may elect (or the employee may require) the use of any accrued paid leave (vacation, sick, personal, etc.) for periods of unpaid FMLA leave. In New York State, employees are eligible for a disability leave. This leave may, at the employer’s option, run concurrently with the FMLA leave. Disability leaves are unpaid except to the extent an employee is eligible to receive Workers' Compensation benefits, short-term disability insurance benefits or paid sick or vacation days. While FMLA guarantees an employee 12 weeks of unpaid leave, New York State short-term disability may provide a portion of the salary to the worker who is out on leave. In New York, the statutory short-term disability benefits for full-time associates are 50% of an individual’s average weekly wage, up to a maximum of $170/week. Companies may elect to supplement this and pay, for example, up to 66.67 % of an individual’s average weekly wage for the first 12 weeks of disability after the one-week waiting period. FMLA leave and short-term disability leave can and often do run concurrently for most employees. Short-term disability coverage only covers the time that a worker is actually medically disabled from injury, illness or pregnancy and delivery. Thus, it may not cover all 12 weeks that you are entitled to under FMLA. Because it is unpaid leave, FMLA permits the employer to require employees to use any form of paid leave that they have available during those 12 weeks. Whether a company should require such use will be a matter of its own policies. C. FirstStep Employment Law Advisor The FirstStep Employment Law Advisor is designed to help employers determine which federal employment laws administered by the U.S. Department of Labor (DOL) apply to their business or organization, what recordkeeping and reporting requirements they must comply with, and which posters they need to post. The Advisor can help all employers, including non-profit organizations, private sector businesses and government agencies. If employers already know which federal employment laws apply to them, the Advisor can quickly provide basic information about how to comply with these laws, including the requirements for recordkeeping, reporting, legal posters and other notices. This information can also be printed off as a reference guide. The FirstStep website is http://www.dol.gov/elaws/FirstStep.

http://www.dol.gov/elaws/FirstStep



D. Other Management Considerations Overview In addition to compliance with various state and federal laws, a start-up company needs to take several other key issues into consideration when hiring and managing workers. Such considerations include:

Hiring policies Offer letters Employee handbooks Compensation Payroll systems/required registrations Employer insurance Required forms Required notices

1. Hiring Policies

When hiring an individual, it is best to have established procedures that every new applicant must follow. For example, when interviewing candidates, some companies prefer that a committee of current employees conduct the interviews using pre-determined questions to gauge the expertise and experience of each candidate. Other companies may rely upon a series of interviews conducted by different members of management as a means to narrowing the field of candidates. Again, such interviews may involve a set of pre-determined questions created to prevent any violations on the part of the company under federal and/or state law. Some hiring procedures will be more or less extensive than either of these; the key element is that the process be fixed and consistent for each position in order to avoid accusations of favoritism and/or discrimination. Moreover, New York State Human Rights Law limits the ability of employers to ask certain questions either in an application form or in a personal interview before selecting an employee, where such inquiries express, directly or indirectly, any limitation or discrimination as to age, race, creed, color, national origin, sexual orientation, military status, gender, disability, predisposing genetic characteristics, or marital status, unless based upon a bona fide occupational qualification. Specifically, a few examples of questions which are not recommended include:

Age: How old are you? What is your date of birth? What are the ages of your children, if any?

Arrest record: Have you ever been arrested?



Disability: Do you have a disability? Have you ever been treated for any of the following diseases. . .? Do you have now, or have you ever had, a drug or alcohol problem?

Predisposing genetic characteristics: Do you have any genetic predisposition to disease? Do any diseases run in your family? Inquiries as to the health status of parents or other family members.

Marital Status: Do you wish to be addressed as Miss? Mrs.? Ms.? Are you married? Single? Divorced? Separated? Name or other information about spouse.

National origin: Inquiry into applicant’s lineage, ancestry, national origin, descent, parentage or nationality, and nationality of applicant’s parents or spouse.

Religion: Inquiry into applicant's religious denomination, religious affiliations, house of worship, religious holidays observed.

Address or Duration of Residence: How long have you lived in this country? In what country did you live before?

Citizenship: Of what country are you a citizen? Inquiries as to whether an applicant or an applicant's parents or spouse are naturalized or native-born citizens; Requirement that applicant produce naturalization papers.

Military Experience: Inquiry into applicant's military experience other than in the Armed Forces of the United States or in a State Militia.

Organizations: Requirement that applicant list all clubs, societies, and lodges to which applicant belongs.

Relatives: Inquiry as to names, addresses and ages of applicant's spouse, children or relatives not employed by the company.

Additionally, certain individuals should be designated to the responsibilities of managing the hiring and termination process. These responsibilities must include completing and submitting any required paperwork. Such individuals should also be responsible for maintaining employment files on applicants and new hires. Such files should contain enough information to demonstrate compliance with EEOC rules and regulations as well as with other federal and state employment laws, such as I-9 and W-2 information. As a general policy, any hiring procedures that are developed, in addition to any procedures for promotions or terminations, should be set forth in the Employee Handbook, discussed below. It is important to note, however, that a company does not want to provide the Employee Handbook to an individual before an offer of employment is accepted. This will avoid any potential claim for a breach of an implied contract of employment. 2. Offer Letters

When deciding to hire an applicant, an offer letter should be presented to that individual so that he or she knows the scope of employment, the compensation to be provided and the types of benefits that will be provided. The offer letter should clearly indicate that the letter is only an offer and does not bind the company or the candidate to any employment



agreement. The employee must acknowledge his or her acceptance of the offer in order to begin employment. Offer letters can be sent to a potential worker through standard delivery services prior to the first day of employment, but some companies present the offer letter to the candidate when he or she comes to fill out the initial employment paperwork. In this circumstance, it is important that the individual reads and understands the offer letter prior to signing any other documents. Should the candidate have any questions or concerns about the nature of the employment, these questions should be addressed before signing anything that would bind the company or the applicant. 3. Employee Handbook

A good method for promoting transparency and increasing workers’ understanding of the benefits offered as well as workers’ goodwill is to establish company-wide policies. An employee handbook is an easy way to set forth these general guidelines, such as vacation accrual, company holidays, grievance management, health insurance, and other company policies. Some areas to be covered in the handbook should include:

Employment policies: A handbook should address any policies that a company is required by law to enforce such as policies prohibiting workplace harassment or violence, safety and health issues, including drug and smoking policies, as well as policies on equal employment opportunities and the hiring of individuals with disabilities.

Compensation policies: A handbook should also contain information on classifications of employment, workweek and hours required, and time sheet, payroll, and paycheck issues. The handbook is an excellent place to discuss overtime, annual raises, garnishment and support orders as well as payroll deductions and other tax considerations.

Time-off benefits: Policies regarding holidays, military or jury leave, paid time off and absences should be included in the handbook. This section is particularly important since significant questions can be raised regarding time-off policies.

Other benefits, such as medical benefits and retirement benefits: This section of the handbook should address, if applicable, flexible benefit plans, flexible spending accounts, life insurance, educational assistance programs and long-term care insurance. In addition, the handbook should expressly refer employees to summary plan descriptions for detailed descriptions of benefit plans.

General management policies: A section should also be included that addresses general policies relating to such things as dress codes and guidelines for appropriate conduct, procedures for early dismissal/emergency closings for weather as well as policies that address use of technology and the internet, staff performance evaluations and employee recognition programs, if applicable.



Trademark Policies: A handbook should answer questions regarding the company’s trademark, such as when and how the mark should be used as well as when the company logo should not be used.

Patent Policies: If the possibility exists of creating a patentable product, it is important to encourage employees to document ideas and progress diligently. These documents can become crucial when seeking patent protection at some later date. A handbook should have general policies regarding storage and retention of email, documentation of project goals and results, reporting and publication procedures for projects, and requirements of confidentiality.

Copyright Policies: A handbook should make employees generally aware of what copyrights the company owns and how the employee can use these items. Similarly, employees should be strongly discouraged from inappropriately using the works of others in any company document. The handbook should point out general plagiarism and misuse concerns, the potential liability that can be created by infringing a copyright, and a preference towards promoting the employees’ original creative efforts.

Trade Secret Policies: Protecting trade secrets requires that every employee be aware of which materials are protected as a trade secret, and employees must also be aware that they have a duty to keep those trade secrets confidential. An employee handbook should make employees aware of any markings that will indicate that material is company confidential as well as how to treat disclosure to parties both inside and outside the company, who is authorized to make such disclosures, and the affirmative duty of every employee not to reveal trade secrets in an inappropriate manner.

While this in not an exhaustive list of all topic areas that could be included in an employee handbook, it does provide an overview of what information should be considered in drafting a handbook. It is important to have workers sign a form indicating that they have received a copy of the handbook and are aware of, and will abide by, its provisions. Employees should be required to read the handbook and should indicate they understand that they are obligated to read it. This will add weight to the importance of the handbook and the policies set forth as well as potentially protect the company from an individual who acts against company policy. Finally, it is usually a good idea to have the handbook reviewed by a labor or employment attorney to avoid drafting a handbook , or sections of a handbook, that might expose the employer to significant liability. 4. Compensation

Potential workers must be told in advance how much they will make and how often they will be paid. Companies are given wide discretion in deciding how they will pay their workers, particularly in light of the fact that different wages, benefits and payment



schedules will attract different applicants. However, there are certain limits upon these decisions. First, when considering an employee’s compensation, it is important to determine if that individual is an exempt or non-exempt employee. Non-exempt individuals are subject to the Fair Labor Standards Act, discussed above, while exempt individuals are not. The FLSA set rules concerning the ways that non-exempt persons are paid. These rules determine factors such as minimum wage and overtime, and other aspects of employment such as meal periods and days off. Determining whether an individual is exempt depends on whether or not he or she meets certain criteria set forth in the FLSA. Exempt individuals are salaried employees who are paid a fixed amount regardless of how much work they do in a given pay period. If a worker is paid by the hour, he or she is automatically a non-exempt employee. Many individuals that are salaried can still be classified as non-exempt. Certain non-exempt jobs (particularly IT jobs) often require workers to be available at any hour of the day. These jobs may require that the worker is paid overtime on top of his or her regular salary. There are numerous classifications of non-exempt workers, and it is important to know if an applicant will fit into one of these classifications prior to filling a particular position. As a rule of thumb, if you are unsure whether an individual position is exempt or not, classify the position as non-exempt, until you can consult with an employee classification expert. Non-exempt workers must be paid overtime for working beyond a certain number of hours in a week. The number of hours can vary depending on the type of work (or by state regulation), but the federal limit is forty hours per week (which may or may not include lunchtime, again depending on the type of work). Pay rates are also statutorily regulated by the federal government. Currently, overtime must be at least 1.5 times the normal pay rate for non-exempt workers that work more than 40 hours per week. States can raise their minimum wage higher than the federal level and can lower the maximum number of hours that can be worked without receiving overtime. It is important to be aware that opening additional offices in other states will require that office to pay according to that state’s wage laws. If a non-exempt employee works more than the set number of hours in a day, not exceeding the 40 hour weekly limit, some companies will exercise an option for him or her to receive compensatory time (a.k.a. “comp time”). When the 40 hour limit has been exceeded, overtime must be paid. Comp time provides for a worker to take an equivalent number of hours off on a later date rather than getting paid overtime for working those extra hours on one day. There are certain limits to comp time, however. Non-exempt workers cannot take comp time beyond the current pay period. However, the NYS Minimum Wage Act generally does not permit an employer to offer an employee compensatory time in lieu of the payment of overtime wages.



In order to properly manage the time of non-exempt individuals, it is important that a company have a structure in place for timekeeping. Workers must be designated to monitor overtime and comp time in order to avoid fraud, and to ensure that workers are justly compensated for the work that they actually do. If a company is concerned about the added costs of overtime, it is important that individuals know that they cannot work extra hours without first getting approval from their manager or supervisor. 5. Payroll System and Required Registrations

Aside from knowing how a worker will be compensated, it is important to have a payroll system in place before he or she begins working. The employer is required to deduct federal and state taxes, social security and medical benefit costs from a worker’s paycheck before delivering that check. In order to have a tax reporting system set up, an employer needs to obtain an Employer Identification Number (“EIN”) from the federal government. This EIN identifies the business and is required for many federal transactions, including financial reporting. An EIN can be obtained through the IRS’ website (www.irs.gov). Additionally, a company should register with both the federal and state department of labor to ensure proper compliance with additional federal and state regulations.

6. Employer Insurance

Every employer is required to have insurance that will cover a variety of situations. Employer insurance is available through many commercial insurers with a variety of different plans to meet differing business needs. Insurance should be obtained to cover the cost of paying for worker’s compensation, disability benefits, the costs of potential litigation, and damage to company property. The company should also establish some form of medical insurance plan. Medical insurance is paid in part by the worker and, in some cases, in part by the employer. Individual insurance plans utilize different cost structures depending on the plan, the number of employees, and the age, health, and family situation of an insured employee. Depending upon company size, when workers leave the company, the employer may be required to continue providing limited medical coverage to that individual under New York insurance law or under the federal “COBRA” system. In this situation, the former worker can elect not to take the coverage, or can take the coverage and agree to pay the higher premiums that accompany it. Some types of insurance, such as unemployment insurance, are automatically governed by state systems. In this circumstance, qualified unemployed former employees are paid by the state from funds generated by business taxes. The Department of Labor determines whether an employee is eligible for unemployment insurance, and payments will only be made for a limited period of time. Qualified employees must be unemployed through no

http://www.irs.gov/



fault of their own, and must be ready and willing to work in a field where there are existing job openings. Employers cannot deduct the cost of unemployment taxes from the paychecks of their employees. Since there are a wide variety of insurance schemes for employers and their workers, it is important the employer consult with an insurance professional to ensure that the company is properly covered, that workers are properly informed of coverage, and that any requirements of confidentiality pertaining to insurance information are met. 7. Required Forms

Once workers have been hired, they will need to fill out a series of required forms. Some of these are federal requirements, such as a W-4 or an I-9, which are required for tax and immigration purposes, respectively. Other documents can be optional based upon the worker’s needs. For example an employer may wish to issue a background check, and will need the worker to fill out a form granting permission to the employer. The employer might also want the individual to sign paperwork indicating that the company will own the rights to any inventions that the employee creates during the time of employment. Not having these forms filled out can cause problems for both the worker and the employer so it is important that the worker sign these forms as soon as possible upon hiring. Many companies require that they be completed before any other work can be done. As with payroll, an employee should be designated to be responsible for ensuring that this paperwork is completed and retaining and organizing copies for the company’s records. 8. Required Notices

Many government agencies require that notices be posted throughout a company’s offices and warehouses notifying workers of various rights and responsibilities that they have as well as advising them about the conditions of their workspace. The U.S. Department of Labor maintains a web page listing the required posters and these posters can be downloaded from that page http://www.dol.gov/osbp/sbrefa/poster/matrix.htm. A similar page is maintained by the New York State Department of Labor http://www.labor.state.ny.us/workerprotection/laborstandards/employer/posters.shtm. While some of these notices are only required in certain industries or for certain professions, the following are some examples that are required in almost every location:

Federal and State Minimum Wage: This notice informs employees of the minimum wage and overtime laws.

Equal Opportunity: Signs must be posted indicating that employer discrimination is not permitted, and that employees should report discriminatory practices.

http://www.dol.gov/osbp/sbrefa/poster/matrix.htm

http://www.labor.state.ny.us/workerprotection/laborstandards/employer/posters.shtm



Family and Medical Leave Act: This notice informs employees of when an employer is forbidden from denying an employee time off; primarily for medically related reasons.

OSHA notices and other safety notices: The Occupational Safety and Health Administration (OSHA) requires that notices be posted informing employees of their right to a safe work place and that employers must label potentially hazardous materials properly.

New York Clean Air Act: New York requires “no smoking” signs to be posted in all places where smoking is prohibited by law.

Again, it is important to note that each state has different requirements about notices that must be posted. When opening an office in another state, check with that state’s Department of Labor to obtain copies of any notices that must be posted. VI. Hiring Foreign Citizens When hiring an individual, a company must first verify that candidate’s citizenship and eligibility for work. Illegal aliens cannot be employed in the United States, and the hiring company has a duty to determine if the potential employee is a US citizen or a legal alien, and whether that individual is eligible to work in the United States. Legal aliens are those that either have a current, valid visa (allowing temporary residence in the US for a specific purpose), or those who have a green card (allowing permanent US residence). It is important to note that not all visa holders can legally work in the United States. Visas can be granted for a variety of purposes and with certain restrictions placed upon them. For example, some visas can be granted solely for the purpose of education or travel, and do not allow the recipient to work. On the other hand, both permanent resident and work visas allow an alien to work, but can still have restrictions placed upon the type of work that can be performed by the individual. It is important that employers know what type of visa a potential employee has been granted, and verify that this person can be hired in the capacity needed by the company. A useful program for technology-based companies to be aware of is the H-1B visa program. H-1B visas allow companies to hire foreign workers provided that the worker has the equivalent of a bachelor’s degree and is hired for a position that is classified as a “specialty occupation” by the United States Citizenship and Immigration Services (“USCIS”). These specialty occupations include physical sciences such as engineering, architecture, and medicine, as well as social sciences, education, business, and the law. The hiring company must file an H-1B visa petition with the USCIS, specifically citing the specialty occupation to be filled. Any aliens hired by the company under an H-1B visa must work in that specified position. H-1B jobs are generally limited to a period of three years, but extensions can be granted depending on such factors as the status of the foreign worker’s green card application.



A foreign student who entered the United States on an F-1 visa may also be eligible for employment with a US company. A foreign student can work for an employer if he or she acquires authorization from USCIS for temporary employment under the optional practical training program (“OPT”) directly related to the student’s major area of study. A student may be granted authorization for a total period of 12 months of employment under the OPT after completion of the course, or, for a student in a bachelor’s, master’s, or doctoral degree program, after completion of all course requirements for the degree (excluding thesis or equivalent). Moreover, students with a science, technology, engineering, or mathematics (“STEM”) degree may apply for an extension for an additional 17 months of OPT while in a valid period of post-completion OPT, provided that the student has not previously received an OPT extension and the student has a bachelor’s, master’s, or doctoral degree in one of the degree programs on the current STEM designated Degree Program List, published at http://www.ice.gov/sevis. A student is responsible for the OPT application process and must initiate the process by requesting the designated school official (“DSO”) at their academic institution recommend the OPT. Finally, aliens of extraordinary ability in the field of science, education or business can come to the United States under an O-1 visa to work in their area of extraordinary ability or achievement. Extraordinary ability means a level of expertise indicating that the person is one of the small percentages who have risen to the very top of the field of endeavor. An alien of extraordinary ability must demonstrate, among other requirements, sustained national or international acclaim and recognition for achievements in the field of expertise by providing evidence of receipt of a major, internationally recognized award or documentation of receipt of nationally or internationally recognized prizes or awards for excellence in the field of endeavor. The initial period of stay under an O-1 can be approved for a period up to three years. A one-year extension may also be granted. An O-1 petition must be filed by an employer in the United States, or by a U.S. agent or a foreign employer through a U.S. agent. An O-1 alien cannot self-petition for O status. Companies interested in hiring foreign workers should bear in mind that United States immigration rules and regulations are a vast and complex area of law that requires assistance from an expert. A company should consider consulting an immigration attorney before proceeding to hire a foreign worker. Chapter 3 Resources IRS Guidance for Businesses with Employees http://www.irs.gov/businesses/small/article/0,,id=98862,00.html

http://www.ice.gov/sevis

http://www.irs.gov/businesses/small/article/0,,id=98862,00.html



IRS Publication 1779: Independent Contractor… or Employee? http://www.irs.gov/pub/irs-pdf/p1779.pdf IRS Form SS-8: Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. http://www.irs.gov/pub/irs-pdf/fss8.pdf U.S. Department of Labor FirstStep Employment Law Advisor http://www.dol.gov/elaws/FirstStep/ General questions about patents and trademarks www.uspto.gov DOL Compliance Assistance http://www.osha.gov/dcsp/compliance_assistance/index.html OSHA State Plans, VPPs, Consultation Programs, Inspections http://www.osha.gov/html/RAmap.html ERISA http://www.dol.gov/dol/topic/health-plans/erisa.htm Health Benefit Coverage under Federal Law http://www.dol.gov/ebsa/pdf/CAGTableOfContents.pdf Health Benefit Education for Small Businesses http://www.dol.gov/ebsa/Newsroom/ltrhealthinsurancetips.html FMLA Advisor http://www.dol.gov/elaws/fmla.htm Wage and Hour Division, FMLA webpage http://www.dol.gov/esa/whd/fmla/index.htm United States Citizenship and Immigration Services www.uscis.gov

http://www.irs.gov/pub/irs-pdf/p1779.pdf

http://www.irs.gov/pub/irs-pdf/fss8.pdf

http://www.dol.gov/elaws/FirstStep/


http://www.osha.gov/dcsp/compliance_assistance/index.html

http://www.osha.gov/html/RAmap.html

http://www.dol.gov/dol/topic/health-plans/erisa.htm

http://www.dol.gov/ebsa/pdf/CAGTableOfContents.pdf

http://www.dol.gov/ebsa/Newsroom/ltrhealthinsurancetips.html

http://www.dol.gov/elaws/fmla.htm

http://www.dol.gov/esa/whd/fmla/index.htm

http://www.uscis.gov/

Chapter 4 – Understanding Intellectual Property


CHAPTER 4 – UNDERSTANDING INTELLECTUAL PROPERTY

I. Introduction Intellectual Property or “IP” is an umbrella term used to identify several categories of legal property rights for intangible assets. IP most commonly refers to patents, copyrights, trademarks, and trade secrets. A broader definition may extend to related areas of law, such as unfair competition, rights of publicity, and other closely associated fields. Despite the fact that they are commonly grouped together, patents, copyrights, trademarks, and trade secrets represent separate, and, in some ways, quite different areas of law. Therefore it is important to understand the distinctions among the various forms of IP, as well as the interplay between them, especially in developing an effective IP strategy for your business. Intellectual Property is not just a legal construct. For many start-up companies, particularly those in the technology sector of a knowledge-based economy, IP can represent a valuable asset and serve as a foundation for financing and future growth. Among other things, IP can serve all of the following business functions:

Source of revenue; Negotiating tool or trading card; Opportunity for competitive advantage; Signal of innovation, creativity and product quality; Prestigious credential for an inventor or company; and Key component of a branding strategy.

At the same time, IP rights owned and actively enforced by competitors have the potential to serve as a roadblock for your business, and can introduce great expense and complexity in the case of infringement claims or other disputes. For this reason, it is important to maintain awareness of the general IP landscape in your market and respect the IP rights of others, in addition to protecting your own IP assets. This chapter will provide an overview of intellectual property, primarily from a U.S. law standpoint, that can be relevant for early-stage businesses. Specifically, this chapter focuses on:

Understanding rights granted under patents, copyrights, trademarks and trade secrets;

Navigating the patent, copyright and trademark registration processes;



Addressing IP issues with employees and independent contractors; and Identifying and mitigating IP-related risk in your business.

II. Patents Fundamentally, a patent represents an exchange between an inventor and the federal government. The inventor agrees to disclose his or her invention to the public in exchange for a limited time property right granted by the government. Specifically, that property right enables the inventor to exclude others from making, using, selling, offering to sell, or importing the patented invention in the United States for the term of the patent. Specific technical and legal requirements must be met in order for the government to issue a patent. It is important to note that the patent property right is a negative right to exclude others; it does not convey any affirmative right for the inventor to practice his or her own invention. Notably, a patent owner could be prevented from practicing his or her own invention if a blocking patent owned by another party stands in the way. The patent term in the U.S. for utility and plant patents is currently 20 years from the filing date of the patent application, unless the term of the patent is further extended, which only occurs under limited circumstances. The term for a design patent is currently 14 years from the date the patent is granted. Utility, plant and design patents are further described below. A patent is granted by the federal government only after a patent application has been formally reviewed and approved by the United States Patent and Trademark Office (USPTO). The USPTO is an agency of the U.S. Department of Commerce. For more information on the USPTO, visit the website at: http://www.uspto.gov/. Generally speaking, rights in patents will be held by individual inventors, unless those rights are conveyed in a written assignment to another party (the “Assignee”), such as an employer. Therefore, in a business setting, when employees are creating intellectual property for the benefit of their employer, it is important for the employer to have IP agreements in place that require the employees to assign rights in patentable inventions that may be developed. The U.S. operates under a “first to invent” patent system, which can be contrasted with the “first to file” system that is used in most other countries throughout the world. More information is provided later in this chapter in the section on International Filing. The process of filing a patent application and interacting with the USPTO while the application is being examined is known as “patent prosecution” and is detailed later in this chapter. In this sense, the term “prosecution” has nothing to do with criminal law. The




term merely describes the patent application process and the negotiation that occurs between an applicant and the patent office during that process. In the U.S., patent law is set forth in Title 35 of the U.S. Code, also known as the Patent Act. http://www.uspto.gov/web/offices/pac/mpep/consolidated_laws.pdf In addition, the USPTO has a set of regulations that govern the agency. These regulations, or rules, can be found in Title 37 of the Code of Federal Regulations (CFR). http://www.uspto.gov/web/offices/pac/mpep/consolidated_rules.pdf The USPTO also maintains an operating manual for patent examiners, known as the “Manual of Patent Examining Procedure” or “MPEP.” The MPEP can be a very useful resource and provide helpful guidance for navigating through patent prosecution, although it does not have the force of law and courts are not bound to follow the MPEP. http://www.uspto.gov/web/offices/pac/mpep/index.html Patenting is a booming business in the United States and other countries. Nearly a half million patent applications were filed in the U.S. in 2008, and more than 1.2 million patent applications are currently pending in the USPTO. Additional patent statistics and details on activities in the patent office are available in the USPTO’s Annual Performance and Accountability Report. Visit: http://www.uspto.gov/web/offices/com/annual/index.html for more information. A. What may be patented? There are three types of patents that may be granted in the U.S.:

Utility patents may be granted to anyone who invents or discovers any new and useful process, machine, article of manufacture, or composition of matter, or any new and useful improvement thereof;

Design patents may be granted to anyone who invents a new, original, and ornamental design for an article of manufacture; and

Plant patents may be granted to anyone who invents or discovers and asexually reproduces any distinct and new variety of plant.

This chapter focuses specifically on utility patents, as the vast majority of patent applications filed and patents issued in the U.S. are utility patents; this is the type of patent that is usually most relevant to small technology-based start-up businesses. An invention may be eligible for patenting in the U.S. if it meets certain legal criteria described in the Patent Act, starting with the fact that the invention falls within one of the categories described above. In addition, there are further requirements set forth in other sections of the Patent Act, as well as in evolving case law that has set legal precedent in

http://www.uspto.gov/web/offices/pac/mpep/consolidated_laws.pdf

http://www.uspto.gov/web/offices/pac/mpep/consolidated_rules.pdf

http://www.uspto.gov/web/offices/pac/mpep/index.html

http://www.uspto.gov/web/offices/com/annual/index.html



interpreting the Patent Act. For example, computer programs are patent-eligible, but mathematical algorithms and laws of nature are not. Business methods and other processes are eligible for patent protection only if (i) the process is tied to a particular machine or apparatus, or (ii) the process transforms a particular article into a different state or thing. Key requirements for patentability include that the invention be novel, useful and nonobvious. These requirements are briefly described below.

Novelty means that the invention must be new, and not already in the “prior art.” Categories of prior art include prior patent applications, granted patents, printed publications, public use by others, inventions that are on sale, and other categories described in section 102 of the Patent Act. http://www.uspto.gov/web/offices/pac/mpep/documents/appxl_35_U_S_C_102.htm

Utility, or usefulness, generally means that the invention has a practical application. Current USPTO guidelines call for the claimed invention to have a “specific and substantial” utility. See section 2107 of the MPEP for more information. http://www.uspto.gov/web/offices/pac/mpep/documents/2100_2107.htm#sect2107

Nonobvious means that the invention represents an advance over the prior art that was not obvious to a person having ordinary skill in the art (PHOSITA). See section 103 of the Patent Act. http://www.uspto.gov/web/offices/pac/mpep/documents/appxl_35_U_S_C_103.htm

In the United States, you must file your patent application within strict time limits of one year from the earliest date that the invention is (i) described in a printed publication in the United States or a foreign country, or (ii) in public use or on sale in the United States. See the section on International Filing for stricter requirements for patent applications in other countries. Once you have determined whether your invention can be categorized as patentable subject matter, and it seems to meet the novelty, utility, and nonobviousness requirements, a patent application must be drafted in a way that meets the specification requirements under the Patent Act. According to Section 112 of the Patent Act, “the specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out his invention.” See http://www.uspto.gov/web/offices/pac/mpep/documents/appxl_35_U_S_C_112.htm.

http://www.uspto.gov/web/offices/pac/mpep/documents/appxl_35_U_S_C_102.htm


http://www.uspto.gov/web/offices/pac/mpep/documents/2100_2107.htm#sect2107

http://www.uspto.gov/web/offices/pac/mpep/documents/2100_2107.htm#sect2107






For a further description of what may be patented, and the legal requirements associated with patenting, visit the Inventor Resources section of the USPTO website: http://www.uspto.gov/web/offices/com/iip/index.htm. An experienced patent attorney or patent agent can help interpret the legal requirements, apply those requirements to the facts of your case, make a preliminary patentability determination, draft a patent application that meets the specification requirements, and navigate through patent prosecution. B. Patent Prosecution Patent prosecution is often a lengthy and complex process. The following is a high level summary of the process. References for more information are also included below. 1. Patent Search

Before filing a patent application, it is common to conduct a search, often referred to as a “patentability search” or “prior art search” to look for prior art that could be potentially relevant to your application. There is no legal requirement to conduct such a search unless you are requesting an expedited examination, yet conducting a search is a good business practice for several reasons. This type of patent search will provide a sense of the prior art landscape around your invention, and identify possible obstacles to patenting your invention. Knowing the prior art landscape in advance may save you valuable time and money in the long run, and may enable you to draft around prior art, resulting in a stronger issued patent that can better survive validity challenges down the road. Granted patents, and, in some cases, published patent applications, are publicly available on a number of websites, including the following:

The United States Patent and Trademark Office (USPTO) www.uspto.gov

The European Patent Office (EPO) www.epo.org

Google Patents www.google.com/patents?hl=en

Free Patents Online www.freepatentsonline.com

Patents2PDF www.pat2pdf.org

http://www.uspto.gov/web/offices/com/iip/index.htm


http://www.epo.org/

http://www.google.com/patents?hl=en

http://www.freepatentsonline.com/

http://www.pat2pdf.org/



Searching granted patents and published applications is a good starting place, but keep in mind that there is also non-patent prior art that can block your application. Technical journals and other printed or online publications, prior public uses of an invention, and inventions that are on-sale are all examples of non-patent prior art. A person who is experienced in patent searching will have a higher likelihood of knowing how to design and conduct a comprehensive prior art search, so it is recommended that you work with a patent attorney or patent agent. As previously mentioned, a search is not required unless you are requesting expedited examination of your patent application; however, if you do conduct a search, or if you are otherwise aware of potentially relevant prior art, it is required that you disclose the prior art to the patent office. This is done through an Information Disclosure Statement, or IDS. For more information, please refer to 37 C.F.R. §1.56, or “Rule 56” as it is commonly known. http://www.uspto.gov/web/offices/pac/mpep/documents/appxr_1_56.htm. 2. Provisional and Nonprovisional Patent Applications

Generally speaking, when we refer to filing a patent application, we are referring to the filing of a regular utility patent application, which is also known as a nonprovisional application. However, there is an option to file another kind of an application, known as a provisional patent application. A brief overview of provisional applications is provided below. In the U.S., a provisional application can establish an early priority date for your patent application, if it contains all of the details to meet the requirements of a nonprovisional filing. Most significantly, although a provisional application requires a complete disclosure, it does not require the filing of claims. More information about claims is included later in this section. It is important to understand that a provisional application is not substantively examined by the patent office and, therefore, a patent will not be issued as the result of a provisional filing. A provisional application will automatically expire one year after its filing date. In order to proceed through patent prosecution and ultimately receive an issued patent, an applicant must file a nonprovisional application. If timely filed (within one year), the nonprovisional application is given the filing date of the provisional application, but only if the provisional application meets all of the requirements of Section 112 of the Patent Act. If a nonprovisional application is not filed within one year, then the provisional application will be deemed abandoned and any nonprovisional application that is subsequently filed will be given its actual date of filing.

http://www.uspto.gov/web/offices/pac/mpep/documents/appxr_1_56.htm



Provisional applications are most frequently used as placeholders. They give applicants time to raise capital, draft claims, develop an application strategy, and test commercial viability of the invention. The 20-year patent term starts from the filing date for the nonprovisional application, not from the filing date of the provisional application. While provisional applications are extremely useful in most cases, it is sometimes more important from a business perspective to have a patent issue more quickly. In these cases, the provisional filing may not be advantageous. Provisional applications are governed by section 111(b) of the Patent Act. The USPTO website has a detailed explanation of provisional patent applications on its website: http://www.uspto.gov/web/offices/pac/provapp.htm. 3. Preparing and Filing a Nonprovisional Patent Application

A nonprovisional patent application will have three main parts: 1) a written description; 2) drawings (where necessary to understand the invention); and 3) claims. The most legally significant portion of the application is the patent claims because they define the scope of the patent owner’s right to exclude others from making, using, selling, offering to sell, or importing the invention in the United States during the patent term. In other words, the claims describe the legal boundaries of the patent, just as a real estate deed would define the geographic boundaries of a land owner’s rights to a piece of real property. When a patent is in dispute, such as in the case of an infringement lawsuit or in a challenge to patent validity, it is most often the claims section of the patent that is most closely scrutinized and determinative of the outcome. Once a patent application has been drafted and filed with the USPTO, the application will be classified according to the type of technology underlying the invention and a patent examiner will be assigned to the case. In due course, he or she will study the application to understand the invention, determine if the application meets the statutory requirements, conduct a prior art search, and make an initial determination of whether claims will be allowed or rejected. The patent examiner will communicate with the applicant or his/her registered attorney or registered patent agent through documents known as “office actions.” The time between filing an application and receiving a first office action can vary according to technology, as some areas of the patent office are more backlogged than others with pending applications. However, it can often take 18-24 months or longer to receive a first office action. The entire process, from filing to a final determination, can take three years or longer. In some areas of technology, the pendency is more than four years. Obtaining a patent is not a quick process, and patent rights will not take effect unless and until a patent is approved and finally issued, although an applicant can use the term “patent pending” after filing an application.

http://www.uspto.gov/web/offices/pac/provapp.htm



During patent prosecution, an examiner may request that the applicant narrow the scope of the claims or cancel claims. The applicant may take the steps suggested by the examiner or may present arguments to defend the claims contained in the original application. After the examination and negotiation process has occurred, the applicant will ultimately receive a Notice of Allowance, with some or all of the claims allowed, or a Final Rejection. An appeals process exists for applicants who wish to contest the determination of the patent examiner. The above description is a high level overview of the basic steps involved in U.S. patent prosecution. It is a highly complex process, with many details and nuances that are not fully described here. For more complete coverage of this topic, see “A Guide to Filing a Nonprovisional (Utility) Patent Application.” http://www.uspto.gov/web/offices/pac/utility/utility.htm 4. Cost of Patenting

Direct expenses related to patenting generally fall into two categories: 1) patent attorney fees or patent agent fees; and 2) official USPTO fees. Additionally, there are indirect expenses, including the time of the inventor or other designated individuals who will be working on activities such as drafting invention disclosures, reviewing drafts of patent applications, or assisting with office action responses. Patent attorney or patent agent fees will vary according to the amount of work that is performed by the attorney/agent and the rate that is charged for that work. Patent attorneys or agents may assist with patent searching, patent application drafting and filing, responding to office actions, representing the applicant in a variety of USPTO proceedings, and handling post-grant activities, such as tracking and paying maintenance fees. To budget appropriately for attorney/agent fees, it is best to discuss the fee structure up front and for all parties to set appropriate expectations. The USPTO publishes its fee schedule online at http://www.uspto.gov/go/fees/. Small businesses can take advantage of reduced USPTO fees. Many prosecution and maintenance fees are reduced 50% for small entities. For a definition of a “small entity” see §1.37 of the MPEP, available at http://www.uspto.gov/web/offices/pac/mpep/documents/appxr_1_27.htm. After a patent is issued, periodic maintenance fees are required to prevent a patent from being abandoned to the public. These fees are due 3 ½ , 7 ½, and 11 ½ years from the date that the patent is granted. The fees become progressively more expensive at each interval. For example, at the 3 ½ year mark, the first patent maintenance fee is currently $980 (or $490 for a small entity). At the 11 ½ year mark, the patent maintenance fee is currently $4110 (or $2055 for a small entity). More information on patent maintenance fees can be found at http://www.uspto.gov/web/offices/pac/maintfee/.

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Altogether, the cost to procure a patent can be very significant. It can easily cost $10,000 or more to file and obtain a patent (if the application is successful and claims are allowed). The expense can be greater or less, depending on the type of technology, the complexity of the invention, the number of claims in the application, the fees charged by the patent attorney/agent, the number of office actions received, and various other factors. Maintenance fees are additional and can top $7,500 per patent, if the patent is maintained throughout its full term. 5. International Filing

This chapter focuses mainly on patent law and process in the United States. It is important to note that the rights granted under a U.S. patent are only effective in the United States and not in other countries. There is no such thing as a worldwide or international patent. To obtain rights in foreign countries you must file directly in the patent office of that country or file through one of several international conventions/treaties. The most widely used patent convention is the Patent Cooperation Treaty, or PCT. The U.S. and the vast majority of other countries are signatories to this treaty. The basic principles of the PCT are outlined in §1801 of the MPEP: http://www.uspto.gov/web/offices/pac/mpep/documents/1800_1801.htm. The laws and rules concerning patenting in other countries are in some ways different from those in the U.S. Most significantly, the U.S. is a “first to invent” system whereas the rest of the world operates under a “first to file” system. This means that, in the U.S., when two parties have made the same invention, patent rights will belong to the first party to invent, rather than the first party to file a patent application; however, the first party must prove, during an “interference” proceeding in the USPTO, that he or she was the first to invent. This is why it is very important to keep accurate records and documentation of the invention, including the date of conception. The concept of an invention date can be quite important in U.S. patenting determinations, but has little significance in most foreign countries. Another important difference between the U.S. and other countries is that the U.S. allows the filing of patent applications up to a year after the invention was patented or described in a printed publication, in public use, or on sale. The occurrence of any of these activities or a nonconfidential divulgation of the invention will constitute an absolute bar to filing a patent application in other countries that require “absolute novelty.” If you wish to preserve the right to obtain a patent in countries outside the U.S., it is recommended that you seek the advice of patent counsel before disclosing information about your invention, or otherwise taking any action that might jeopardize your ability to file abroad.

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C. The Business Decision of Whether to Patent As discussed previously, an invention may be eligible for patenting in the U.S. if it meets the legal criteria described in the Patent Act as further interpreted by applicable case law. Specifically, the invention must fall within a category of patentable subject matter; it must be novel, useful, and non-obvious; and the patent application must disclose the invention in such a way that satisfies the specification requirements. Evaluating these factors will help you determine whether an invention may be patented from a legal perspective, but there are additional factors to consider when determining whether an invention should be patented from a business perspective. Some examples are provided below.

What is the overall IP and business strategy? What is your patent portfolio strategy? What is the coverage of your existing portfolio of patents and patent applications? How does this particular invention fit within that strategy and existing portfolio?

How easily could a competitor work around your patent? If it is easy to work around, the patent will be less valuable because there are available alternatives and it will be more difficult to block your competitors.

What is the expected lifespan of the invention? In a short-cycle business, such as computer software, patents may be less valuable than in a long-cycle business, such as pharmaceuticals. It can take several years for a patent to grant, and if the technology will have advanced beyond your patent by the time it issues, the patent will be less valuable. You will not have the same leverage if the technology is outdated when the patent is issued.

Are you willing to enforce the patent and can infringement be detected? If you are unwilling or unable to enforce a patent, its value will be significantly diminished. On a related note, if you are unable to detect infringement without the discovery of confidential information, which may only be available after you have commenced litigation, it will be more difficult to enforce your patent.

Have you considered alternative strategies? Trade secret protection and defensive publication both represent alternative strategies to patenting. When deciding whether to pursue patent protection, always consider your full range of options and how those options fit with your overall business strategy.

What are the expectations around cost? The initial cost to prepare and file an application is just that – an initial cost. There are additional costs and fees that will accrue along the way in responding to office actions, and paying the patent issue fee and maintenance fees. Be aware of the costs and plan for them.

D. Preparing to work with a Patent Attorney or Agent Although inventors may choose to represent themselves pro se before the patent office, most choose to work with an experienced patent attorney or agent that has the legal and technical knowledge necessary to competently navigate through patent prosecution. The



USPTO provides guidance on patent attorneys and agents on its website at http://www.uspto.gov/web/offices/pac/doc/general/attorney.htm. The attorney or agent will be most effective if he or she receives clear, factually accurate, and timely information from the inventor or assignee. It will be important to be able to answer the following questions when working with a patent attorney or agent:

What is the invention? Prepare in advance to describe the invention. Bring any documentation, drawings, inventor disclosures, or other similar documents that would help in understanding the essence of the invention.

What is the point of novelty? The attorney will be looking for the inventor's “aha” moment when the light bulb went on in her/his head. What is different about this invention that distinguishes it from prior art?

What was the date of invention? The attorney will want to know when the inventor conceived of the invention and whether there has been an “actual reduction to practice,” meaning that the invention has been made, such as a prototype, physical embodiment or process. It is helpful to keep inventor's notebooks so that this question can be answered easily and later evidenced, if necessary.

Who are the inventors? This question is important because all real and true inventors need to be named in an application and all inventors need to sign the application. Prior to assignment, the inventors will own the invention. Inventors are those who contributed to the invention's conception. The claims are the embodiment of the invention, and once the claims are drafted, everyone who conceived of any element of the claims should be listed as an inventor. Engineers and researchers who aided in reducing the invention to practice are not necessarily inventors.

What prior art are you aware of? This question concerns the novelty of the invention. Prior art will include granted patents, published patent applications, printed publications, and inventions that are on sale or in public use. Refer to 35 U.S.C. §102 for a complete list of prior art categories. Remember to include the inventor's own patents, patent applications and publications when answering this question. Virtually every invention builds on another's idea, so instances where there is no potentially relevant prior art are rare. Be candid with your attorney. Disclosure is required under patent law and will allow you to develop the best patenting strategy and the most effective claims. Failure to disclosure potentially relevant prior art can form a basis for invalidating the patent later.

Is this a first filing or have you already filed in a foreign office? The answer to this question is important because novelty can be defeated by patents granted on any foreign applications filed more than one year prior to filing in the U.S.

Are you ready to file a non-provisional application? If you are not ready to incur the expense of a non-provisional application, or you need more time to test the invention or its commercial viability, the provisional patent application may be a

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good short-term alternative. Just remember what a provisional application is and what it is not. It is essentially a placeholder. It is not a patent application that will be examined and result in a patent being granted.

E. Patent Tips for Entrepreneurs 1. Start Thinking About Patents Early. Patent systems in countries worldwide are designed to reward early activities and actions by inventors. The U.S. employs a "first-to-invent" system and other countries throughout the world have a "first-to-file system." In either case, even under the U.S.’s first-to-invent system, early patent filing is encouraged and rewarded. Certain activities in the U.S. may "start the clock" on a one-year grace period (time bar) in the U.S. for filing, or bar you from obtaining patents in other countries. Therefore, you must consider patent activities as early as possible to preserve your right to file and avoid the inadvertent loss of rights. Also be aware that the early actions of other parties can affect your rights as well. 2. Keep Good Records. Keeping good records of the invention process can be important for several reasons. Under the U.S. first-to-invent system, you may need to support or corroborate your invention date or provide evidence of the timing of certain activities that can trigger time bars. Good records also help to identify "true inventors," who must be named on a patent application. Even if you choose not to patent your own technology, good records can be critical in a defensive mode to protect against a claim of infringement by another party or to support a case of invalidity against another party's patent. Good records are best kept in the form of an Inventor's Notebook, with detailed, contemporaneous entries that are dated and witnessed. 3. Be Conscious of What You Keep Secret and What You Disclose. Entrepreneurs face competing priorities: some priorities favor early disclosure of information; some favor non-disclosure. It is advised that entrepreneurs carefully consider and make informed and affirmative decisions about what to disclose, to whom, and when. Certain disclosures can trigger the one-year time bar in the U.S. and bar the ability to seek patents in other countries. The use of non-disclosure (confidentiality) agreements is advisable, but be aware of their limitations. If you decide NOT to patent your technology, pro-active disclosure/publication can be part of an alternative strategy. 4. Understand the Interplay Between Global and Local. Although there is no such thing as a "worldwide" or "international" patent, activities outside the U.S. do matter to a U.S. inventor. Patents and printed publications anywhere in



the world can serve as "prior art" and bar your ability to obtain a patent in the U.S. Likewise, your own activities within the U.S. can impact your ability to patent elsewhere. Be aware that nearly half of U.S. patents and applications are not owned by U.S. residents. Therefore, your local competitors may not be the only ones to hold patents that can impact your business. 5. Plan for the Cost. There's no way around it: patents can be expensive to obtain, maintain, and enforce. To an entrepreneur or small start-up company, the cost can seem (and be) prohibitive. However, if technology is the main asset of your business, the cost of patenting may be an important investment that can better position you to grow your business or attract investors or buyers. There is a cost to NOT making the investment. To optimize your investment, make patenting decisions carefully and strategically with the help of an experienced patent attorney or agent. With regard to patent office fees, be aware that the USPTO has small-entity fees which are half of normal fees. Also be aware that fees are ongoing rather than one-time. Patent attorney/agent fees will far exceed the patent office fees, so don't be taken by surprise. Get a cost estimate from your attorney and work it into your financial plan. 6. If You File a Patent Application, You're Not Done. Expect To Wait. Patent prosecution can take a long time. There are currently more than 1.2 million patent applications pending before the USPTO. Average pendency to a first office action is currently greater than 24 months, and average pendency to a final allowance or rejection is currently greater than 32 months. In certain areas of technology, it can take much longer. In other words, after you file a patent application, in most cases you can expect to wait three, four or even five years to get a patent. To get the earliest possible effective date for your patent, consider a provisional application filing, but understand that provisionals are only placeholders and are not examined; getting a patent granted will require the filing of a regular utility application. Once you have filed an application, you are in a negotiation with the USPTO - expect office actions and claim amendments. You can use the term "patent pending" while you wait, but you will not have any enforceable rights until a patent is formally and finally granted by the government. 7. Consider Other Forms of IP Protection. Patents are one form of IP, not the only form of IP. Think about IP broadly and include trade secrets, copyright and trademarks in your IP portfolio. If you choose not to patent, and also choose not to maintain your technology as a trade secret, defensive publication can be part of an alternative strategy. By defensively publishing your invention, you are creating a prior art record that can bar others who may try to patent the same technology.



8. Think About IP Strategically. Ideally, IP should be considered strategically and not as an after-the-fact, check-the-box exercise. If you think about IP only after-the-fact, you risk losing certain rights or sub-optimizing some of the value. IP strategy should be an integral part of your overall business strategy. It's important to conduct an IP inventory, build an overall IP portfolio, and review and assess that portfolio regularly. Remember also that it's not only about protecting YOUR inventions; it's also about avoiding infringing the rights of others. It is important to think strategically about how to avoid infringement, and therefore avoid risk for your business. 9. Knowledge is (Usually) a Good Thing. Knowledge can be a good thing, but it does bring added responsibility. Knowledge about the patenting process will make you a better consumer of legal services. Knowledge about the competitive patent landscape can allow you to work around existing patents or more strategically plan your own portfolio. Having certain kinds of knowledge up-front can save you time, money and headaches in the long run. But knowledge also brings responsibility. Unless you are pursuing an accelerated examination process there is no requirement that you conduct a prior art search; however if you do have knowledge of prior art that is material to patentability, it must be disclosed to the PTO in Information Disclosure Statements (IDS). In an infringement context, reckless disregard of knowledge of a potential infringement can also, under certain circumstances, lead to claims of willful infringement and treble ($$$) damages. Disclose what you know to your patent attorney or agent and ensure that appropriate actions are taken. 10. Leverage the Experience of Experts. Work with a patent attorney or agent. Patent prosecution is very complicated and patent claim drafting is both a skill and an art that is developed over time with experience that an individual inventor is unlikely to have. While you can represent yourself pro se before the PTO, it may not be wise to do so. Also, certain work can only be done by patent attorneys (e.g., legal opinion work). However, there are things you can do to cut down on costs. The more and better information you bring to the table initially, and the more responsive you are to your patent attorney's questions and requests for information and documents, the easier and faster the process will go. III. Trademarks Trademarks and service marks (collectively, “trademarks” or “marks”) are words, symbols, names, or devices that identify and distinguish the source of goods or services. Common law trademark rights arise immediately upon beginning use of a mark on or in connection



with specific goods or services, nevertheless there are numerous advantages to owning a trademark registration, especially a federal registration. Marks that are used in interstate commerce may be federally registered with the trademark office within the United States Patent and Trademark Office (“USPTO”). Marks used only within New York State may be registered with the New York State Department of State (“NYS DOS”). More information on the trademark registration process is provided later in this chapter. Basic facts about trademarks are provided on the USPTO website at: http://www.uspto.gov/web/offices/tac/doc/basic/. Trademarks are indicators of the source or origin of a product or service. They can take the form of words, phrases, symbols, designs, or even sounds and smells. Trademarks are used to identify goods, while service marks are used to identify services; otherwise, the legal rules surrounding them are essentially the same.1 For convenience, “trademarks” will refer to both trademarks and service marks in this section. Trademarks are valuable tools once they become established because they can provide instant familiarity for the consumer, allowing consumers to identify the source of goods or services and establishing trust that goods and services will meet certain expectations. Companies such as McDonald's® have benefited greatly from the trademarks associated with their business. Consumers that see the Golden Arches sign or McDonald’s® name from the highway will know exactly what to expect if they take the next exit from the highway for a lunch break. Examples of other valuable and well-known trademarks are Coca-Cola® and Microsoft®. Names, stylized typesets, graphic logos, sounds, and colors can all be trademarked, as long as they have an identifying function that is unique to the trademark owner. Trademarks provide their owner with the right to exclude others from using their mark on or in connection with specific goods or services in a way that is likely to cause consumer confusion. A trademark owner does not have the right to exclude others from using the mark for unrelated goods or services where such use is unlikely to cause consumer confusion. For example, Ford Motor Company owns a series of trademark registrations for the mark FORD in connection with automobiles, automobile parts, and related goods. The mark FORD is also used by Ford Models, Inc. in connection with a modeling agency. Both are well known companies using the (famous) mark FORD, yet it is unlikely that consumers would confuse a Ford automobile with Ford modeling services and the use of the mark by both companies can peacefully co-exist in the market without consumer confusion.

1 There are some differences between service marks and trademarks during the registration process before the USPTO.

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In this section, we will focus on the following areas:

providing an overview of U.S. trademark law; selecting a trademark; obtaining a federal trademark registration; and maintaining and enforcing trademark rights.

A. Overview of Trademark Law Trademark rights and causes of action can arise under common law, state law and federal law. Common law rights arise from actual use of a mark, even without an accompanying registration, and are limited to the geographic area in which the mark is used. Common law rights are enforced at the state level, usually in connection with the state’s unfair competition laws. Marks used within state boundaries, and not in federal interstate commerce, may be registered with state offices responsible for trademark matters. Marks used only within New York State may be registered with the New York State Department of State (“NYS DOS”). For more information, visit the NYS DOS website at http://www.dos.state.ny.us/corp/miscfae.html. To learn about registering a trademark in a state other than New York, refer to the following list, which provides links to the various state offices responsible for trademark matters. http://www.uspto.gov/web/menu/statetmoffices.html Federal trademark law is governed under the Trademark Act, Title 15, Chapter 22 of the U.S. Code. The Trademark Act is commonly known as the Lanham Act. A copy of the rules of practice before the USPTO in trademark cases (37 C.F.R. Part II) and the Lanham (Trademark) Act can be found in the attached document available on the USPTO website: http://www.uspto.gov/web/offices/tac/tmlaw2.pdf. Federal registration is available for trademarks that are used in interstate commerce. For goods, "interstate commerce" involves sending the goods across state lines with the mark displayed on the goods or the packaging for the goods. For services, "interstate commerce" involves offering a service to those in another state or rendering a service that affects interstate commerce (e.g. restaurants, gas stations, hotels, etc.). The benefits of federal registration and an overview of the federal registration process are outlined in section C below. B. Selecting a Trademark 1. Selection Overview

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A start-up company will need to select a company name for the business, as well as names for products and services that are marketed by the business. When a company uses a name to conduct business, but the name is not used directly in connection with specific goods or services, this is known as a trade name. As discussed in Chapter 1, a trade name can be registered with the department of state, or other appropriate office at the state level, but the trade name does not acquire trademark rights unless it is used in connection with specific goods or services. When selecting a mark for goods or services, it is important to choose a mark that will be effective as a marketing tool for branding the product or service, and also be a strong mark from a legal perspective. It can be difficult to balance these two objectives for reasons further described below. From a legal perspective, there are several categories of marks. Each category will be afforded different level of protection depending on the strength and distinctiveness of the mark. The categories are as follows:

Fanciful or coined marks are afforded the highest level of trademark protection. In this category, the mark does not convey any direct relationship to the product or service. A coined marked is a word that is made up and has no plain English meaning. Examples include EXXON®, KODAK®, and PROZAC®. These words mean nothing, apart from the secondary meaning they have acquired in connection with products and services they have become known for. Although they are very strong trademarks from a legal perspective, it requires more effort from a marketing and branding perspective for the consuming public to associate the mark with specific goods and services.

Arbitrary marks include words that have a plain English meaning, but that meaning is not related at all to the products or services with which the mark is associated. Examples include APPLE® for computers and DOMINO® for sugar. Arbitrary marks are also afforded a very high level of trademark protection.

Suggestive marks suggest or hint at qualities or characteristics of a product or service, but do not directly describe the product or service. Some examples include JAGUAR® for an automobile, GREYHOUND® for transportation services, or COPPERTONE® for suntan lotion. Suggestive trademarks may be federally registered, and also tend to work well from a marketing and branding perspective, as the consumer is usually able to make some association with the goods and services offered under the mark.

Descriptive marks convey an immediate idea of the ingredients, qualities or characteristics of a product or service. That is, a consumer would immediately recognize what the product or service is based on the descriptive trademark associated with it. AMERICAN AIRLINES® is an example of a descriptive mark. Descriptive marks that merely describe a product are considered weak trademarks from a legal perspective and, in most cases, are not immediately protectable as



trademarks. Descriptive marks can, however, acquire “secondary meaning” when they have been used for an extended period of time and have been the subject of extensive marketing and advertising efforts that would lead the consuming public to make a connection between that mark and the product or service that it represents.

Generic marks can never be registered as trademarks. An example of a generic mark is SOFTWARE for software, COMPUTER for computers, APPLE for the fruit. Trademarks can either start out as generic, like the previous examples, or they can become generic due to improper use. Trademark owners must take affirmative steps to avoid their trademarks from being used in a generic way or their marks may become unenforceable. ESCALATOR and YO-YO are examples of trademarks that were lost due to the broad use of the word as a generic term apart from the brand name.

2. Trademark Searches When selecting a trademark, it is important to conduct an initial availability search to determine whether the mark is already in use by another party for similar goods or services. The most common starting point is a preliminary search, sometimes known as a “knock-out” search, during which you conduct a very basic search of the USPTO trademark records to determine whether the mark is already registered to another party for similar goods or services, or is the subject of a pending trademark application. USPTO records may be searched through the Trademark Electronic Search System (TESS) available at: http://tess2.uspto.gov/bin/gate.exe?f=tess&state=4005:hn1diu.1.1 In addition, it is a good practice to use an internet search engine such as Yahoo or Google to identify common law uses of the identical mark for similar goods or services. If you find that the same mark is already in use for similar products or services, you may want to consider using a different mark that is not already registered or in use by another party. Before proceeding with a trademark application, it is advisable to conduct a more comprehensive availability search than the initial knock-out search you may have already completed. In a comprehensive search, the USPTO registry, state trademark registries and common law databases are searched more broadly for similar marks that are already registered, in the application phase, or just in prior use for classes of goods and services that may conflict with your proposed use of the mark. In addition to merely searching for identical marks, a comprehensive search includes alternate spellings of the mark, and other minor variations that would render the mark non-identical, yet still be likely to cause consumer confusion. For example, BICK pens or BIK pens, although not spelled identically to the well-known mark “BIC pens” could be confusing to consumers since all three variations could be pronounced the same way. As another example, merely reversing the order of words within a trademark would not necessarily eliminate consumer confusion. The use of the mark “KING BURGER” could be

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considered likely to cause confusion with “BURGER KING®” even though the words are in a different order. Any mark that is similar in sight, sound or connotation with an earlier mark might create a likelihood of consumer confusion, and a comprehensive trademark search is designed to identify these prior marks whether registered or unregistered. There are numerous vendors that provide comprehensive trademark search services. Your trademark attorney can also provide search services, can interpret the search results, and can provide a written trademark availability or clearance opinion. C. Obtaining a Federal Trademark Registration 1. Benefits of Federal Trademark Registration Although common law trademark rights arise through the use of a mark on or in connection with specific goods or services, without any accompanying registration, there are a number of benefits to federal trademark registration. Some of these benefits include:

Constructive notice nationwide of the trademark owner’s claim. Evidence of ownership of the trademark. Jurisdiction of federal courts may be invoked. Registration can be used as a basis for obtaining registration in foreign countries. Registration may be filed with the U.S. Customs Service to prevent importation of

infringing foreign goods. 2. Overview of the Trademark Registration Process Once you have selected a trademark and conducted a search to determine its availability for your use, the next step is to file a trademark application with the USPTO. You may choose to file a trademark application before you have started using the mark, on an intent-to-use basis, or after you have commenced use of the mark, on an actual use basis. Note that the Trademark Office maintains two registers: 1) the Principal Register; and 2) the Supplemental Register. Nearly all marks are filed directly on the Principal Register. However, certain marks that are not eligible for registration on the Principal Register, but are capable of distinguishing an applicant's goods or services, such as a descriptive trademark, may be registered on the Supplemental Register. A coined, arbitrary or suggestive trademark will always be filed on the Principal Register. If you file on the Principal Register, but are only eligible for the Supplemental Register, you will be permitted to amend the application to change registers during the prosecution of the application. Applications with the USPTO can be made in writing or completed electronically through the Trademark Electronic Application System (TEAS), as found here:



http://www.uspto.gov/teas/eTEASpageA.htm The following basic information will be required for completion of an electronic application:

Owner of the mark – trademark applications can be filed in the name of an individual or a business entity

Name and address for correspondence – the applicant can represent him or herself, or can appoint an attorney to receive correspondence. You may elect to have the Trademark Office correspond with you by email, if desired.

Trademark – you must indicate what the trademark is, and whether it is a word mark or a design mark. For word marks, a drawing of the mark will be automatically generated by the TEAS system.

Basis for Filing - Most U.S. applicants base their application on their current use of the mark in commerce, or their bona fide intention to use their mark in commerce in the future. Current use is designated by a filing basis 1(a), and intent to use is designated by filing basis 1(b). The 1(a) and 1(b) designations refer to sections of the Trademark Act: 15 U.S.C. 1051(a) and (b), respectively. A further description of filing basis is available at: http://www.uspto.gov/go/tac/doc/basic/appcontent.htm - basis.

International Classification – goods and services are categorized in various trademark classifications. A high level schedule of classifications is available at http://www.uspto.gov/go/tac/doc/basic/international.htm.

Description of Goods or Services – you must include a description of the goods or services associated with the mark in each international classification. The description must be written in a format that is acceptable to the Trademark Office. Consult the U.S. Acceptable Identification of Goods and Services Manual for more information. http://tess2.uspto.gov/netahtml/tidm.html

Specimen of use – an actual example of the mark being used on the goods or in connection with the marketing of services is required for any application that is filed on an actual use basis. If you have not yet commenced use of the mark, and you are filing on an intent-to-use basis, then obviously you cannot file a specimen of use at the time of filing. You will file a specimen of use at a later stage when you actually begin using the mark. What constitutes an acceptable specimen depends on whether you are using the mark for goods or a service. Further guidance on specimens is available on the USPTO website: http://www.uspto.gov/go/tac/doc/basic/appcontent.htm - spec

Date of First Use – for applications filed on an actual use basis, you will be required to indicate the date when the mark was first used anywhere and the date of first use in interstate commerce.

Payment of Fee – a filing fee will be required for each international class listed in the trademark application. A list of trademark fees is available online at

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http://www.uspto.gov/go/fees/. Currently, the application fee per class ranges from $275 to $375 depending on the type of application submitted. To encourage electronic filing, the Trademark Office charges a lower fee for electronic filing and a higher fee for paper filing.

For more information on filing a trademark application, please refer to: “What the Application Must Include” from the USPTO website: http://www.uspto.gov/go/tac/doc/basic/appcontent.htm. Although paper filings are strongly discouraged by the Trademark Office, if you do not have access to the Internet, you can call the Trademark Assistance Center at 1-800-786-9199 to ask that a paper application be mailed to you. 3. Examination of a Trademark Application Once a trademark application is filed, it is issued a filing receipt and a serial number as a unique identifier for the application. Using the serial number, you may check on the status of an application through the Trademark Applications and Registrations Retrieval (TARR) database on the USPTO’s website at http://tarr.uspto.gov/. If you do not have access to the Internet, you can call the Trademark Assistance Center at 1-800-786-9199 (or 571-272-9250 if you live in Northern Virginia) to request a status check. Applicants should check on the status of their pending applications every six months. After being received, the application will be assigned to a trademark examiner who will conduct the examination process in accordance with the Trademark Manual of Examining Procedure (TMEP): http://tess2.uspto.gov/tmdb/tmep/ The examiner will communicate with the applicant or his/her designated attorney through documents known as Office Actions. In some cases, an examiner will communicate with an applicant or attorney in a less formal manner via telephone or email. In some cases, trademark applications are approved without the need for any office actions. In other cases, an examiner may refuse to register a mark for one or more of the reasons listed below. The applicant will then have a six-month period to respond to the office action as appropriate. If a response is not received within six months, the application will be declared abandoned. 4. Refusals to Register a Trademark The Trademark Office will refuse to register certain words, names, symbols or devices as trademarks. For example, a mark that merely is the generic name for the goods on which it is used cannot be registered. Additionally, Section 2 of the Trademark Act (15 U.S.C. §1052) contains several of the most common (though not the only) grounds for refusing registration. The grounds for refusal under Section 2 are summarized as follows:

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the proposed mark consists of or comprises immoral, deceptive, or scandalous

matter; the proposed mark may disparage or falsely suggest a connection with persons

(living or dead), institutions, beliefs, or national symbols, or bring them into contempt or disrepute;

the proposed mark consists of or comprises the flag or coat of arms, or other insignia of the United States, or of any State or municipality, or of any foreign nation;

the proposed mark consists of or comprises a name, portrait or signature identifying a particular living individual, except by that individual's written consent; or the name, signature, or portrait of a deceased President of the United States during the life of his widow, if any, except by the written consent of the widow;

the proposed mark so resembles a mark already registered in the Patent and Trademark Office (PTO) that use of the mark on applicant's goods or services are likely to cause confusion, mistake, or deception;

the proposed mark is merely descriptive or deceptively misdescriptive of applicant's goods or services;

the proposed mark is primarily geographically descriptive or deceptively geographically misdescriptive of applicant's goods or services;

the proposed mark is primarily merely a surname; and the proposed mark comprises any matter that, as a whole, is functional.

Despite an applicant’s arguments that its mark is registrable, an examiner may continue his or her refusal to register a mark for one or more reasons listed above. Upon a final refusal, the applicant can appeal the examiner’s refusal to the Trademark Trial and Appeal Board (TTAB). For more information on the TTAB, visit http://uspto.gov/go/dcom/ttab/index.html. 5. Notice of Publication and Opposition Period If the examining attorney raises no objections to registration, or if the applicant successfully overcomes all objections, the examining attorney will approve the mark for publication in the Official Gazette, a weekly publication of the USPTO. After the mark is published in the Official Gazette, any party who believes it may be damaged by registration of the mark has thirty (30) days from the publication date to file either an opposition or a request to extend the time to oppose. An opposition is similar to a proceeding in federal court, but it is held before the TTAB. For more information on the TTAB, visit http://uspto.gov/go/dcom/ttab/index.html.

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6. Registration If no opposition is filed or if the opposition is unsuccessful, the application enters the next stage of the registration process. A Certificate of Registration will issue for applications based on use. A Notice of Allowance will issue for intent-to-use applications. With respect to the latter, the applicant then has six (6) months from the date of the Notice of Allowance to either: (1) use the mark in commerce and submit a Statement of Use; or (2) request a six-month extension of time to file a Statement of Use. No more than five (5) extensions of time may be granted. After that point, the application will go abandoned. 7. Using Trademark Symbols Immediately upon use of a mark on specific goods or services, the ™ symbol (for trademarks) and SM symbol (for service marks) may be used, even without a federal registration, to denote an assertion of common law rights to a mark. The federal registration symbol ® may only be used once the mark is actually registered in the U.S. Patent and Trademark Office. Even though an application is pending, the registration symbol may not be used before the mark has actually become registered. The federal registration symbol should only be used on goods or services that are the subject of the federal trademark registration. 8. Maintaining a Trademark Registration For a trademark registration to remain valid, an Affidavit of Use, also known as a Section 8 Affidavit, must be filed, together with the appropriate fee, attesting to the continued use of the mark on or in connection with each and every product and service listed in the registration: (1) between the fifth and sixth year following registration, and (2) within the year before the end of every ten-year period after the date of registration. The registrant may file the affidavit within a grace period of six months after the end of the sixth or tenth year, with payment of an additional fee. The registrant must also file a Section 9 renewal application and fee within the year before the expiration date of a registration, or within a grace period of six months after the expiration date, with payment of an additional fee. Assuming that an affidavit of use is timely filed, registrations granted PRIOR to November 16, 1989 have a 20-year term, and registrations granted on or after November 16, 1989 have a 10-year term. This is also true for the renewal periods; renewals granted PRIOR to November 16, 1989 have a 20-year term, and renewals granted on or after November 16, 1989 have a 10-year term.



9. Trademark Infringement

A person infringes a federally registered trademark when, without the consent of the owner of the trademark, he or she uses the registered mark (or a colorable imitation) in connection with the sale or advertising of any goods or services, such that there is a likelihood that purchasers would be confused or deceived into believing that the source of the goods or services is the trademark owner. A federal cause of action for infringement is brought under 15 U.S.C. §§1114, 1125, and is properly brought in a federal court. U.S. federal courts have fashioned unique tests for what constitutes a “likelihood of confusion” by setting forth specific factors that should be considered to measure a likelihood of confusion. Typically, these factors include some variety of the following: (1) the strength of the mark; (2) the proximity of the goods; (3) the similarity of the marks; (4) evidence of actual confusion; (5) the similarity of marketing channels used; (6) the degree of caution exercised by the typical purchaser; and (7) the defendant's intent. In addition to bringing an action for infringement, owners of trademarks can also bring an action for trademark dilution under either federal or state law even in the absence of a likelihood of confusion. Under federal law, 15 U.S.C. §1125(c), a dilution claim can be brought only if the mark is "famous." In addition to federal trademark causes of action, there also may exist a number of state-law causes of action under state unfair competition law.

IV. Copyright Overview Copyright is a form of intellectual property law that protects original works of authorship including literary, dramatic, musical, and artistic works. Examples include poetry, novels, movies, songs, computer software, and architectural drawings. Works protected by copyright are more specifically defined in sections 102 and 103 of the Copyright Act: http://www.copyright.gov/title17/92chap1.html. An important factor in determining whether copyright protection is available for a work is the distinction between 'ideas' and 'expression'. In copyright language, this is often called the “idea-expression dichotomy.” Ideas are not copyrightable, but a fixed form of expression is. Further, copyright does not protect facts, inventions, systems, or methods of operation, although it may protect the way these things are expressed. As an example of the idea-expression dichotomy, several different authors may write books that cover the same or very similar ideas and topics. However, as long as each author creates an original work and does not copy from the work product created by another author, there is no violation of copyright.

http://www.copyright.gov/title17/92chap1.html



Examples of work products that may be subject to copyright in a business setting include a written business plan, system documentation, user manuals, computer software code, website content, books and other written materials. To obtain a copyright, an original work of authorship must be fixed in a tangible medium of expression. Copyright covers both published and unpublished works. A work is subject to copyright protection the moment it is created and fixed in a tangible form that is perceptible either directly or with the aid of a machine or device. Copyright registration is not required; however, there are benefits to registering a copyright, and it is necessary to do so if you wish to bring a suit under federal law for infringement of a U.S. work. The U.S. Copyright Office in Washington D.C. is one of the major service units of the Library of Congress. The Copyright Office website is available at http://www.copyright.gov/. A. Copyright Law Federal copyright law in the United States is governed under Title 17 of the U.S. Code (the “Copyright Act”), which is available at http://www.copyright.gov/title17/. The rights of a copyright owner are specifically enumerated in the Copyright Act and include the following:

To reproduce the work in copies or phonorecords. A “phonorecord” encompasses all the different formats in which a sound recording may be fixed, such as vinyl records, audiotapes, compact discs, and mp3s.

To prepare derivate works based upon the work; To distribute copies or phonorecords of the work to the public by sale, rental, lease,

or lending; To perform the work publicly; To display the work publicly; and In the case of sound recordings, to perform the work publicly by means of digital

audio transmission.

A work infringes a copyright if it is identical to the copyrighted work, or if it is substantially similar to the copyrighted work and the infringer had access to the copyrighted work. 1. Copyright Term Over time, there have been changes in the law regarding the term of a copyright – in other words, the period of time a copyright exists before the work passes into the public domain. For works created on or after January 1, 1978, the copyright term is 70 years after the author’s death. In the case of a joint work, the term lasts for 70 years after the last surviving author’s death. For a work made for hire (further described in section 4), and for anonymous works and pseudonymous works, the duration of copyright will be 95 years

http://www.copyright.gov/

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from publication or 120 years from creation, whichever is shorter. For works created before January 1, 1978, or for further details on copyright duration, please refer to the Copyright Office Circular 01: http://www.copyright.gov/circs/circ01.pdf, and Circular 15t: http://www.copyright.gov/circs/circ15t.pdf 2. Special Note on Computer Programs A computer program qualifies as a 'literary work' for the purposes of copyright, and all copyrightable expression within the program is protected by copyright. Copyright protection is not available for ideas, program logic, algorithms, systems, methods, concepts, or layouts. Further details about copyright and computer programs in available in Circular 61, titled “Copyright Registration for Computer Programs,” available from the Copyright Office at: http://www.copyright.gov/circs/circ61.pdf. 3. Collaborative Projects and Joint Authorship In today's business environment, collaborative projects occur frequently. Such projects tend to produce works with one or more authors that may qualify for copyright protection. A work that is created by multiple authors can either be: i) in the form of a “joint work” in which each author owns an undivided interest in the work as a whole; or ii) a work in which each contributor holds his or her own severable copyright interest in the portion of the work that he or she created. Each scenario requires an assessment of the facts and circumstances to determine if the parties intended to create a joint work, or works with separate copyright interests. The Copyright Act defines a “joint work” as “a work prepared by two or more authors with the intention that their contributions be merged into inseparable or interdependent parts of a unitary whole.” The intention of the parties is paramount in determining whether a joint work, or separate works have been created. Case law indicates that for a work to be a “joint work,” i) it must be contemplated by each of the parties (when each makes a contribution) that the contribution will be part of a unitary work to which another will make or has already made a contribution; and ii) each purported joint author must intend to contribute to a joint work at the time his or her alleged contribution is made. To prevent misunderstandings, it is important to define the intentions of the parties in writing. In the case of a joint work, each joint author will have an undivided interest in the whole, can grant licenses to the work, exploit the work, and take other actions without the consent of the other joint authors, although there is a duty to account to other joint authors for profits realized as a result of any such dealing or exploitation. 4. Works Made for Hire

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Although the general rule is that the person who creates a work is the author of that work, there is an exception to that principle under copyright law for a category of works called “works made for hire.” If a work is “made for hire,” the employer, or other hiring party, and not the individual who created the work, is considered the author. The employer or other hiring party may be a firm, an organization, or an individual. A work is considered made for hire if (1) the work is prepared by an employee within the scope of his or her employment or (2) the work was specifically ordered or commissioned for specifically defined purposes and under specific circumstances pursuant to a written agreement. The first provision applies exclusively to employees, and the second provision applies to independent contractors. Despite the fact that the Copyright clearly states that work made by an employee within the scope of his or her employment will be a work made for hire, it is a nonetheless a good practice for employers to require new hires to sign an employment or IP rights agreement that specifies the ownership of copyright and other intellectual property rights resulting from work made by employees. With respect to independent contractors, it is important that agreements be made in writing. Subsection (2) above refers to work “specifically ordered or commissioned for specifically defined purposes and under specific circumstances pursuant to a written agreement.” Working with independent contractors in the absence of a written agreement can lead to a variety of problems, including, but not limited to, issues related to the ownership of intellectual property. More information on works made for hire can be found in Circular 09 published by the Copyright Office: http://www.copyright.gov/circs/circ9.html. 5. Copyright Notices Copyrighted works may be identified with a copyright notice. Use of a copyright notice is not currently required under U.S. law. However, although use of the notice is optional, it serves a number of important purposes. It puts the public on notice that the work is protected by copyright and identifies the copyright owner. It also shows the year of first publication. If the work is later infringed, the existence of a copyright notice will make it more difficult for an infringer to claim innocent infringement to mitigate actual or statutory damages. The correct form of a copyright notice is as follows: The word “Copyright,” the abbreviation “Copr.”, or the symbol “©.” The date of first publication. The name of the owner of the copyright in the work. Example: © 2009 Albany Law School

http://www.copyright.gov/circs/circ9.html



In some instances you may see notices that also include the term “All Rights Reserved” immediately following the copyright notice. This is not required, nor does it provide any legal benefit, under U.S. law. Further details and guidance about use of a copyright notice can be found in Circular 3, published by the Copyright Office at: http://www.copyright.gov/circs/circ03.html. 6. Copyright Registration Copyright registration is available through the U.S. Copyright Office. Registration is not mandatory, but is required for a U.S. author that wishes to bring a suit for copyright infringement under federal law. It is also beneficial to promptly register an original work because statutory damages and attorneys’ fees are available as remedies if registration occurs either prior to infringement or within the first three months of first publication. Absent willfulness, statutory damages can range from between $750 and $30,000 per work, at the discretion of the court. If willfulness is proven, a plaintiff may be entitled to damages up to $150,000 per work. Otherwise, only actual damages and profits are available if infringement began before the copyright was registered. Actual damages and profits are often very difficult to prove. Also, for works registered within the first five years of publication, the certificate of registration creates a presumption in a court of law that the copyright is valid. Authors seeking copyright registration may apply to the Copyright Office, along with a small fee, and deposit copies of the work. The Copyright Office will only examine the work to the limited extent necessary to determine if the work contains copyrightable subject matter and whether the requirements of the application have been met. There is no substantive review of the work to determine the level of originality or to verify the claim by the author that he is or is the original author. In this sense, it is important to note that copyrights are “registered” not “granted.” For more information on copyright registration, please review the registration section of the Copyright Office’s Circular 01 at: http://www.copyright.gov/circs/circ1. To register a copyright work through the U.S. Copyright Office’s online application system, eCO, please visit: http://www.copyright.gov/register/. The Copyright Office’s fee schedule is available at: http://www.copyright.gov/docs/fees.html. 7. Fair Use One of the rights accorded to the owner of copyright is the right to reproduce or to authorize others to reproduce the copyrighted work. This right is, however, subject to

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certain limitations. One of the more important limitations is the doctrine of “fair use.” The doctrine of fair use has developed through case law over the years, and is currently codified in section 107 of the Copyright Act: http://www.copyright.gov/title17/92chap1.html - 107. Section 107 contains a list of the various purposes for which the reproduction of a particular work may be considered “fair,” such as criticism, comment, news reporting, teaching, scholarship, and research. Section 107 also sets out four factors to be considered in determining whether or not a particular use is fair:

the purpose and character of the use, including whether such use is of commercial nature or is for nonprofit educational purposes;

the nature of the copyrighted work; amount and substantiality of the portion used in relation to the copyrighted work as

a whole; and the effect of the use upon the potential market for or value of the copyrighted work.

Under certain limited circumstances, the doctrine of “fair use’ can be asserted as an affirmative defense to a claim of copyright infringement. However, it is important not to interpret the fair use doctrine too broadly. For example, although “nonprofit educational purposes” is listed within the first factor, there is no general exemption for academic research or wholesale copying of materials for classroom distribution. The other factors must be taken into account when determining whether an otherwise infringing use is subject to a fair use exemption. V. Trade Secrets Overview Trade secret law provides legal protection for information that is kept secret from competitors and provides economic value because competitors do not know the information. In order to maintain trade secret protection, affirmative steps must be taken to maintain the confidentiality of the information and prevent unauthorized disclosures. There is no registration of trade secrets. Perhaps the most famous trade secret in existence today is the Coca-Cola® formula. In some cases, trade secret protection may be an attractive alternative to patenting, as the cost is low and the protection will last as long as long as the information is kept secret. Subject matter eligible for trade secret protection can include marketing data, pricing information, manufacturing know-how, formulae, patterns, devices, business plans, software, customer lists and other compilations of information.

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Trade secret law is grounded in common law, but many states have also adopted trade secret statutes, most of which are based on the Uniform Trade Secrets Act, or UTSA. New York is one of the few states that have not adopted the UTSA. Under the UTSA, "trade secret" means information, including a formula, pattern, compilation, program device, method, technique, or process, that: (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. To determine whether a trade secret exists, a court may consider the following factors:

the extent to which the information is known outside the plaintiff's business; the extent to which the information is known by employees and others involved in

the plaintiff's business; the extent of measures taken by the plaintiff to guard the secrecy of the information; the value of the information to the plaintiff's business and to its competitors; the amount of time, effort, and money expended by the plaintiff in developing the

information; and the ease or difficulty with which the information could be properly acquired or

duplicated by others. A. Maintaining the Confidentiality of Trade Secrets The owner of a trade secret must take reasonable steps to ensure that the secret remains a secret. These steps may include:

Limiting disclosure to those who need knowledge of the trade secret. This includes limiting information that is disclosed to employees;

Physically limiting access to the trade secret; Using nondisclosure agreements to provide a contractual basis to prevent

disclosure, and to provide a contractual basis for relief if the trade secret is misappropriated; and

Periodically reviewing and updating the trade secret to ensure that the trade secret remains properly defined.

B. Trade Secret Misappropriation Under the UTSA, "misappropriation " means: (i) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or (ii) disclosure or use of a trade secret of another without express or implied consent by a person who (A) used improper means to acquire knowledge of the trade



secret; or (B) at the time of disclosure or use knew or had reason to know that his knowledge of the trade secret was (I) derived from or through a person who has utilized improper means to acquire it; (II) acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or (III) derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or (C) before a material change of his position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake. Trade secret misappropriation can occur in connection with the breach of nondisclosure agreements, fraudulent acts to obtain the information, or acts of industrial espionage. However, reverse engineering or other forensic analysis of a legitimately obtained product does not constitute misappropriation, which limits the value of trade secret protection for commercially available products. Because of this limitation, trade secrets are generally best suited to protect detailed information such as formulae, or other commercially valuable information that would be difficult to reverse engineer or analyze in a commercially valuable way. Independent development of a trade secret without improper disclosure or improper access to the trade secret or anyone who had knowledge of the trade secret is not a misappropriation. Successful plaintiffs in claims for misappropriation may receive injunctive relief and/or money damages. Money damages may be most appropriate when there has been wide dissemination of the trade secret. If the secret is no longer a secret, then an injunction may be meaningless to a plaintiff. Criminal prosecution is also available for extreme cases of theft or espionage. Evidence is critical in claims of misappropriation, and it is important for businesses to keep good records to ensure they can prove they took the necessary steps to ensure protection of the trade secret. Annual audits by legal experts to assess the precautions that a business is taking to maintain their trade secrets may often prove to be worth the time and money spent. C. Loss of Trade Secret Protection Although there is no set term for trade secret protection, protection ends when there is widespread dissemination of the trade secret. To put it simply, when the secret is no longer a secret the courts will not afford its holder legal protection. Dissemination may occur purposefully through publication or patenting. It may also occur accidentally if the information is inadvertently leaked to, or discovered by, the public. As long as the secret is not generally known, however, it may be protected as a secret.



To avoid the inadvertent loss of trade secret protection, an employer should consider implementing some or all of the following:

A written policy that covers confidential information/trade secrets and establishes procedures to maintain information confidential and secret;

Non-disclosure/confidentiality agreements with employees, independent contractors, and others who will have access to trade secret information;

Good policies and practices around the termination of employees to ensure that trade secret information does not walk out the door with employees, particularly those who are leaving to work for a competitor (i.e. exit interviews);

Document, email and other electronic control mechanisms to prevent the dissemination of secret communications; and

Clean desk policy so that trade secret and confidential papers are locked up and kept under control at all times.

D. Trade Secret Protection vs. Patent Protection If a company elects to patent a trade secret, it will lose the perpetual nature of the protection, since patent applications are published and patent protection only lasts 20 years from filing (or a minimum of 17 years). However it will gain the protection associated with patents, which can provide many benefits for the term of the patent. For example, while independent development of a trade secret is not a misappropriation, independent development of a previously patented invention is an infringement of the patent. Whether or not this tradeoff is worthwhile depends on the exact nature of the intellectual property and the details of the business.

Chapter 5 – Managing Agreements


CHAPTER 5 – MANAGING AGREEMENTS I. Introduction Start-up companies are likely to deal with contracts on a regular basis. Businesses and entrepreneurs who are eyeing commercialization of technology should be prepared to enter into a number of agreements involving the development, protection and licensing of intellectual property (“IP”). The structure of a new company and the stage of IP development will often determine the type(s) of contract(s) required for a specific transaction. An understanding of these contracts will help prepare the business for technology commercialization and growth. This chapter will familiarize a start-up business with the contracts it may encounter. This chapter will focus on

Non-disclosure Agreements/Confidentiality Agreements Licensing Agreements/Product Licenses Services Agreements Joint Development Agreements General Contract Provisions

Agreements dealing with company formation, employment, independent contractors or financing will be discussed in other sections of this handbook. II. Non-Disclosure Agreements Overview The work of many people is often required in order for a start-up company to bring a new technology to market. Commercialization may also involve the cooperation and joint efforts of multiple companies. During the development phase, it is frequently necessary for the start-up to permit third parties to test and evaluate a new technology. The third party may wish to evaluate how well the new technology performs in certain environments or whether it is suitable for integration and operation with other pre-existing technologies. Moreover, the start-up itself may desire third party evaluation and feedback to assist with improving its own internal development efforts. When collaborating with third parties during the commercialization process, a company may need to share information that it would otherwise not disclose. Such disclosure might include a wide range of information, even information pertaining to the company’s most critical IP. The disclosure could therefore result in the ideas behind the start-up’s new technology being appropriated by a third party or person – innocently or otherwise. For



these reasons, it will be necessary to negotiate and sign a non-disclosure agreement (“NDA”). The execution of an NDA prior to disclosure of patentable confidential information can also prevent the triggering of the one-year time bar in the United States for filing a patent application after information is made public. In fact, prior to making any disclosure to a third party, it is common for the party making the disclosure, usually referred to as the “disclosing party” or the “discloser,” to put an NDA in place. An NDA, also known as a confidentiality agreement, creates a contractual obligation between, or among, the parties to maintain the confidentiality of the information that they share with each other. It prohibits the parties that receive confidential information, usually referred to as a “receiving party” or the “recipient,” from disclosing that information to third parties or using it in an unauthorized way for the receiving party’s own benefit. Because the provisions of an NDA can vary widely, it is essential that these agreements be carefully reviewed prior to signing in order to ensure that each side is aware of the obligations created by the agreement. While it may seem obvious that there could be a risk involved in providing confidential information to others, there may also be a risk in receiving confidential information. By signing an NDA, a company typically agrees to keep the information confidential and not use the information for its own benefit. Therefore, entering into an NDA may create difficulty for a receiving party that has ideas, inventions or plans that are similar to the confidential information being shared by the disclosing party. If those ideas, inventions or plans are developed independently and without the use of the disclosing party’s confidential information, then typically there would be no violation of the NDA. However, where there is a reasonable chance that the receiving party may engage in work that is similar to the work being conducted by the disclosing party, the burden of possessing that potential competitor’s confidential information may pose a greater risk than the company wishes to assume. Even if a receiving party develops information independently without violating the terms of the NDA, the appearance that it might have breached the NDA can compromise an otherwise good working relationship. In some cases, a party may not wish to receive another entity’s confidential information, or it may believe that the other party is not providing confidential information. In these instances, a unilateral NDA can be employed. A unilateral, or “one-way”, NDA protects only the confidential information disclosed by one of the parties. Unilateral NDAs might be appropriate where a company needs to disclose details of a project or technology to suppliers, consultants and others who will be providing products or services to the company but who will not be disclosing their own confidential information. In other instances where each party will share confidential information, a bilateral NDA is probably appropriate. Bilateral, “two-way”, or “mutual” agreements may also be appropriate for



cases where there is co-development or where deeper collaboration between the parties is necessary. Finally, in certain situations, an “evaluation” NDA might be a suitable agreement. Such an NDA is usually entered into when two or more parties are considering whether to do business together and, accordingly, only want to share a limited amount of confidential information to determine whether such an arrangement will be beneficial to all. An NDA executed for business evaluation purposes is usually, therefore, more limited in both scope and duration. It is most often bilateral, although it can be unilateral as well. Regardless of whether the NDA is unilateral or bilateral, it is imperative that the agreement clearly and accurately reflect the understanding of the parties. The following discussion evaluates key components of an NDA. A company engaged in discussion regarding an NDA or in the process of signing an NDA should consider all of these issues before executing any agreement. A. Components of an NDA Several key terms should be included in every NDA, regardless of the business arrangement or the nature of the deal. These key terms include:

Definition of confidential information Use rights Compelled disclosure Term Warranty/limitation of liability

1. Definition of Confidential Information

Not every piece of information that parties share during business discussions is confidential. Therefore, NDAs should clearly identify what information is truly confidential and should be protected. It is vital that the confidential information (“CI”) be clearly and accurately defined so that the CI is adequately protected and its use is appropriately limited. The definition of CI should be broad enough to encompass all non-public information that the recipient may come in contact with, including research notebooks and technical plans. CI may also include customer, business, research or development information, as well as know-how, methods, techniques and processes. When determining what information is confidential, a start-up should also include any material that might eventually be protected by patent or copyright. To protect types of confidential information that might not have been contemplated when the NDA was drafted, the agreement should also include as CI any information that the discloser



identifies as confidential information when it discloses the information to the recipient. The key to defining CI is to include any non-public information that could harm the start-up company if released. Finally, the definition of CI often expressly lists the types of information that are excluded from the definition of CI and do not need to be treated confidentially, including publicly available information. Most NDAs specify the type of information that is protected. For example, if a company wishes to share information related to an entire computer system, but the agreement only protects information that is related to a subsystem, then any information that is disclosed regarding the entire system, and not specifically protected in the NDA, would be disclosed without the benefit of NDA protection. The specified information can be described very broadly (e.g., all information related to the company’s technology) or very narrowly (e.g., only information that is related to the integration of the company’s technology with XXX’s notebook computers) as necessary to protect the company’s interests. As business relationships develop, the scope of information that is disclosed typically grows. It is crucial to insure that the scope of the NDA expands as well. Therefore, the scope and applicability of an agreement should be evaluated on a periodic basis. 2. Use Rights

Just as it is important to carefully define the CI covered by the NDA, it is equally important to limit the use of the CI that is covered under the agreement. Language defining the purpose for which the CI is being shared should be included in the NDA. For example, if the purpose of sharing the CI is to explore a potential business opportunity or evaluate a joint technology project, the agreement should clearly state this intent. Use of the CI should be limited to achieving that purpose. Most importantly, as mentioned above, language should be included that does not permit the recipient’s use of the CI for its own benefit. Additionally, use of the CI should be limited to those individuals in the recipient’s company who have a need to know and who are under an obligation of confidentiality to the recipient. The NDA may also permit the recipient to share the CI with individuals outside the company who have a need to know and who are under an obligation of confidentiality to the recipient, such as lawyers or consultants. The recipient company, however, should be held liable for any breach of the NDA by such third parties and language stating such obligation should be incorporated into the NDA. Finally, language should be included that requires the recipient to use reasonable care in protecting the CI. Specifically, such care should be at least the same degree of care as recipient uses to protect its own CI. 3. Compelled Disclosure

Because a recipient of CI may be required by law to disclose the CI in response to a subpoena or a government inquiry, language in the NDA should make clear that, while



disclosure under these circumstances does not violate the terms of the NDA, such disclosure should be limited to only that information which is required to comply with the law. Language should be included that requires the recipient in that circumstance to provide prompt written notice to the discloser and to disclose only such CI as is required. Often, disclosing companies will also include language that places an affirmative obligation on the recipient to take reasonable actions and to provide reasonable assistance to the discloser in order to secure confidential treatment of the CI and limit the CI that is disclosed. 4. Duration of Confidentiality Obligation

The length of time during which the CI must be treated confidentially should always be clearly set forth in the agreement. It is especially important to note the duration of such obligation when, as is usually the case, the confidentiality obligations are intended to survive the termination of the underlying agreement. Otherwise, at the end of the contract period, the contractual obligation to maintain information confidentially is terminated, and a party is free to speak about, or act using information that was disclosed during the term of the agreement. Unless otherwise specified, the confidentiality obligation may remain in perpetuity. The period of confidentiality can also be based upon the expiration of the agreement, the date upon which information is disclosed, a calendar date, or upon the date of an event, or when certain conditions are met, such as when the information becomes public or when a product is released. At a minimum, this period should be sufficient to allow a company to file for patent protection and preferably will last until the company’s product is introduced. Finally, following the period in which the information provided was treated confidentially, provisions for its return should be incorporated into the NDA. The recipient should be required to return the CI or destroy the CI and certifying that it has complied. The provisions of an NDA can be incorporated in other agreements. In such circumstances, the legal analysis regarding confidentiality terms remains the same, regardless of where they appear. If confidentiality provisions are incorporated within the scope of a larger agreement, it is also important to review the scope and duration of the protection as compared to previous NDAs. For example, since the NDA and the larger agreement into which it is being incorporated by reference probably have different durations, the language in the larger agreement may state that notwithstanding the term provisions of the NDA, the NDA will remain in effect for the duration of the larger agreement. 5. Warranties/Limitations of Liability

To limit unnecessary risk and litigation, an NDA should state that the information provided by disclosing party to the recipient is provided “as is” with no warranties of accuracy,



reliability or completeness. Although the disclosing party may warrant that it has the right to make the disclosures to the recipient, a company may want to limit its exposure by making clear that it has no liability to recipient or recipient’s representatives arising out of the use of the CI. III. Licensing Agreements/Product Licenses Overview For many technology companies, licensing is a preferred method by which they can capitalize upon the successful development of their technology and intellectual property. A license agreement grants the licensee, among other rights, the right to use the specified IP. In return, the licensee provides the licensor with compensation for these rights granted under the license. Specifically, the agreement governs the relationship between the parties and sets forth the rights and limitations of the licensee, as well as the duties and obligations of the licensor. There are several issues that a company must decide when licensing its technology. For example, the company should determine whether the license should simply grant rights to the licensee or whether it should also include some type of “grant-back” of rights from the licensee (bilateral vs. unilateral license). The agreement should clearly indicate what the scope of the technology being licensed is and whether the licensee can improve on the technology. In the event that that licensee is permitted to do so, the license agreement should clearly set forth which party owns the IP rights in the improved technology. Moreover, the license agreement should address payment and royalty considerations, assignment and/or transferability of the license, and what happens if either party breaches the terms of the agreement. A. Components of a License Agreement Overall, a typical license agreement should include the following key terms:

Definition of licensed technology License grant Use restrictions Payment terms/royalties, if appropriate Term of license Termination Additional terms



1. Definition of licensed technology

A license agreement should clearly define the technology that is being licensed. Licensed technology may include any technology that is owned or legally controlled by the licensor and that relates to such things as ideas, innovations, inventions, know-how, methods, or techniques held by the licensor. It is vital that the licensed technology or patent be completely and accurately defined so that the use of the technology by the licensee is adequately described and appropriately limited. As with an NDA, the scope of the license or the definition of the licensed technology may grow or evolve as the relationship between the licensee and licensor develops. It is crucial to ensure that the scope of the license agreement expands with the expansion of use and/or restrictions of the licensed technology. Therefore, the license agreement should be evaluated on a periodic basis and amended, if necessary.

2. License Grant

The license grant is the core of a license agreement. It establishes the parameters of what the licensee may do with the licensed technology and identifies the limits of the license. A license grant should clearly establish that the technology is being licensed only, and that no ownership rights are being granted or conveyed under the license agreement. The license grant should also clearly state whether the license is an exclusive or non-exclusive license. An exclusive license is one that precludes the licensor from granting the same rights to another party. In a non-exclusive licensing arrangement, the licensor may grant licenses to multiple licensees, and no single licensee receives exclusive rights to the licensed technology. An exclusive license may merit more compensation on the part of the licensee than a non-exclusive license does for the same technology. Non-exclusive licenses grant only a right to practice without interference from the licensor. As such, it is important for the licensee to be able to work with the licensor to ensure that the IP will be protected if a non-exclusive license is granted. The license agreement may also limit the use of the licensed technology to a specific field of use or to a specific geographic territory. A field of use places certain restrictions on the permitted use of the licensed technology. For example, a company may issue a license for a touch screen technology for portable music players, but not for laptop computers. A license for such limited use may be exclusive or nonexclusive within the field of use. Licenses can also be limited geographically, based on product lines, or product applications. The broadest license available is a worldwide license which does not contain limitations on field of use.



3. Use Restrictions

In the event that the licensed technology is subject to general use restrictions such as limitations on reverse engineering, decompiling, disassembling or making derivative works, these restrictions should be clearly set forth in the license agreement. The agreement should also provide for termination of the license or other potential damages for failure by the licensee to comply with the restrictions. Other areas that may require use restrictions include any attempt to unlock or bypass an encryption method or copy protection device, as well as any attempt to alter, remove or obscure a patent, trademark or copyright notice on the licensed technology. 4. Payment Terms

Compensation for the use of a licensed technology can take many forms, including money, preferred pricing agreements, or licenses to other technologies (called a “cross license”). In many cases, a license will contain an initial license payment as well as provisions for ongoing royalties and annual maintenance and technical support fees. If the license agreement obligates the licensor to develop the licensed technology under a services arrangement, the agreement may also contain milestone payments to made upon completion of prescribed portions or milestones of the development. The presence of royalties or maintenance fees at least partially aligns the interest of the licensee and licensor, encouraging both parties to abide by the terms and conditions set forth in the license agreement for the continuing benefit of both. Compensation associated with a license varies depending on the circumstances. Often, licenses for proven IP – patents that are the basis of products that are commercially viable and/or trademarks or copyrights that have been established as commercially useful – will demand the highest compensation. It is important for both the licensor and licensee to realize that it requires more than technology to commercialize a product, and while it might be tempting for the licensor to demand a premium, there may be significant additional investment required to bring a product to market. Finally, as mentioned above, exclusive licenses are often more likely to require payment of larger license fees and/or guaranteed minimum royalties, since if the licensee does not effectively exploit the licensed technology, the IP owner will be kept out of the marketplace. 5. Term of License

All licenses should have a defined time period – even if that period is for the duration of the intellectual property’s protectable lifespan. There may also be an event that ends the agreement; such as if a party defaults or becomes bankrupt. It is necessary to make provisions for these scenarios in the license agreement and to consider the impact of a



party’s bankruptcy, to ensure that the parties are protected, even if these scenarios seem unlikely to occur. Terms and conditions for the return of the licensed technology in the event of a license agreement termination should also be set forth in this section. Language should also be incorporated to address the damages owed by each party and/or other remedies available, as applicable, in the event of a breach of the license agreement by the other party. 6. Termination Generally

Although most parties put significant thought into how to begin a business relationship, they do not as often think about successful exit strategies, particularly in situations where changing circumstances might lead to termination of an agreement prior to its scheduled termination date. Typically, an agreement can terminate in one of three ways. First, an agreement can end on its stated termination date which the parties agreed to upon execution of the agreement. In other words, the agreement expires according to its term. Second, an agreement can terminate prior to its stated termination date if one or both parties terminate the agreement for no reason other than changed circumstances indicate that termination is necessary or appropriate. Termination on this basis is referred to as “termination without cause” and generally requires a provision in the contract explicitly permitting such a termination. Third, an agreement may be terminated by one or both parties if, for various reasons, one or both parties have breached – or did not meet the obligations set forth in the agreement. Such a termination is known as a “termination for cause” and is discussed in detail below. 7. Termination Due to Breach

Because parties usually do not enter into an agreement with an expectation that something will go wrong, companies may fail to carefully consider or evaluate termination clauses when contracts are initially drafted. When the business relationship is going well, neither party may be concerned with how, or under what circumstances, the contract might end. However, particularly if the parties’ relationship begins to deteriorate, it is imperative to have a comprehensive termination provision set forth in the contract to resolve outstanding issues dealing with, among other things, ownership of IP, loss of license rights, and continuing obligations. The agreement should set forth the definition of a material breach. A material breach is often defined as a failure to do something that is required in a contract where the breach is serious enough to destroy or significantly diminish the value of the contract. In other words, it is a substantial failure in the performance of a contract, significant enough to release the aggrieved party from its obligation(s). In the event that a material breach occurs, one or both of the parties may wish to have the contract "enforced" on its terms, or may try to recover for any financial harm caused by the alleged breach. A termination for



cause provision might establish the ground rules for the parties if such a material breach occurs. The contract should expressly state that a material breach can trigger a termination for cause. The termination for cause provision usually allows one party to terminate the contract if the other party has not cured, or corrected, the breach – if possible – after proper notice. Often, termination language states that if either party breaches a material obligation under the agreement and such breach is not cured within some specified time period after receipt of written notice, the non-breaching party is permitted to terminate the agreement. Without this provision, it may not be clear when one party can terminate the contract if the other party isn’t performing. In that case, a party may be forced to sue the other party or risk being subjected to a lawsuit if the contract is not properly terminated. A termination for convenience provision incorporates language that provides the parties with the option to terminate the agreement without cause upon advance written notice to the other party. How far in advance such a notice should be provided depends on the circumstances of the parties. In some case, a notice period of 30 days may be acceptable to both parties. In other cases, either party (usually the licensee) may be so dependent on the agreement that it may require a longer notice period in order to wind down its dependence on the agreement and arrange for an alternative business option. In the event of such termination for convenience, the agreement should clearly spell out the manner for determining and allocating costs and losses, particularly those incurred by the non-terminating party. Finally, as part of termination clause, parties should consider and address loss of use, if applicable and appropriate, of the licensed technology following termination (i.e., suspending license grant), ownership of any licensed technology, continuing relations/business agreements, and alternative dispute resolution (“ADR”). ADR is discussed in more detail at the end of this chapter. B. Representations, Warranties and Indemnification Several important terms and conditions should also be expressed in the agreement. Usually, such terms are defined and then set apart by capitalization or upper case letters when they are referenced in other parts of the writing. Capitalization helps to resolve any possible doubt that the words are meant to refer to the defined term. Moreover, since capitalization is a standard legal convention, great care should be taken not to capitalize terms that are not defined in the contract, and to use all capitalized (i.e., defined) terms consistently throughout the agreement to avoid ambiguities, which may lead to disputes. Other important terms of a license might include:

Representations: A license agreement will often contain a statement of fact which, on the basis of its accuracy, the parties have agreed to enter into the agreement. A common example of a representation is the verification that no litigation is pending



against one of the parties to an agreement. Similarly, parties often ask for a representation that no patent infringement claims have been filed against the other party. A representation is a statement concerning events or facts that are true and which took place, or were in effect, prior to the execution of the agreement. Whereas a representation is only a matter of collateral information or intelligence on the subject of the contract, a warranty (discussed below) is a condition that must be met once the contract is signed, and therefore, must be strictly and literally complied with in order to avoid a breach of warranty. It is sufficient if the representation is true in substance. However, it is a best practice to indicate in a representation that the information contained in the agreement is “to the best of the company’s knowledge,” in the event that there is an issue of fact that the business is not aware of or did not know at the time the contract was signed. Warranty: A license agreement typically contains some type of warranty and/or limitation of liability clause. The focus and extent of such warranties or limitations will vary, with the licensor and the licensee desiring different terms, and it is important to note that protracted negotiations are often required to reach an agreement on the type of warranties provided.

A standard warranty clause might warrant, or guarantee, that the parties have the right to enter into the agreement and perform the obligations created by the agreement. A limited product warranty may also be provided by the licensor, but the licensor should take care to limit exposure to risk and litigation by, for example, carefully crafting the warranty to apply only to material defects for a defined period of time. A licensee may also wish the licensor to warrant that the licensed technology will conform to any documentation or specifications provided with the technology.

The licensor should consider disclaiming any additional warranties, including warranties of merchantability or fitness for a particular purpose. A licensor should generally also avoid providing a warranty that the licensed technology does not infringe the IP rights of third parties – something that is always difficult for a licensor to know for certainty. As explained below in the indemnification discussion, this does not mean the licensee is left unprotected if it is sued by a third party based on infringement of that party’s IP by the licensed technology. Overall, both parties should avoid, where possible, providing a warranty if it is possible that such a warranty could be breached or if the party does not believe it can honor the guaranty. An attorney familiar with licensing agreements should be able to provide information on what warranties are appropriate for the licensed technology covered by the agreement.

Indemnification: In an indemnification clause, the party providing the indemnity (known as the "Indemnitor") promises to protect the other party (the "Indemnitee")



from future losses that may arise in connection with the parties' performance under the contract. In this way, an indemnity clause serves as a way for the parties to allocate risk under the contract. As an example, an indemnification provision might specify that Party A would provide compensation to Party B to cover losses incurred by Party B in the event that a representation made by Party A turns out not to be true, and the misrepresentation causes harm. An indemnification provision may also allocate the risk in an agreement by stating the obligations of the parties in the event a third party is harmed due to the actions of the parties when performing the contract. For example, a licensee may require that the licensor include language in the license agreement that protects it from a claim of infringement by a third party where the licensed technology infringes that party’s patent, copyright or trademark. If the licensor agrees to provide such protection, or indemnification, the licensor may wish to limit the scope of obligation in the event that the licensee caused such infringement through the licensee’s own acts or willful infringement. The licensor should also consider whether it can acquire insurance sufficient to cover its indemnification obligations and the cost of such insurance. Finally, the licensor may wish to seek indemnification from the licensee for any liabilities arising out of the licensee’s unauthorized use of the licensed technology or from use of the licensed technology outside the scope of the license grant. For example, the licensor may seek to disclaim all liability, either direct or indirect damage, resulting from such unauthorized use. Additional Terms: Licensors and licensees may also negotiate and agree on certain items such as insurance requirements, sublicensing, transferability, remedies for breach of contract, and other terms to ensure that the IP is exploited to the commercial advantage of the parties. IV. Services Agreements Overview Services agreements are appropriate for start-up companies that offer professional services instead of, or in addition to, software, technology or other products. Unlike a license agreement, a services agreement covers the creation of specific deliverables according to the terms of an agreement between the parties. The specifications for the deliverables are included in a Statement of Work (“SOW”) that is attached to the services agreement. An SOW also usually sets forth the milestones to be achieved and the payment required from the client for each milestone reached. A services agreement should carefully detail the terms and conditions for delivery and clearly define the expectations of the parties with respect to the services to be provided, including service levels and/or



technical support, where applicable. At a minimum, a services agreement should include a complete description of the services to be provided, any required client obligations or duties necessary to assist with the completion of the services, such as access to client facilities or computers, and the necessary rights to any customer materials needed to complete the services. If applicable, rights to ownership of any deliverables should also be carefully evaluated and set forth in the agreement. A. Components of a Services Agreement Services agreements are imperative for companies who provide professional services to companies. Such professional services may include the creation of a specific, tangible deliverable or could be the provision of a service, such as Internet hosting services or alternative energy services. Services agreements can be drafted to address complex technology needs, and can be used to implement solutions to a variety of companies. Some common items that are addressed in a services agreement include:

Ownership of IP Client cooperation Fees/payment Termination

1. Ownership of IP Apart from an accurate and complete description of the services to be provided, perhaps the most important element of a services agreement is ownership of the deliverable created under the SOW. From the standpoint of the service provider, the services agreement might state that all right, title and interest to the deliverables developed under the agreement are retained by the service provider (or licensor of the services, if applicable). Similar to the issue with warranties discussed above, however, the provider of services and the company requiring such services may have very different perspectives on ownership of deliverables. Many companies, particularly larger companies with greater negotiating power, adopt an approach that if they pay services fees for the development of IP then they own that IP. This point will usually be heavily negotiated in contract discussions, with each side determined to retain ownership. In any event, where applicable and appropriate, the services agreement should also grant the other party a license to use the deliverables within the scope of the agreement. Where the services to be provided are strictly service-based and do not result in a deliverable, the service provider might demand that ownership of original materials, methods, processes and other know-how to perform the services be expressly retained by the service provider. However, to the extent that the customer, or licensee, has provided any proprietary information necessary to complete the deliverables or provide the services, the service agreement might confirm that ownership of that information is



retained by the customer, and that no ownership rights in the proprietary information transferred to the service provider under the agreement. Finally, for deliverables that are created at the explicit instruction of the customer and where ownership is expected to be transferred to the customer under a “work made for hire” agreement, such agreement should clearly set forth the nature of the work to be provided (i.e., work for hire) and the fact that ownership in the deliverable will transfer to the customer at the time of creation. A complete discussion of a “work made for hire” is provided in Chapter 4 of the handbook. For purposes of this chapter, it is sufficient to differentiate between a deliverable owned by the service provider and licensed to a customer and a “work made for hire” owned by the customer who contracted for the work to be performed.

2. Client Cooperation

In a services agreement, it is imperative that a customer or client (or licensee of the services, if applicable) is contractually obligated to perform any duties or provide any information necessary to complete the services. Often, in addition to access to facilities and/or computers, a client might be required to provide any data, information or technological know-how needed by the service provider to meet its obligations under the agreement. In some cases, the customer may need to provide certain graphics or other technology in order to complete the deliverable. In this case, the appropriate sublicense rights must be granted to the service provider to use the third party content. For the perspective of the service provider, therefore, the services agreement should state that the service provider (or licensor of the services, if applicable) is not responsible for any delay or deficiency caused by a breach of the client’s expressed duties or obligations. Such client cooperation should be required to occur on a timely basis and in the manner set forth in the service agreement. The service agreement should also provide for damages in the event of a breach by the client in providing such cooperation. 3. Fees/Payment

As discussed above, fees due under a services agreement are often set forth in an SOW and correspond to the completion of an appropriate milestone in the development of a deliverable. Milestone payments may be based on an estimate of time and materials needed to perform each piece of the work. Alternatively, these payments may be based on the percentage of the total cost of the creation of the deliverables. A lump sum payment may be appropriate in certain situations, as might a monthly fee for services provided. It is important for the service provider (or licensor of the services, if applicable) to understand the cost to perform the services and accurately capture such information in the services agreement so that upfront costs are limited.



4. Termination

As discussed above, the terms and conditions that apply in the event of a termination of an agreement should be carefully considered and set forth in the agreement. For a services agreement, termination clauses should also consider what to do in the event the agreement is terminated prior to completion of any stated milestones. For example, the provision should address whether the service provider is entitled to any payment for the unfinished part of the SOW or whether repayment of any money paid in advance is appropriate and applicable. It should also address ownership of any IP developed up to the date of termination. The termination provision in a services agreement might also address liquidated and other damages as well as any excess cost incurred by the customer in completing the contract under a new service provider. V. Joint Development Agreements Overview A joint development agreement (“JDA”) is a written agreement that allows for the coordinated activities of two or more entities on continuing development or commercialization of certain IP. JDAs can be used to advance a technology, develop a prototype, bring a product to market, or complete steps necessary for additional commercialization. JDAs typically cover the allocation of work, distribution of intellectual property, payment related to the development of the technologies, and the management of the collaboration between the companies. Typically, the motivating factor for a joint development arrangement is that each party has technology that the other party can benefit from and expand upon or develop jointly. The JDA is the framework on which the relationship is built. Because it will govern the relationship of the parties and may be called upon if conflicts or disputes arise, the JDA should be negotiated and drafted with care and attention to detail. Therefore, it is important to raise and negotiate the major points of the relationship to avoid uncertainty and potentially time-consuming and expensive litigation. In addition, the JDA should set forth the scope of the work, where the work is to be performed, a schedule for the completion of various tasks, and identify which party will perform each portion of the work. A. Ownership A JDA should clearly address the contribution of each partner to the project and clarify ownership of initial contributions by the parties as well as resulting developments. Specifically, each partner's contribution should be set forth in the JDA as either part of the main contract or as an appendix to it. Each party should carefully evaluate and appropriately license their initial contribution, usually referred to as “Background IP.”



Background IP is the pre-existing IP that each party owns individually and brings into the joint development activity. The JDA should clearly set forth which party owns what IP and what rights are granted to the other party to develop on or work with the existing IP/technology. The JDA should also specifically set forth the rights that the non-owning party has to the technology with respect to 1) use of the Background IP in developing technology under the JDA, 2) use of the Background IP in future technology/products based on the jointly developed IP and 3) use of a jointly-owned technology containing the Background IP. Other issues to be considered include whether the royalty-free rights that might have been granted for use in joint development convert to royalty-based rights for use in a technology/product containing the background IP. A very important, but often overlooked, aspect of a joint development arrangement is the ownership of any intellectual property rights arising out of the development work, which is created within the scope of a JDA pursuant to its terms. These rights are often referred to as “Foreground IP.” It may include IP created by only one party or IP that was developed jointly by both parties. The JDA should address what rights each of the parties have with respect to use of the technology in the development efforts, as well as the rights each party receives for use of the technology in future products. The JDA should also specify the rights that each party has to license the technology or subsequent products and should address the licenses/rights that may be granted. In addition to the ownership issue, the parties to a JDA should determine who is responsible for filing, prosecuting, and maintaining patent applications on any inventions. Usually, the owner of the invention is given the first right to file, prosecute, and maintain – as well as pay for – patents throughout the world. If the first right is not exercised, the contract usually requires that notice be provided to the other parties who are then permitted to file, prosecute, and maintain the patents. In that case, it is conventional that the party who undertakes the expense of filing, prosecuting, and maintaining the patents will assume ownership of them and, therefore, the right to enforce them. In the event of joint ownership, the parties may share in the costs of the patent prosecution while one party may be given the obligation to file the patent application and administer the prosecution of the patent. B. Termination The terms and conditions under which a JDA may be terminated can be as important as the terms that created it. Close attention should be paid to the situations that can trigger termination and to the ownership and licensing issues at stake following termination. As previously discussed, termination clauses should specify under what circumstances one party can end the relationship. Often, the contract can be terminated only upon breach by the other party, subject to a period of time, usually 30 days, for the breaching party to remedy the breach. The termination clause should set forth detailed procedures regarding how notices of such breach should be made to the other party/parties. In any event, there



should be clear provisions setting forth ownership of the tangible assets (e.g., laboratory equipment) procured during the term of the JDA as well as ownership of research results and continuing research material. Any continuing rights to use the Background IP, Foreground IP or any technology developed during the term of the JDA should be clearly stated in the termination provision. C. Additional Components of a JDA JDAs are among the most flexible agreements available to companies. They are used to manage very complex situations, and can be used to implement creative solutions across technologies and companies. JDAs can incorporate any provisions that the parties feel are appropriate and necessary for their business relationship. Some of the more common items that are addressed include: Allocation of IP: Parties to a JDA can choose to allocate any IP that is developed in any manner they see fit. Some common methods of allocation are based on the field of the invention or intended use. The parties can agree to grant or accept licenses, royalties or other compensation depending on the circumstances and how, if at all, such compensation is to be shared. Since the parties’ respective statutory (as opposed to contractual) rights to exploit the jointly-developed IP under copyright or patent law may vary substantially, depending on the type of rights at issue, parties to the JDA should consult with experienced legal counsel to ensure that their agreement carefully addresses their intentions. Non-solicitation clause: A non-solicitation clause prevents one party to a JDA from inducing the employees of the other party to join their company. The clause also prevents a party from interfering with the other party’s relationship with its employees in general. Standard language usually includes a prohibition for a proscribed period of time (“during the term of this agreement and for a period of 2 years subsequent to the termination of this agreement”) and requires the prior written consent before an employee can work for, directly or indirectly, any party with whom the employee had any contact with or exposure to at any time during the term of the agreement. Milestones and Deliverables: In order to ensure that each party is making progress towards satisfying the agreement, each party may require the other to verify that their efforts are proceeding successfully. In many cases, these take the form of deliverables that one party must provide to the other parties. Technical demonstrations, prototypes, manufacturing designs, marketing studies and other events that are considered indicative of progress are often used to show acceptable progress. When milestones and/or deliverables are achieved, they typically trigger additional obligations for one or both parties. Acceptance testing, payments of cash, commitment of additional resources and/or additional actions are all common when a milestone has been reached.



If a party is unable to meet a deliverable requirement, remedies can be provided, such as termination of the JDA, reduced compensation, and/or a refusal to share intellectual property. Selection of milestones, deliverables and remedies are critical components that can make the difference between a successful agreement and one that is difficult for both parties. Warranty: A JDA might contain some type of warranty or limitation of liability clause. A standard warranty clause might warrant, or guarantee, that each party to the JDA has the right to enter into the agreement and perform the obligations set forth in the agreement. Other warranties between the parties may be appropriate depending on the level of each party’s involvement and expectations. An attorney familiar with JDAs should be able to provide information on what warranties are appropriate for the IP covered by the agreement. Indemnification: A JDA should also state any applicable indemnifications or other protections that each party should provide to the other(s). These may include patent infringement indemnification for any Background IP, as described above, or for any damages resulting from the misuse of such IP. Additional Terms: In addition, the parties to a JDA may agree on certain items such as insurance requirements, employee or equipment resources, remedies for breach of the JDA, requirements related to the marketing of the jointly-developed work, protection of confidential information and other terms to ensure that the IP is exploited to the commercial advantage of the parties. VI. General Contract Provisions A. Importance of General Provisions Most contracts have provisions that seem entirely divorced from the subject matter of the contract. They are usually located at the end of the agreement. Among other things, they contain provisions for the administration of the agreement, resolutions of conflicts and other matters that have little to do with the reasons that they parties want to establish a contract. These general terms can be very important in the event of a dispute and should be carefully reviewed prior to execution of a license agreement. B. Components Governing Law and Venue: Contractually, the parties may attempt to choose which state’s law will govern an agreement. Because laws vary from state to state, it may be advantageous to use the laws of one state as opposed to another. At the very least, there may be some instances where a party would choose to avoid the laws of a particular jurisdiction. If the parties fail to set forth the law they wish to govern the contract and it



becomes necessary to litigate a dispute that arises under the contract, the governing law may be determined by the court applying the conflict of law provisions of the state in which litigation is conducted. For the most part, contract law in the United States is consistent across jurisdictions, reducing the effect of the law to be applied. However, the parties to a contract can also attempt to select the venue in which any dispute resolution will occur. It is almost always advantageous to have venue be sited in your locality. It is less expensive and administratively simpler to manage litigation in your hometown than having to travel. This is particularly true where there are great distances involved. Because a judicial award in one country may not be enforceable in another country, it may be appropriate in cross-border agreements to include a provision that requires the parties to arbitrate (as discussed further below) their disputes instead of resorting to litigation. The United States and most industrialized nations are signatories to an international treaty that obligates the courts of the each signatory country to honor the judgments of arbitrators emanating from another signatory country. Modification Clauses: Most contracts have provisions that require amendments or modifications to the agreement to be in writing and signed by individuals with the authority to act on behalf of their company. Without this clause, each party can claim that they had a different understanding of the agreement and changes that were made to it. It is good business practice to ensure that this clause is incorporated into every agreement that is executed. Severability: Most agreements have a provision that allows for the severability or removal of certain provisions if they are found to be invalid or unenforceable. If any single term of the agreement is invalid or held unenforceable in a court of law, then under this provision, it is considered severed from the agreement and will not invalidate the remaining terms. Force Majeure: This clause is necessary if the parties wish to excuse either party from performing as a result of events beyond their control. Examples of such events include; acts of God, acts of government, terrorism, wars, riots, strikes or other labor disputes, shortages of labor or materials, fires, and floods. Entire Agreement: This clause is necessary if the parties wish to prevent the later inclusion of verbal promises or concessions made by individuals within the company that are not contained in the written contract. Often such provision contains language that states the agreement embodies the entire understanding of the parties and that it supersedes any previous understandings or commitments, oral or written. Assignment: This clause is necessary if a party desires to limit the transfer of the other party’s obligations under the agreement to a third party. In most contract situations, there are three ways to limit, or restriction, assignment. First, an agreement may allow either or



both parties to assign the agreement to a third party without any requirements whatsoever. In this case, assignment can occur upon the execution of a simple assignment agreement between the assigning party and the third party. A second, more limited, approach may be to provide the parties the right to assign the agreement without prior written consent of the non-assigning party in limited circumstances, usually in connection with a merger or acquisition. Finally, language may be included in an agreement that will allow for the transfer, or assignment, of the agreement – with its accompanying rights and obligations – to a third party with the prior, written consent of the non-assigning party. Usually, language voiding any transfer without such prior written consent is also included. VII. Alternative Dispute Resolution Business disputes arise for many reasons, and many of these reasons are related to contracts and relationships underlying the contracts. In some cases, there is disagreement as to whether a contract has been breached. In other scenarios, both parties may believe that they are entitled to relief or compensation. In other instances, the dispute may be limited to the amount of the damages. One option in resolving these disputes is to litigate the matter in an appropriate state or federal court. Litigation is often slow, expensive and can be very public. Initial decisions in litigation may be appealed, and the length of the proceedings can be a sufficient barrier to resolution of the matter. Alternate dispute resolution (“ADR”), or “private dispute resolution” provides an alternative to litigation. There are three main categories of ADR; negotiation, mediation, and arbitration. Each of these techniques can be very effective, and can allow the parties to resolve their differences in a faster and more private setting. Moreover, ADR, specifically negotiation and mediation, allows the parties to retain control over the process and the results of ADR. Additionally, ADR allows the underlying conflict to be resolved in a manner that may allow the parties to maintain a productive relationship. For these reasons, ADR can be a very effective tool for growing businesses. Frequently, parties will contractually agree to one or more ADR techniques as part of an agreement, prior to an issue arising. In other situations, the parties agree to seek ADR only after an issue presents itself. A. Negotiation Negotiation is largely a self-directed process in which the parties attempt to resolve the conflict themselves. In many cases, no legal representation is required, although it would not be uncommon to seek legal counsel who can assist in the negotiation process. There is no third party to impose a solution, and the scope of a negotiation may grow beyond the issue that precipitated the dispute. Negotiation is so commonplace that it does not always appear to be a litigation alternative, but seems more like part of the process of business. In the event that the parties do not resolve their differences, other methods of ADR remain if both parties agree to use them, as does litigation. Any contractual resolution that the parties reach should be set forth in writing and reviewed by an attorney prior to execution of the final agreement.



B. Mediation In mediation, a neutral third party facilitator is present to help resolve the differences between the parties. A mediator may have expertise in the area of the dispute, and has specialized training to facilitate dialogue between the parties. Mediators do not impose solutions; rather they offer a process to third parties – and guide them through this process – that may enable the parties to resolve the differences or reach resolutions on their own. The process may be formal or informal, depending on the mediator, the parties, and the nature of the dispute. In many cases, a mediator will assist the parties in drafting a document that articulates the decision which the parties have agreed to as a result of the mediation. Unless the parties agree contractually to make it binding, mediation is not binding, and the parties are free to pursue other solutions if they are not able to resolve their issues. As with negotiation, a contractual solution that is facilitated by mediation should be reviewed by counsel prior to execution. C. Arbitration Arbitration is a more formal procedure than mediation or negotiation. An arbitrator has the authority to impose a decision upon the parties. In most cases, the decision is binding and is not subject to judicial appeal. Arbitration is the most formal method of ADR, but is still considerably more flexible than litigation. The number of arbitrators, confidentiality, formality of evidentiary rules, use of witnesses and outside authorities are decided by the parties, rather than the default laws. There are “blends” of mediation and arbitration that can be very useful because they give the parties an opportunity to solve many of the issues themselves, leaving only a portion of the decision to the arbitrator. In other cases, the parties may limit the solutions that an arbitrator can enter, or impose a range of solutions from which the arbitrators can choose. Arbitration may be useful in resolving patent disputes because the arbitrators may resolve infringement issues, but do not have the authority to invalidate a patent. This leaves the intellectual property intact, which protects the patent holder and leaving an opportunity for the alleged infringer to license the patent, retaining a certain amount of exclusivity and comparative advantage. Chapter 5 Resources Licensing Executives Society http://www.usa-canada.les.org/ American Arbitration Society http://www.adr.org/

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http://www.adr.org/

Chapter 6 – Working with Universities


CHAPTER 6 – WORKING WITH UNIVERSITIES I. Introduction As an entrepreneur or small business owner, you may wish to explore opportunities to work with universities, either through licensing of their intellectual property (“IP”) or by utilizing the services and support provided by their incubators or technology parks. Universities today can play a large role in regional economic development, based in part on their ability to assist start-up companies through incubators and technology parks and in part through their offering of new technologies and unique licensing arrangements. The role of universities in technology transfer and early stage business support has evolved over the last 20 years, in part due to changes following the passage of the Bayh-Dole Act, discussed below. While universities have always been viewed as a source of basic scientific, technological and mathematical knowledge, they are now becoming recognized as a resource for innovative solutions to encourage economic growth and provide new business support. Specifically, this chapter will examine three ways that a start-up business can benefit from working with a university:

University-supported incubators or technology parks University-owned intellectual property Sponsored research

Each strategy for development is discussed in greater detail below, outlining potential benefits and drawbacks. II. Incubators and Technology Parks Overview A start-up company with its own technology should consider whether a university incubator or technology park, which can provide valuable assistance in areas such as business plan development, management guidance, and technical assistance, is an appropriate or viable option. With the assistance provided by an incubator or technology park, the development of a business from concept to commercialization and market success can often be achieved. Many start-up companies lack capital and management experience. Because emerging businesses frequently need support services to assist them in becoming viable, incubators and technology parks can offer affordable, flexible space and lease options, reception and telephone answering services, and exposure to a network of business and technical



consultants. In addition, relationships with financial institutions and potential access to capital, and new business opportunities through relationships with other incubator clients and economic development agencies may be possible. The overall goal of the facilitating university is to help a new company grow to a level where it can exist independently of the incubator or the technology park. Early stage start-up businesses may receive more benefits from an incubator that incorporates flexible leases and shared services with significant management guidance, business networking and consulting. Technology parks may be more appropriate for an advanced technology start-up that has progressed in its development and commercialization of its products and/or services. Such a company may be looking for a planned community with buildings designed primarily for private/public research and development facilities coupled with a contractual, formal or operational relationship with one or more science/research institutions of higher education. A business in a technology park will often have more experience and know-how in running a business and will not require significant early stage support. Ideally, new businesses that benefited from services and space in an incubator will move on to lease commercial space within three to four years, which in turn makes room for new companies within the incubator. Tenants in a technology or research park may choose to remain and play a significant role in promoting technology-led economic development for the community or region. Although this chapter focuses on university-based incubators and technology parks, information on business-based or technology-based incubators or technology parks is available on New York State Foundation for Science Technology and Innovation, NYSTAR, at http://www.nystar.state.ny.us under the section entitled NYS Technology Business Development. A. University-based Incubator Programs University-based incubator programs are business development services that focus on giving new businesses access to resources and exposure that most start-ups would not be able to easily procure on their own. Since the early years of a company are the least likely to be profitable, incubator programs benefit a developing company by:

● alleviating costs through discounted use of space and facilities ● helping to encourage income through exposure to venture capitalist programs ● offering consulting and advisor options ● providing direction based upon successful business models.

University-based incubators can have a great impact on a start-up company because they maintain ties with three important groups - entrepreneurs, students, and research faculty at the universities themselves. Specifically, university-based incubators can provide companies access to well-equipped laboratories, extensive libraries, powerful computer

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systems, and subject experts from the faculty. Moreover, the university setting can offer a workforce of knowledgeable students with whom internship or part-time job opportunities can be arranged. Often the fledgling businesses share human resources such as receptionists, secretarial and janitorial staff, and office equipment. Finally, university-based incubators can provide real-world examples and opportunities to apply academic knowledge to real business problems and foster an introduction to entrepreneurship early in a student’s professional career. Under New York State law, a university-based incubator must offer low-cost space, technical assistance, support services and educational opportunities to an entity located in the state. To be classified as a university-based incubator - which is necessary for an incubator tenant to receive certain tax credits - the incubator facility and the entity must act in partnership with an accredited post-secondary college or university located in the State. For information on university-based incubator programs in New York State, go to http://www.nystar.state.ny.us/incubators.htm. For more information about incubator programs in general, go to National Business Incubator Association at www.nbia.org. New York State currently has over 80 incubators and technology parks, and has seen a steady increase in the number of business and technology incubators in operation. These incubators host more than 600 companies, and occupy more than 3.6 million square feet of space and support companies that employ more than 4,000 workers. One-third of all existing incubators are associated with a university or college in New York, and one-quarter of all incubators have a high technology focus. For example, in Albany, New York, Rensselaer Polytechnic Institute is home to the RPI Incubator which has assisted over 250 companies since 1980, with most of these companies remaining in the capital region of NYS. The RPI Incubator currently has 44 participating companies providing more than 400 jobs with annual sales of Incubation "graduates" exceeding $600 million. The Incubator for Nanotechnology Ventures, Emerging Sciences, and Technologies (INVEST) is a nanotechnology incubator created in 2005 by Russell Sage College and Evident Technologies of Troy, the incubator’s first tenant. The incubator provides space and resources to help high tech companies grow and expand while advancing Sage’s science and technology programs. B. International Opportunities Another important function of an incubator program is to provide “soft landings” for foreign business. In today’s global economy, many companies are expanding into international markets. A foreign company entering the US market for the first time is likely in need of special services an incubator can offer to assist with the transition. Examples of specialized services an incubator can offer a foreign company starting its business in the US include:

http://www.nystar.state.ny.us/incubators.htm

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Translation services Language training Domestic market research and entry assistance Access to capital and potential funders Intellectual property protection assistance Help meeting government regulations Help with import/export laws Patent assistance Help obtaining business and driver’s licenses Cultural training Immigration & visa assistance Housing assistance

Incubator programs are also providing services for US companies to “soft launch” into foreign locations. C. Technology Parks A science or technology park is a space, physical or cybernetic, managed by a specialized professional team that provides value-added services, whose main aim is to increase the competitiveness of its region or territory of influence by stimulating a culture of quality and innovation among its associated businesses and knowledge-based institutions. Technology parks organize the transfer of knowledge and technology from its sources to companies and to the market place. Their main goal is the creation of new and sustainable innovation-based companies through incubation and spin-off processes. Technology parks are developed around universities, and provide some of the same resources as incubators, on a larger scale and a more permanent basis. This is a valuable resource for businesses looking to set up a permanent home in a technology community. A fundamental objective of a technology park is to develop interactions among tenant companies, the university and the marketplace. Such interactions help companies stay on the leading edge of technology and research. The services, connections and partnerships of can be vital to the continuing growth of the companies in a technology park. For example, the Tech Garden in Syracuse, New York provides early-stage and mid-size technology companies with a competitive edge both in getting off to a good start as well as driving accelerated growth in the form of strategic relationships and connections in other parts of the state. Start-up companies should research the availability and viability of locating in a technology park since such locations can offer more than a physical site. Technology parks are often fully integrated knowledge-based communities that provide services, partnerships, and amenities to support the success of companies and their employees. Another benefit to

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location in a technology park is that the parks attract a diversity of technologies reflective of the varied technological strengths of the university. Such an environment can encourage growth and market success for smaller start-ups that wouldn’t normally have access to such a knowledge base. Because technology parks are financed and/or supported by a university, they can offer necessary services and provide resources to a start-up company above and beyond a traditional office setting. The Saratoga Technology and Energy Park (STEP) is a special destination for clean-energy and environmental technology companies in the heart of New York’s Tech Valley. More than a physical site, it is a fully integrated knowledge-based community that includes programs, services, partnerships, and amenities to support the success of companies and their employees. The Rensselaer Technology Park is the owner, developer and operator of multi-tenant rental space in Rensselaer County. 11 buildings comprising 320,000 square feet of space have been developed and the leasing, fit-up and management are administered by the Park office. These buildings have been designed as one story, highly flexible and adaptable space to accommodate technology enterprises ranging from the sophisticated needs of computer environments and research labs to the provision of conventional office and manufacturing space. Park staffs have developed design and construction expertise to address the unique and unpredictable needs of tenants in a very timely and responsive manner. For more information on technology parks in New York, go to www.nystar.state.ny.us. For information on technology, or research, parks generally, go to the Association of University Research Parks at www.aurp.net. III. Licensing Opportunities Overview If a start-up company wants to utilize or commercialize a previously developed university technology, it can often negotiate a license to that technology with the university’s technology transfer office. Many universities now have technology transfer offices dedicated to identifying research which has potential commercial interest and to develop strategies for how to license and market the resulting technology. While university research may result in a scientific and commercial interest, universities are rarely in the position to take such results to market. A start-up company often may often come up with a specific, practical process or application for such research and wish to commercialize the results. The process to commercially develop and market research varies widely. It can involve licensing agreements between start-up companies and the university or the creation of joint ventures and partnerships to share both the risks and rewards of bringing new technologies to market. Other corporate vehicles, e.g. faculty start-ups or spin-offs, are


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used where the university does not have the necessary time, resources or skills to develop a new technology. Both the licensing aspects and spin-offs are considered below. Since a university is a non-profit institution, the only way for it to commercialize intellectual property is through a licensing effort. The university agrees to license either all or part of the technology to a company so that it can use the IP in the pursuit of commercializing products. In exchange, the company will typically return some benefits back to the university, usually in the form of patent cost reimbursements, fees and royalties based on product sales incorporating the intellectual property, equity in the company or some combination of these benefits. Some of the agreements necessary for this type of relationship are discussed in more detail in Chapter 5 of this handbook. Also, when working with a university to license their IP, a start-up company should always consider the Bayh-Dole Act and the obligations and limitations created under that Act. A. University Licensing in the Wake of Bayh-Dole Act Since the passage of the Bayh-Dole Act in 1980, ownership of many government-funded inventions now transfers to the universities for the purpose of further development and commercialization. The contracting universities and businesses are then permitted to exclusively license the inventions to other parties. The federal government, however, retains “march-in” rights to license the invention to a third party, without the consent of the patent holder or original licensee. These rights would typically be exercised when the government determines the invention is not being made available to the public on a reasonable basis, in other words, to issue a compulsory license. Perhaps the most important change that Bayh-Dole Act made is that it reversed the presumption of title. Bayh-Dole permits a university, small business, or non-profit institution to elect to pursue ownership of an invention in preference to the government. Universities and other non-profit entities can retain the title in a federally funded “subject invention.” A subject invention means any invention that is “conceived or first actually reduced to practice in the performance of work under a funding agreement.” This definition covers a wide range of research activities that are either partially or completely federally funded. When a university elects to retain title to an invention, it assumes responsibility for taking certain actions to properly manage the invention and provide certain reports to the government regarding the invention. Compliance with these obligations is critical to the success of, and ongoing federal support for, the Bayh-Dole Act. As public and Congressional interest in technology transfer increases, and as the volume of activity continues to grow, government reviews of the practices of institutions involved in the process of commercialization of inventions will be conducted more frequently. Accordingly, there will be an increasingly greater need for attention to the details involved in meeting federal

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reporting obligations and other requirements imposed by 37 CFR Part 401. In exchange, the organization is required to:

Report each disclosed invention to the funding agency Elect to retain title in writing within a statutorily prescribed timeframe File for patent protection Grant the federal government a non-exclusive, non-transferable, irrevocable, paid-

up license to practice or have practiced on its behalf throughout the world Actively promote and attempt to commercialize the invention Not assign the rights to the technology, with a few exceptions Share royalties with the inventor Use any remaining income for education and research Give preference to US industry and small business

B. University-Created Intellectual Property If a business is interested in developing university-owned intellectual property (IP), it will need to negotiate a license agreement with the university. When an invention is first disclosed to a university, the university will evaluate the invention, and decide whether it wants to retain rights to the invention or surrender it to the federal government according to the Bayh-Dole Act. In the vast majority of cases the university will choose to retain the invention. However, a major concern of the university will be to defray the substantial patenting costs it is required to incur if it wants to protect the invention. To that end the university will look to licensing the IP. Potential licensees will be either faculty start-ups or established industry. The benefits of technology licensing to the entrepreneurial entity include the potential to commercialize a lucrative product. However, the drawbacks are the likely rudimentary state of the licensed IP, which may prevent fast commercialization without an outlay of substantial capital. Other issues aside from royalty rates and the description of the scope of the license will typically confront negotiations of a license to university IP. A university is primarily a research and educational institution. Technology transfer is a secondary mission for the university. Accordingly the university will usually attempt to avoid all potential liability that may arise out of a license agreement. The university will refuse to provide any warranties on the licensed IP; it will be licensed “as is.” In addition, the university will also insist that the licensee indemnify the university against any liability that may arise from the licensee’s commercial use of the licensed IP. Furthermore, the university will insist the licensee maintain extensive insurance coverage, and that the university be named as additional insured in the policy to insulate the university from any potential liability arising from the agreement. The university is typically interested in the prompt and diligent development of the licensed IP. This interest is governed both by the Bayh-Dole Act’s requirements, and the

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university’s independent goal of adding value to the results of research and making a return on investment on the IP. The university will not see a return on its research unless the licensed products and processes based on the IP are manufactured and sold. Therefore the agreement will likely have a section stipulating milestones that the licensee must reach in a timely fashion with respect to marketing the licensed IP. Another concern for the university is the industry practice of shelving licensed technology in favor of a competing product. The university will likely insist on a provision allowing the cancellation of the agreement if certain production and/or marketing goals are not met within a specified time period. C. Faculty Start-ups and Spin-offs A faculty start-up is a new company established to do further research on or to commercialize a faculty-created invention or other form of IP, which is licensed from the university. Faculty start-ups can be equally beneficial to the faculty and the university. Faculty members have a strong economic interest in developing and commercializing their invention. Furthermore, established industry may be less interested in pursuing the commercialization of university created IP, because of its early development stage. On the other hand, faculty and students that worked on the project are in a better position to recognize the potential of their endeavor. Additionally, faculty and students have an established relationship with the university and may be better aware of incubator programs and other resources available to them. D. Conflicts of Interest Conflict of interest issues will inevitably arise in the start-up context and will need to be addressed by the parties involved. These issues typically occur when company-sponsored research is done in a university lab by a professor who also has a financial interest in the company, or when a professor who has a financial interest in a company is involved in collaborative research with the university. For example, the Public Health Service and the National Science Foundation have regulations on objectivity in research. Both require adoption of procedures by which faculty must disclose outside financial interests when those interests are likely to be affected by the research they conduct. The university must review the disclosures, determine whether a conflict exists, and decide how to manage or eliminate it before federal funds are expended. A financial interest is significant if it amounts to more than $10,000 in annual income, or involves equity that is greater than $10,000 or five percent of the outstanding equity in a company. IV. Sponsored Research A. Role of Sponsored Research



A start-up business may want sponsored research to be done by the university if development is still in the early stages. A company may also want to pursue Small Business Innovation Research grants from the federal government in conjunction with a sponsored research agreement with a university. The Small Business Innovation Research/Small Business Technology Transfer Program (SBIR/STTR) is a funding program that encourages small businesses to explore their technological potential and provides the incentive to profit from commercializing new technology. Because the risk and expense of conducting serious research and development efforts are often beyond the means of many small businesses, SBIR enables small businesses to compete on the same level as larger businesses. SBIR funds critical startup and development stages and encourages the commercialization of the technology, product, or service, and can be used to engage a university to perform necessary and costly early stage research. Small businesses must meet certain eligibility criteria to participate in the SBIR program. Ass SBIR participants must be:

American-owned and independently operated For-profit Principal researcher employed by business Company size limited to fewer than 500 employees

Additional information regarding SBIR can be found at www.sbir.gov. Additional information about working with government is provided in Chapter 7 of this handbook. The availability of a university to conduct research and perhaps develop valuable intellectual property is a powerful tool. It is a great way for a company to develop and/or acquire IP because it is cost effective, and the company can identify exactly what it wants according to a statement of work. The research project may be directed to general research and development, or it may be targeted at a more tangible need to develop new products for commercialization. For example, New York State Foundation for Science, Technology and Innovation provides a list of Research Expertise Inventories for small businesses. This portfolio includes research expertise and major facilities at New York’s universities and research centers that could assist in many areas of research including biomedical, cellulosic ethanol, fuel cells, photovoltaic systems, regenerative medicine, and wind turbines, to name a few. For more inform on this, visit NYSTAR’s website at www.nystar.state.ny.us/inventories.htm. Typically, the goal of a private sponsor is to obtain secured and exclusive control of all resulting IP, to save on research costs, and to ensure that secrecy is maintained. However, the private company may need to agree on some compromises to these goals, because universities have to operate within certain rules and policies that may prohibit them from acting as the sponsor wishes.

http://www.sbir.gov/

http://www.nystar.state.ny.us/inventories.htm



In order to create a research project, the parties will need to negotiate a sponsored research agreement. This agreement will outline the scope of the research to be performed, the compensation to be paid, the general terms of IP ownership, research deliverables, and other contract terms. The points of friction that will invariably arise will be the ownership and licensing rights of developed IP, and publication rights. These potential roadblocks are more fully discussed below. B. Ownership of Research Results The initial goal of a sponsor who pays for university research is the ownership of any IP that may result. The university, on the other hand, is under regulatory obligations which restrict its abilities to assign IP developed in federally sponsored research projects by the Bayh-Dole Act, in addition to tax regulations. The university has to comply with the Bayh-Dole Act, which regulates patent rights in federally funded research programs. The Bayh-Dole Act prohibits the university from assigning to a private sponsor the title to intellectual property developed in a program using federal funding. If the school is not interested in the IP, the IP must be transferred to the government, not the private sponsor. Because funding for university research typically comes from multiple sources, most universities take the position that federal funds are normally involved in every project, thereby making the Act applicable. Therefore, as a practical matter, a university will never agree to assign IP to a sponsor, even a private one. The sponsor will need to negotiate an option to license the research results once they are developed. (To avoid confusion, recall that a license is different from an assignment.) Certain kinds of industrial sponsored research, or an agreement to certain terms in the research agreement, can destroy the tax-exempt status of bonds that finance the buildings in which the research is conducted. Generally, unless the research facilities were not constructed with tax-exempt bond money, the university may not give an exclusive license to the IP to the private sponsor and pre-negotiate the royalty rate for any license to the resulting IP. The university can, however, give the sponsor first rights to negotiate for a license at the time the technology is ready for licensing. C. Publication Rights The sponsor may want to keep the results of the research secret, at least until it can secure property rights in the result. However, this goes directly against the university’s goal of publishing and disseminating information. One of the university’s primary goals in the conducting of research is the publication of the results. The university will usually not give up its rights to publish, however, so a compromise which provides for a short delay in publication, usually not to exceed 60 to 90 days, will need to be reached. A typical section of a sponsored research agreement will address this issue by requiring the publishing party to provide the other party to the agreement with any proposed publication in advance of



the intended publication date. This allows the sponsor to file provisional patent applications to protect the rights to the developed IP. Another reason a university will not give up publication rights is directly related to export control regulations. Export controls are restrictions on certain technologies that keep them from being sold to, used by, or even described to foreign nationals, even those on US soil. Many universities have a large portion of their student body that is comprised of foreign students. If a research project at a university involves technology that is subject to export controls, students from certain countries could be barred from the project. However, if a project involving basic or applied research in science or engineering is conducted without publication or access restrictions, the university can avail itself of the “fundamental research” exclusion as an exception to the export control regulations. Therefore it is in the university’s interests to keep collaborative projects within the fundamental research exclusion. The university can still explore new technologies, without turning away qualified members of the student body. However, the fundamental research exception is destroyed by the introduction of any publication restrictions on the research. Furthermore, the private sponsor must recognize that an outright prohibition on publication will not be agreed to by the university and plan accordingly. There are many ways in which a fledgling company may profitably work with universities and, in many cases, obtain rights to unique IP or valuable know-how. It will be important to negotiate a carefully considered agreement that takes into account the needs of all parties. Chapter 6 Resources National Business Incubator Association www.nbia.org New York State Foundation for Science Technology and Innovation (NYSTAR) www.nystar.state.ny.us Small Business Innovation Research/Small Business Technology Transfer Program (SBIR/STTR) www.sbir.gov The Association of University Research Parks www.aurp.net University Based Incubator Program Information http://www.nystar.state.ny.us/incubators.htm

http://www.nbia.org/


http://www.sbir.gov/

http://www.aurp.net/

http://www.nystar.state.ny.us/incubators.htm

Chapter 7 – Working with Government


CHAPTER 7 – WORKING WITH GOVERNMENT I. Introduction As an entrepreneur or small business owner, you may wish to explore opportunities to provide products and/or services to government clients. State, federal and local governments offer opportunities for small businesses to expand and grow through government contracts and grant programs. For example, in New York State alone, the Office of General Services awards and administers contracts with an annual value exceeding $3 billion. State agencies, local governments, schools and libraries, charities and many other organizations authorized by law use Office of General Services contracts. Because the bidding and award process for both state and federal contracts can be lengthy and complex, this chapter is designed to provide start-up companies with a broad overview of steps to be taken to navigate the process and maximize the company’s potential for being awarded these opportunities. This chapter will focus on:

Navigating the state and federal procurement systems Understanding small business resources and opportunities Knowing where to look for state and federal grants

II. Navigating New York State Procurement This section focuses on New York State’s procurement process and the basic guidelines that small businesses must be aware of in order to do business with the state. Understanding how to navigate the state’s procurement system is an important step to obtaining state contracts. In New York State, all procurements by state agencies for commodities, services, and technology must comply with the guidelines developed by the New York State Procurement Council (Guidelines). These Guidelines apply to all procurement contracts with the exception of printing contracts, construction contracts, and contracts with architectural, surveying or engineering services or with not-for-profit organizations. The Guidelines are available on the Office of General Services website at http://www.ogs.state.ny.us/procurecounc. Guidelines for other states are available at http://www.nigp.org/stwebsit.htm. NYS agency purchases are broken into three categories - services, commodities, and technology. Services are the performance of a task or tasks, which may include the use of a material good or a quantity of material goods. Commodities are standard articles of commerce in the form of material goods, supplies, products or similar items. This is distinguished from technology which is a good or service, or a combination of goods and services, the result of which is a technical method of achieving a practical purpose or an

http://www.ogs.state.ny.us/procurecounc

http://www.nigp.org/stwebsit.htm



improvement in productivity. Because the procurement process for each of these categories is different, it is important to determine in which category or categories your business might fall so that you can properly market to the government. Commodities procurements do not require technical specifications or vendor evaluation as part of the consideration to obtain them. Commodities procurements are granted on a “lowest price” basis only. Services and technology are procured on a “best value” basis. According to the guidelines, best value is defined as those contracts that optimize quality, cost and efficiency. In New York State, there are at least four specific areas that companies must be familiar with in order to under NYS procurement and the role of the Guidelines in that process:

OGS Centralized Contracts Competitive Procurement Bids Discretionary Buying Thresholds Procurement Stewardship Act

A. OGS Centralized Contracts Overview In New York State, the Office of General Services (OGS) is responsible for the creation, negotiation and maintenance of centralized contracts for commodities as well as centralized contracts for services and technology. Centralized contracts allow companies that have been approved and have agreed to comply with established terms and conditions to sell their products or provide their services to state and local governments. Once a business has been placed on the approved contracts list and has entered into a centralized contract, it can respond to government agencies that conduct “mini-bids” to procure specific goods or services, including technology, under these centralized contracts. 1. Centralized Contracts for Commodities

The OGS Procurement Services Group (PSG) establishes centralized contracts for commodities commonly needed by the various state and local agencies. Under the Guidelines, if a commodity is available under a centralized contract in the form needed by the agency with the necessary function and utility requirements, such commodity must be purchased under that contract. However, there are exceptions to the use of PSG contracts. These include:

Preferred Sources – discussed below. “OGS or less” – If the commodity is not available under a centralized contract in the

exact form with the specific function and utility needed, then agencies are permitted



to procure items competitively outside a centralized contract, even if other centralized contracts exist for similar goods. However, agencies can only exercise this option if (1) the price is economically beneficial to the purchasing agency, and (2) the state contractor with the centralized contract is given the opportunity to meet the lower price.

Consortia procurements – If justified by price, state agencies may purchase from a consortia in accordance with the Consortia Guidelines, which are available at http://www.ogs.state.ny.us/procurecounc.

New centralize contracts – An agency may also request that PSG enter into a new centralized contract to meet a specific agency need.

2. Centralized Contracts for Services and Technology

PSG also establishes centralized contracts for services and technology. Unlike the centralized contracts for commodities, the use of these centralized contracts by NYS agencies is optional, not mandatory. It is important to note that procurements can be made on a regional basis under the services and technology centralized contracts and can include multiple vendors to allow for flexibility on the part of the state agencies and the providers. More information on centralized contracts and bidding opportunities is available at http://www.ogs.state.ny.us/purchase. B. Competitive Procurement Bids Overview There are two procurement methods used by NYS agencies to obtain commodities, services or technology when a centralized contract is not applicable: the Invitation for Bid (IFB) and the Request for Proposal (RFP). These methods will be discussed in more detail below, but it is important to note that there are significant differences between state and federal procurement procedures involving IFBs and RFPs, even though both entities use the same terminology. Businesses should familiarize themselves with the differences before responding to a bid. Federal bids will be covered later in this chapter. In New York State, regardless of the method the NYS agency uses to procure goods or services, a “lowest price” method is always used to award commodities contracts, and a “best value” method is used to award service or technology contracts. However, best value and lowest price are often the same. This is true when price is the only measure for choosing between competing offers or when quality and efficiency requirements have been fully defined in the specifications. It is also important to note that NYS agencies are only permitted to award contracts to vendors that meet certain responsibility standards. The agencies must measure


http://www.ogs.state.ny.us/purchase



responsibility as set forth in the Guidelines, focusing on such details as the offeror’s qualifications, financial stability, legal authority, integrity and performance. Start-up businesses wishing to obtain contracts with NYS agencies should ensure that they can meet the Guidelines’ definition of a responsible vendor. All vendors will be required to complete a Vendor Responsibility Questionnaire as part of their proposal. More information and a copy of the questionnaire are available at http://www.osc.state.ny.us/vendrep.

1. Invitation for Bid

When price is the NYS agency’s only selection factor, and where the commodity, service or technology is easily explained and exact specifications can be described in the solicitation, an IFB is the appropriate procurement method. Start-up businesses responding to an IFB should keep in mind that the contract will be awarded to the lowest bidder, and that cost is the only criterion for making the decision to award. Typically, IFBs are used in commodities purchases where price is the deciding factor. 2. Request for Proposal

As other factors become more important, such as complex requirements or specifications that cannot be easily and exactly set forth, NYS agencies employ the RFP for procurement of commodities, service or technology. Start-up businesses responding to an RFP should remember that the contract will be awarded to the bidder with the best value, which optimizes quality, cost and efficiency.

To ensure a fair and open procurement process, NYS agencies are required to define in the RFP the process by which the procurement is being conducted and to disclose the process to potential offerors. NYS agencies must also give offerors the opportunity to learn why their offer was not selected. Such information should be used by businesses to supplement and strengthen future responses. For start-up companies participating in their first procurement response, it might be a good idea to make a Freedom of Information Law request to obtain copies of past proposals that were selected. It is also important to explore expired or expiring contracts from the NYS agencies with whom the companies wish to contract. 3. Bidder Notification

For most commodities, services or technology bids, the best approach for small businesses is to register on New York State’s Bidder Notification Service. Registration enables small businesses to receive notification about procurement opportunities as they become available. Small businesses interested in this notification service should apply online using the Online Vendor Registration for Bidder Notification Service (BNS), available at

http://www.osc.state.ny.us/vendrep



www.ogs.state.ny.us/ovr. Registration involves providing basic information and selecting the appropriate commodities and/or services classification area(s). Once registered, small businesses will automatically receive email notification of bid opportunities. Please note: bid documents are available on the OGS website and may be accessed even if the small business is not registered on BNS. There are also continuous and periodic recruitment bid opportunities for certain contracting areas. This information is available online at www.ogs.state.ny.us/purchase/continuousbid.asp . C. Discretionary Buying Thresholds For purchases under the discretionary buying threshold, as defined in the Guidelines, neither the use of a centralized contract nor a formal competitive process is required. NYS agencies may simply award contracts to businesses who offer lowest price or best value. Pursuant to New York State Finance Law, NYS agencies’ discretionary buying threshold is $50,000. For purchases made from small businesses or companies certified under Article 15-A of the New York State Executive Law, discussed below, the threshold is $100,000. While NYS agencies are still required to select a responsible vendor and to obtain written quotes that include the terms and conditions of procurement, start-up businesses should be aware of this method for obtaining contracts with state agencies because it does not require centralized contracts or involve the lengthy procedure of competitive bidding. For purchases below the discretionary buying threshold, an informal competitive process may be used. D. Procurement Stewardship Act Legislation that took effect on June 30, 2008 introduced changes and improvements to the New York State Procurement Stewardship Act. These changes make it easier for businesses to compete for state procurement contracts and improve the opportunities offered to certain small businesses and minority or women-owned businesses. Under the Procurement Stewardship Act, changes have been made to provisions of the New York State Finance Law that are designed to:

encourage the creation of regional contracts for certain commodities and services in order to enable more small businesses to participate in New York State’s centralized contracts process;

open New York State’s centralized contracts for continuous recruitment during the life of the contract;

provide for the daily publication of a procurement opportunities newsletter (called the Contract Reporter, discussed below), available online and free of charge through the NYS Secretary of State at http://www.nyscr.org;

http://www.ogs.state.ny.us/ovr

http://www.ogs.state.ny.us/purchase/continuousbid.asp

http://www.nyscr.org/



allow for technology-related procurements to be conducted through the use of the internet and other electronic tools; and

allow NYS agencies to procure commodities, services or technology from a responsible vendor based upon a contract established with another governmental entity.

Start-up businesses should monitor these changes as well as the procurement opportunities newsletter as it becomes available to determine those agencies that have issued bids or are looking for commodities, services or technology. III. Additional Resources and Opportunities in New York State NYS agencies are required to make good faith efforts to utilize established percentages of minority- or women-owned businesses in their contracts. Accordingly, under the Guidelines and in accordance with New York State Finance Law, certain categories of businesses enjoy special status which permits them to contract with state agencies without the requirements of competitive procurement for contracts up to $100,000. Start-up businesses should determine if they fall into any categories which might eliminate their need to competitively bid on state contracts. In New York State, these categories include:

Small businesses Minority- or Women-Owned Businesses (MWBE) Preferred Sources

A. Small Businesses Overview Small businesses in New York State provide over one third of the commodities, services and technology procured by NYS agencies under centralized contracts. PSG handles more than 2,700 contracts with small businesses, totaling almost $3 billion in business annually. Moreover, purchases made directly from small businesses by NYS agencies provide additional sales opportunities. It is also important to determine if a start-up company qualifies as a small business in New York State because the discretionary buying threshold for NYS agency purchases made from small businesses is $100,000, rather than $50,000. This higher threshold enables agencies to obtain commodities, services or technology valued at less than $100,000 from small businesses without formal competition. 1. Who is Eligible?

In New York State, a small business is defined as one that:

Is resident in the State of New York



Is independently owned and operated Is not dominant in its field Employs 100 or fewer people

2. Direct Sales Opportunities

If no centralized contract with OGS exists, or if OGS does not have a centralized contract for the commodities, services or technology needed, NYS agencies may develop their own bids. Small businesses should, therefore, determine which NYS agencies may require their goods or services and contact those agencies directly to request placement on the agency’s bidders list. A complete list of NYS agencies is available on the Office of Technology website at http://www.oft.state.ny.us. 3. Non-State Agency Opportunities

In addition to procurement opportunities with NYS agencies, small businesses can contract with non-State agencies eligible to purchase commodities, services or technology from OGS contracts. Directories are available to assist small businesses in finding more information on these non-State agencies that include individual towns and counties in New York State, public schools, city and villages, and county hospitals, nursing homes and clinics. The following websites provide directories online or provide information on how to obtain hard copies of these publications:

Directory of Public Schools and Administrators in New York State - www.nysed.gov Health Facilities Directory - www.hes.org County Directory - www.nysac.org Directory of Town Officials - www.nytowns.org Directory of City and Village Officials - www.nycom.org

4. New York State Contract Reporter

Small businesses should also subscribe to the New York State Contract Reporter, a weekly newsletter that announces contracting opportunities with NYS agencies and other eligible entities in New York State. The Contract Reporter covers weekly opportunities for contracts valued at $15,000 or more. In addition, opportunities for contracts ranging from $5,000 to $15,000 are published quarterly, and opportunities for contracts over $200,000 are published semi-annually. Again, the Contract Reporter is available at http://www.nyscr.org. B. Minority- or Women-Owned Businesses (MWBE) Overview

http://www.oft.state.ny.us/

http://www.nysed.gov/

http://www.hes.org/

http://www.nysac.org/

http://www.nytowns.org/

http://www.nycom.org/




In New York State, MWBEs are provided with additional growth and development opportunities through their participation in the procurement process. The state government has been mandated to provide greater opportunity to these businesses, and MWBE certification with New York State also provides the advantage of accessing a variety of loan and technical assistance programs. Again, because of the additional resources and opportunities available, start-up companies who are eligible for certification should take the necessary steps to become MWBE-certified in New York State. In New York State, Executive Law Article 15-A sets forth the rules for the MWBE program. Executive Law Article 15-A also established the Division of Minority and Women Business Development with the Department of Economic Development. The laws and regulations promulgated by the Division can be found at www.nylovesmwbe.ny.gov. 1. Who is Eligible?

In New York State, any business that is owned, operated and controlled by minority group members and/or women is eligible for certification. A business will qualify for certification if it has been in business for at least one year and at least 51% of the business is owned by citizens or permanent residents who are either:

Black persons having origins in any of the Black African racial groups; Hispanic persons of Mexican, Puerto Rican, Dominican, Cuban or Central or South

American descent of either Indian or Hispanic origin; Asian and Pacific Islander persons having origins in any of the Far East countries,

Southwest Asia, the Indian subcontinent or the Pacific Islands; Native American or Alaskan Native persons having origins in any of the original

people of North America; or Women

2. Certification

In order to receive certification, the business must request an application from the New York State Empire State Development office in either Albany or New York City. The NYS Empire State Development’s website at http://www.empire.state.ny.us contains information on office hours and location. A blank form can also be printed off the website. Upon receipt of the completed application, and following verification of the information contained in and submitted with the application, an interview will be conducted by a member of the Empire State Development office staff. After an analysis is conducted, the business will be notified if certification has been granted. It may take several months to receive a decision on your application. It is important to note that if certification is denied the business is afforded the opportunity to appeal the decision.

http://www.nylovesmwbe.ny.gov/

http://www.empire.state.ny.us/



Upon certification, the business will be added to the official NYS Directory of Certified Minority- and Women-Owned Business Enterprises. This directory is used by all entities who participate in state procurement. It is also used by New York State’s prime contractors and may be accessed by the general public, including corporations and other business entities, who are seeking certified MWBE subcontractors. The directory is available via the New York State Empire State Development’s website at http://www.nylovesmwbe.ny.gov/cf/search.cfm. Again, it is important to note that the discretionary buying threshold for MWBEs in New York State is $100,000. C. Preferred Sources Overview The special status of Preferred Sources, as defined below, is available to certain businesses or organizations, enabling them to provide commodities, service or technology directly to NYS agencies without going through the procurement process. Because of the preference given to Preferred Sources, start-up businesses should determine if they are eligible to become, or to partner with, a Preferred Source. NYS agencies must first make reasonable efforts to determine whether a Preferred Source is interested in providing a commodity or performing a service before they open the procurement to competitive bidding. 1. Who is Eligible?

The businesses entitled to this special status are:

qualified charitable non-profit making agencies for the blind, qualified non-profit making agencies for other severely disabled persons, qualified employment programs for mentally ill persons, and certain veterans’ organizations.

The special status is also granted to the Department of Correctional Services Industries Program, also known as Corcraft (together, the Preferred Sources). 2. When Must an Agency Use a Preferred Source?

NYS agencies are required to purchase from Preferred Sources when the commodities or services needed are:

on the List of Preferred Source Offerings published by OGS; approved by OGS as not exceeding fifteen (15) percent above the prevailing market

price for the same or similar commodities or services, or in the case of Corcraft

http://www.nylovesmwbe.ny.gov/cf/search.cfm



products, are approved by DOCS as not exceeding a reasonable fair market price for the same or similar commodities; and

available in the proper form offering the function and utility required by the NYS agency.

3. Priority

For the procurement of commodities, New York State Finance Law prioritizes among Preferred Sources as follows:

Corcraft Qualified agencies for the blind All other qualified agencies

For the procurement of services or technology, all qualified charitable agencies are accorded equal priority. IV. New York State Grants Overview New York State grant programs offer small businesses the resources necessary to pursue projects that might otherwise be too costly to develop or implement. NYS agencies reciprocally benefit by funding projects that advance their particular mission, goals, and duties. One major benefit of grant programs is that organizations are given freedom to find creative solutions to meet agency needs rather than following the strict specifications that contract relationships require. NYS agencies typically post grant opportunities on their websites using a Request for Application (RFA). While most agencies post RFAs on their websites, a general list of New York State grant opportunities can also be found at http://www.nysegov.com/citguide.cfm. A. Potential Grants In New York State, many agencies provide grants to small businesses. The following agencies or entities offer grant programs that technology based start-up companies may find particularly useful:

Department of Health Office of Health Information Technology Transformation New York State Stem Cell Science (NYSTEM) Department of Environmental Conservation Department of Labor New York State Energy Research and Development Authority (NYSERDA) New York State Foundation for Science, Technology and Innovation (NYSTAR)

http://www.nysegov.com/citguide.cfm



1. Department of Health

The Department of Health offers a variety of grant programs for companies working in health related fields. A current list of opportunities can be found at http://www.nyhealth.gov/funding/. 2. Office of Health Information Technology Transformation

The Office of Health Information Technology Transformation works to organize and establish information technology programs and policies across the public and private healthcare sectors. The initial phase of grant awards was announced on May 24, 2006. The program is currently in its fifth phase. Grants are made available to organizations to improve the infrastructure and capacity of the healthcare information exchange system, but the amount of available funds varies from year to year depending on budget constraints. The goal of the office is to support a statewide interoperable health information exchange through a State Health Information Network. Specific grant opportunities can be found at http://www.nyhealth.gov/technology/. 3. NYSTEM

In collaboration with the Empire State Stem Cell Board, NYSTEM provides research grants to promote scientific knowledge in the field of stem cell biology and related topics. The NYSTEM website provides a list of current grant opportunities and allows organizations to sign up and receive alerts when new grant opportunities are available. The website can be accessed at http://stemcell.ny.gov. 4. Department of Environmental Conservation

The Department of Environmental Conservation publishes a list of environmental protection and improvement grants that are typically reserved for nonprofit organizations and sole proprietorships. The list can be accessed at http://www.dec.ny.gov/pubs/grants.html. 5. Department of Labor

The Department of Labor offers grants to improve workforce productivity and capabilities. Currently, the Department has several on-going funding and grant opportunities for workforce training. Information on these opportunities can be found at http://www.labor.state.ny.us.

http://www.nyhealth.gov/funding/

http://www.nyhealth.gov/technology/

http://stemcell.ny.gov/

http://www.dec.ny.gov/pubs/grants.html

http://www.labor.state.ny.us/



6. NYSERDA

NYSERDA provides organizations with grants designed to address New York's energy and environmental needs. Numerous grant programs are available for various projects and initiatives in areas such as new construction, energy efficiency improvements, wind and solar systems, and energy audits. In addition to their grant programs, NYSERDA offers interest rate reductions on loans from participating lenders for energy efficiency improvements and renewable technologies. These opportunities can be found at http://www.nyserda.org. 7. NYSTAR

NYSTAR is charged with promoting outstanding high technology research and commercialization efforts that contribute to the State’s economic development and job creation. NYSTAR works to increase the number of high technology jobs and companies in New York through the commercialization of research being conducted at the colleges, universities, and research institutions throughout the State. NYSTAR is also charged with increasing the total amount of Federal and private research dollars being attracted to New York State. NYSTAR publishes the Funding Opportunity Newsletter which lists grant opportunities available to organizations in science and technology related fields. The Newsletter is available online at http://www.nystar.state.ny.us/. V. Navigating Federal Procurement The federal government is the largest buyer in the world. In 2005, federal agencies issued over 10 million contracts. Overall, federal contracts totaled about $400 billion, $79.6 billion of which were issued to small businesses. Federal government contracts are ideal for small businesses because the United States Office of Government Contracting (OGC) works to ensure maximum participation by small, disadvantaged, and woman-owned businesses in federal government contract awards and large prime subcontract awards. To facilitate maximum participation by small businesses, the government has created programs and services designed to aid small businesses. Many of these programs and services are free of charge. When contracting with the federal government, start-up companies should be familiar with, and understand the relationship between, the federal agencies and the contracting methods involved in the procurement process. Both will be discussed in detail below. A. Government Agencies There are many federal agencies that work in conjunction with small and disadvantaged businesses to assist in obtaining government funds and technical assistance with government procurement. These agencies include, but are not limited to:

http://www.nyserda.org/




The Small Business Administration The Office of Small and Disadvantaged Business Utilization The General Services Administration

1. Small Business Administration

The Small Business Administration (SBA) is the federal government’s primary resource for small businesses. It is responsible for helping small businesses market and sell their products and services to federal agencies. The SBA website, www.sba.gov, provides valuable information to start-up companies. The SBA also has district offices that provide more localized information and assistance. Moreover, the SBA supports three very important organizations for small businesses. These are:

Small Business Development Centers (SBDCs) – in partnership with state and local governments and educational institutions, these centers are designed to provide training, management counseling, technical assistance and one-on-one assistance with government procurement. Additional information is available at www.sba.gov/sbdc/sbdcnear.html.

Women’s Business Centers (WBCs) – these regional centers are tailored to meet the needs of the specific geographic areas they serve and are good resources for information regarding opportunities in those regions. For additional information, contact your local SBA District Office, locations are available at www.sba.gov.

Service Corps of Retired Executives (SCORE) – a volunteer organization that conducts training, counseling and one-on-one assistance for all types of small businesses. Additional information is available at www.score.org.

2. Office of Small and Disadvantaged Business Utilization

Most federal agencies now have an Office of Small and Disadvantaged Business Utilization (OSDBU) that is tasked with ensuring the agency complies with federal laws, regulations, and policies to include small businesses as sources for supplies and services. The purpose of the OSDBU is to assist federal agencies to meet their diversity goals and work closely with small and disadvantaged businesses to provide assistance and support in obtaining government contracts. More information and a list of all federal agencies’ OSDBU offices are available at www.osdbu.gov. 3. General Services Administration

The General Services Administration (GSA) works to assist small businesses with federal procurement. The GSA has established goals for awarding contracts to these businesses and for providing small businesses with subcontracting opportunities. Moreover, within

http://www.sba.gov/

http://www.sba.gov/sbdc/sbdcnear.html

http://www.sba.gov/

http://www.score.org/

http://www.osdbu.gov/



the GSA, there are 11 regions responsible for acquiring products, services and technology to support federal agencies throughout the 50 states, U.S. territories, and overseas. Each region provides small business assistance and information to companies interested in doing business with the appropriate region. More information and a break-down of the regions are available at www.gsa.gov. B. Contracting Methods For small or start-up businesses, there are several methods of obtaining contracts with the agencies of the federal government. Small businesses should investigate all methods that meet the needs and offerings of their businesses. These include:

Central Contractor Registry Consolidated purchasing programs GSA Schedules Simplified procedures Sealed bidding RFPs and negotiated contracts Subcontracting

1. Central Contractor Registry

Overview Federal agencies search for contractors using the Central Contractor Registry (CCR), available at http://www.ccr.gov/. This database is the primary source for agencies to learn about prospective contractors. In order to win a government contract, a business must be registered with the CCR. Entering a small business profile into CCR also allows the business to populate the SBA’s Dynamic Small Business Search engine (DSBS), where its business information and capabilities statements can be viewed by contracting officers, large prime contractors, and the general public. To register, or for more information, visit www.ccr.gov. a. Registration There are four items needed to register with the CCR, and the registration process will be expedited if this information is available before attempting to register. Registration requires: Data Universal Numbering System (DUNS) Number, Tax Identification Number (TIN), Statistical information about your business, and Electronic Funds Transfer (EFT) information.

http://www.gsa.gov/

http://www.ccr.gov/

http://www.ccr.gov/



DUNS Number: A DUNS number is a unique identification number based on the physical location of your business. Acquiring a number is free for all businesses and is required to register with the federal government for contracts or grants. DUNS numbers can be requested online at http://fedgov.dnb.com/webform or by calling 1-866-705-5711.

TIN: Federal agencies are required to collect TINs and to include the TIN in vouchers submitted for payment. TINs may be found on the original notice you received from the IRS assigning your Employer Identification Number or on your business’ most recent federal tax return. If you have questions about your TIN, contact the IRS at 1-866-255-0654. Note: If you are a sole proprietor, your TIN is the same as your Social Security Number. A newly assigned TIN may take up to four weeks to process with the CCR.

Statistical information needed: You will be required to provide the receipts and number of employees for both the organization's profile location and on a world-wide basis, which includes all affiliates. Organizations that sell or generate electricity, refine petroleum, or that are financial institutions will be required to provide additional data.

EFT Information: The required EFT information is used for payment of invoices and includes an ABA routing number for your bank, account number and type, or lockbox number, automated clearing house (ACH) point of contact, remittance point of contact, and accounts receivable point of contact.

Start-up companies interested in working with the federal government will also need to determine their North American Industry Classification System (NAICS) classification. The NAICS system was developed in order to classify business types for statistical purposes. The NAICS system has replaced the Standard Industrial Classification (SIC) code system and is uniform throughout the United States, Canada and Mexico. NAICS classification is important in government contracting because the government uses this system to identify products and services by industry type. It is important that you know your company’s code(s) because the code(s) can be used to search agency websites for solicitations. Codes can be found at www.census.gov/naics/. Your business may fall into multiple categories so make sure you do a thorough search. b. Additional Business Opportunities Businesses may also search for current bids using the Federal Business Opportunities database, commonly referred to as Fed Biz Opps. www.fedbizopps.gov. Federal agencies are required to list all Invitations for Bids over $25,000 on this website. Registration for this website only requires a DUNS number. However, your business does not need to be registered in order to access general contract listings. Registration grants your business access to sensitive data.

http://fedgov.dnb.com/webform

http://www.census.gov/naics/

http://www.fedbizopps.gov/



2. Consolidated Purchasing Programs

Most federal agencies have common purchasing needs -- carpeting, furniture, office machine maintenance, petroleum products and perishable food supplies are just a few examples. Sometimes the government can realize economies of scale by centralizing the purchasing of certain types of products or services through certain acquisition vehicles such as multi-agency contracts and government-wide acquisition contracts (GWACs). These vehicles encourage long-term vendor agreements with fewer vendors. The use of these contract vehicles allows government agencies to quickly fill requirements by issuing orders against existing contracts or schedules. The three largest interagency consolidated purchasing programs are administered by the General Services Administration, the Defense Logistics Agency, and the Department of Veterans Affairs. For more information on these and other consolidated purchasing programs, go to http://www.sba.gov/services/contractingopportunities/basics/buys/index.html, or visit www.sba.gov/services/ and click “Basics”. 3. GSA Schedule

a. Definition Another way for small businesses to work with the federal government is through the GSA Scheduling Program. The purpose of this program is to offer federal agencies a uniform process for obtaining products and services. Under this program, products and services are categorized into 62 groups known as “Schedules”. These categories encompass a variety of products and services ranging from industrial products to professional services. A GSA Schedule is a five year contract that sets forth a standardized price schedule. Agencies place orders under a Schedule, and businesses submit proposals to become the agency’s supplier. Businesses must complete an application process in order to be considered an approved supplier under a GSA Schedule. During this process, prices for products or services are negotiated, and the result is a determination of a fair and reasonable price for schedule contracts based on the business’ prices and discounts offered to its commercial customers. Successful businesses are placed on a list of approved suppliers and are able to participate in government contracting opportunities for that particular GSA Schedule. In order to fully understand the process of getting on a GSA Schedule, it is recommended that start-up businesses take the Center for Acquisition Excellence online course that describes various features of the GSA Schedules such as how to submit an offer and how the offer is evaluated and contract awarded. More information is available at https://cae.gsa.gov/.

http://www.sba.gov/services/contractingopportunities/basics/buys/index.html

http://www.sba.gov/services/

https://cae.gsa.gov/



b. Benefits of Using the GSA Schedule The GSA Schedule program offers businesses access to government markets that would otherwise be unavailable. Federal agencies use the Schedules program because it is a reliable way to obtain the products and services they need at the lowest available price. The program gives agencies a shorter lead time and lower administrative costs than obtaining the goods and services from the open market. Government purchasers use the Scheduling system to search for vendors that offer solutions to purchasing needs. Using the system gives businesses exposure to millions of potential customers that are looking for the particular products and services. Generally, GSA Schedules are created for a 5-year period with options to extend the contract beyond this period. Given the long term nature of GSA Schedule contracts, the need for vendors to continually go through proposal and negotiation processes is diminished. Terms and conditions are negotiated in the initial schedule contract, and there is no need to renegotiate each order. Vendors only need to respond to the specific aspects of the schedule order that have not been negotiated in the initial application process. As a result, the acquisition process is streamlined and costs are lower. c. GSA Solicitations GSA solicitations will identify the Schedule and describe each special item number (SIN). SINs are groups of generically similar (but not identical) items that are intended to meet similar customer requirements. It will also include the terms and conditions that will apply to contracts awarded under that Schedule taken from the Federal Acquisition Regulations (FAR). The solicitation will also instruct prospective offerors on what they need to do in order to submit an acceptable bid. Solicitations are published using the Fed Biz Opps website discussed above (www.fedbizopps.gov). The GSA Schedule solicitations are organized by acquisition activity and provide a brief description of each GSA Schedule solicitation, the solicitation number, and a point of contact for obtaining additional information. Sellers can look for the solicitation title that appears to cover the areas of desired participation in the GSA Schedules program. d. Contractor Team Arrangements Under a Contractor Team Arrangement (CTA), two or more GSA Schedule contractors work together, and by complementing each other's capabilities, offering a total solution to meet a federal agency’s requirements. CTAs provide a "win-win" situation for both GSA Schedule contractors and federal agencies:




GSA Schedule contractors may compete for Schedule orders for which they may not independently qualify.

Federal agencies may procure a total solution rather than making separate buys for each part of a requirement.

CTA documents are developed by the team members themselves and will vary from one CTA document to another. While not all-inclusive, GSA has developed the Elements of a Contractor Team Arrangement Document, which identifies areas that are typically of interest to the government. GSA strongly encourages the submission of the CTA document in response to a Request for Quotation so that an ordering agency may gain an understanding of how the arrangement will work, and may identify any areas of responsibility that may require clarification. 4. Simplified Procedures

Simplified procedures refer to, and are available for, government purchases under $100,000. In an effort to make government purchasing procedures less complex, the government passed the Federal Acquisition Streamlining Act which introduced the simplified procedure reforms. Under the Act, all purchases greater than $2,500, but less than $100,000, are reserved for small businesses. Federal agencies are not required to contract with small businesses, however, if the contracting agency cannot obtain two or more competitive offers from small businesses. Competitiveness is defined by price, quality and delivery. The term “micro-purchases” are used to describe purchases that are less than $2,500. Micro-purchases are not reserved for small businesses and there is no formal bidding process. One source sites total agency purchases of this kind to average about 70,000 per day. The large number of micro-purchase transactions that occur daily makes this a good source of commerce for small businesses. Agencies make these purchases using a Government Purchasing Card. Government Purchasing Cards act like credit cards, and therefore it is important that your business be equipped to process credit card payments. 5. Sealed Bidding

Sealed bidding is the process used when agency requirements are clear, accurate and complete. Federal agencies use an Invitation for Bid (IFB) in the sealed bidding process. An IFB is a formal invitation for suppliers to submit a proposal on a specific agency requirement – typically for a product or service. Standard IFBs describe the product or service needed, instructions for preparing a bid, the conditions for purchase, packaging, delivery, shipping and payment, contract clauses to be included, the date, time and location that the bid will be open, and the deadline for submitting bids.



Under sealed bidding, the lowest bid usually wins unless the IFB states an alternative means of quantifying the price-related factors. The winning bidder must also be responsive and responsible, which means the bidder must meet all the specifications of the IFB and be reputable and financially sound. In a case where a company is the lowest bidder but was denied an award on the basis of irresponsibility or unresponsiveness, it might be wise to consult with an experienced government contracts lawyer to determine the reasons for the denial and what efforts should be taken to improve future bidding. 6. RFPs AND Negotiated Contracts

When federal agency contracts are greater than $100,000 and require a highly technical product or service, the government may issue a Request for Proposal (RFP). RFPs allow federal agencies to request the product or service and solicit proposals from businesses. Due to their highly technical nature, businesses responding to RFPs must explain how they intend to carry out the request and the price of doing so. The terms in an RFP may be negotiated by the agency and company after they have been submitted by the company. A federal agency may also issue a Request for Quotation (RFQ), as discussed above, if the agency is simply checking into the possibility of acquiring a product or service. The primary difference between an IFB and an RFP is that RFPs utilize best value rather than best price or price-related factors in making a determination. Again, best value is based on factors other than cost which allow federal agencies to choose the business that will optimize quality, cost, and efficiency, even if it means paying a slightly higher price. If purchasers are going to make an award based on best value, they must state their intention to do so in the solicitation document and include a description of the evaluation criteria and factors other than the price that will be considered in making a contract award. Typically, factors considered for RFPs include: cost, past performance, and a technical evaluation of whether the bidder is able to fulfill the agencies needs. IFBs, RFPs and RFQs are listed on the Fed Biz Opps website, and start-up companies should regularly monitor this website for opportunities and sign up to receive business opportunity notices via email. 7. Subcontracting

For small businesses, it may be most beneficial to subcontract with a prime contractor offering products or services to the federal government. Federal agencies can meet their goals of providing business to women- or minority-owned businesses through prime contractors or through subcontractors, and many choose to award large contracts to prime contractors who utilize small businesses to fulfill their requirements. Moreover, for contracts valued at more than $500,000, prime contractors are required to submit a plan that specifically states their goals for subcontracting with historically underutilized businesses. Because prime contractors are often looking for subcontractors who can fill



this role, small businesses should research websites and resources available for locating these opportunities. SUB-Net is the primary website for listing and identifying federal subcontracting opportunities. It is also an excellent source of information on prime contractors that regularly use subcontractors. The website is sponsored by the SBA and is available at www.sba.gov/subnet/index.cfm. It is important to note that this website is also used by federal agencies as well as state and local governments to find providers of products or services. More importantly, this website is used by several agencies, through their OSDBUs, to publish lists of prime contractors seeking subcontractors. In addition to SUB-Net offered by the SBA, the GSA offers a subcontracting directory which provides information to small businesses looking for opportunities with GSA prime contractors. The directory includes the prime contractor’s company name, business information and point of contact. The directory is available at www.gsa.gov/subdirectory. VI. Additional Resources and Opportunities in Federal Contracting Under the direction of the OGC, the federal government has established small business contracting goals in an attempt to further socioeconomic needs. Specifically, the OGC has stated that 23% of all government contracts should be awarded to small businesses. Of the 23% of contracts awarded to small businesses, the government has set additional subgoals: 5% of these contacts are reserved for disadvantaged businesses, 5% are reserved for women-owned businesses, 3% are reserved for HUBZone businesses and 3% are reserved for disabled veteran-run businesses. Therefore, within the federal government, there are several types of additional resources and opportunities available to certain types of businesses. These include:

Small Businesses Minority-Owned/Women-Owned Businesses (M/WBE) Disadvantaged Businesses/8(a) Designation HUBZone Businesses Disabled Veteran Businesses

A. Small Businesses 1. Who is Eligible?

Generally speaking, the SBA defines a small business as one that is for-profit, independently owned and operated and not dominant in its field. Size standards are based on the average

http://www.sba.gov/subnet/index.cfm

http://www.gsa.gov/subdirectory



number of employees for the preceding twelve months or on sales volume averaged over a three-year period. These standards vary depending on the industry, as indicated below:

Manufacturing: Maximum number of employees may range from 500 to 1500, depending on the type of product manufactured;

Wholesaling: Maximum number of employees may range from 100 to 500 depending on the particular product being provided;

Services: Annual receipts may not exceed $2.5 to $21.5 million, depending on the particular service being provided;

Retailing: Annual receipts may not exceed $5.0 to $21.0 million, depending on the particular product being provided;

General and Heavy Construction: General construction annual receipts may not exceed $13.5 to $17 million, depending on the type of construction;

Special Trade Construction: Annual receipts may not exceed $7 million; and Agriculture: Annual receipts may not exceed $0.5 to $9.0 million, depending on the

agricultural product.

More specific information on size standards is available on the SBA website at http://www.sba.gov/services/contractingopportunities/sizestandardstopics/index.html. There are several categories of certification available for small businesses. Although formal small business certification is not required to bid on federal contracts, certified small businesses receive benefits that others do not. It is a good idea to understand the different types of small business classifications and determine whether your business qualifies. Certifiable categories of small businesses include: Minority-Owned Business (MBE), Women-Owned Business (WBE), Small Disadvantaged Business (SDB) or Disadvantaged Business Enterprises (DBE), 8a Business Designation (8a), HUBZone Business Enterprise (HUB), and Disabled Veteran Business (DVBE). Advantages of becoming a certified small business include access to many business development resources including:

Access to SBA district offices. http://www.sba.gov/localresources The SBA mentor-protégé program. http://www.sba.gov/aboutsba/sbaprograms/. Access to 7j training program. Business training in topics such as improving

management, leadership, cost and pricing. http://www.sba.gov/aboutsba/sbaprograms/.

Access to procurement center representatives Access to over 960 Small Business Development Centers that offer training and

other forms of business assistance. Access to the SCORE program, which offers counseling and training from retired

business executives.

http://www.sba.gov/services/contractingopportunities/sizestandardstopics/index.html

http://www.sba.gov/localresources



Access to over 99 Women’s business centers offering training, counseling, mentoring. http://www.sba.gov/aboutsba/sbaprograms/onlinewbc/index.html.

Surety bond guarantee program. SBA can guarantee bonds for contracts up to $2 million. http://www.sba.gov/aboutsba/sbaprograms/osg/index.html.

Note: Businesses may qualify for more than one certification program, enhancing the additional resources and opportunities available to those businesses. B. Minority-Owned/Women-Owned Businesses (M/WBE) 1. Who is Eligible?

A Minority-Owned Business (MBE) is a for-profit business enterprise that is located in the United States and is owned, operated and controlled by minority group members. A business may have MBE status regardless of the size of the organization. Minority status is available for United States Citizens who are Asian, Black, Hispanic or Native American. See www.mwbe.com for specific details on minority membership requirements. To be considered owned and operated by minority members, at least 51% of the business must be owned by minority group members. If the business is a publicly-owned enterprise, at least 51% of the stock must be owned by minority group members. Additionally, the management and daily operations of the business must be controlled by those minority group members. To be certified as a Women-Owned Business (WBE), evidence must be provided to show that at least 51% of the enterprise is owned, managed and controlled by women. The business must also show that it has been operating for at least six months, and the business owner must be a US citizen or resident alien. Specifically, evidence must be provided to indicate that:

contribution of capital and/or expertise by the woman business owner is real and substantial and in proportion to the interest owned.

the woman business owner directs or causes the direction of management, policy, fiscal, and operational matters.

the woman business owner has the ability to perform in the area of specialty or expertise without reliance on either the finances or resources of a firm that is not owned by a woman.

Certification must be done in person at local or regional agencies. To see the location nearest you visit www.mwbe.com/cert/agencies.htm.

http://www.sba.gov/aboutsba/sbaprograms/onlinewbc/index.html

http://www.sba.gov/aboutsba/sbaprograms/osg/index.html

http://www.mwbe.com/

http://www.mwbe.com/cert/agencies.htm



C. DISADVANTAGED BUSINESSES 1. Who is Eligible?

To be a certified small disadvantaged business (SDB) or a disadvantaged business (DBE), the business must be a for-profit business that is at least 51% owned by one or more individuals who are both socially and economically disadvantaged or, in the case of a publicly owned corporation, at least 51% of the stock is owned by one or more such individuals. Additionally, the management and daily business operations must be controlled by one or more of the socially and economically disadvantaged individuals who own it. A socially or economically disadvantaged individual is any citizen or permanent resident who is:

found to be a socially and economically disadvantaged individual on a case-by-case basis, or

in the following groups, members of which are rebuttably presumed to be socially and economically disadvantaged:

o Black Americans o Hispanic Americans o Native Americans o Asian-Pacific Americans o Subcontinent Asian Americans o Women o Any additional groups whose members are designated as socially and

economically-disadvantaged by the SBA at such time as the SBA designation becomes effective

Certification can be done through the completion of an online application that can be accessed at www.sba.gov/aboutsba/sbaprograms/sdb/apply/sdb_apply_cert.html.

2. 8(a) Designation

The 8(a) program is a development program administered by the SBA to help small disadvantaged businesses compete. 8(a) designation provides businesses with access to business development assistance and support programs including training, financial support, mentoring, procurement assistance, business assignment, management assistance, technical assistance, SBA loan guarantees, surety loan guarantees, and assistance finding contracting opportunities.

http://www.sba.gov/aboutsba/sbaprograms/sdb/apply/sdb_apply_cert.html



To be eligible for the 8(a) program, business owners and managers must meet individual eligibility requirements. Individuals used to determine socially or economically disadvantaged status must be the majority owners of the applicant business and must also be engaged full time in the daily management and operation of the business. Socially disadvantaged individuals include African Americans, Hispanic Americans, Asian Pacific Americans, Native American, Subcontinent Asian Americans, and other individuals who can show with a preponderance of evidence that they are disadvantaged because of race. Economically disadvantaged individuals are those with a personal net worth not exceeding $250k, excluding ownership interest in the business and primary residence. 8(a) applicants must also be citizens of the US, meet small business size standards, and demonstrate sound management and technical experience in the field of business. An application may be completed online at https://sba8a.symplicity.com/applicants/guide. D. Hubzone Businesses 1. Who is Eligible?

The HUBZone Business program is designed to aid businesses located in historically underutilized business zones. Zone locations for businesses can be found at https://eweb1.sba.gov/hubzone. The purpose of this program is to promote economic development and employment growth in distressed areas by providing access to more federal contracting opportunities. A business can qualify for the HUBZone program if it meets the following criteria:

it qualifies as an SBA small business, its principle office is located in a HUBZone, it is owned and controlled by one or more US Citizens, and at least 35% of its employees reside in a HUBZone.

For more information and to apply online, go to https://eweb1.sba.gov/hubzone. E. Disabled Veteran Businesses 1. Who is Eligible?

A Disabled Veteran Business (DVBE) is owned and controlled by one or more disabled veterans. A disabled veteran is a United States military, naval or air service veteran with a service related disability of at least 10%. To qualify for this program the following requirements must be met:

https://sba8a.symplicity.com/applicants/guide

https://eweb1.sba.gov/hubzone

https://eweb1.sba.gov/hubzone



The business must be a sole proprietorship or partnership with at least 51% owned by one or more disabled veterans or, in the case of a publicly owned business, with at least 51% of its stock owned by one or more disabled veterans; OR a subsidiary which is wholly owned by a corporation in which at least 51% of the parent company’s voting stock is owned by one or more disabled veterans; OR a joint venture in which at least 51% of the joint venture’s management, control and earnings are held by one or more disabled veterans.

One or more disabled veterans must control the management and daily business operations, however, the disabled veteran(s) exercising management and control need not be the same disabled veteran(s) who own the business.

The business must be a sole proprietorship, partnership or corporation with its home office located in the United States and is not a branch or subsidiary of a foreign corporation, firm or business.

VII. Federal Grants Small businesses and individual entrepreneurs are also eligible for a variety of federal government grants. For federal grants, most start-up companies should consider the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Awards. SBIR and STTR awards are two prominent grant programs offered by the federal government that target technological based firms. The SBIR program is a federal program administered by twelve federal agencies for the purpose of helping to provide early-stage research and development funding to small technology companies. STTR is a federal government program similar to SBIR but smaller in scale. This program is administered by only six federal agencies for the same purpose as SBIR. The major difference between the SBIR and STTR programs is that the STTR awardees are required to work with a not-for-profit research institution or national laboratory on the proposed project. Through these programs, grants are awarded to small business enterprises for early stage technological development. Participating government agencies include the Department of Agriculture, Department of Commerce, Department of Defense, Department of Education, Department of Energy, Department of Health and Human Services, Department of Homeland Security, Department of Transportation, the Environmental Protection Agency, the National Science Foundation and NASA. SBIR/STTR awards are given to enterprises that have innovative solutions to problems. Government agencies specify technological areas that they are interested in advancing or specific problems that they would like solved, and they solicit proposals from small businesses about how to advance the technological field or solve the problem. Solicitations are released periodically from each agency and present technical topics of research and development which the agency is interested in funding. Because there are so many



participating agencies, and each agency might have multiple areas of interest, it is likely that a business with an innovative idea can find an agency that is willing to grant an SBIR/STTR award. Companies are invited to compete for funding by submitting proposals that answer the technical needs of the agency's solicitation. Each participating agency lists solicitations on the SBIR website. Because businesses submit proposals directly to these agencies, it is a good idea to have an individual who is experienced with SBIR/STTR grants assist in the writing the proposal. The government has many programs designed to assist small businesses in this process. To qualify for an SBIR/STTR award, a business must be American-owned and independently operated, organized for-profit, have less than 500 employees, and the primary researcher for the SBIR/STTR award must be employed by the business. Information on how to apply for these grants is available at http://www.science.doe.gov/sbir/. Please note: The government retains a royalty-free license for any outcome of SBIR/STTR awards, and the government also retains the right to use intellectual property for free. Small businesses that are awarded grants under these programs do retain ownership of the technology developments and are encouraged to commercialize the technology. Chapter 7 Resources New York State Procurement Council Guidelines http://www.ogs.state.ny.us/procurecounc State Procurement Guidelines http://www.nigp.org/stwebsit.htm. Centralized Contract and Bidding Opportunity Information http://www.ogs.state.ny.us/purchase Vendor Responsibility Questionnaire http://www.osc.state.ny.us/vendrep Online Vendor Registration for Bidder Notification Service (BNS) www.ogs.state.ny.us/ovr. Continuous and Periodic Recruitment Bid Opportunities www.ogs.state.ny.us/purchase/continuousbid.asp

http://www.science.doe.gov/sbir/



http://www.ogs.state.ny.us/purchase


http://www.ogs.state.ny.us/ovr

http://www.ogs.state.ny.us/purchase/continuousbid.asp



New York State Procurement Opportunities Newsletter http://www.nyscr.org New York State Agencies http://www.oft.state.ny.us. New York State Directory of Public Schools and Administrators www.nysed.gov New York State Health Facilities Directory www.hes.org New York State County Directory www.nysac.org New York State Directory of Town Officials www.nytowns.org New York State Directory of City and Village Officials www.nycom.org Minority and Women-Owned Business Enterprise Resources www.nylovesmwbe.ny.gov New York State Empire State Development Office http://www.empire.state.ny.us New York State Grant Opportunities http://www.nysegov.com/citguide.cfm NYSERDA www.nyserda.org New York State Department of Labor http://www.labor.state.ny.us. New York State Department of Environmental Conservation http://www.dec.ny.gov/pubs/grants.html Small Business Administration www.sba.gov



http://www.nysed.gov/

http://www.hes.org/

http://www.nysac.org/

http://www.nytowns.org/

http://www.nycom.org/

http://www.nylovesmwbe.ny.gov/

http://www.empire.state.ny.us/

http://www.nysegov.com/citguide.cfm


http://www.labor.state.ny.us/

http://www.dec.ny.gov/pubs/grants.html

http://www.sba.gov/



Service Corps of Retired Executives www.score.org Office of Small and Disadvantaged Business Utilization (OSDBU) www.osdbu.gov General Services Administration (GSA) www.gsa.gov Central Contract Registry (CCR) www.ccr.gov Data Universal Numbering System (DUNS) Number http://fedgov.dnb.com/webform NAICS Classification Codes www.census.gov/naics/ Federal Business Opportunities www.fedbizopps.gov

http://www.score.org/

http://www.osdbu.gov/

http://www.gsa.gov/

http://www.ccr.gov/




Appendix


APPENDIX: Early Stage Business Support for the Cleantech Sector

SECTION 1: PURPOSE AND OVERVIEW OF APPENDIX I. Introduction This Appendix to the Legal Handbook for Early Stage Business has been created to provide industry-specific information and resources for the cleantech and alternative energy sectors. While the Handbook itself was initially developed to assist entrepreneurs and start-up companies navigate the maze of legal issues that generally arise during early stage business formation, the Appendix is specifically intended to reduce the barriers to entry for technology businesses focused on renewable and clean energy product development, enabling them to build and grow successful companies. The creation and development of the Appendix has been done in consultation with, and through funding provided by, the New York State Energy Research and Development Authority (NYSERDA). NYSERDA provides energy-related technical and financial packaging assistance to businesses and institutions to promote energy efficiency and economic development, as well as providing energy research and development programs that promote safe and economical energy production efficiency technologies in New York State. For more information on NYSERDA, please visit the agency’s website at www.nyserda.org. The individual sections of this Appendix are intended to work together to provide information and resources in a framework that focuses on legal issues related to development of large and small scale alternative energy projects in New York State, including the legal aspects of zoning and land use, building and energy codes, environmental reviews, and equipment testing and certification. The sections also cover challenges that may arise in the context of regulatory compliance and interconnection. The Appendix is designed to include information that is pertinent for the providers of distributed generation products and services, including the manufacturers of such products, as well as for the installers and certified technicians who are responsible for installing and performing verification testing on distributed generation systems in New York State. With increased opportunities for interconnection, and open competition occurring in a free market economy, distributed generation (DG) – which is defined as the use of smaller scale power generation technologies located close to the load being served where surplus power can be provided to the utilities for use by additional customers – is growing. Smaller generators, usually not owned by the utility companies, are being brought online to help supply the need for additional power. These smaller generation facilities might be a home-owner with excess power from a solar panel or wind turbine. It might be a small office


Appendix


with a diesel generator, or a local school using biogas or geothermal power. In all cases, the providers of the equipment and services, such as installation and maintenance, must meet system requirements and regulations before these resources can be brought online. In addition, because DG technologies and systems are emerging as a viable supplement to centralized power production, independent evaluations of DG technologies and systems are required to assess performance and the applicability and efficacy of a specific technology at any given site prior to their interconnection. Therefore, as new DG technologies are developed and introduced to the marketplace, compliance with uniform and repeatable methods of evaluating the performance of a DG system are needed in order to create and grow a successful cleantech business. These issues are discussed in detail throughout the Appendix, and numerous websites and other resources are provided for cleantech early stage businesses. Although renewable and clean energy technologies have the potential to produce energy at large power plants or at small, localized power sources, using distributed generation, localized power sources can supply power on-site, reducing the demand for energy from a main power grid. DG systems can also reduce the burden on an electric grid at times of peak demand, provide power in the case of a power plant failure, or serve as an alternative to large, centralized power plants. In some instances, excess power can be sold back to utilities through net metering and brought into the grid, providing DG operators with added income. Accordingly, such DG systems play an important role in promoting energy efficiency and the use of renewal energy. The information in this Appendix will focus primarily on the regulations and legal requirements related to wind and solar power, since together they comprise the fastest growing alternative energy technologies in New York State. The Appendix will also identify a number of issues that are specific to small scale wind and residential solar power projects. Although the Appendix does not specifically focus on biomass and/or biofuel, biomass energy is also an emerging alternative energy technology in New York State, and many of the land use topics in this chapter as well as the interconnection requirements in the next chapter apply to biomass technologies. Section 2 of the Appendix addresses issues that arise when alternative energy companies initiate proceedings for energy development projects, such as wind and solar installations. Regardless of the size of the project or the nature of the alternative energy involved, companies may need to work through a comprehensive and/or complex system of regulatory and permitting requirements. While project specifications and projected energy output will vary, alternative energy projects are required to comply with numerous local, state and federal regulatory standards enforced by various permitting agencies. Specifically, this section presents and discusses zoning and permitting requirements and provides information and resources on land use generally. Finally, Section 2 also identifies additional regulatory requirements as well as the role of state and local agencies and other

Appendix


entities that are directly involved in the oversight of construction and operational effects of a proposed alternative energy project. Section 3 addresses the regulatory issues facing product and service providers who support small or large scale alternative energy projects, including those regulations related to interconnection and equipment certification. Because interconnection deals with the connection of renewable energy or alternative energy systems to the existing power grid, product testing and certification as well as interconnection requirements must be evaluated to ensure proper compliance and oversight. Section 3 will discuss such requirements and provide information on methods for compliance. It will also identify additional regulatory requirements as well as the role of federal and state agencies and other entities that are directly involved in the oversight of grid interconnection. II. Alternative Energy Projects in New York State A. Biomass Energy Projects Biomass energy is produced from organic fuel sources, such as plant matter, animal waste, and methane gas emitted by landfills. The most common production method is the incineration of plant matter to create steam for powering turbines, which simultaneously generates heat for buildings and industrial processes. Biomass materials can also be converted into liquid fuels (such as ethanol or biodiesel) or into gas, either by burning the fuel source under pressure in a “gasifier” or, in the case of manure, by converting the source into methane through the use of a bacterium. Biomass energy systems can produce consistent power without interruption, which enables them to supplement solar and wind energy systems by providing a steady, or “baseload,” power source. This ensures continuous delivery of electricity during times when wind and solar systems are not producing power. Start-up companies involved in biomass/biofuel equipment face testing and certification challenges as well as issues related to grid interconnection. Accordingly, Section 3 – and to a lesser extent, Section 2 – can provide valuable information for early stage businesses in this area. More information on biomass systems, including biodiesel and bioenergy, is available at http://www1.eere.energy.gov/biomass/. Additional information is also available at http://www.newyorkbiomass.org/. B. PV/Solar Energy Projects Solar energy captured through photovoltaic panels is becoming a more viable option for power production on a smaller scale, often affixed on residences and commercial buildings. Although some municipalities have not yet specifically enacted zoning regulations to protect solar implementation, they have relaxed parts of their codes that normally would

http://www1.eere.energy.gov/biomass/

http://www.newyorkbiomass.org/

Appendix


have prohibited or restricted its use through modifying historic preservation laws and providing exemptions from maximum building height requirements. Currently, the solar ordinances enacted by local governments in New York State generally tend to regulate their use for aesthetic and safety reasons. However, with New York’s newly adopted policy on net-metering (discussed in Section 3), which changed the tariffs of six investor-owned utilities to strengthen and promote the installation of small-scale renewable energy programs in homes and businesses, the importance of local laws regulating renewable energy has increased substantially. A number of municipalities now indicate that solar energy and access to sunlight are important public purposes in their general land use regulations. Other municipalities have enacted local laws that expressly allow solar energy projects in single-family residential districts, multi-family residential districts, and commercial districts. However, similar to other energy projects, there are situations where product providers and/or installers of photovoltaic (PV) or solar energy projects may face obstacles such as complex permitting processes, inconsistent permitting processes across jurisdictions, and high permit fees. Requirements for installing PV systems, for example, usually include electrical permits from local building department and interconnection permits and/or agreements with local utility companies. Building permits may be required, and in some cases a zoning, design review or other type of planning permit may be required. Finally, in some instances, special use permits or conditional use permits may be required in some municipalities. The Appendix will highlight some of these issues and offer resources that provide information on specific permitting and land use issues. For more information on solar energy projects, go to:

http://www.ases.org/, the website for the American Solar Energy Society http://www.nyseia.org/, the website for New York Solar Energy Industries

Association C. Wind Turbine Projects With respect to wind power, the decision on whether to allow a wind farm to be sited in a community or even to allow small-scale DG systems for use in individual homes resides with the local authorities. Therefore, it is important that developers, installers, and product and service providers become familiar with all aspects of wind development and local laws and regulations. It is also important to note that such laws and regulations will differ based on the size of the project. As the information provided by NYSERDA demonstrates, wind generation equipment is categorized into three general classifications based upon their nominal power output:

Small-Scale – Corresponds to micro- and small-scale turbines (400 watts to 250 kW) intended for remote power, battery charging, or net metering type generation. The

http://www.ases.org/

http://www.nyseia.org/

Appendix


small turbines can be used in conjunction with solar photovoltaics, batteries, and inverters to provide constant power at remote locations where installation of a distribution line is not possible or is more expensive. The current NYS net metering program limits the turbine size to 27.5 kW for residential systems, 500 kW for farm-based systems, or 110% of the property’s annual consumption (verified by comparing expected annual energy production estimate with annual usage).

Medium-Scale – Corresponds to medium sized turbines (250 kW to 1000 kW)

intended for remote grid production, often in conjunction with diesel generation or load-side generation. “Load-side” generation produces electricity on the customer’s side of the utility meter, which directly offsets the customer’s consumption of higher cost grid power and will possibly reduce use of electricity at peak times. New York State has a net metering program that allows the owner of a renewable energy source, such as a wind turbine, to sell any excess energy back to the utility at retail price. To be eligible for the current net metering program, the size of the system is subject to limitations, a non-residential wind turbine installation is limited to the lesser of the peak load or 2.0 MW.

Utility-Scale – Corresponds to large turbines (1000 kW and larger) generally intended to generate bulk energy for sale in power markets. They are typically installed in large arrays or wind energy projects, but can be installed in small quantities on distribution lines, otherwise known as distributed generation. Utility-scale development is the most common form of wind energy development in the U.S.

For specific information on wind energy projects, NYSERDA has developed a comprehensive Wind Energy Tool Kit, available http://www.powernaturally.org/programs/wind/toolkit.asp. In addition, more information on wind energy projects is available at:

http://www.awea.org/, the website for American Wind Energy Association http://windpowerlaw.info/, the wind power law blog covering wind issues in New

York SECTION 2: PERMITTING AND LAND USE I. Introduction This section includes information on:

Laws and regulations relating to zoning, including variance and appeal processes Permits required under the New York State Building Code and Energy Code The role of state agencies in obtaining SEQRA approval Additional permits required under state and federal regulations

http://www.powernaturally.org/programs/wind/toolkit.asp

http://www.awea.org/

http://windpowerlaw.info/

Appendix


II. Municipal Land Use Requirements A. Overview Most alternative energy projects are subject to municipal oversight with local authorities reviewing project proposals under various regulatory frameworks, including local zoning ordinances and state statutes, such as the State Environmental Quality Review Act, which will be discussed in more detail below. Although certain steps in the permitting and/or approval process for alternative energy projects may be spread throughout varying federal, state or local agencies, the overall responsibility for approving alternative energy projects usually remains, for the most part, within local municipality boundaries. In most cases, particularly those involving DG systems, alternative energy equipment and project authorizations will commence through procedures and authorizations from municipal local town boards/planning boards throughout New York State. For general information on municipalities in New York State, including information, where available, on comprehensive land use plans, zoning ordinances or permitting applications, go to http://www.nysegov.com/citguide.cfm?context=citguide&content=munibyalpha. A directory of state, county and city government websites, including state agency websites, is available at http://www.statelocalgov.net/state-ny.cfm. B. Local Laws and Regulations In New York State, local governments have the authority to pass laws relating to property, local affairs or government, provided such laws are consistent with the Constitution and general statutes of New York State. Specifically, local governments may pass laws that allow a city, town or village to legislate for the protection and enhancement of its physical environment as well as for the protection, order, safety, health and well-being of persons or property. This means that, subject to the Constitution and general laws of New York, every city, town or village is empowered to regulate and limit, for example, the location and size of buildings, the proper use for open spaces, and the density of population in any given area. While such regulations may be uniform for each class of building in a particular city, town or village, regulations in one district may differ from those in other districts. In order to plan and successfully complete an alternative energy project, therefore, it will be important for companies and/or developers to know what local laws and/or regulations could impact the project or the provision of products or services necessary to complete the project. Local regulations that may apply to proposed alternative energy projects include building permits, special use permits, site plan review, and zoning ordinances. The use of these

http://www.nysegov.com/citguide.cfm?context=citguide&content=munibyalpha

http://www.statelocalgov.net/state-ny.cfm

Appendix


regulations varies widely across the state. While most New York municipalities have zoning laws, many of the more remote, rural parts of the state do not use zoning. Alternative energy projects located on land that is not subject to zoning may only require a building permit and, possibly, a site plan review, discussed below. Where zoning is in use, the biggest impediment to the siting of alternative energy facilities is the ordinance that fails to identify such projects as allowed uses. In most zoning ordinances, non-listed uses are considered prohibited uses and may only be permitted through the use variance process, also discussed below. Therefore, companies looking to initiate an alternative energy project, or companies providing products and services for such a project, should conduct research to determine what zoning laws are in place in the city, town or village in which the project or installation – whether wind turbine or PV installation – will commence. C. Zoning and Permitting In general, land use regulations are intended to guide future growth and development by ensuring that sufficient land is available for a variety of uses, that uses are compatible, and that a reasonable transition area exists between areas of different usage. As such, they can be an important element in addressing what, if any, alternative energy projects will be allowed in a municipality. There are a variety of ways in which municipalities can review and approve land use for alternative energy projects and/or facilities. Cities, towns or villages may adopt zoning ordinances which govern whether a given project/development is permitted. However, local zoning ordinances must be adopted in accordance with a comprehensive plan which provides the framework for the local zoning law. In New York State, adoption of a formal, written comprehensive plan (“Comprehensive Plan”) is voluntary. While a city, town or village is not required to adopt a Comprehensive Plan, if a city, town or village chooses to adopt a Comprehensive Plan, all land use regulations must be in accordance with the Plan. This means that cities, towns or villages in New York State will have zoning laws that are designed specifically to implement the Comprehensive Plan of that city, town or village. A white paper complied by the Department of State providing basic information on Comprehensive Plans and zoning decisions is available at http://www.dos.state.ny.us/lgss/pdfs/zncompplan.pdf It is important to note, however, that if a city, town or village elects not to adopt a Comprehensive Plan, zoning decisions must still be made in accordance with a well-considered plan pursuant to Town Law §272-a, Village Law §7-722 or General City Law §28-a, as appropriate and applicable. In other words, zoning boards must still base their zoning decisions on some plan that is identifiable and clear which provides details on the requirements of the community, including existing land uses, agricultural practices, economic strategies, transportation needs and any other policies consistent with orderly

http://www.dos.state.ny.us/lgss/pdfs/zncompplan.pdf

Appendix


growth and development. A plan is inclusive and “comprehensive” if it addresses a wide range of planning issues and provides legitimacy to local zoning and land use decisions. A company wishing to be involved in an alternative energy project, or to be a provider and/or installer of products or services needed for such a project, will need to understand local zoning laws and, often with the help of legal counsel, determine the type of permit that is required by the local municipality while complying with any other local laws or regulations relating to such project. For example, companies and/or developers should be prepared to first determine whether, for the location they have identified for their project or installation, a Comprehensive Plan exists. In New York State, a 2008 survey indicated that 69% of municipalities have adopted some type of Comprehensive Plan. In some cases, Comprehensive Plans may be found on a municipality’s website, such as the Comprehensive Plan for the Town of Rochester, New York which is available at http://www.townofrochester.net/Pages/RochesterNY_codetask/index. In other cases, companies can contact the municipality directly to determine whether a Comprehensive Plan has been adopted. Companies should also research whether a city, town or village has zoning regulations in place (as of 2008, 71% of towns and 89% of villages had zoning regulations in place). Again, some municipality websites may have information regarding applicable zoning ordinances online, or such information may be obtained by contacting the municipality. The following websites also provide general information on municipal zoning laws:

http://www.dos.state.ny.us/lgss/publications.htm#Zoning - NYS Department of State, Local Government Services, zoning publications; and

http://www.nyc.gov/html/dcp/html/subcats/zoning.shtml - the website for zoning laws in New York City.

Companies working on proposed alternative energy projects may want to determine whether such projects are allowed under existing zoning laws, or whether a permit or variance would be required. Therefore, for most projects, companies should understand and be prepared for one of the following situations to apply to a zoning request:

Permitted Use: If the project falls within existing zoning laws as an outright “permitted” use, where such use is allowed in the zone without the need for further government approval, then no addition steps will be required to obtain zoning approval (although building or other permits may be required). An example of this would be where a town or village has adopted zoning laws that permit the development of wind farms in all zoning districts.

http://www.townofrochester.net/Pages/RochesterNY_codetask/index

http://www.dos.state.ny.us/lgss/publications.htm#Zoning

http://www.nyc.gov/html/dcp/html/subcats/zoning.shtml

Appendix


Special Use Permit, Conditionally Permitted Use (also Conditional Use, Exception, Special Use, or Special Exception) might be required if the requested land use is generally appropriate in the zone, but requires approval by government authorities who set conditions to ensure compatibility with the primary land use in the zone. When zoning ordinances are enacted, they frequently specify certain property types or uses that will be allowed in some cases if a conditional use permit is applied for and granted. An example might be a wind project in an agricultural district.

An “Accessory Use” permit may be granted if the requested/proposed land use

supports the primary land use allowed under the law and does not require special government approval. Accessory use is often granted where the use or structure of the building is consistent with and of a nature customarily incidental and subordinate to the principal use or structure on the same lot (e.g., wind turbines on a farm).

A “Variance” may be appropriate in some situations where, if approved, it would

allow for a land use that is not normally permitted in the zone. When a property is definitely not in conformance with a zoning ordinance, nor is it allowed under conditional use rules, it is in violation of the zoning law. The property owner can apply for a variance and a hearing is held to determine if the property can be utilized in the requested or proposed fashion, even though it is in violation of the existing zoning laws. If so, a variance may be granted.

If it is determined that a project is not subject to review under the local land use regulations such as a zoning ordinance, a site plan review may be required. In fact, research indicates that site plan reviews are quite common in New York, and companies should be prepared to address questions/issues related to such review. The purpose of a site plan review is to evaluate the plans for specific types of development to ensure compliance with all appropriate land development regulations and consistency with the municipality’s permitting and building codes. The process is usually initiated when an application for a building permit is submitted. Upon receipt, the appropriate authority within the municipality will determine whether the project is subject to a site plan review. If the project is subject to such a review, the plans are usually transmitted to the planning board or zoning board for review and action. No permit for the development or use of the project will be issued until an approved site development plan is authorized by the municipality. A determination should be made as to whether a site plan review is being used by a municipality as a land use tool. Site plan reviews will be a locally developed and administered process for reviewing and approving development projects. As indicated, it is important to note that site plan review can be used with or without zoning ordinances. However, they are particularly common if the type of land use activity planned is not subject to other land use regulations such as zoning ordinances. Each municipality may

Appendix


have a formal written site plan review process which developers and/or companies should be aware of and for which they should prepare. Site plan review is normally performed by the planning board or zoning board of appeals. Overall, a typical procedure for obtaining a land use permit will follow a process similar to the one set forth below. Most often the applicant will want to:

Research municipal zoning laws and/or regulations Obtain the proper forms/application for the permit – such forms or applications are

usually available from the Town or Village Clerk, the Zoning Enforcement Officer, or even from the municipality’s website, if available.

Complete the forms/application including information regarding lot sizes, the location of the proposed project showing existing structures, wells and septic systems and any additional information relating to neighboring structures, wells and/or septic systems.

Contact the zoning enforcement officer, or similar individual with municipal authority, to gain insight on what environmental impact statements may be required. This may be a SEQRA Short Form or Long Form (discussed below). A proposer will also need to determine if any other, additional New York State permits will be required (i.e. DEC, NYS Health) and whether any Federal permit(s) may be required (i.e. Fish and Wildlife). Both state and federal requirements are discussed in greater detail later in the chapter.

Submit the completed forms and pay the required permit application fees. It is typical for a town or village planning or zoning board to review all permits and land use actions. Many special permits will require additional review and permitting, and most municipalities will advise the applicant of any such actions that should be taken following or during the permit review process. Finally, another resource for searching applicable local law can be found at http://www.law.columbia.edu/centers/climatechange/resources/municipal. This site has put together databases of many of these municipal laws relating specifically to green building, solar energy, wind energy, and energy efficiency. Additional examples of local ordinances related to wind projects have been compiled by NYSERDA and can be found at http://www.gflrpc.org/ProgramAreas/Wind/LL/Fenner,Martinsburg,Westfield,Eden,%20Henderson,%20Portland,%20Clinton,%20Ellenburg.pdf. D. Zoning Board of Appeals If a proposed alternative energy project is denied, an applicant may apply to the zoning board of appeals in each municipality if the applicant can show that it was “aggrieved” by an actual decision or action by an enforcement officer. Generally, an applicant can appeal to the zoning board of appeals if the applicant either disagrees with a decision of an

http://www.law.columbia.edu/centers/climatechange/resources/municipal

http://www.gflrpc.org/ProgramAreas/Wind/LL/Fenner,Martinsburg,Westfield,Eden,%20Henderson,%20Portland,%20Clinton,%20Ellenburg.pdf

http://www.gflrpc.org/ProgramAreas/Wind/LL/Fenner,Martinsburg,Westfield,Eden,%20Henderson,%20Portland,%20Clinton,%20Ellenburg.pdf

Appendix


enforcement officer in a zoning matter or if the applicant believes that an exception, also known as a variance, to the zoning laws should have been made. In order to initiate an appeal, the applicant must file a notice of appeal with the zoning board of appeals following the enforcement officer’s filed decision or action. A copy of the notice must also be sent to the enforcement officer. Typically, an appeal can be filed if an applicant has been “aggrieved,” or prevented from using the land in a manner applied for, by the decision or action of an enforcement officer. A person is “aggrieved” if his or her property value is affected negatively by the enforcement officer’s action. Commonly, a property owner who either has been refused a permit or has been served with an enforcement action, is the aggrieved party. In addition, an applicant can submit a Notice of Appeal if the applicant has already submitted an application for subdivision, site plan, or special use permit approval which requires an area variance in connection with that approval. In those instances, no decision of the enforcement officer is necessary. The applicant may simply file a Notice of Appeal directly with the Zoning Board of Appeals. The decisions of an enforcement officer that are appealable are the grant or denial of a permit, or any order which mandates certain action, such as a cease-and-desist or stop-work order. Typically, the Zoning Board of Appeals can grant two types of relief in relation to an enforcement officer’s decisions. The Board can grant a variance or provide interpretative relief. Interpretative relief is based on the municipal zoning regulations in question while a variance must follow the standards of proof found in state statutes, specifically §267-b of the New York State Town Law, §7-712-b of the Village Law, or §81-b of the General City Law respectively. For example, if an applicant believes the enforcement officer's decision is incorrect, the applicant may request interpretative relief, reversing the officer's decision. If the applicant believes that the officer's decision may be correct, but that it can show proof under the statutes that a variance is warranted, then the applicant may request a variance. General information is available from the NYS Department of State regarding zoning board of appeals guidelines in New York at http://www.dos.state.ny.us/lgss/pdfs/guidelns.pdf. E. Building Codes 1. Overview While alternative energy projects utilize technology that may be unique in comparison to other forms of energy-generating equipment, the issues associated with building and electrical code compliance for these projects are similar to those faced by traditional power-generating plants. Moreover, road construction, operations and maintenance building construction for alternative energy projects are no different from other construction projects. Although many local authorities who are familiar with inspection requirements for residential, agricultural or commercial construction may be less familiar

http://www.dos.state.ny.us/lgss/pdfs/guidelns.pdf

Appendix


with regulatory and inspection requirements for alternative energy projects, in most situations, the local utility companies receiving energy from the proposed project are responsible for inspection and acceptance of the equipment, energy collection systems, substations, and interconnection. This will be discussed in more detail in Section 3. However, companies should be aware of New York State building codes and permit requirements and should also note that many local governments can have their own building codes, which may address issues not addressed by the state building code. Therefore, companies preparing to complete alternative energy projects should be prepared to comply with various state and local building codes. 2. New York State Uniform Fire Prevention and Building Code In New York State, the task of developing and promulgating the New York State Uniform Fire Prevention and Building Code (“Uniform Code”) is a state responsibility. However, New York State Executive Law § 381 calls for cities, towns, and villages to be responsible for enforcing the Code. In other words, pursuant to a Department of State regulation (19 NYCRR Part 1201), municipalities are in charge of the administration and enforcement of the Uniform Code with respect to buildings, premises and equipment in their city, town or village. Unlike the earlier State Building Construction Code and State Building Conservation and Fire Prevention Code, the Uniform Code does not need to be affirmatively adopted by a municipality. It is in effect by directive of the State Legislature. Therefore, the Uniform Code, which prescribes minimum standards for both fire prevention and building construction, is applicable in every municipality of the State. The current version of the Uniform Code consists of several sections:

Residential Code of New York State (RCNYS) Building Code of New York State (BCNYS) Plumbing Code of New York State (PCNYS) Mechanical Code of New York State (MCNYS) Fuel Gas Code of New York State (FGNYS) Fire Code of New York State (FCNYS) Property Maintenance Code of New York State (PMCNYS)

Taken together, these sections comprise the substantive provisions of the Uniform Code. The Code itself can be found at http://publicecodes.citation.com/st/ny/st/index.htm. The Uniform Code is used by local authorities to determine whether proposed construction complies with relevant zoning laws and building codes. Therefore, an applicant for a building permit must provide information sufficient to enable the local official issuing the

http://publicecodes.citation.com/st/ny/st/index.htm

Appendix


permit to make the determination that the proposed work will be in conformance with the requirements of the Uniform Code. As discussed, an individual city, town, or village cannot choose to exclude itself from the provisions of the Uniform Code. However, New York State Executive Law § 381 allows for a municipality to decline the right to be the entity enforcing the Uniform Code within its boundaries. Specifically, the municipality can adopt a local law stating that it will not enforce the Code, and thereafter responsibility for enforcement will pass to the county in which the particular city, town, or village is located. In this case, companies must be prepared to work instead with the individual county to ensure compliance with the Uniform Code and to obtain approval for the building project from the county. If the county, pursuant to its rights under NYS Executive Law, declines to enforce the Uniform Code, it may adopt a county law to that effect and responsibility for Code enforcement will then immediately pass to the NYS Department of State. In the event that the NYS Department of State has the responsibility for Code enforcement, companies will be required to submit a Building Permit Application to the Division of Code Enforcement and Administration at the NYS Department of State. The application for such state permit is available at http://www.dos.state.ny.us/code/pdf/BuildingPermitApp301.pdf. As is evident from this discussion, part of the challenge for companies attempting to secure the necessary building permits or to demonstrate compliance with the Uniform Code must determine which entity – local municipality, county or state – will be enforcing the Uniform Code. In addition, cities, towns, and villages may enact local standards which differ from those set forth in the Uniform Code, but only to the limited extent authorized by New York State Executive Law § 379. Specifically, NYS Executive Law § 379(3) states that "nothing in this article shall be construed to prohibit any municipality from adopting or enacting any building regulations relating to any matter as to which the uniform fire prevention and building code does not provide, but no municipality shall have the power to supersede, void, repeal or make more or less restrictive any provisions of this article or of rules or regulations made pursuant hereto." Accordingly, the legislative body of a city, town, or village can enact a law or ordinance which imposes higher or more restrictive standards for construction than those contained in the Uniform Code. Therefore, it is important for companies seeking to obtain building permits to determine what laws or regulations, in addition to the State’s Uniform Code, might affect an alternative energy project by carefully reviewing any local ordinances that might apply. Again, a helpful website for information on local ordinances is available at http://www.nysegov.com/citguide.cfm?context=citguide&content=munibyalpha. This website contains links to the official government websites for counties, cities, towns, and villages in New York State. A directory of all state, county and city government websites is also available at http://www.statelocalgov.net/state-ny.cfm.

http://www.dos.state.ny.us/code/pdf/BuildingPermitApp301.pdf

http://www.nysegov.com/citguide.cfm?context=citguide&content=munibyalpha

http://www.statelocalgov.net/state-ny.cfm

Appendix


3. Variance to Building Codes In New York State, although enforcement of the Uniform Code and its regulations is usually left to the local municipalities, the Secretary of State is authorized to adopt regulations which prescribe minimum standards for administration and enforcement of the Uniform Code. Likewise, the Secretary of State is also authorized to establish a procedure by which provisions or requirements of the Uniform Code may be varied or modified (a “variance”) in cases where strict compliance would entail unnecessary hardship or would otherwise be unwarranted. Accordingly, the NYS Secretary of State has adopted 19 NYCRR Part 1205 (Uniform Code: Variance Procedures) which establishes a dual process for obtaining variances from the Uniform Code. Cases which involve a minor variance, those where the proposed modification does not substantially affect the Code’s provisions for health, safety or security, are classified as routine cases and are processed administratively by the Department of State. Information on such variances is available at http://www.dos.state.ny.us/CODE/part1205.htm. In the case of an application for a minor variance or modification, the code enforcement officer and fire official will have the opportunity to comment on the request for variance prior to a variance being issued. Substantive, or major, variance requests are reviewed and decided by regional boards of review. Requests for variances from the Uniform Code are initiated by contacting the regional offices of the Codes Division. Information on the regional offices of the Codes Division is available at http://www.dos.state.ny.us/code/reg_off_reg.htm. Pursuant to § 1205.4 of 19 NYCRR Part 1205, each regional board of review has the authority to vary or modify, in whole or in part, any provision or requirement of the Uniform Code in cases where strict compliance with such provision or requirement would “entail practical difficulties or unnecessary hardship or would otherwise be unwarranted; provided, however, that any such variance or modification shall not substantially adversely affect provisions for health, safety and security and that equally safe and proper alternatives may be prescribed.” Regional boards of review also have the power to hear and decide appeals of any order or determination of a local official charged to enforce or purporting to enforce the Uniform Code. Applications for a variance from the New York State Department of State are available at http://www.dos.state.ny.us/code/pdf/varianceapp_311.pdf. F. Energy Code 1. Overview The New York State Legislature added Article 11 to the Energy Law to provide for a comprehensive energy conservation construction code applicable to all public and private buildings in New York State. Article 11 sets forth the process by which the State Energy

http://www.dos.state.ny.us/CODE/part1205.htm

http://www.dos.state.ny.us/code/reg_off_reg.htm

http://www.dos.state.ny.us/code/pdf/varianceapp_311.pdf

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Conservation Construction Code (“Energy Code”) is to be developed, maintained, administered, and enforced for the conservation of energy in buildings in New York State. Both state and local governments are participants in this process. New York State Energy Law §11-107 provides that administration and enforcement of the Energy Code within a municipality should be conducted by the same governmental entity that has authority for administration and enforcement of the Uniform Code, as discussed above. Specifically, the statute directs enforcement of the Energy Code in the manner prescribed by local law or ordinance or by the procedures adopted pursuant to Executive Law § 381 for administration and enforcement of the Uniform Code. Consequently, if a municipality has adopted a local law declining to administer and enforce the Uniform Code (see Section 2.II.E.2 above), the result is that the municipality will also relinquish responsibility for administering and enforcing the Energy Code. Responsibility to enforce the Energy Code (similar to enforcement of the Uniform Code) will then fall to either the county in which the building project is located or, in the event the county also decline to administer and enforce the Uniform Code, to the state. It should be noted that if a municipality choose to reassume responsibility for code enforcement (either the Uniform Code or the Energy Code), it may adopt a second local law to repeal the local law that preempted that municipality from enforcing either Code. Authority to administer and enforce the Uniform Code and the Energy Code will return to the municipality as of the effective date of the second local law. The Energy Code addresses requirements for the design of building envelopes for adequate thermal resistance and low air leakage and for the design and selection of mechanical, electrical, service water-heating and illumination systems and equipment which enables effective use of energy in new building construction. Specific information on the requirements found in Energy Code is available at http://www.dos.state.ny.us/code/part1240.htm. To obtain a full copy of the Code, go to http://www.dos.state.ny.us/code/energycode/Code.htm. 2. Variance to Energy Code Energy Law § 11-106 specifically provides for variances from the provisions of the Energy Code. The statute directs that any standard or requirement of the Energy Code may be varied or modified, in whole or part, with regard to specific construction upon application made by or on behalf of an owner, where strict compliance with such standard or requirement would “entail practical difficulty or cause any unnecessary hardship in relation to such construction, provided, however, that any such variance or modification shall provide for alternative energy conservation standards or requirements to achieve to the extent practicable the purposes of this article.” An application for a variance or modification of any standard or requirement of the Energy Code should be made to the Secretary of State. The basis for a variance or modification from the Energy Code is different than for the Uniform Code. The Energy Law requires that

http://www.dos.state.ny.us/code/part1240.htm

http://www.dos.state.ny.us/code/energycode/Code.htm

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variances from the Energy Code include alternative provisions for energy conservation so as to achieve, to the extent practicable, the intent of Article 11 of the Energy Law. Requests for variances from the Energy Code are initiated by contacting the regional office of the Codes Division or the Energy Services Unit in the Codes Division. Site visits, if deemed necessary, are conducted by technical staff in the Regional Services Unit. There are no application fees for processing of Energy Code variances. As with Uniform Code variances, the local code enforcement officer has an opportunity to comment prior to a variance being issued. Variances are issued directly by the Department of State. III. New York State Requirements A. Overview In New York State, any action that is directly undertaken, funded and/or approved by local, regional or state agencies must be reviewed to determine the potential environmental impact of that action. For example, before a wind farm can be developed, a review must be conducted early in the planning stages to consider all environmental factors. For alternative energy projects, a project sponsor must have an environmental review performed by the appropriate agencies where the development involves approval by local municipalities of zoning and land use permits as well as state agency decisions related to environmental impact. Companies seeking to complete an alternative energy project in New York State must be aware of a number of laws and regulations that will impact the permitting of such a project B. State Environmental Quality Review Act (SEQRA) In many cases, alternative energy projects in New York State may be required to obtain approval under the State Environmental Quality Review Act (SEQRA). For example, a town that has laws governing the use of land within its boundaries may require all project actions to be subject to a review to determine if an environmental impact assessment must be done. While this assessment may not complex, some actions will require a more detailed environmental assessment. If an assessment is required, the company is usually notified by the municipality’s planning or zoning board which may direct the process. Often, as illustrated later in this section, projects may require environmental review by other New York State agencies (i.e. DEC, Dept. of Health) while some will require additional review by federal agencies. Historically, in response to the federal National Environmental Policy Act (NEPA), New York State passed the State Environmental Quality Review Act of 1975 to mirror NEPA’s regulatory standards, but placed review and enforcement of environmental quality control issues in the hands of decisional agencies and local municipalities instead of a single controlling environmental agency. Therefore, in New York State, any action that is directly undertaken, funded and/or approved by local, regional or state agencies must be reviewed

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to determine the potential environmental impact of that action. Such environmental review is performed according to the requirements set forth in SEQRA, discussed below. For alternative energy projects, a project sponsor must have an environmental review performed by the appropriate agencies since the development would involve approval by local municipalities of zoning and land use permits as well as state agency decisions related to environmental impact. Accordingly, SEQRA review will be necessary for an action if any state or local agency has authority to issue a discretionary permit, license or other type of approval for that action. SEQRA also applies if an agency funds or directly undertakes a project, or adopts a resource management plan, rule or policy that affects the environment. Typically, other local and state agencies will become involved in specific aspects of a proposed alternative energy project and equipment approval including the Public Service Commission, New York State Office of Parks and Recreation and Historic Preservation, the Department of Agriculture and Markets, and the Department of State. The critical factor in formulating proposals is anticipating and preparing for official review from these agencies and what expectations and standards need to be met. Any NYS agency can participate in a SEQRA review as either an “Involved Agency” or as an “Interested Agency.” An Involved Agency is an agency that has or will have a discretionary decision to make regarding some aspect of the proposed action. Finally, a “Lead Agency” is the agency principally responsible for carrying out, funding and/or approving the proposed action. [Note: Information provided on the SEQRA process in this section was obtained from the Department of Environmental Conservation, at http://www.dec.ny.gov/permits/357.html. In addition, the following website provides information on SEQRA compliance, http://concernedcitizens.homestead.com/SEQRA_Primer.html.] SEQRA review involves an eleven step process: 1. Classifying the Action If the proposed action does not require a discretionary decision, a review under SEQRA does not have to be completed. If a discretionary decision is required for the particular action, the action must be classified as a Type I or Type II action. Type I actions are those projects that are more likely to require the preparation of an Environmental Impact Statement (EIS) because Type I actions have a greater likelihood of having an adverse environmental impact. Type 1 actions include any unlisted actions that include a nonagricultural use occurring wholly or partially within an agricultural district and exceeds twenty-five percent (25%) of any threshold established in Part 617.4 of the Act; or any unlisted action (unless the action

http://www.dec.ny.gov/permits/357.html

http://concernedcitizens.homestead.com/SEQRA_Primer.html

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is designed for the preservation of the facility or site) occurring wholly or partially within, or substantially contiguous to, any historic building or structure. An Unlisted action is one that does not meet or exceed the thresholds contained on the Type I list and is not contained on the Type II list. An unlisted action requires a determination of significance and may require the preparation of a draft EIS. If the action in question is listed as a Type I action under §617.4 or enacted as a Type I action by the local municipality, SEQRA must be completed. If the action is not a Type I action, it will be classified as a Type II action, which signifies that the action is deemed to not have a significant impact on the environment and does not require further SEQRA procedures. Type II actions are found within §617.5 or within a locally adopted Type II. Type II actions never require the preparation of a determination of significance or a draft EIS. Commonly, if an action is classified as Type II, review under SEQRA is completed. However, an agency or local decision-making body may choose to provide documentation in the project file that the action has been officially classified as Type II. 2. Complete the Correct Environmental Assessment Form The process for completing SEQRA continues with the project developer completing a full Environmental Assessment Form (EAF). When an action in question is determined to be a Type I action, developers are required to submit a completed and full Part 1 of an Environmental Assessment Form (EAF) to the lead reviewing agency. The reviewing agency then continues the process by completing Parts 2 and 3 and may waive the need for a completed EAF if a draft EIS is completed and attached to the application. The EAF is a checklist of potential areas where impacts could be significant with regards to the project’s construction and maintenance. A complete EAF must contain enough information to properly describe the proposed action, purpose of action, location of proposed action and the project’s potential impacts on the surrounding environment. The main purpose of an EAF is to determine whether an Environmental Impact Statement (EIS) and subsequent further inquiry into the proposed project’s environmental ramifications, is necessary. Generally, in New York State, local permitting agencies and local decision-making bodies are responsible for reviewing a completed EAF. Typically, local planning boards, town boards and other local decision-making bodies, as “involved agencies,” work in conjunction with project developers to follow environmental and other relevant safety standards. The reviewing body or agency must make its official findings in writing, which must contain “a reasoned elaboration” of the basis for the declaration and that the agency or body thoroughly analyzed the relevant areas of environmental concern that were identified during the review procedure as a whole. Other agencies may take part in the review process, as “interested agencies,” because although they lack the jurisdiction to fund,


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approve or directly undertake an action, these agencies wish to participate because of specific expertise or concern about an aspect of the proposed action. However, interested agencies only have the same power and ability in the review process as a member of the public. Upon completion of review, the local agency will make a “positive” or “negative” declaration regarding the potential impacts of the proposed project. A “positive” declaration indicates that adverse environmental impacts will most likely result from the proposed project and thus, an EIS must be prepared. A “negative” declaration signifies that there were no indications upon review to suggest that any adverse environmental impacts will result from the proposed project. A negative declaration may end the review process, unless the written declaration is challenged in court by local citizens that the declaration lacks a sufficient basis to support the associated negative declaration label. 3. Coordinate Review When a Type I action is determined, Part 1 of the EAF and any other information supplied by an applicant will be distributed to any other involved agencies. A lead agency to review the materials will be established. If an involved agency is approving, funding or directly undertaking an action, that agency is automatically the lead agency. If two or more agencies are involved and a particular agency wants to become the lead agency, they must put in a request during this process and wait thirty days with no opposition arising to their request before their status as lead agency may be approved. 4. Determine Significance The lead agency has 20 calendar days to make its determination of significance by reviewing the whole action, complete EAF if applicable and input from involved agencies and the public. If the lead agency determines the action does not have adverse environmental impacts, the lead agency will issue a negative declaration which lists all concerns and why the concerns will not have adverse environmental impacts. If the lead agency determines the action will have adverse environmental impacts, the lead agency will declare a positive declaration that adverse environmental impacts are apparent and the agency will require the applicant to prepare a full EIS.

5. Preparation of the Draft Environmental Impact Statement (EIS) The applicant always has the right to prepare the draft EIS. However, if the applicant refuses to prepare the draft EIS, the lead agency can prepare the draft EIS, have the EIS prepared by a consultant, or terminate its review of the action altogether and charge a fee to the applicant for any work done in preparing a draft EIS. An EIS can vary in some of its content, but certain requirements must be included:




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a concise description of the proposed action, its purpose, public need and benefits, including social and economic considerations;

a concise description of the environmental setting of the areas to be affected, sufficient to understand the impacts of the proposed action and alternatives;

a statement and evaluation of the potential significant adverse environmental impacts at a level of detail that reflects the severity of the impacts and the reasonable likelihood of their occurrence;

the draft EIS should identify and discuss the following only where applicable and significant:

o reasonably related short term and long term impacts, cumulative impacts and other associated environmental impacts;

o adverse environmental impacts that cannot be avoided or adequately mitigated if the proposed action is implemented;

o any irreversible and irretrievable commitments of environmental resources that would be associated with the proposed action should it be imposed;

o any growth inducing aspects of the proposed action on solid waste management and its consistency with the state or locally adopted solid waste management plan;

o impacts of public acquisitions of land or interests in land or funding for non-farm development on lands used in agricultural production and unique and irreplaceable agricultural lands within agricultural districts; and

o if the proposed action is in or involves resources in Nassau or Suffolk Counties, impacts of the proposed action on and its consistency with the comprehensive management plan for the special ground water protection area program;

a description of the mitigation measures to minimize environmental impacts; a description and evaluation of the range of reasonable alternatives to the action

that are feasible, considering the objectives and capabilities of the project sponsor. The description and evaluation of each alternative should be at a level of detail sufficient to permit a comparative assessment of the alternatives discussed. The range of alternatives must include the no - action alternative. The no action alternative discussion should evaluate the adverse or beneficial site changes that may occur, in the absence of the proposed action. The range of alternatives may also include, as appropriate, alternative:

o sites o technology o scale or magnitude o design o timing o use; and o types of action

6. Determine the Adequacy of the Draft EIS for Public Review


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A lead agency has 45 days to classify a submitted draft EIS as adequate for public review in terms of its content. If the lead agency determines a submitted EIS is not adequate for public review, the lead agency has 30 days to determine the adequacy of a resubmitted draft EIS. If a lead agency determines that the draft EIS is adequate and up to its standards, the lead agency will issue a Notice of Completion of a Draft EIS. 7. Publish Notice that an EIS is Accepted for Public Review If the lead agency determines that the draft EIS is adequate to its standards, it will issue a Notice of Completion of a Draft EIS. 8. Public Comment Upon the filing of the Notice of Completion of a Draft EIS, the official public comment period begins. The public comment period must be held for a minimum of 30 days and upon the holding of a public hearing on the action, an additional 10 day period of public comment must be maintained. 9. Decide Whether to Hold a Public Hearing After a lead agency accepts a draft EIS, the agency must decide on whether to hold a public hearing. A public hearing is not required under SEQRA, however if a hearing is decided to be held, the lead agency must produce a Notice of Public Hearing. The hearing must be held no sooner than 15 days after the Notice issued and no later than 60 days after the issuance. A public hearing can be held to address public and SEQRA concerns and issues. 10. Preparation of the Final EIS The lead agency is responsible for the adequacy and accuracy of the final EIS and must ensure that the final EIS is issued within 45 days after the close of any hearings or within 60 days after the filing of the draft EIS, whichever occurs last. The final and official EIS must consist of the draft EIS, including any necessary revisions and supplements; copies or a summary of the substantive comments received and their sources; and the lead agency's response to the comments. 11. SEQRA Findings Under SEQRA requirements, each involved agency must prepare its own written SEQRA findings statement, after a final EIS has been filed and before an agency makes a final decision. A positive findings statement means that the project or action is approvable after consideration of the final EIS, and demonstrates that the action chosen is the one that avoids or minimizes adverse environmental impacts presented in the EIS and weighs and






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balances them with the social, economic and other essential considerations. If the action is not approvable, a negative findings statement documenting the reasons for the denial must be prepared. The findings can be finalized no sooner than 10 days following the filing of the Notice of Completion of the Final EIS, and if the action involves an applicant, the lead agency's findings must be made within 30 days from the filing date. For more information on the SEQRA process, please consult the Department of Conservation’s website at http://www.dec.state.ny.us/website/dcs/index.html. Also, see NYSERDA’s Wind Energy Tool Kit section specifically on SEQRA, “Overview of the SEQR Process” available at http://www.powernaturally.org/Programs/Wind/toolkit/17_overviewSEQRprocess.pdf. C. Enforcement, Non-Compliance and Assistance for SEQRA The New York State Legislature has mandated that each agency of government is responsible for ensuring all SEQRA requirements are met. Therefore, no single, official agency has direct oversight over SEQRA implementation in New York State. However, the Department of Energy Conservation (DEC) has been assigned the responsibility of issuing regulations regarding the SEQRA process and providing informal interpretations and guidance about the conduct of SEQRA. DEC cannot provide formal legal opinions about the conduct of SEQRA by other agencies.

Non-compliance of SEQRA provisions by agencies opens the possibility of legal action against such agencies. If an agency makes an improper decision or allows a project to commence without undergoing SEQRA specifications, citizens or groups who can demonstrate that they may be harmed by this failure may take legal action against the agency under Article 78 of the New York State Civil Practice Law and Rules. Project approvals may be rescinded by a court and a new review required under SEQRA. New York State's court system has consistently ruled in favor of strong compliance with the provisions of SEQRA. To assist local agencies and decision-making bodies, DEC provides informal interpretations and guidance about the conduct of SEQRA. These informal interpretations are based on the experience of DEC staff. DEC, however, cannot provide formal legal opinions about the conduct of SEQRA by other agencies. State and local agencies and other interested parties should consult with their own legal counsel for formal interpretations of SEQRA law and regulations. Even if the DEC is not an involved agency, it will fully participate in the environmental review of the proposal to ensure that resource issues of statewide concern are identified and assessed in the environmental review process conducted under SEQRA. The DEC's interests would include assessing the projects possible impact to state wildlife such as bats, raptors (hawks and eagles, for example), migratory waterfowl, and migratory songbirds

http://www.dec.state.ny.us/website/dcs/index.html

http://www.powernaturally.org/Programs/Wind/toolkit/17_overviewSEQRprocess.pdf

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and their habitats. If impacts were disclosed, the DEC would also identify ways that the impacts could be avoided or reduced.

D. Related State Laws, Regulations and Agencies 1. NYS Department of Environmental Conservation (DEC) i. Overview In addition to its role in providing guidance on SEQRA compliance, the DEC may also become involved in alternative energy project approval if land that will be affected by the project falls into its jurisdiction under the federal Clean Air and Clean Water Acts. For example, issues related to streams or wetlands represent one of the most common ways in which the DEC could become involved. While the DEC may not issue a permit for a specific project, permits may be required for specific actions taken in the construction of such a project when the construction could involve the filling of a section of a state-regulated wetland or a disturbance to the bed or banks of a state-regulated river or stream. For alternative energy projects, the following permits from the DEC may be required: ii. Freshwater Wetlands Permit In New York State, the requirement for this permit was created in light of the legislature’s intent to preserve, protect, and conserve freshwater wetlands and to regulate development to preserve their beneficial qualities. This type of permit would be required, for example, when regulated activities involve freshwater wetlands that appear on the New York State wetlands maps. While it is not likely that an energy facility would be located in a wetland, it is possible that an access road or that electrical interconnections between the site, the substation, and the electric grid may involve disturbances to a wetland. More information on this permit is available at http://www.dec.ny.gov/permits/6058.html. iii. Use and Protection of Waters Permit This permit program was created in view of the legislature’s intent to minimize the disturbance of streams and water bodies and so prevent unreasonable erosion of soil, increased cloudiness of the water due to individual particles, loss of fish and aquatic wildlife or habitat destruction. The permit may be required for an alternative energy project if construction of access roads or electrical interconnections involves disturbance to a stream or river, or if excavation or placement of fill occurs in any of the “navigable waters of the state or in wetlands that are adjacent to and contiguous at any point to any of the navigable waters of the state, and that are inundated at mean high water level or tide.”


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More information on this permit is available at http://www.dec.ny.gov/permits/6042.html. iv. Federal Clean Water Act Certificate Applicants for a federal license or permit for activities, including but not limited to the construction or operation of alternative energy facilities that may result in any discharge into waters of the United States, are required to apply for and obtain a Water Quality Certification from DEC indicating that the proposed activity will not violate water quality standards. The certificate verifies that the federally approved action is in compliance with State water quality standards or designated use of the water body. The burden of proof is on the applicant. Unlike the Freshwater Wetland permit, this permit and corresponding certificate are necessary for the discharge of dredged or fill material to wetlands smaller than 12.4 acres in size. Water Quality Certification is required for when alternative energy project construction activities or the excavation or placement of fill results in a discharge to waters of the United States where a permit might be required from the U.S. Army Corps of Engineers under Section 404 of the Clean Water Act, discussed below. Some examples of activities requiring a Water Quality Certification are:

those activities described above, under each Protection of Waters category, that involve placement of fill in waters of the United States;

temporary discharges of decant waters from dredge material disposal sites or from barges and vessels.

This certificate program was created to ensure that federal agencies issue permits without violating the state’s water quality standards or impairing designated uses. The federal permit process, and corresponding state certification under Section 401, regulates the discharge of dredged or fill materials to the waters of the United States (to include wetlands). The State must issue a Section 401 water quality certificate before a Federal agency can approve a Section 404 permit. More information on this certificate is available at http://www.dec.ny.gov/permits/6546.html. More information on the federal certification under Section 404 is included below, in the Army Corps of Engineers section. v. General Permit for Stormwater Discharges from Construction Activity



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For large scale alternative energy projects, the amount of land disturbed during construction depends on the size of the project, the existing infrastructure (e.g., roads and transmission), and topography. For such large scale construction, a permit issued by the DEC may also be required. This permit, the General Permit For Stormwater Discharges from Construction Activity, can be obtained by the developer or operator of a construction activity by filing a completed Notice of Intent (NOI) with the DEC. Submitting an NOI is an affirmation that a Stormwater Pollution Prevention Plan (SWPPP), discussed below, has been prepared for the site and will be implemented prior to the commencement of construction activities. For more information on this permit, go to http://www.dec.ny.gov/chemical/43133.html. vi. General Stormwater Pollution Prevention Plan Components All SWPPPs must include provisions for erosion and sediment controls. For certain construction activities, the developer or operator must prepare a “full” SWPPP which includes water quantity and water quality controls (postconstruction stormwater control practices), in addition to the erosion and sediment controls. Construction activities that require the full SWPPP are:

Construction sites or post construction runoff discharging a pollutant of concern to either an impaired water identified on DEC’s 303(d) list or a TMDL watershed for which pollutants in stormwater have been identified as a source of the impairment.

Construction site runoff from Phase 1 construction activities (construction activities disturbing five (5) or more acres).

Construction site runoff from construction activity disturbing between one (1) and five (5) acres of land during the course of the project, exclusive of the construction of single family residences and construction activities at agricultural properties.

The detailed components of a Stormwater Pollution Prevention Plan are set forth in the Appendix E of the New York State Stormwater Management Design Manual. The Design Manual also provides standards, specifications and uniform criteria for the design of Stormwater management practices. The Manual is available online and may be found at: http://www.dos.state.ny.us/lgss/stormwaterpub/index.html. The NYS DEC web site also provides a link to the New York Standards and Specifications for Erosion and Sediment Control (also known as the Blue Book) which contains standards and specifications for erosion and sediment control measures commonly used on construction sites. The blue book may be found at: http://www.dec.state.ny.us/website/dow/toolbox/bluebook/bluebook.html. 2. NYS Public Service Commission/Department of Public Service

http://www.dec.ny.gov/chemical/43133.html

http://www.dos.state.ny.us/lgss/stormwaterpub/index.html

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The Public Service Commission (PSC) is an independent five member decision-making body established by New York State Public Service Law (PSL) § 4 that regulates investor owned electric, natural gas, steam, telecommunications, and water utilities in New York State. The Department of Public Service (DPS) is the state agency that is responsible for carrying out the PSC’s legal mandates. The PSC is responsible for overseeing issues related to energy interconnection and transmission, including the siting of facilities. It must also approve the construction of wind energy facilities with generating capacity over 80 megawatts, pursuant to PSL § 68. The PSC also has approval authority over actions involving intrastate electric power transmission lines and high pressure natural fuel gas pipelines, and actions related to such projects. More information on the PSC and its role in regulating interconnection is covered in Chapter 10. The PSC's statutory authority has its own "SEQRA-like" review, record, and decision standards that apply to major gas and electric transmission lines. Moreover, the PSC makes the final decision on Article VII applications. Article VII (Siting of Major Utility Transmission Facilities) is the section of the New York Public Service Law that requires a full environmental impact review of the siting, design, construction, and operation of major intrastate electric and natural gas transmission facilities in New York State. It is important for companies to note that Article VII supersedes other State and local permits except for federally authorized permits. NYS Public Service Law requires that an applicant must apply for a Certificate of Environmental Compatibility and Public Need and meet the Article VII requirements before constructing any such intrastate facility. Article VII sets forth a review process for the consideration of any application to construct and operate a major utility transmission facility. 3. NYS Office of Parks, Recreation & Historic Preservation The New York State Office of Parks, Recreation & Historic Preservation is particularly concerned with potential impacts to historic resources, such as buildings listed on the State or National Registers of Historic Places and archeological sites. Consultation with this office may be necessary if an alternative energy project might introduce visual impacts involving historic structures or locations. For more information on this Office and the tools it has available to developers, please see the Legal Aspects of Municipal Historic Preservation, a publication that provides an overview of municipal regulatory authority under state and federal status to preserve local historic resources. Companies can download the Historic Preservation Handbook at http://www.dos.state.ny.us/lgss/pdfs/hispres.pdf .

http://www.dos.state.ny.us/lgss/pdfs/hispres.pdf

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For more information on the Office of Parks, Recreation & Historic Preservation, please go to http://nysparks.state.ny.us/. 4. NYS Department of Agriculture and Markets Cities, towns and villages in New York State have broad ability to enact land use rules and regulations. However, Section 305-a of the Agriculture and Markets Law mandates that these powers must be in accordance with the policy and goals of Article AA-25 of the Agricultural and Markets Law. This law prevents unreasonable restrictions by local government rules on land use within agricultural districts unless it can be demonstrated that public health or safety is threatened. The purpose of the law is to encourage development and improvement of agricultural land for production of food and other agricultural products. The Department of Agriculture and Markets (DAM) has created a document specifically focused on wind energy to facilitate the review process. The Guidelines for Agricultural Mitigation for Windpower Projects is available at http://www.agmkt.state.ny.us/AP/agservices/constructWind.html. In addition, DAM has produced a report on how local laws are related to and affect agricultural districts. This document provides guidance to landowners and developers within an agricultural district on the application of Section 305-a, discussing specifically whether a local law or ordinance restricts farm operations in an agricultural district. To download Local Laws and Agricultural Districts, please go to http://www.dos.state.ny.us/lgss/pdfs/agdistricts.pdf. Such questions may come into play if a wind farm developer is looking to initiate an alternative energy project on a farm impacted by local laws or ordinances. IV. Federal Agencies and Related Regulatory Standards A. Overview Aside from state and local regulation for alternative energy projects, certain federal agencies will have specified concerns and initiate a narrow scope of review over aspects of proposed projects. While the level of federal involvement may not be as in-depth as other mandated state and local directives, many federal agencies are concerned with specific aspects of alternative energy projects, including off-shore proposals and projects being constructed on federal lands. The Federal Aviation Administration, along with New York State and federal Department of Transportation inquiries, the United States Army Corps of Engineers and the United States Fish and Wildlife Service, all provide narrow investigations focusing on overall project specifications in connection with inquiries about flight pattern and military radar interference, as well as water and animal conservation and contamination issues.

http://nysparks.state.ny.us/

http://www.agmkt.state.ny.us/AP/agservices/constructWind.html

http://www.dos.state.ny.us/lgss/pdfs/agdistricts.pdf

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Federal agencies will often launch investigations for proposed alternative energy projects involving off-shore and/or federal land usage. While local planning boards and state regulating agencies will be involved in approving off-shore projects, the Environment Protection Agency (EPA), the Department of Energy (DOE), and the Federal Energy Regulatory Commission all share power over regulating and approving off-shore alternative energy proposals located in the outer continental shelf. Additionally, projects that are proposed to reside on federal lands will automatically trigger preliminary investigations by the Bureau of Land Management (BLM). B. Environmental Protection Agency The Environmental Protection Agency (EPA) occupies important advisory and enforcement roles concerning alternative energy siting, construction and maintenance. The EPA monitors construction and maintenance of projects under the Clean Water Act, Oil Pollution Act, and the Comprehensive Environmental Response, Compensation and Liability Act. Authorized under the Clean Water Act (33 USC 1251; 33 USC 403), the EPA has the authority over the National Pollution Discharge Elimination System (NPDES) Stormwater Permit program, which controls water pollution by regulating point sources that discharge pollutants into waters of the United States. This program oversees the potential for discharge from site assessment, construction and operation. In most cases, the NPDES permit program is administered by authorized states. New York State has an approved state NPDES permit program and is approved to regulate federal facilities and has an approved general permitting program. Authorized under the Oil Pollution Act (33 USC 2701), the EPA has the authority over the Spill Prevention, Control and Countermeasure (SPCC) Plan. This plan establishes procedures, methods, and equipment requirements to prevent and contain oil spills which may come from fuel stored on alternative energy sites from emergency power generators or other purposes. Finally, authorized under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA or Superfund) (42 USC 9601-9675), EPA has the authority over the American Society for Testing and Materials (ASTM) Environmental Site Assessment. This assessment program oversees construction and maintenance of properties in terms of any liability stemming from contaminated property. Because any violations of EPA regulations may result in civil, criminal or cleanup enforcement proceedings, companies initiating an alternative energy project should be aware of those regulations that affect the completion of the project. Information on EPA regulations is available at http://www.epa.gov/lawsregs/. EPA’s civil enforcement program protects human health and the environment by taking legal action to bring polluters into compliance with the federal environmental laws. EPA's criminal enforcement program uses stringent sanctions, including jail sentences, to promote deterrence and help ensure compliance in order to protect human health and the

http://www.epa.gov/lawsregs/

Appendix


environment. Criminal enforcement is often used against the most serious environmental violations as well as those which involve egregious negligence or conduct involving intentional, willful or knowing disregard of the law. EPA's cleanup enforcement program protects human health and the environment by getting those responsible for a hazardous waste site to either clean up or reimburse EPA for its cleanup. EPA uses a number of cleanup authorities independently and in combination to address specific cleanup situations. C. Department of Energy The Department of Energy (DOE) plays vital roles in educating the developers, individual states and the public regarding the efficient use of alternative energy as well as the benefits of utilizing alternative energy sources such as wind and solar methods. The DOE is also a crucial factor in the authorizing and permitting of siting for alternative energy projects. The DOE’s Wind & Hydropower Technologies Program, available at http://www1.eere.energy.gov/windandhydro/, is working to improve wind technology and increase the use of wind energy in the U.S. The Wind Program works with partners in the wind industry to develop clean, domestic, innovative wind energy technologies that are cost-competitive with fossil fuels. In addition, the Wind Program collaborates with the electric power industry to integrate wind power into our electricity supply while maintaining the stability and reliability of the electric grid. Finally, the Wind Program works with other federal agencies, states, and communities to reduce barriers to wind power development. In regard to federal wind siting activities, the DOE plays an important role in many of the permitting procedures for potential wind energy projects. The DOE, in conjunction with other federal agencies, plays a role in radar and wind power interference studies and permitting, wind-siting issues at the county and municipal government level, and energy and wind-related transmission right of way permits and authorizations. The DOE’s Solar Energy Technology Program, available at http://www1.eere.energy.gov/solar/, accelerates the development of solar technologies as energy sources for the nation and world. The solar program also educates the public about the value of solar as a secure, reliable, and clean energy choice. D. Federal Energy Regulation Commission The Federal Energy Regulatory Commission (FERC) is an independent agency that regulates the interstate transmission of electricity, natural gas, and oil. FERC also has the authority to license certain alternative energy projects such as hydropower projects. The Energy Policy Act of 2005 gave FERC additional responsibilities and objectives including finding reliable, efficient and sustainable energy for customers. Specifically, Congress and the President in the Energy Policy Act of 2005 gave FERC new regulatory authority over the

http://www1.eere.energy.gov/windandhydro/

http://www1.eere.energy.gov/solar/

Appendix


reliability of the nation's bulk-power system. Mandatory and enforceable reliability standards and a strong reliability program are critical elements of that new authority. Accordingly, companies should understand and be prepared to comply, to the degree appropriate and necessary, with these new standards. Information on the reliability standards is available at http://www.ferc.gov/industries/electric/indus-act/reliability.asp. In 2010, FERC will establish processes to track studies that are related to the development of reliability parameters associated with the integration of new technologies and new alternative energy and distributed generation systems. Using this data, the Commission will perform analyses to see if these reliability parameters are feasible for the bulk power system. The Commission will also seek input from industry and will coordinate and work with other government agencies to identify reliability issues that affect the national goals of reducing carbon and increasing the penetration of renewable energy resources. Because FERC works closely with Independent System Operators (ISOs), Regional Transmission Organizations (RTOs), and state commissions, companies should be familiar with FERC’s major orders and regulations, available here http://www.ferc.gov/legal/maj-ord-reg.asp, as they relate to any proposed project. E. US Department of the Interior- Bureau of Land Management The United States Department of the Interior’s Bureau of Land Management (BLM) is responsible for the management of 258 million surface acres and 700 million sub-surface acres of mineral estate throughout the United States. Therefore, BLM plays a key role in ensuring the country’s needs are met by managing both federal renewable and non-renewable sources of energy in an environmentally sound way. Since its passage in 2005, the Energy Policy Act authorizes BLM to occupy a vital and critical role in achieving the Act’s objectives and goals. The BLM is authorized to review and approve permits and licenses from companies to explore, develop, and produce oil and gas and geothermal resources on both federal and Indian lands. BLM is also responsible for inspection and enforcement of oil, gas, and geothermal wells and other development operations to ensure that lessees and operators comply with the lease requirements and BLM's regulations. Although the Bureau of Indian Affairs issues leases on Indian lands, BLM handles the operational approvals and supervision of operations on these lands. Information on the BLM and its jurisdiction over alternative energy projects under the Energy Policy Act are available at http://www.blm.gov/wo/st/en/prog/energy/epca_chart.html. F. US Fish & Wildlife Service

http://www.ferc.gov/industries/electric/indus-act/reliability.asp

http://www.ferc.gov/legal/maj-ord-reg.asp

http://www.ferc.gov/legal/maj-ord-reg.asp

http://www.blm.gov/wo/st/en/prog/energy/epca_chart.html

Appendix


If a proposed project site includes or is adjacent to sensitive plant or wildlife habitat, the USF&WS can perform a threatened and endangered species review. The review identifies any threatened or endangered species located in or near the proposed project area and determines the likely level of impact. A positive species finding would trigger the National Environmental Policy Act’s requirement for an assessment of the need for an Environmental Impact Statement. Companies should be aware that this process could be coordinated with the SEQRA process. For more information on the permits granted by the US Fish & Wildlife Service, go to its website at http://www.fws.gov/permits/. G. Army Corps of Engineers The Army Corps of Engineers (COE) may become involved in a project, if any portion of the project (e.g., access road, distribution line) crosses a water body subject to COE jurisdiction such as streams flowing into navigable waters. Its level of involvement could range from expert review to mitigation plan suggestions to permit issuance. For example, as discussed above, Section 404 of the Clean Water Act requires a landowner to obtain a permit from COE prior to beginning any non-exempt activity involving the placement of dredged or fill material in waters of the United States, including wetlands. Certain ongoing, normal farming practices in wetlands are exempt and do not require a permit. In order to be exempt, the activities cannot be associated with bringing a wetland into agricultural production or converting an agricultural wetland to a non-wetland area. Companies involved in an alternative energy project that may require a permit under Section 404 should be aware that individual permits are issued to a single entity (individuals or companies) to authorize specific activities. Once a complete permit application is received by COE, a public notice is issued which describes the proposed project. The Corps of Engineers evaluates all comments received and makes a final permit decision. General permits are issued to the public-at-large to authorize specific activities that have minimal environmental impacts such as bank stabilization activities or construction of farm buildings. A general permit can be issued on a State, regional, or nationwide basis. Activities authorized by a general permit require less review than an individual permit would require. For information on the regulatory authority provided to the Corps by the EPA, go to http://www.usace.army.mil/CECW/Documents/cecwo/reg/mou/moa_epa404q.pdf H. Federal Aviation Administration Given the height of today’s commercial wind turbines, the majority of wind energy facilities are subject to review by the Federal Aviation Administration (FAA) for safety lighting. The

http://www.fws.gov/permits/

http://www.usace.army.mil/CECW/Documents/cecwo/reg/mou/moa_epa404q.pdf

Appendix


FAA requires lighting on any structure taller than 200 feet. Projects located near airports or military facilities or in aviation corridors may require additional review, even if they fall below the 200 foot threshold. FAA lighting varies significantly from project to project because the FAA currently does not have a national standard for lighting utility-scale wind turbines. Each of the nine FAA regions has flexibility in determining how a particular project should be lit based on the current advisory circular. Some lighting scenarios include lighting every other turbine or bracketing the project (i.e., lighting the turbines at just the corners of the project, the outermost ring of turbines, or the turbines at the end of rows). Projects typically require L864/L865 red and white strobe lights, though a few projects have been allowed to use L810 red obstruction lights. Companies working with the FAA should note that, until a national standard is finalized, wind developers will continue to submit lighting plans to their regional FAA office, and an FAA Obstruction Hazard Analyst will determine lighting requirements on a case-by-case basis. According to the FAA website, any temporary or permanent structure, including all appurtenances, that exceeds an overall height of 200 feet (61m) above ground level (AGL), or exceeds any obstruction standard contained in 14 CFR Part 77, should normally be marked and/or lighted. However, an FAA aeronautical study may reveal that the absence of marking and/or lighting will not impair aviation safety. Conversely, the object may present such an extraordinary hazard potential that higher standards may be recommended for increased conspicuity to ensure safety to air navigation. Normally, outside commercial lighting is not considered a sufficient reason to omit recommended marking and/or lighting. Recommendations on marking and/or lighting structures can vary depending on terrain features, weather patterns, geographic location, and in the case of wind turbines, number of structures and overall layout of design. The FAA may also recommend marking and/or lighting a structure because of its particular location. Companies can find additional guidance on these lighting regulations at http://www.faa.gov/regulations_policies/advisory_circulars/index.cfm/go/document.information/documentID/74452. If the structure is on airport property, contact the nearest FAA Airports’ Regional/Airports District Office available at http://www.faa.gov/airports/news_information/contact_info/regional/. In order to determine if a structure or project requires lighting under current regulations, a company can also contact an Air Traffic Organization Obstruction Evaluation Specialist that services its area. Information on Evaluation Specialists is available on the FAA website at https://oeaaa.faa.gov/oeaaa/external/public/aorMap.jsp. SECTION 3: REGULATORY COMPLIANCE AND INTERCONNECTION I. Introduction

http://www.faa.gov/regulations_policies/advisory_circulars/index.cfm/go/document.information/documentID/74452

http://www.faa.gov/regulations_policies/advisory_circulars/index.cfm/go/document.information/documentID/74452

http://www.faa.gov/airports/news_information/contact_info/regional/

https://oeaaa.faa.gov/oeaaa/external/public/aorMap.jsp

Appendix


Specifically, this section will concentrate on:

Jurisdictional authority of the various state and local agencies and utilities State and local regulations regarding interconnection and equipment safety NYS’ Standard Interconnection Requirements IEEE 1547 and UL 1471 requirements for equipment testing and certification

As discussed in Section 2, many of the compliance and permitting matters involved in alternative energy projects focus on zoning, land use and the resulting environmental and aesthetic effects of an alternative energy development proposal. However, the testing and certification of alternative energy equipment as well as compliance with the interconnection requirements and safety standards are also necessary aspects of commencing alternative energy projects. For example, in terms of commercial or large scale alternative energy projects, wind and PV equipment will not only have to conform to local utility and state standards, but may also have to comply with regulations and recommendations from the National Electric Code (NEC) and regulations from the Federal Energy Regulatory Commission (FERC). FERC is an independent federal agency that regulates the interstate transmission of electricity, natural gas and oil, as well as the licensing of hydropower projects pursuant to the Energy Policy Act of 2005. As part of that responsibility, FERC regulates the transmission and wholesale sales of electricity in interstate commerce, reviews siting applications for electric transmission projects in certain, limited circumstances, and protects the reliability of the high voltage interstate transmission system through mandatory reliability standards and monitoring. For smaller projects, many areas outside of FERC’s jurisdictional responsibility are dealt with by a State’s public utility commission. For example, an area considered outside of FERC's responsibility is the regulation of retail electricity and natural gas sales to consumers within a particular state. Therefore, with the exception of hydro-electric and certain, specific energy projects, jurisdictional authority over energy generation, transmission and supply projects typically resides with the appropriate state entity, local utility companies and municipalities. In New York State, regulation of smaller scale energy generation, transmission and supply is the responsibility of the Public Service Commission (PSC), which is part of New York State’s Department of Public Service. Under New York law, the PSC has all powers necessary to carry out the supervision and regulation of the manufacture,2 transportation, sale and/or distribution of gas (natural or manufactured or mixture of both) and electricity for light, heat or power to persons or corporations owning, leasing or operating the same. It is important for companies to understand the role of the PSC because it is responsible for the

2 Note: All natural gas drilling activity is regulated by the NYS Department of Environmental Conservation.

Appendix


oversight of all utility companies in this state. Currently, in New York, there are 6 major utilities. Each utility covers a specific region in the state and is tasked with assisting distributed generation providers with connecting to the existing power grid pursuant to New York State’s Standard Interconnection Requirements and with their own interconnection requirements. Although the role of the utilities will be discussed in more detail below, for general information on the individual utilities in New York State and for additional information on their respective interconnection requirements, please go to the following websites:

Central Hudson covers New York State’s Mid-Hudson River Valley - http://www.centralhudson.com/

Con Edison serves New York City and its northern suburbs -

http://www.coned.com/

New York State Electric & Gas delivers electricity to 871,000 customers and natural gas to 256,000 across more than 40% of upstate New York - http://www.nyseg.com/

National Grid covers the counties in the north and west of New York State -

https://www.nationalgridus.com/

Orange & Rockland Utilities Inc. covers Orange and Rockland counties - http://www.oru.com/index.html

Rochester Gas & Electric delivers electricity and natural gas energy to 650,000

residents and businesses in a nine county region centered on the city of Rochester in upstate New York – http://www.rge.com/

For contact information for each of the utilities in New York State to address questions related to interconnection, go to http://www.dps.state.ny.us/IC_Contacts.htm. In addition to these interconnection regulations and requirements which will be examined more closely in later sections, equipment certification for DG products must be obtained to ensure conformity with approved equipment specifications and interconnectivity requirements. This certification usually involves a nationally recognized testing laboratory (NRTL) and the federal Occupational Safety and Health Administration (OSHA). Specifically, OSHA-approved NRTLs have the important role of testing and certifying equipment to be used in alternative energy projects. Through its NRTL program, OSHA recognizes certain private sector laboratories that have met the necessary qualifications to evaluate and certify a company’s equipment after determining that such equipment meets consensus-based standards of safety.

http://www.centralhudson.com/

http://www.coned.com/

http://www.nyseg.com/

https://www.nationalgridus.com/

http://www.oru.com/index.html

http://www.rge.com/

http://www.dps.state.ny.us/IC_Contacts.htm

Appendix


Companies who wish to provide distributed generation equipment for an alternative energy project must receive certification from an NRTL in order for their products to be used in distributed generation systems. For example, Underwriter Laboratories (UL) is an OSHA-certified NRTL that provides services for product safety certification and compliance solutions. Working with a range of entities - from manufacturers and consumers to regulatory bodies and code officials – UL has significant experience testing products for public safety and is considered one of the leading NRTLs in the nation. To find an NRTL for equipment certification or to obtain additional information on OSHA’s program, go to http://www.osha.gov/dts/otpca/nrtl/. Finally, companies involved in providing product and services for alternative energy projects should be aware that the New York Independent System Operator (NYISO) may require additional regulatory compliance in some situations (discussed in detail in Section 3.IV.B). While NYISO is private, not-for-profit corporation, it functions much like a quasi-public corporation, being considered an “electric corporation” for purposes of the PSC’s jurisdiction, and a “reliability coordinator” for purposes of FERC’s jurisdiction. NYISO is responsible for the reliability of the efficient flow of power from more than 500 generating units on nearly 10,900 miles of high-voltage transmission lines in New York State. NYISO administers and monitors New York’s wholesale electricity markets and is responsible for conducting long-term assessments of New York State’s electricity resources and needs. It also evaluates the feasibility of projects proposed to meet those needs, and develops and deploys state-of-the-art technology to sustain and enhance the performance and efficiency of the power grid and electricity markets serving New York State. As discussed in more detail below, NYISO works directly with companies and developers of alternative energy projects and has an important role in the interconnection of these projects to the transmission lines and electric grid. As demonstrated by this detailed introduction, there are many entities that manufacturers and installers of DG products must interact with and obtain approvals from in order to complete a DG project. Specifically, manufacturers and installers must work with utilities, an NRTL such as UL, and other local, state and/or federal agencies having jurisdiction and authority over DG projects. In order to understand this complex arrangement of overlapping authorities and the areas they regulate, this chapter will first provide a general overview of New York State’s power grid. II. Electric Power Grid A. Overview Traditional utility electric power systems were designed to support a one way power flow from the point of generation at a large scale facility through a transmission system to distribution level loads. These systems were not originally intended to accommodate the

http://www.osha.gov/dts/otpca/nrtl/

Appendix


flow of power from smaller distributed generation systems at the distribution level back into the electric power grid. Because of this fact, electric utility companies have developed certain requirements related to power needs and safety concerns that must be addressed regarding the performance and safety of distributed generation systems that will be connected to the electric power systems. Such needs center on reliable performance of the overall system, power quality and availability, and protection against faults which could cause the system to shut down. The safety issues focus on utility monitoring and repair, islanding (which will be discussed below) and system failures. DG products and installations are regularly subjected to investigation and installation requirements by a broad base of regulators, both through state utilities and the utility commissions. In New York, for example, the utilities have implemented their own interconnection rules, which the PSC enforces. The State has also enacted the Standardized Interconnection Requirements (SIR) which define the application and approval process for DG projects, including the deadlines for applying for the necessary approvals, while also defining technical interconnection requirements. DG product and service providers must comply with two sets of rules – both the individual utility companies’ requirements and NYS SIR – for installation and interconnection of alternative energy distributed generation projects. Utility companies want assurances that the equipment and systems that are interconnected with the electric grid will operate properly after they are manufactured and installed and will continue to operate properly after years of service in the field. However, most previously established utility test methods and equipment test methods are not compatible with the new microprocessor-based interconnected DG equipment being developed today. Therefore, most utilities and state utility commissions are proceeding cautiously when it comes to interconnection of DG systems. Accordingly, the PSC, together with the individual utility companies, have created statewide DG interconnection requirements, which are used to closely evaluate installation of DG products and services. Specifically, as will be covered in more detail in the Testing and Certification Section below, in order for the equipment to be interconnected to the utility system without additional protective devices, the interface equipment must be equipped with the minimum protective function requirements by the utility and be tested by a NRTL recognized by OSHA in compliance with certain federal standards, such as UL 1741 (Inverters, Converters, Controllers and Interconnection System Equipment for Use With Distributed Energy Resources). Although this requirement will be discussed in more detail below, it should be noted here that the applicant for interconnection – whether an installer, manufacturer, or homeowner - must provide to the utility company the necessary documentation, including the proposed equipment certification, demonstrating compliance with UL 1741 by a NRTL. This is important because, if the equipment is UL 1741 certified by NRTL and compliance documentation is submitted to the utility, the utility will readily accept such equipment for interconnection in NYS.

Appendix


In addition, the Federal Energy Policy Act of 2005 also requires that state commissions consider certain standards for interconnection through electric utilities. Section 1254 of the Act requires that “interconnection services shall be offered based upon the standards (IEEE Standard 1547 for Interconnecting Distributed Resources with Electric Power Systems) developed by the Institute of Electrical and Electronics Engineers.” IEEE 1547 is essentially the “law of the land” for interconnections because it is the accepted engineering standard and because federal law mandates its use. Requirements for compliance with IEEE 1547 will be discussed below in Section 3.V.A. B. Radial distribution systems Interconnection issues can arise when installing a system onto either a radial distribution system (RDS) or network grid distribution system (network grid). A RDS relies on a single primary feeder line that delivers electricity from a substation to transformers located along the line. In contrast, network grids (like NYC’s) are complex, integrated, and redundant systems with multiple primary feeder lines and transformers that operate in parallel to improve grid reliability in urbanized areas. The differences between a RDS and a network grid are found in reliability, cost, and accessibility. A RDS is considered less reliable, less expensive, and easier to access for repair and interconnection purposes than a network grid. Radial distribution systems have an electrical substation, radial feeders for energy delivery, and tie to transformers that convert the voltage to an acceptable utilization level. Each feeder can serve several hundred to several thousand electric utility customers, and each transformer can serve one to twenty customers. RDS lines can be less than a mile to more than 20 miles long from each substation to the farthest point. The difficulty with interconnection of a DG system to a RDS is that if any part of the system experiences a failure, some or all of the customers served by the feeder will be without power until it is repaired. An installer can typically expect to deal with a RDS when interconnecting to a utility in NYS. A RDS is most common especially outside of very large urban areas. Other states also follow this same pattern and do not typically use an RDS in very dense and populated cities. C. Network Grid Distribution Systems A network grid is more reliable than a RDS but has a complex and difficult system that usually requires additional protective devices when connecting a DG system to the utility’s grid. Currently, network grids are primarily used in large urban cities (such as NYC), and are less commonly used in smaller cities (such as Syracuse, NY). A network grid is designed so that each load receives its power from several transformers that are

Appendix


simultaneously supplied from different primary feeders. Thus, a single equipment failure will not result in a network outage. The secondary line of the transformers is placed in parallel configuration to form a “secondary grid system.” There are two types of secondary grid systems: a “spot network” and “area network.” A spot network is a secondary system comprised of network transformers at a particular location in order to serve a unit building. An area network has the secondary line of many transformers in a wide area (up to several blocks) connected together. An important reason why a network grid is highly reliable is because both types of network grids are designed with redundant transformers and redundant feeders that can be taken out of service for maintenance, to add new equipment, to remedy a feeder or transformer outage, or to correct a significant drop in the load on the network without affecting a single customer. Because of such complexity, the utilities with network grids focus on preventative or corrective maintenance and backup capability. Every network grid has a network protector (NP), which is a relay and breaker pair that senses reverse-power flow (from either a faulted component or a planned outage) and is designed to interrupt the power from flowing back toward the utility system. A NP is installed on distribution feeders to mitigate safety hazards to the public, prevent or minimize damage to equipment, and improve service reliability by clearing an abnormal condition by removing a small section of the circuit for a given fault. Distribution feeders are protected by a circuit breaker at the substation and line reclosers, sectionalizers, interrupters, and fuses are protected at intermediate locations along the main feeders and laterals. Because some DG systems may feed power back into the network grid, additional regulations exist to protect the capability of the grid, and DG equipment and service providers should be aware of these additional regulations when working on or installing such systems on a network grid. Regional utility companies will be able to provide information on such regulations in the event the DG system is connecting to a network grid. Again, for contact information for the individual utility companies, go to http://www.dps.state.ny.us/IC_Contacts.htm D. Preventative and/or General Safety Requirements Installers seeking to interconnect a DG system to the grid can expect to incur fees and charges related to such interconnection as they begin their application. When DG systems are interconnected to network grids it may cause electricity to return back into the grid which can open network protectors inappropriately and disrupt electricity service to other customers. To protect against this problem, most utilities have created interconnection requirements that require prospective DG system installers to install protective devices (reverse power relays, circuit breakers, etc.) at all locations where the installer wants to operate generation in parallel with the company’s system. NYS SIR and most utilities in NYS require the installation of a manual disconnect switch with the interconnection of

http://www.dps.state.ny.us/IC_Contacts.htm

Appendix


almost all DG systems. Furthermore, there are expensive reverse power relays that must be installed when interconnecting to a network grid and exporting power. There are also the fees associated with getting equipment certified by a NRTL. Finally, there utility companies impose tariffs that an installer can incur while waiting for their system to be interconnected during the application process, and must be paid before installation can occur. In addition, reverse power relays are normally required in network grids if it is determined by the utility that a DG system will export power. The reverse power relays help to prevent power from being fed back into the network grid. Electricity fed onto a network grid from a distributed generator could shut down entire sections of the grid. Reverse power relays can cost anywhere from $15,000 - $40,000 per relay in New York State, and the cost may rise above $40,000 in New York City (NYC) where a network grid is used and the requirement of reverse power relays is mandatory. However, such cost can be avoided if the DG system does not export excess power to the grid. Therefore, in the event that such cost is prohibitive, an installer or system owner might want to consider whether it is still cost-effective to export excess power. III. NYS Standardized Interconnection Requirements (SIR) As discussed, in New York State, the PSC – working with the appropriate local utility company – regulates the interconnection of DG systems with the electric power grid. In order to facilitate the proper and safe interconnection of all systems, the PSC has enacted statewide standards that set forth both the design requirements and operating requirements for DG systems. Specifically, SIR defines the application process and set deadlines for applications while providing the technical interconnection requirements that apply to systems which generate 2 MW of power or less. The PSC also maintains a list of certified equipment that complies with all SIR requirements. The list can be found at http://www.dps.state.ny.us/08E1018/SIRDevices.pdf. In 2008, SIR was modified to incorporate newly passed net metering laws and to simplify the application process for projects which are 25 kW of power and below. The new SIR requirements also incorporate UL 1741 standards (November 2005 revision) and update equipment certification requirements, while eliminating the disconnect switch for inverter based systems 25 kW or less. Finally, the 2008 version requires utilities to implement a web-based system for interconnection project status and, for systems 25 kW and below, allow customers the ability to submit application via the web. DG installers as well as product and service providers should be prepared to comply with all aspects of these regulations. This section, therefore, serves to introduce, or highlight, the design and operating requirements. The next section provides an overview of the application process itself.

http://www.dps.state.ny.us/08E1018/SIRDevices.pdf

Appendix


A. SIR Design Requirements 1. Common Design Requirements The system owner must provide protection and control equipment, including a protective device that has an automatic disconnect device. The automatic disconnect device must be able to automatically disconnect the generator upon the detection of an islanding condition and/or upon detection of a utility system fault. Islanding is an unsafe condition in which a portion of the grid continues to have power, produced from a DG system, even though power from the utility company has been shut off (see Section 3.III.B.5). The required operating ranges of voltage response for the generators must be 88% to 110% of nominal voltage magnitude. The required operating ranges of frequency response for the generators must be from 59.3 Hertz (Hz) to 60.5 Hz. Generators above 30 kW may be asked by the utility to operate at frequency ranges below 59.3 Hz. 2. Synchronous Generators Synchronous generators are rotating energy conversion machines capable of operating as stand- alone power sources that run independently of any other source. Synchronous generators are required to have automatic synchronizing equipment or manual synchronizing equipment with a relay supervision, voltage regulator, and power factor control. A system owner’s synchronous generator must have reactive power capability that can withstand voltage changes up to 5% of the base voltage levels. Also, the voltage regulator must be able to maintain the generator voltage under steady state conditions within +/- 1.5% of any set point and within an operating range of +/- 5% of the rated voltage of the generator. System owners must ground their synchronous generators either by solid grounding, high or low resistance grounding, high or low reactance grounding, or ground fault neutralizing grounding. 3. Induction Generators Induction generators may be interconnected if brought up to synchronous speed and if it can be demonstrated that the initial voltage drop measured at the Point of Common Coupling (PCC), which is where the utility interconnects with the new system, is acceptable based on current inrush limits. The system owner must submit information verifying the maximum starting kilovolt-ampere (kVA) data to the utility to verify that the voltage dip due to starting the system is within the visible flicker limits as defined by IEEE 519. If corrective step-switched capacitors or additional capacitors are installed on the customer’s side of the PCC, the utility will review these measures and may require additional equipment. 4. Inverters

Appendix


Direct current generators can only be installed in parallel with the utility’s grid by using a synchronous inverter. It is recommended that this equipment is selected from the “Certified Equipment” list maintained by the PSC on their website. As mentioned above, the list can be found at http://www.dps.state.ny.us/08E1018/SIRDevices.pdf. An interconnected, distributed generating system that uses equipment not listed on the “Certified Equipment” list must be protected by additional utility grade relays using settings approved by the utility and verified in the field which meet all functional requirements of IEEE 1547. A line inverter can be used to isolate the customer from the utility system if it is demonstrated that the inverter isolates the customer from the utility system safely and reliably. 5. Minimum Protective Function Requirements While there are no standardized minimum protective function requirements set forth in SIR for all utilities across NYS, each utility will determine what minimum protective functions are required on a case-by-case basis by taking into account several factors including but not limited to:

Type and size of the distributed generation facility; Voltage level of the interconnection; Location of the distributed generation facility on the circuit; Distribution transformer; Distribution system configuration; Available fault current; Load that can remain connected to the distributed generation facility under isolated

conditions; and Amount of existing distributed generation on the local distribution system.

Most utilities choose to follow the minimum standards set in the table below.

Synchronous Generators

Induction Generators

Inverters

Over/Under Voltage (Function 27/59)



Over/Under Frequency (Function 81O/81U)



Anti-Islanding Protection

NYS SIR does require that the utility notify the system owner in writing if additional protective functions are necessary. The notice must include a description of the specific aspects of the utility system that require the addition and an explicit justification for the

http://www.dps.state.ny.us/08E1018/SIRDevices.pdf

Appendix


necessity of the addition. The utility must also specify and provide settings for those functions that the utility designates as being required to satisfy protection practices. Protective devices must use their own current/potential transformers and cannot share electrical equipment associated with utility revenue metering. If the system owner’s protective devices fail/malfunction (including loss of control power) the automatic disconnect device must open, thus disconnecting the generation from the utility system. A system owner’s protection equipment must use a non-volatile memory design such that a loss of internal or external control power (including batteries) will not cause a loss of interconnection protection functions or loss of protection set points. 6. Metering Changes to metering may be required with the introduction of a DG system. Additional revenue metering or modifications to existing metering will be reviewed on a case-by-case basis by the utility. Any incremental metering costs are included in the applicant’s required interconnection costs. Net metered solar, farm waste, farm wind (25 kW or less) and residential-wind customer-generators are only required to contribute to the cost of dedicated transformers and other safety equipment, but farm wind and non-residential wind customer-generators with systems of 25 kW and larger are responsible for payment of one-half of interconnection costs in addition to the costs of the dedicated transformer and other safety equipment. a. Net Metering Net metering is a provision in the New York Public Service Law that allows consumers to install small, grid-connected renewable energy systems, such as solar and wind systems, to reduce their electric bills and have less impact on the electric grid. Specifically, net metering is an arrangement between the utility company and a customer or landowner, where excess power generated by a DG system is sent to the grid for use by other customers while the customer’s electric bills are reduced in exchange for the surplus energy supplied to the power grid. Under net metering, excess electricity produced by the DG system, but not consumed by the customer, can flow into the utility grid and is registered as a credit through the meter. If consumption of electricity exceeds what is generated by the energy system, the meter will register the amount of electricity that is consumed from the electricity grid. Most utility companies will install digital electric meters for net metering customers that are programmed to calculate net consumption and generation. Net metering is available on a first-come, first-served basis to customers of the state's major investor-owned utilities, subject to technology, system size and aggregate capacity limitations. Publicly-owned utilities are not obligated to offer net metering; however, the Long Island Power Authority (LIPA), for example, offers net metering on terms similar to

Appendix


those in the state law. Below is listing of the system size limitations, organized by technology and eligible sector.

Solar: 25 kW for residential, 2 MW or peak load (lesser of) for non-residential; Wind: 25 kW for residential, 500 kW for farm-based, and 2 MW or peak load (lesser

of) for non-residential; Biogas: 500 kW (farm-based only) Micro-CHP and Fuel Cells: 10 kW (residential only)

In addition, the PSC has determined that the maximum system size for small non-residential customers that are not on demand meters should be limited to the utility's threshold for requiring a demand meter. This threshold falls between 5 kW and 12 kW depending on the utility in question. The aggregate limit on net-metered PV, on-farm biogas systems, micro-CHP and fuel cell systems combined is set at 1.0% of a utility's 2005 electric demand, while the limit on aggregate wind system capacity is 0.3% of 2005 demand. Individual utilities are authorized to place higher limits on aggregate net-metered capacity if they choose to do so. b. Cost Legislation and subsequent PSC orders establish rules relating to customer responsibility for interconnection costs (e.g., new meters, transformers, or other equipment) and limitations on such costs. Cost treatments vary by customer type and system size (see NY Public Service Law §§ 66-j and 66-l). As part of the changes to SIR, the PSC has developed uniform interconnection rules for net-metered systems. B. SIR Operating Requirements 1. General Requirements In addition to the specific operating requirements dealing with transformers and disconnect switches discussed below, there are several general operating requirements which DG system owners – and the companies that provide them with products and/or services - must be aware of and comply with in order to meet the standards. These include:

System owners must provide a 24-hour telephone contact that the utility can contact to arrange access during normal business hours for repairs, inspection or emergencies;

Any changes to voltage and frequency trip set point adjustments must be reviewed and approved by the utility;

During outages, system owners cannot provide any power to the utility system, unless they have an open tie to the utility;

Appendix


The system owner are allowed to disconnect from the utility without prior notice in order to self-generate;

Under certain conditions, a utility may require a direct transfer trip (DTT), which is the remote operation of a circuit breaker by means of a communication channel, and must provide detailed evidence to the system owner as to the need for DTT; and

Proposed modifications by the system owner that will have an impact on the interface at the PCC after they are installed and a contract has been executed between the utility and the system owner must be reviewed and approved by the utility before they are made.

2. Dedicated Transformer The utility reserves the right to require a DG system to connect to the utility system through a dedicated transformer either provided by the connecting utility at the system owner’s expense, purchased from the utility, or one that conforms to the connecting utility’s specifications. A dedicated transformer is one that has a secondary line that serves only one customer. The transformer may be necessary to ensure conformance with a utility’s safe work practices, to enhance service restoration operations, or to prevent detrimental effects to other utility customers. A dedicated transformer is not required if the installation is designed and coordinated with the utility to protect the utility system and its customers adequately from potential detrimental net effects caused by the operation of the DG system. If the utility determines a need for a dedicated transformer, it shall notify the system owner in writing of the requirements. The notice shall include a description of the specific aspects of the utility system that necessitate the addition, the conditions under which the dedicated transformer is expected to enhance safety or prevent detrimental effects, and the expected response of a normal, shared transformer installation to the conditions. 3. Manual Disconnect Switch Systems larger than 25 kW and non-inverter based systems of 25 kW or less must be able to be isolated from the utility system by means of an external, manual, visible (clearly marked "Generator Disconnect Switch" with permanent 3/8 inch or larger letters or larger, and located within 10 feet of the utility’s external electric service meter or another utility approved location), gang-operated, load break disconnecting switch that is installed, owned, and maintained by the customer-generator, and located between the generating equipment and its interconnection point with the utility system. The disconnect switch must be lockable in the open position with a 3/8 inch shank utility padlock. The basic insulation level of the disconnect switch must coordinate with the utility’s equipment. Disconnect devices must meet applicable Underwriter Laboratories (UL), American National Standards Institute (ANSI), IEEE standards, and all applicable local, state, and federal codes (New York City Building Code may require additional certification). For

Appendix


installations above 600V or with a full load output of greater than 960A, a draw-out type circuit breaker with the provision for padlocking at the draw-out position can be considered a disconnect switch. A disconnect switch specified for a system size larger than 25kW and non-inverter based systems of 25 kW or less may be opened by the utility any time for any of the following reasons:

To eliminate conditions that constitute a potential hazard to utility personnel or the general public;

Pre-emergency or emergency conditions on the utility system; A hazardous condition that is revealed by a utility inspection; Protective device tampering; and Parallel operation prior to utility approval to interconnect.

The disconnect switch may also be opened by the utility, after notice to the responsible party has been delivered and a reasonable time to correct has elapsed, for the following reasons:

A system owner has failed to make available records of verification tests and maintenance of its protective devices;

A system owner's system adversely impacts the operation of utility equipment or equipment belonging to other utility customers; and

A system is found to adversely affect the quality of service to adjoining customers. SIR also requires that all DG systems interconnecting to the grid have a utility-accessible and lockable manual disconnect switch. The manual disconnect switch must be in an area that is clearly visible and located within 10 feet of the utility’s external electric service meter or another utility approved location. This may create difficulties particularly when the system itself is not readily accessible (e.g., when a system is located on the top floor of a high-rise building or in the garage of a house). Providing a utility-accessible disconnect switch could require significant amounts of wire and conduit, or trenching, running from the system to the switch and back again. Installers can avoid the unexpected complications created by a manual disconnect switch by planning ahead for the extra costs and the placement of the disconnect switch. An installer cannot completely avoid the requirement of a manual disconnect switch, except for certified inverter-based systems up to 25 kW which are not required to have a manual disconnect switch. Therefore, an installer that has a certified inverter-based system should inform the utility that a manual disconnect switch is not required for their system. On the other hand, all others systems should anticipate that it is likely that they will need to leave extra space around the service meter that is readily accessible.

Appendix


4. Power Quality The maximum harmonic limits for electrical equipment must be in accordance with IEEE 519 to limit the maximum individual frequency voltage harmonic to 3% of the fundamental frequency and the voltage Total Harmonic Distortion to 5% on the utility side of the PCC. Any voltage fluctuation resulting from connection of the customer's energy producing equipment to the utility system must not exceed the limits defined by the maximum permissible voltage fluctuations border line of visibility curve identified in IEEE 519. This is necessary to minimize the adverse voltage effect upon other customers on the utility system. 5. Power Factor If the average power factor is less than 0.9 (leading or lagging), the power factor correction required by the installation of the generator is considered a commercial item to the utility. Induction power generators may be provided from the utility at the system owner’s expense. Installation of variable correction equipment by the system owner on the system owner’s side of the PCC must be reviewed and approved by the utility before installation. 6. Islanding Under SIR, islanding is not permitted in NYS. As mentioned, islanding refers to the condition where the DG system continues to provide power to a location even though power from the electric utility is no longer present. For example, in the case of a power blackout, a building that has solar panels that feed power back to the electrical grid continues to power the building, and the building becomes an "island" with power surrounded by a "sea" of unpowered buildings. Islanding can be dangerous to utility workers, who may not realize that the building is still powered even though no power is being provided from the grid. For that reason, SIR requires that DG systems have the mechanism to detect islanding and immediately stop producing power in the event that islanding is detected. C. Application Process 1. For Systems Generating Up To 25 kW of Electric Power - 6 Steps

1) Initial Communication from Potential Applicant. a. Ranges from a general inquiry to the utility or a fully completed

application.

2) Inquiry is Reviewed by the Utility to Determine the Nature of the Project.

Appendix


a. Technical staff contacts the utility by phone or in person to discuss the scope of the interconnection with the potential applicant to determine what specific information and documents (including application, contract, technical requirements, lists of qualified type-tested equipment/systems, applicable rate schedules, and metering requirements) will be provided to the potential applicant. All such information and a copy of the NYS SIR must be sent to the applicant within three business days following the initial communication from the potential applicant, unless the potential applicant indicates otherwise. Then, a utility representative will be designated to serve as the point of contact for the applicant (unless the utility informs the applicant otherwise) to coordinate the potential applicant’s project with the utility.

3) Application Filed by Applicant. a. The potential applicant submits an application package to the utility. A

complete application package consists of: i. A letter of authorization by the customer (if the applicant is an

agent for the customer), ii. The standard single page application form completed and signed

by the applicant, iii. A signed copy of the standardized contract, iv. A three line diagram for the system identifying the manufacturer

and model number of the equipment(s), v. A copy of the manufacturer’s data sheet for the equipment(s),

vi. A copy of the manufacturers verification test procedure(s) and vii. A copy of the equipment(s) certification to UL 1741 if applicable.

b. If the application is not complete, the utility must notify the applicant by email, fax, or other form of written communication, and explain the missing factors within five business days of receipt of the application package.

c. If the proposed system meets the NYS SIR technical requirements the utility will return a signed and executed standardized contract to the applicant within ten business days of receiving the application and proceed with the installation.

d. If the proposed system does not meet the technical requirements then the utility must notify the applicant by email, fax, or other form of written communication and explain the technical issues or problems within ten business days of receiving the application.

4) System Installation a. The applicant must install the system according to design accepted by the

utility and the equipment manufacturer’s requirements. All inverter based systems less than 25 kW will be allowed to interconnect to the

Appendix


utility system for not more than two hours, only to assure proper operation of the installed equipment.

b. For net metered systems, any modifications related to existing metering configurations to allow for net metering shall be completed by the utility prior to Step 5. The utility shall complete the necessary metering changes within ten business days of receiving the request from the applicant.

5) Applicant’s Facility is Tested According to NYS SIR. a. The applicant must perform verification testing according to the written

verification test procedure provided by the equipment manufacturer within ten business days of the system installation.

b. The utility is given the option to witness the tests, but if they opt out the applicant must send a written notification that certifies that the system has been installed and tested in compliance with the NYS SIR, the utility-accepted design and the equipment manufacturer’s instructions within five days of the test.

6) Final Acceptance. a. Within five business days of receiving the written test notification from

Step 5, the utility will either issue the applicant a formal letter of acceptance for interconnection, or will request a date and time be set for a joint on-site verification and witness of operation of the system. This joint on-site verification must be completed within ten business days after being requested. The utility will issue the applicant either a formal letter of acceptance for interconnection or a detailed explanation of the deficiencies in the system within five business days of the completion of the on-site verification.

2. For Systems Generating Up To 2 MW Of Electric Power - 11 Steps NOTE: There is an exception for applicants installing inverter-based systems 25 kW to 2 MW which allows them to follow the same 6-step process as systems 25 kW and less, as long as the inverter-based system has been certified and tested in accordance with UL 1741 and the utility has approved the project. The utility has fifteen business days from the original application submittal to determine and notify the applicant in writing of its findings. If the utility determines that the inverter-based system is not eligible for the 6-step process, the applicant can: (1) continue with the regular 11-step process for systems above 25 kW and up to 2 MW, or (2) request a review by the Department of Public Service. The 11-step process for non-inverter based systems above 25 kW up to 2 MW is outlined below (the first two steps are similar to the first three steps of the 6-step process):

1) Initial Communication from Potential Applicant.

Appendix


a. Ranges from a general inquiry to the utility or a completed application.

2) Inquiry is Reviewed by the Utility to Determine the Nature of the Project. a. Technical staff contacts the utility by phone or in person to discuss the scope

of the interconnection with the potential applicant to determine what specific information and documents (such as an application, contract, technical requirements, listing of qualified type-tested equipment/systems, applicable rate schedules, and metering requirements) will be provided to the potential applicant. All such information and a copy of the NYS SIR must be sent to the applicant within three business days following the initial communication from the potential applicant, unless the potential applicant indicates otherwise. Then, a utility representative will be designated to serve as the point of contact for the applicant (unless the utility informs the applicant otherwise) in coordinating the potential applicant’s project with the utility.

3) Application Filed by Applicant. a. The potential applicant submits an application to the utility that must

include: i. The completed standard application form,

ii. A copy of equipment certification according to UL 1741, iii. A three line diagram specific to the proposed system, iv. A letter of authorization (if applicant is an agent for the customer), and v. Payment of a non-refundable $350 application fee (the fee shall be

refunded to net metering customer-generators unless applied toward the cost of installing a dedicated transformer). If the applicant proceeds with the project to completion, the application fee will be applied as a payment to the utility’s total cost for interconnection, including the cost of processing the application. Within five business days of receiving the application, the utility will notify the applicant of receipt and whether the application has been completed adequately.

4) Utility Conducts a Preliminary Review and Develops a Cost Estimate for the

CESIR. a. The utility must conduct a preliminary review of the proposed

interconnection. When the review is complete, the utility will inform the applicant whether the proposed interconnection is viable or not, and provide the applicant with a cost estimate associated with the completion of the CESIR. The preliminary review must be completed by the utility and a written response detailing the outcome of the preliminary review must be sent to the applicant within fifteen business days of the completion of Step 3.

5) Applicant Commits to the Completion of the CESIR.

Appendix


a. Before beginning the CESIR, the applicant must provide to the utility: i. A complete detailed interconnection design package,

ii. Name and phone number of the individual responsible for addressing technical and contractual questions regarding the proposed system, and

iii. If applicable, advance payment. b. The complete detailed interconnection design package shall include:

i. Electrical schematic drawings reflecting the complete proposed system design. The drawings must show all electrical components proposed for the installation, and their connections to the existing on-site electrical system from that point to the PCC.

ii. A complete listing of all interconnection devices proposed for use at the PCC.

iii. The written verification test procedure provided by the equipment manufacturer, if required.

iv. Three copies including: 1. A proposed three line diagram of the generation system

showing the interconnection of major electrical components within the system with equipment ratings that indicate:

a. Number, individual ratings, and type of units comprising the above rating;

b. General high voltage bus configuration and relay functions;

c. Proposed generator step-up transformer MVA ratings, impedances, tap settings and winding voltage ratings;

2. Electrical studies that demonstrate that the design is within acceptable limits and limited to the following: system fault, relay coordination, flicker, voltage drop, and harmonics.

6) Utility Completes the CESIR. a. CESIR consists of two parts:

i. Review of the impacts to the utility system when the proposed system is interconnected, and

ii. Review of the proposed system’s compliance with the applicable criteria set forth below.

b. A CESIR must be performed by the utility, within sixty business days of receipt of the information set forth in Step 5, to determine if the proposed generation on the circuit results in any relay coordination, fault current, and/or voltage regulation problems (for systems using type-tested equipment, the time required to complete the CESIR may be reduced).

i. A full CESIR may not be needed if the aggregate generation is less than: 50 kW on a single-phase branch of a radial distribution circuit or 150 kW on a single distribution feeder.

Appendix


c. Upon completion of the CESIR, the utility will provide to the applicant in writing:

i. Any utility system impacts, ii. Notification of whether the proposed system meets the applicable

criteria considered in the CESIR process (and if applicable, a description of where the proposed system is not in compliance with these requirements),

iii. Subject to subsections (1) through (4) below, a good faith and detailed estimate of the total cost of completion of the interconnection of the proposed system and/or a statement of cost responsibility for a dedicated transformer or other required interconnection equipment:

1. An applicant that will not be net metered must receive an estimate including the costs associated with any required modifications to the utility system, administration, and on-site verification testing;

2. An applicant that will be net metered and is either a wind farm or a non-residential wind applicant intending to install wind electric generating equipment of more than 25 kW must receive an estimate with the costs associated with any required modifications to the utility system, administration, metering, and on-site verification testing, and the applicant is responsible for one-half of such costs. It must also include the applicant's responsibility for the actual cost of installing any dedicated transformer and other safety equipment according to the maximum established in subsection (4);

3. An applicant that will be net-metered and is not a wind farm or non-residential wind applicant will have no responsibility for the interconnection costs described in subsection (2), but a statement must be provided showing the applicant’s responsibility for the actual cost of installing any dedicated transformer and other safety equipment up to the maximum established in subsection (4), and;

4. With respect to an applicant that is to be net-metered, if the utility finds that it is necessary to install a dedicated transformer or other equipment to protect the safety and adequacy of electric service provided to other customers, the applicant will be informed of its responsibility to install such equipment.

Appendix


Generator Type Generator Size Maximum Equipment Responsibility

Solar Less than or equal to 25 kW $350

Solar Over 25 kW up to 2 MW $5,000 Wind Less than or equal to 25 kW $750

Wind Over 25 kW up to 2 MW $5,000 Farm Wind Over 25 kW up to 500 kW $5,000

Farm Waste Up to 500 kW $5,000

7) Applicant Commits to Utility Construction Using Utility’s System

Modifications. a. The applicant and utility will execute a standardized contract for

interconnection and the applicant will provide the utility with an advance payment for the utility’s estimated costs as identified in Step 6.

8) Project Construction. a. The applicant will build the facility according to the utility-accepted design,

and the utility will commence construction/installation of system modifications and metering requirements as identified in Step 6. The schedule for this work is to be discussed and agreed upon between the utility and applicant according to Step 6.

9) Applicant’s Facility is Tested in Accordance With the NYS SIR. a. Verification testing must be performed according to the written test

procedure in Step 5 and any site-specific requirements identified by the utility in Step 6. The final testing will be conducted within ten business days of complete installation at a mutually agreeable time, so the utility has the opportunity to witness the tests. If the utility opts not to witness the test, the applicant will send a written notification to the utility within five (5) days of the test that certifies that the system has been installed and tested in compliance with the NYS SIR, the utility-accepted design, and the equipment manufacturer’s instructions.

10) Interconnection. a. The applicant’s facility will be allowed to commence parallel operation upon

satisfactory completion of the tests in Step 9. The applicant must have complied with and continue to comply with the contractual and technical requirements.

11) Final Acceptance and Utility Cost Reconciliation.

a. If the utility witnessed the verification testing then they must issue either a formal letter of acceptance for interconnection or a detailed explanation of

Appendix


the deficiencies in the system to the applicant within ten business days of the test.

b. If the utility chose not to witness the verification testing then they must issue either a formal letter of acceptance for interconnection or request that the applicant and utility set a date and time for an on-site verification and witness operation of the system within ten business days of receiving the written test notification from Step 9.

i. The joint on-site verification must be completed within twenty business days after being requested.

ii. Within ten business days of the completion of the on-site verification, the utility will issue to the applicant either a formal letter of acceptance for interconnection or a detailed explanation of the deficiencies in the system. The utility will also merge its actual costs related to the applicant’s project against the application fee and advance payments made by the applicant. The applicant will receive either a bill for any balance due or a reimbursement for overpayment as determined by the utility, except that a net metering applicant may not be charged in excess of the cost of installing the dedicated transformer or other safety equipment described above in Step 6.

IV. Additional Regulatory Requirements A. Interconnection Inventory By January 31 and July 31 of each year, the utility companies, working with installers and customers, must submit an inventory of all active DG projects to the PSC. This allows the PSC to monitor interconnection activities at each utility and ensure that all applications are being handled in a timely manner. At a minimum, the following information should be provided in the inventory:

Company Applicant Name System Type System Capacity Net Metered (Yes/No) Protective Equipment Application Review Start and End date Preliminary Review Start and End date CESIR Start and End date Verification Testing date Final Letter of Acceptance date

Appendix


B. NYISO Interconnection Procedures for Large Scale/Commercial Development For developers of large scale alternative energy projects, NYISO has developed additional requirements in order to connect to the electric power grid. Because of the seriousness of the safety and reliability issues that can arise with large scale projects are involved, NYISO provides feasibility studies for developers for each Point of Interconnection (POI). Specifically, for each POI to be studied, the developer of a large scale project will be required to submit to NYISO:

a request for interconnection, a $10,000 deposit, a demonstration of site control (or another $10,000 deposit in lieu of site control),

and technical data.

Each POI to be evaluated is considered a separate request, even if the POI is the same site but at a different voltage level, and developers are required to submit a separate set of deposit(s) and data. Upon receipt of a valid interconnection request, NYISO staff will assign the project a queue position and initiate the “Interconnection Study” process. Initially, a meeting will be held between NYISO, the developer and the connecting Transmission Owner(s) (TO) to determine alternative interconnection options and to exchange information. After the meeting has occurred, the developer will make an informed and definitive selection of which POIs should be studied by NYISO. NYISO will then enter into a Feasibility Study Agreement with the developer, which must be executed and returned to NYISO with a $10,000 deposit. Upon the receipt of executed agreement, NYISO will begin the feasibility study. The study will consist of a power flow and short-circuit analysis of the base case with the addition of any facilities that have become in-service, have a signed Interconnection Agreement, or hold a higher pending queue position. Should a modification occur, such as a higher queued project dropping out of the queue, a re-study may be needed. After the completion of the Feasibility Study, NYISO will provide the customer with a report including a good faith estimate of (i) system upgrades required to effect full transfer of the new generation (ii) cost responsibility for necessary system upgrades, and (iii) time to construct. Along with the Feasibility Study Report, the developer will receive a System Reliability Impact Study (SRIS) Agreement, to be executed and delivered to NYISO, including demonstration of site control. The SRIS will study the effects of the proposed project to the overall reliability of the New York Transmission system. This study will consist of a short-circuit analysis, power flow, and stability analysis of the base case with the addition of any facilities that have become in-service, have a signed Interconnection Agreement, or hold a higher pending queue position, as well as all transmission upgrades for the queue projects

Appendix


added. Should a modification occur, such as a higher queued project dropping out of the queue, a re-study may be needed. After the completion of the SRIS, NYISO will provide the customer with a report including a (i) good faith estimate of non-binding upgrade costs, (ii) good faith estimate of a non-binding upgrade timeline, and (iii) a list of required upgrade facilities. Finally, the developer will receive an Interconnection Facilities Study Agreement. For this study, the project will be placed into a cluster called a class year for the study. The developer will execute and deliver the Facilities Study Agreement to NYISO, including demonstration of site control and a deposit equaling the greater of $100,000 or the facilities portion of the estimated monthly study cost. The clustered approach to the Interconnection Facilities Study will include all class year projects in one combined study. The study will specify and estimate the cost of the equipment, engineering and design work, permitting, site acquisition, procurement and construction work and commissioning needed for the class year at each substation or feeder. Along with the estimated cost, a good faith schedule for upgrades will be established, which will contain major milestones to facilitate the tracking of the progress of each large facility interconnection project. After the Facilities Study has been completed, the developer will have the option to enter into an Optional Interconnection Study, which will utilize further data to support the previous studies. Upon the completion of the Optional Interconnection Study and/or the Facilities Study, a Large Generator Interconnection Application (LGIA) will be tendered by NYISO. The LGIA will be signed by the developer and filed with FERC along with a non-refundable $250,000 security to the TO to begin construction of the necessary facility upgrades. The facility will have no more than 3 years to become commissioned after the signing of the LGIA. For additional information on large scale development or the regulatory authority of NYISO, please go to http://www.nyiso.com/public/index.jsp. V. Equipment Testing and Certification A. Equipment Standards As mentioned previously, the Federal Energy Policy Act of 2005 called for state commissions to take into consideration and create standards to govern DG interconnection with local utility companies. The standards which were universally adopted were developed by the Institute of Electrical & Electronic Engineers and specifically address interconnecting DG systems to electric power systems. These standards, known as IEEE 1547, are viewed as a regulatory step in the process of providing distributed generation systems. In order to connect a DG system to the power grid, or to provide individual products or services that will be used in a DG system, manufacturers and/or installers must be able to demonstrate compliance with IEEE 1547. The published standards are available

http://www.nyiso.com/public/index.jsp

Appendix


on the IEEE Standards Association website at http://grouper.ieee.org/groups/scc21/1547/1547_index.html. IEEE 1547 provides technical specifications, such as power quality, islanding, and other general requirements as well as testing specifications and requirements such as design testing (temperature stability, synchronization, reverse power and harmonics and flicker), production testing, interconnection installation evaluation and periodic interconnection testing. Specifically, IEEE 1547 focuses on what would result if the DG system operated outside of the nominal parameters and what would occur during normal operating conditions with respect to voltage, frequency, harmonics, and flicker. IEEE 1547 is directed at the interconnection equipment itself and conditions at the point of common coupling. The point of common coupling is defined as point where a local electric power system, the electric system associate with directly serving the customer load, is connected to an area electric power system, e.g., the utility system. It is important to note that IEEE 1547 does not impact the DG equipment itself, but rather the equipment needed to achieve interconnection with the system. Within IEEE 1547, there are several subsections that equipment providers must be familiar with and conform to in order to comply with the standards, including:

IEEE 1547.1 - Standard for Conformance Tests Procedures for Equipment Interconnecting Distributed Resources with Electric Power Systems. This standard specifies the type, production, and commissioning tests that shall be performed to demonstrate that the interconnection functions and equipment of a distributed resource (DR) conform to IEEE Standard 1547. Interconnection equipment that connects distributed resources (DR) to an electric power system (EPS) must meet the requirements specified in this standard. Standardized test procedures are necessary to establish and verify compliance with these requirements. These test procedures must provide both repeatable results, independent of test location, and flexibility to accommodate a variety of DR technologies.

IEEE 1547.2 Application Guide for IEEE 1547 Standard for Interconnecting

Distributed Resources with Electric Power Systems. This guide provides technical background and application details to support the understanding of IEEE 1547 Standard for Interconnecting Distributed Resources with Electric Power Systems. This document facilitates the use of IEEE 1547 by characterizing the various forms of distributed resource technologies and the associated interconnection issues. Additionally, the background and rationale of the technical requirements are discussed in terms of the operation of the distributed resource interconnection with the electric power system. Presented in the document are technical descriptions and schematics, applications guidance, and interconnection examples to enhance the use of IEEE 1547.

http://grouper.ieee.org/groups/scc21/1547/1547_index.html

Appendix


Information on the entire 1547 Series of Standards, as well as the Standards themselves, are available at http://grouper.ieee.org/groups/scc21/dr_shared/. B. Certification In order for the equipment to be acceptable for interconnection to the utility system without additional protective devices, the interface equipment must be equipped with the minimum protective function requirements listed in the table in Section III.A.5 of this chapter and be tested by an NRTL recognized by OSHA in compliance with Underwriter's Laboratories (UL) Standard 1741. UL 1741 is the companion to IEEE 1547 and is the standard requirement for inverters, converters, controllers and interconnection system equipment that is used with DG systems. It provides the basis for certification of inverter-based systems, which are sometimes referred to as “pre-certified” systems. It goes beyond IEEE 1547 to include such things as construction, materials, wiring and component spacing. It provides for protection against risk of injury to persons and assists with reliability through output characteristics and utility compatibility. UL 1741 covers both inverters, converters, charge controllers, and interconnection system equipment intended for use in stand-alone (not grid-connected) and for utility-interactive (grid-connected) power systems. Utility-interactive inverters, converters, and ISE are intended to be operated in parallel with an electric power system to supply power. For utility-interactive equipment, these requirements are intended to supplement and be used in conjunction with the IEEE 1547 and IEEE 1547.1. Please note: The products covered by these requirements are also intended to be installed in accordance with the National Electrical Code (NEC), NFPA 70. Information on NFPA 70 is available at the National Protection Fire Association’s website at http://www.nfpa.org/aboutthecodes/AboutTheCodes.asp?DocNum=70. All certified equipment must be tested in accordance with UL 1741 in addition to IEEE 1547. Companies providing such equipment or products for a DG system must have their equipment tested and certified by a NRTL. Such equipment testing and certification information can be submitted to the utilities directly, but the NYS DPS will continue to maintain a certified equipment list as well. Any equipment that is not tested and certified by a NRTL will be reviewed by DPS and PSC staff before final approval and posting on the Department’s website for certified equipment. UL 1741 has been expanded to cover the interconnection of all types of DG systems, including PV modules and panels, fuel cells, micro-turbines, and wind and hydro turbines. For each interconnection application, documentation demonstrating the proposed equipment certification, stating compliance with UL 1741 by an NRTL, shall be provided by the applicant to the utility. If an equipment manufacturer, vendor, or any other party

http://grouper.ieee.org/groups/scc21/dr_shared/

http://www.nfpa.org/aboutthecodes/AboutTheCodes.asp?DocNum=70

Appendix


desires, documentation indicating compliance as stated above may be submitted to the DPS Commission for listing under the “Certified Equipment” list on the Department’s website (http://www.dps.state.ny.us/distgen.htm). Please note that utilities are not responsible for reviewing and approving equipment tested and certified by a non-NRTL. If equipment is UL 1741 certified by an NRTL and compliance documentation is submitted to the utility, the utility shall accept such equipment for interconnection in New York state. All equipment certified to UL 1741 by an NRTL shall be deemed ‘certified equipment’ even if it does not appear on the Department of Public Service Commission’s website. C. Verification Testing All interface equipment must include a verification test procedure as part of the documentation presented to the utility. Except for the case of small single-phase inverters, the verification test must establish that the protection settings meet the SIR requirements. The verification testing may be site-specific and is conducted periodically to assure continued acceptable performance. Upon initial parallel operation of a generating system, or any time interface hardware or software is changed, the verification test must be performed. A qualified individual must perform verification testing in accordance with the manufacturer’s published test procedure. Qualified individuals include professional engineers, factory-trained and certified technicians, and licensed electricians with experience in testing protective equipment. The utility reserves the right to witness verification testing or require written certification that the testing was successfully performed. Verification testing shall be performed at least once every four years. All verification tests prescribed by the manufacturer shall be performed. If wires must be removed to perform certain tests, each wire and each terminal must be clearly and permanently marked. The generator-owner shall maintain verification test reports for inspection by the utility. Single-phase inverters and inverter systems rated 25 kW and below shall be verified upon initial parallel operation and once every four years as follows: the generator-owner shall interrupt the utility source and verify that the equipment automatically disconnects and does not reconnect for at least five minutes after the utility source is reconnected. The owner shall maintain a log of these operations for inspection by the connecting utility. Any system that depends upon a battery for trip power shall be checked and logged at least annually for proper voltage. Once every four (4) years the battery must be either replaced or a discharge test performed. All interface equipment must include a verification test as part of the documentation presented to the utility. The verification test for small single-phase inverters must establish that the protection settings meet the NYS SIR requirements. A verification test

http://www.dps.state.ny.us/distgen.htm

Appendix


must be performed on the initial parallel operation of a generating system or any time interface hardware or software is changed. A qualified individual must perform verification testing in accordance with the manufacturer’s published test procedure. Qualified individuals include professional engineers, factory-trained and certified technicians, and licensed electricians with experience in testing protective equipment. The utility reserves the right to witness verification testing or require written certification that the testing was successfully performed. Verification testing must be performed at least once every four years. If wires must be removed to perform certain tests, each wire and each terminal must be clearly and permanently marked. The system owner shall maintain verification test reports for inspection by the utility.

Reference Guide


REFERENCE GUIDE Name of Document Needed Action that Needs to be Taken

Chapter 1

Starting Your Business

Sole Proprietorships

Certificate of Assumed Name

Filed with county clerk

Certificate of Conducting Business as a Sole Proprietor

Must be notarized in each county the Business is located

Certificate of Discontinuance of the DBA

Filed when officially closing a Sole Proprietorship

IRS form SE

Self-employed tax form that Sole Proprietors must fill out

General Partnerships

Certificate of Conducting Business as Partners

General Partnership Formation form-file with county clerk where the business is located

Form 1065 and New York State form IT-204

General Partnerships must obtain a taxpayer identification number, and file an informational tax return every year for federal taxes

Limited Partnership

Certificate of Limited Partnership

File with the New York Department of State, Division of Corporations

Reference Guide


Publish Notification of Formation

This must be done in two newspapers, within the county of business, for six consecutive weeks, within 120 days of filing

Corporations

Certificate of Incorporation (COI)

File with the Department of State along with a filing fee.

Employer ID (“EIN”)

Must be obtained from Internal Revenue Service in order to set up a tax reporting system

Formal Notice of Dissolution

Must file with New York State for dissolution of a Corporation

Limited Liability Company

Articles of Organization

Filed with the Department of State

Affidavit of Publication

Filed with the Department of State

Publish Notification of Formation

Published in two newspapers designated by the county clerk in which the LLC resides

Selecting and Reserving a Name

Sole Proprietorships - General Partnerships- Limited Liability Partnerships Certificate of Assumed Name

Filed directly with the county clerk in the county in which the entity conducts or transacts business

Chapter 2

Reference Guide


Financing Your Business Business Plan/ Prospectus

Document that is used to articulate a plan for growing and forming a business and to show information to prospective investors

Chapter 3

Working with Independent Contractors/Employees

Employee/Employer Tax Forms

1099 Tax Form

If $600 or more is paid to an independent contractor, a business must file this with the IRS

SS-8 Form

A form that can be submitted to the IRS if a business has a query whether an individual is an independent contractor

W-4 Form

Used to report financial information to the IRS

I-9 Form

It is used by an employer to verify an employee's identity and to establish that the worker is eligible to accept employment in the United States

Required Forms for Office

Required Poster Notices

Both Federal and State Governments require certain notices of employees rights to be posted throughout offices and warehouses

Petition with the USCIS

Required for any company interested in H-1B visa program

Reference Guide


Employee Handbook

Guidelines for: vacation accrual, company holidays, grievance management, health insurance, and other company policies

Chapter 4

Understanding Intellectual Property

Patent Applications Provisional Application

Discloses how to make the invention; they give applicants time to raise capital, draft claims, and develop an application strategy

Nonprovisional Application

The beginning of formal prosecution with the USPTO. This contains both the Disclosure and Claims. It is highly recommended that an experienced patent prosecutor draft the claims

International Application

A year after filing in the U.S., the applicant can file a formal application in the designated foreign countries who have signed the Patent Cooperation Treaty (PCT)

Registration of Copyright/Trademarks

Registered Trademarks

Registered based on an intent to use, and can be registered with both Dept. of State in NY and USPTO (quick on-line registration available)

Registration of a Copyright

Applicant must submit the registration with the Copyright Office and include both: a small fee and copies of the work

Reference Guide


Trade Secrets

Covenant not to Compete

Contracts made with employees who could eventually leave the company and use proprietary information in competition with their former employee – should be made to protect the value of a trade secret

Non-solicitation agreements

Used to prevent former employees from taking a business's customers on its trade secret-protected customer list

Chapter 5

Managing Agreements

Nondisclosure Agreement (“NDA”)

“NDA” - creates a contractual obligation between the your business and 3rd parties - to maintain the confidential information provided without disclosing it to third parties, or using it for a company’s own benefit

License Agreement

Governs the relationship between the parties and sets forth the rights and limitations of the licensee as well as their duties and obligations of the licensor

Statement of Work (“SOW”)

Covers the use of specific deliverables that are created according to the terms of an agreement between the parties

Joint Development Agreement (“JDA”)

A written agreement that allows for the coordinated activities of two or more entities on continuing development or commercialization

Reference Guide


Chapter 6 Working with Universities

Chapter 7 Working with Government

New York State Procurement New York State Procurement Council (Guidelines)

All procurements by state agencies for commodities, services, and technology must comply with these guidelines

OSG Centralized Contracts

Office of General Services (OGS) - Centralized Contracts

Allow companies that have been approved and have agreed to comply with established terms and conditions to sell their products or provide their services to state and local governments

Competitive Procurement Bids

Vendor Responsibility Questionnaire

This form is required to be completed by all vendors that wish to obtain contracts with NYS agencies.

Freedom of Information Law request

A business can obtain copies of past proposals that were selected to use in order to strengthen their own bid

Register with New York State’s Bidder Notification Service

Registration enables small businesses to receive notification about procurement opportunities as they become available

Reference Guide


SMALL BUSINESSES

Subscribe to the New York State Contract Reporter

A weekly newsletter that announces contracting opportunities (contracts valued at $15,000 or more) with NYS agencies and other eligible entities in New York State

MINORITY- AND WOMEN-OWNED BUSINESS ENTERPRISES (MWBE)

In order to receive MWBE-certification

The business must request an application from the New York State Empire State Development office in either Albany or New York City

New York State Grants

Request for Application (RFA) – NYS grant opportunities

NYS agencies typically post grant opportunities on their websites using this application

CENTRAL CONTRACTOR REGISTRY

Items required to Register with the Central Contractor Registry (CCR) (1) Data Universal Numbering System (DUNS) Number

• Data Universal Numbering System (DUNS) Number • Tax Identification Number (TIN) • Statistical information about your business • Electronic Funds Transfer (EFT) information This is a unique identification number based on the physical location of your business and can be acquiring free: • online at http://fedgov.dnb.com/webform • by calling 1-866-705-5711 TINs may be found on the original notice you received from the IRS assigning your Employer


Reference Guide


(2) Tax Identification Number (TIN) (3) Statistical information about your business (4) Electronic Funds Transfer (EFT) information

Identification Number or on your business’ most recent federal tax return Includes the receipts and number of employees for both the organization's profile location and on a world-wide basis, which includes all affiliates Includes an ABA routing number for your bank, account number and type, or lockbox number, automated clearing house (ACH) point of contact, remittance point of contact, and accounts receivable point of contact

North American Industry Classification System (NAICS) classification

The NAICS system was developed in order to classify business types for statistical purposes Codes can be found at www.census.gov/naics/

GSA

Application process for GSA Schedule

During this process prices for products or services are negotiated, and the result is a determination of a fair and reasonable price for schedule contracts based on the business’ prices and discounts offered to its commercial customers

Submission of the CTA Documents

GSA strongly encourages this in response to a Request for Quotation so that an ordering agency may gain an understanding of how the arrangement will work, and may identify any areas of responsibility that may require clarification


Reference Guide


RFPs AND NEGOTIATED CONTRACTS

Responding to a Request for Proposal (RFP)

Business must explain how they intend to carry out the request and the price of doing so

Additional Resources and Opportunities in Federal Contracting

To receive: Formal Small Business Certification

Certification must be done in person at local or regional agencies. To see the location nearest you visit www.mwbe.com/cert/agencies.htm

To receive: Small Disadvantaged Business (SDB) Certification or Disadvantaged Business (DBE) Certification

Certification can be done through the completion of an online application at:

www.sba.gov/aboutsba/sbaprograms/sdb/apply/sdb_apply_cert.html

DISADVANTAGED BUSINESSES Eligibility for 8(a) Program

A business must complete the online application forms at: https://sba8a.symplicity.com/applicants/guide

Federal Grants

Requirements for SBIR/STTR award

• American-owned and independently • Operated organized for-profit • Have less than 500 employees • Primary researcher for the SBIR/STTR award must be employed by the business.

http://www.mwbe.com/cert/agencies.htm

http://www.sba.gov/aboutsba/sbaprograms/sdb/apply/sdb_apply_cert.html

https://sba8a.symplicity.com/applicants/guide

Reference Guide


Information on how to apply for these grants is available at http://www.science.doe.gov/sbir/

http://www.science.doe.gov/sbir/

Resource List


RESOURCE LIST Adams Capital Management, Inc. (ACM) ACM is a national venture capital firm specializing in early-stage applied technology investments. Adams Capital Management 245 First Street 18th Floor Cambridge, MA 02142 T: (617) 444-8620 www.acm.com Adirondack Chamber of Commerce 5 Warren Street Glens Falls, NY 12801-2801 T: (518) 485-7647 F: (518) 792-4147 E: [email protected] www.adirondackchamber.org Adirondack Economic Development Corporation (AEDC): AEDC offers a variety of loan programs for small businesses in the Adirondack Region. Additionally, AEDC maintains a business resource center that provides links to information for business owners on topics such as customer service, marketing, management and technology. The business resource center provides tools including cash flow templates, calculators and model business plans. The AEDC offers additional information of particular interest to women entrepreneurs.

Adirondack Economic Development Corporation 67 Main Street Suite 200 P.O. Box 747 Saranac Lake, NY 12983-0747 Toll-Free (888) 243-AEDC T: (518) 891-5523 F: (518) 891-9820 E: [email protected] http://www.aedconline.com/index.html Adirondack Venture Fund The Adirondack Venture Fund promotes responsible economic growth in the Adirondack North Country and throughout the Tech Valley by investing in privately held companies. The Adirondack Venture Fund works closely with entrepreneurs and a network of advisors, co-investors and community leaders to enhance the effectiveness of the business plans. Adirondack Venture Fund 2038 Saranac Ave Lake Placid, NY 12946

http://www.acm.com/



http://www.adirondackchamber.org/

http://www.aedconline.com/index.html

Resource List


T: (518) 523-7092 E: [email protected] www.adirondackventurefund.com Advanced Research Center in Pharmacogenomics at Albany Medical College This Advanced Research Center (ARC) will seek to identify candidate genes for disease susceptibility as well as adverse reactions to chemicals and drugs. The ARC will use this information to develop technologies that identify susceptibility to drug therapies and inform the development of new drug therapies that prevent adverse reactions. The Center also creates commercial opportunities for New York companies, generating significant savings in health care costs and improving the health of all New Yorkers. www.nystar.state.ny.us/arcs.htm#albanymed Advantage Capital Partners Advantage Capital Partners is an organization of venture capital partnerships with offices throughout the United States. Advantage Capital Partners offers equity and debt capital as well as counsel and other support to operating businesses that have the potential for excellent investor returns as well as significant community impact. Advantage Capital Partners 5 Warren Street Suite 204 Glens Falls, NY 12801 T: (518) 743-0060 F: (518) 743-1787 www.advantagecap.com Albany Center for Economic Success (ACES): ACES is a private, non-profit organization that focuses on building local business by providing incubator services and technical assistance programs. ACES owns and operates the Orange Street Incubator which aims to build businesses and generate jobs in the Arbor Hill Community of the City of Albany. The incubator provides below market rate office space and supports tenants through shared clerical staff, general office equipment, conference space, and on-going technical service. ACES offers free one-on-one counseling, technical assistance, business plan development, budget counseling, and training and education for entrepreneurs. Albany Center for Economic Success, Inc. 255 Orange Street Albany, New York 12203 Contact: Mayra E. Santiago T: (518) 427-7804 F: (518) 427-6203 www.acesincubator.org Albany Colonie Chamber of Commerce The Albany-Colonie Regional Chamber of Commerce works to improve business by providing networking opportunities, health insurance programs, cost-saving benefits and many other services and programs for members. The Chamber is made up of more than 2,800 businesses that


http://www.adirondackventurefund.com/

http://www.nystar.state.ny.us/arcs.htm#albanymed

http://www.advantagecap.com/

http://www.acesincubator.org/

Resource List


employ more than 110,000 workers. The Chamber administers New York State’s Entrepreneurial Assistance Program which is designed to provide business assistance to aspiring entrepreneurs, increase the formation of new businesses and strengthen the operations of businesses during the early stages of development. Services include classroom instruction and one-on-one counseling, peer support groups and business mentoring from experienced business owners. The Chamber also provides small business loan options through the Entrepreneurial Assistance Center Loan Fund, AI Tech Loan Fund and SBA Pre-Qualification Loan Program. Albany Colonie Regional Chamber of Commerce One Computer Drive South Albany, NY 12205-1631 T: (518) 431-1400 F: (518) 431-1402 E: [email protected] http://acchamber.org/home.aspx Albany Local Development Corporation (ALDC) ALDC is a not-for-profit organization that offers business loan programs with the goal of fostering business growth and job creation in the City of Albany. Through its lending programs and development projects, the ALDC aims to create new employment opportunities, and encourage commercial and industrial investment in the City. ALDC offers three loan programs, the ALDC Revolving Loan Fund, the Enterprise Community Loan Fund, and Statewide Zone Capital Corporation. Loans offered through the ALDC Revolving Loan Fund can be used for the following: acquisition of real property, machinery and equipment, and for construction, renovation or rehabilitation of real property. Lending offered through the Enterprise Community Loan Fund is limited to prospective or existing businesses located within the designated Empire Zone areas in the City of Albany. Enterprise Community Loans may be used for the purchase of fixed assets or real estate and generally may not exceed one-half of the total project costs. The Statewide Zone Capital Corporation loan fund provides low-interest rate loans to certified Empire Zone businesses. Loan proceeds can be used for working capital, equipment acquisition and real estate purchase. Albany Local Development Corporation 21 Lodge Street Albany, NY 12207 T: (518) 434-2532 x 12 www.albanyny.org/Businesses/EconomicDevelopment/AlbanyLocalDevelopmentAgency.aspx Alliance of Technology and Women (ATW) (Albany chapter) ATW offers worldwide support to women and men who share the common interests of empowering women in technology, increasing the number of women in executive roles, and encouraging women and girls to enter technology fields. ATW aims to educate members on technology and management trends, offer personal and professional development, and provide opportunities for women to connect with fellow professionals and build relationships with business leaders. E: [email protected]


http://acchamber.org/home.aspx

http://www.albanyny.org/Businesses/EconomicDevelopment/AlbanyLocalDevelopmentAgency.aspx

Resource List


www.atwinternational.org/chapters/albany/ Arsenal Business & Technology Partnership Adjacent to the Hudson River and I-787, the site includes 2.2 million square feet of industrial, laboratory, office and warehouse space, a fiber-optic telecommunications infrastructure, steam generation, electrical transmission system and rail service. The site is a New York State Empire Zone, offering large tax incentives and other benefits to businesses that locate here. The park provides unique partnerships with UAlbany Nano College, the Federal Government, the State Government, Academic institutions and the Military. The 140 acre campus also offers modern buildings, immediate access to interstate highways and rail, a secure and gated perimeter, and onsite police, fire protection, HAZMAT and first aid services. 44 Dalliba Avenue Watervliet, NY 12189-4015 T: (518) 266-6006 F: (518) 266-6020 www.arsenalpartnership.com Association of University Technology Managers (AUTM) The AUTM is a global network of more than 3,500 technology transfer professionals who work in academic, research, government, legal and commercial settings. The Association is dedicated to promoting and supporting technology transfer through education, advocacy, networking and communication. Association of University Technology Managers 111 Deer Lake Road, Suite 100 Deerfield, IL 60015 T: (847) 559-0846 F: (847) 480-9282 www.autm.net Bioconnex Bioconnex is a partnership among private companies, higher education institutions, research organizations, and the CEG. The partnership is dedicated to developing and expanding the biotechnology community to establish the Capital Region and Tech Valley as a premier location for biotechnology research, education and industry. The goals of Bioconnex include creating collaboration within the biotechnology industry, developing partnerships, providing networking opportunities, and fostering partnerships among research, education and business. Center for Economic Growth 63 State Street Albany, NY 12207 T: (518) 465-8975 E: [email protected] www.bioconnex.org Business Accelerator

http://www.atwinternational.org/chapters/albany/

http://www.arsenalpartnership.com/

http://www.autm.net/


http://www.bioconnex.org/

Resource List


The Business Accelerator offers high-impact business improvement services to technology companies in New York State’s Tech Valley. Selection of clients is based on the individual company’s commitment to stay and grow in Tech Valley. Business Accelerator targets established companies who are pursuing expansion strategies and who are open to new ideas and changes to realize growth goals. Businesses selected must have a revenue greater than $1 million and revenue goals in excess of $10 million. Selected participants undergo a thorough needs assessment so the Accelerator team can help provide the right services at the right time. E: [email protected] http://ceg.org Business Resource Center (BRC) The BRC in Kingston, NY offers assistance for business development, education, business counseling and training. The BRC is part of the SUNY Ulster’s satellite campus, and provides a variety of credit and noncredit classes which are scheduled at convenient times including evenings and weekends. Business Resource Center Ulster County Community College 1 Development Court Kingston, New York 12401 T: (845) 339-2025 F: (845) 339-1631 E: [email protected] www.sunyulster.edu/community_business/business/brc.jsp Capital Area Technology Association (CATA) CATA is a technology association in Eastern New York and Western New England whose purpose is to share information about the IT and telecom industries. CATA offers members the opportunity to network with peers and to further their understanding of products and services. Capital Area Technology Association PO Box 12813 Albany, NY 12212 T: (518) 438-6000 www.cataconnect.com Capital District Community Loan Fund (CDCLF) The CDCLF is a non-profit community development financial institution serving the Capital Region. It serves as a community-based lender to expand access to credit and capital in disadvantaged communities. Typical loans are given for the development of housing and other facilities, and can be used toward working capital, equipment, inventory, site acquisition, or new construction. Both short and long-term loans are available with a modest application fee. Entrepreneurs and community groups are encouraged to contact the Community Loan Fund early in the planning stages of a project. Capital District Community Loan Fund


http://ceg.org/


http://www.sunyulster.edu/community_business/business/brc.jsp

http://www.cataconnect.com/

Resource List


255 Orange Street Albany, NY 12210 T: (518) 436-8586 www.cdclf.org Capital District Computer Enthusiasts of NY: Capital District Computer Enthusiasts of New York, Inc. is an educational charity whose mission is to provide training to individuals from the casual personal computer user to the advanced user. E: [email protected] www.cdceny.org CDM CDM is a full-service consulting, engineering, construction, and operations firm delivering exceptional service to public and private clients worldwide. CDM offers a variety of services ranging from management consulting and architectural and geotechnical engineering, to construction management, and operations. CDM One Cambridge Place 50 Hampshire Street Cambridge, MA 02139 T: (617) 452-6000 F: (617) 452-8000 www.cdm.com Center for Advanced Interconnect Science and Technology NY CAIST NY CAIST is a $7.5 million funding program that supports basic nanoelectronics research on behalf of the entire U.S. semiconductor industry. The mission of CAIST is to bring together a critical mass of intellectual capital and state-of-the-art infrastructure to implement a multi-phased basic science strategy to address medium range computer chip challenges. Universities contributing to the research results include Columbia University, Cornell University, Lehigh University, Massachusetts Institute of Technology (MIT), Penn State, Rensselaer Polytechnic Institute (RPI), Stanford, SUNY Binghamton, University of Florida, University of Maryland, University of North Texas, University of Texas at Arlington and the University of Texas at Austin. CNSE’s Albany Nano Tech Complex University at Albany Law School 255 Fuller Road Albany, NY 12203 T: (518) 437-8686 http://cnse.albany.edu/business_resources/centers_programs/caist.html Center for Advanced Technology in Nanomaterials and Nanoelectronics The mission of the Center is to act as a research, development, education, and economic outreach resource for industries which manufacture, use, or supply microelectronics, electronics, optoelectronics, bioelectronics, nanotechnology, and telecommunications devices and components.

http://www.cdclf.org/


http://www.cdceny.org/

http://www.cdm.com/

http://cnse.albany.edu/business_resources/centers_programs/caist.html

Resource List


CNSE’s Albany Nano Tech Complex University at Albany Law School 255 Fuller Road Albany, NY 12203 T: (518) 437-8686 http://cnse.albany.edu/business_resources/centers_programs/catn2.html Center for Applied Research in Collaborative and On-Demand Computing The Center for Applied Research in Collaborative and On-Demand Computing (CCODC) at Marist College offers services, support, and training to assist new and existing companies in applying technologies that multiply computing capacity at a substantial cost savings. Center for Collaborative and On-Demand Computing (CCODC) Marist College St. Ann's Hermitage 3399 North Road Poughkeepsie, NY 12601 T: (845) 575-3588 T: (845) 575-3128 F: (845) 575-3095 http://ccodc.marist.edu Center for Automation Technologies and Systems (CATS) The CATS at Rensselaer Polytechnic Institute (RPI) serves as a focal point for a broad range of research and development in both practical and theoretical aspects of automation. CATS works with industry in programs encompassing basic research through manufacturing system design and pilot line development. The Center provides an effective interface to leverage a broad range of research resources in automation at RPI, with highly trained technical staff to provide project management that matches industrial requirements and schedules. Industrial partners gain early access to results, information on related developments, and introduction to highly trained students. Center for Automation Technologies and Systems Rensselaer Polytechnic Institute 110 8th Street CII 8015 Troy, NY 12180 T: (518) 276-3953 F: (518) 276-4897 www.cats.rpi.edu Center for Economic Growth (CEG) The CEG is a private, not-for-profit membership based economic and business development organization committed to regional economic expansion throughout New York State’s Capital Region and Tech Valley. CEG implements strategic initiatives to enhance the Region's competitiveness by attracting both high-tech talent and companies through site location assistance while providing innovative services to grow local businesses and prepare regional communities for future growth. CEG offers business acceleration and support services throughout

http://cnse.albany.edu/business_resources/centers_programs/catn2.html

http://ccodc.marist.edu/

http://ccodc.marist.edu/

http://www.cats.rpi.edu/

Resource List


Tech Valley. CEG also supports several industry-focused groups that capitalize on the value of networks and the collective approach to sharing resources and ideas. Center for Economic Growth (CEG) 63 State Street Albany, NY 12207 T: (518) 465-8975 F: (518) 465-6681 http://www.ceg.org/ Center for Future Energy Systems Center (CFES) The CFES offers a variety of business assistance services to companies in the energy industry. The Center provides business planning assistance and assistance with state and federal funding proposals including Small Business Innovative Research (SBIR) and Small Business Technology Transfer (STTR) Proposals. The CFES has experience with proposals for state and federal agencies such as NYSTAR, NYSERDA, the Department of Energy and the National Science Foundation. The CFES helps entrepreneurs identify Rensselaer Polytechnic Institute (RPI) researchers to assist with sponsored research projects, find resources for funding and provide networking opportunities. The CFES can help businesses find the resources to meet their laboratory and researching needs. Center for Future Energy Systems Rensselaer Polytechnic Institute 110 Eighth Street Troy, NY 12180-3590 T: (518) 276-6754 F: (518) 276-4897 E: [email protected] www.rpi.edu/cfes Center of Excellence in Nanoelectronics (CEN) The CEN at the Albany NanoTech Complex is a fully-integrated technology deployment, product prototyping, manufacturing support, and workforce training resource for emerging generations of integrated circuitry. The overarching goal of the CEN is to act as a world class center for pre-competitive and competitive technology deployment, quick turn-around prototyping, and workforce training and development using universal 200mm and 300mm wafer platforms. The Center aims to assemble the critical mass necessary for the creation of vertically and horizontally integrated industry-university consortia and public-private partnerships to convert long-term prospective innovations into real business opportunities and revenue-generating ventures. In addition, the CEN implements innovative real-time educational programs to train a critical pool of highly qualified scientists, engineers, and technicians to support the needs of the nanoelectronics industry. CNSE's Albany NanoTech Complex University at Albany 255 Fuller Road Albany, NY 12203

http://www.ceg.org/


http://www.rpi.edu/cfes

Resource List


T: (518) 437-8686 E: [email protected] http://cnse.albany.edu CEOconnex CEOconnex is a nine-month program offered by the CEG that links selected technology CEOs with the Capital Region's most successful corporate executives and challenges them to orient their businesses for performance and growth. This executive program has been designed to help participants connect with business leaders over dinner, create professional alliances, develop skills and methods for expanding business and discover paths of achievement and the route around obstacles. Center for Economic Growth 63 State Street Albany, NY 12207 T: (518) 465-8975 E: [email protected] www.ceoconnex.com Chamber of Southern Saratoga County: The Chamber of Southern Saratoga County provides assistance to its members through programs including business planning, financial and marketing counseling, cash-flow management, and technical assistance. The Chamber has affiliations with the Small Business Development Center (SBDC), the Job Service Employer Committee, and the Service Corps of Retired Executives (SCORE). Southern Saratoga Chamber of Commerce 15 Park Avenue, Suite 7B Clifton Park, NY 12065 T: (315) 498-6070 E: [email protected] http://www.southernsaratoga.org Chief Executives Network for Manufacturing The Chief Executive Network for Manufacturing of the Capital Region, Inc. is an association of 75 manufacturers located in the Capital Region dedicated to providing a forum for local manufacturing CEOs and top executives to discuss critical business issues, share knowledge, and develop best practices by drawing on collective knowledge of its membership. Chief Executives Network 63 State Street Albany, NY 12207 T: (518) 465-8975 E: [email protected] www.cenmfg.org CITEC Manufacturing & Technology Solutions


http://cnse.albany.edu/


http://www.ceoconnex.com/

http://www.nyjsec.org/

http://www.scorealbany.org/



http://www.southernsaratoga.org/

http://www.cenmfg.org/

Resource List


CITEC Manufacturing & Technology Solutions is a not-for-profit economic development organization that offers hands-on assistance to companies in Northern New York in the areas of strategic planning, lean enterprise, process improvement, plant layout, funding assistance, marketing, safety, e-business, energy/utilities, human resources, new product development, and more. CITEC Manufacturing & Technology Solutions Box 8561 Clarkson University 65 Main Street, Room 101/201 Peyton Hall Potsdam, New York 13676 T: 315-268-3778 F: 315-268-4432 E: [email protected] www.citec.org Community-Based Business Incubator The Community-Based Business Incubator is a not-for-profit organization that offers assistance to any entrepreneur located in Upstate NY or who wishes to locate to Upstate NY. Community-Based Business Incubator’s goal is to serve as a catalyst for local economic development by creating a community platform for entrepreneurs. The Incubator links entrepreneurs to suppliers, business plan developers and offers financial and grant assistance. http://cbbic.org/contactus.aspx Division of Minority Women’s Business Development The mission of the Division of Minority and Women’s Business Development is to encourage and assist state agencies in their efforts to increase participation by minority and women-owned business enterprises (MWBEs) on state contracts so as to facilitate the award of a fair share of such contracts to MWBEs. New York State Department of Economic Development Empire State Development 30 South Pearl Street Albany, NY 12245 T: (800) 782-8369 E: [email protected] http://www.nylovessmallbiz.com/ Empire State Development Division for Small Business 30 South Pearl Street Albany, NY 12245 T: (518) 292-5220 Dutchess County Regional Chamber of Commerce One Civic Center Plaza, Suite 400 Poughkeepsie, New York 12601 T: (845) 454-1700


http://www.citec.org/

http://cbbic.org/contactus.aspx


http://www.nylovessmallbiz.com/

Resource List


F: (845) 454-1702 www.dutchesscountyregionalchamber.org East Campus at State University of New York (Biotech Business Incubator) The East Campus at State University of New York houses the Biotech Business Incubator. The incubator offers close proximity to the resources of the East Campus and in particular, the staff and equipment at the Center for Functional Genomics. The incubator also offers laboratory space, office space, conference facilities, support services including reception, access to standard office equipment such as photocopiers and fax machines and fee-for-service access to essential research services. East Campus at State University of New York One University Place Rensselaer, New York 12244 Contact: Eugene K. Schuler T: (518) 525-2779 F: (518) 525-2799 www.albany.edu/eastcampus/index_bus_incu.html Empire State Development (ESD) Empire State Development (ESD) offers assistance to startup businesses and established businesses through a variety of programs discussed below. New York State Department of Economic Development Empire State Development 30 South Pearl Street Albany, NY 12245 T: (800) 782-8369 E: [email protected] www.nylovessmallbiz.com Empire Zones New York State’s Empire Zone program was created to stimulate economic growth through a variety of State tax incentives designed to attract new businesses to New York State and to enable existing businesses to expand and create more jobs. Empire zones are located in all counties, excluding Hamilton: Kingston (Ulster), Poughkeepsie (Durtchess), OC, Columbia Co, Albany City, Albany Co, Green Co, Troy, Rensselaer Co, Schenectady Co., Saratoga Co., Washington Co., Warren Co., Moriah/Port Henry (Essex), Clinton Co., Plattsburgh, Franklin Co., Herkimer Co., Gloversville (Fulton), Amsterdam (Montgomery), Schoharie Co. T: 1-800-STATE-NY (1-800-782-8369) www.nylovesbiz.com/tax_and_financial_incentives/Empire_Zones/default.asp Energy and Environmental Technology Applications Center (E2TAC) E2TAC addresses the needs of advanced energy and environmental applications by leveraging the

http://www.dutchesscountyregionalchamber.org/

http://www.albany.edu/eastcampus/index_bus_incu.html



http://www.nylovesbiz.com/tax_and_financial_incentives/Empire_Zones/default.asp

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intellectual power base and state-of-the-art infrastructure at the College of Nanoscale Science and Engineering (CNSE) and making use of its extensive capabilities in microelectronics and nanotechnology. E2TAC is at the forefront in business acceleration and education in the increasingly important areas of renewable energy and energy efficiency. E2TAC is a participant in the National Renewable Energy Laboratory's (NREL) Clean Energy Alliance. The Clean Energy Alliance is an association of business incubators and partners dedicated to helping early-stage clean energy-related businesses launch, grow, and become successful ventures. College of Nanoscale Science & Engineering University at Albany, SUNY 255 Fuller Road, Albany, NY 12203 T: (518) 437-8685 www.e2tac.org Entrepreneurship at RPI Office of E*ntrepreneurship Renselaer Polytechnic Institute 110 8th street Walker Lab, Suite 4010 Troy, NY 12180 USA T: (518) 276-3022 F: (518) 276-8062 www.rpi.edu/about/entrepreneurship.html www.eship.rpi.edu/index.html Environmental Investment Program Through the Environmental Investment Program (EIP), the New York State Department of Economic Development (DED) supports projects that lead to measurable pollution prevention and economic development results. EIP awards are made on a competitive basis. Projects with a strong likelihood of creating results in a timely fashion receive more favorable reviews.

Environmental Services Unit 30 South Pearl Street Albany, New York 12245 T: (518) 292-5340 E: [email protected] www.nylovesbiz.com/Productivity_Energy_and_Environment/Environmental_Assistance/pollution_prevention.asp FA Technology Ventures FA Technology Ventures is an early stage investor, providing venture capital, management and guidance for companies in the emerging growth sectors of information technology and energy technology. FA Technologies look for business ideas with the potential for greatness and experienced, passionate entrepreneurs to execute on them. FA Technology Ventures 677 Broadway

http://www.e2tac.org/

http://www.rpi.edu/about/entrepreneurship.html

http://www.eship.rpi.edu/index.html


http://www.nylovesbiz.com/Productivity_Energy_and_Environment/Environmental_Assistance/pollution_prevention.asp

http://www.nylovesbiz.com/Productivity_Energy_and_Environment/Environmental_Assistance/pollution_prevention.asp

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Albany, NY 12207-2990 T: (518) 447.8200 F: (518) 447.8524 www.fatechventures.com Focus Center - New York Focus Center - New York is a founding member of The National Interconnect Focus Center. The Center is a research consortium addressing long-term challenges in the development of next generation computer chips. They develop the science and technology of interconnects, the complex signal-carrying conduits in the computer chip that are universally recognized as the technology driver for increased chip speed and performance. The Center’s research initiatives include moletronic-based interconnect nanotechnology, nano/microsystem-based optoelectronics, advanced atomic-scale metrology development, and dynamic optical interconnects. http://cnse.albany.edu/business_resources/centers_programs/focus_center_ny.html Grants.gov Grants.gov is a comprehensive source to find and apply for Federal Government grants. U.S. Department of Health and Human Services Grants.gov 200 Independence Avenue, S.W. HHH Building Washington, DC 20201 T: 1-800-518-4726 E: [email protected] www.grants.gov Greater Southern Dutchess Chamber of Commerce 300 Westage Bus. Center # 100 Fishkill, NY 12524-2220 T: (914) 897-2067 F: (914) 897-3593 http://gsdcc.org Greene County IDA The Greene County IDA focuses on developing “shovel ready” sites and existing historic locations with the goal of marketing to and attracting a diverse mix of business types and employment opportunities for local residents. Targeted businesses are those that are anticipated to be good corporate citizens and employers offering outstanding benefit packages. Working in partnership with the Greene County Office of Planning and Economic Development and the Greene County Chamber of Commerce under the banner of GreeneBusiness, Green County IDA offer a variety of financial and incentive based tools and management flexibility to help foster success. The IDA works in conjunction with local communities, state and local governments, the business community and numerous regional partners with sound planning, sensitivity to the environment and the preservation of our quality of life.

http://www.fatechventures.com/

http://cnse.albany.edu/business_resources/centers_programs/focus_center_ny.html


http://www.grants.gov/

http://gsdcc.org/

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Greene County IDA 270 Mansion Street Coxsackie, NY 12051 T: (518) 731-5500 F: (518) 731-5520 E: [email protected] www.greeneida.com Greene Business & Technology Park and Kalkberg Commerce Park The Greene Business and Technology Park and Kelkberg Commerce Park offer 100 shovel ready acres, fast track building options, Wi-Fi, nature trails and housing options. Greene County IDA 270 Mansion Street Coxsackie, NY 12051 T: (518) 731-5500 F: (518) 731-5520 E: [email protected] www.greeneida.com/index.php?id=16 Greene County Department of Planning and Economic Development (GCDPED) GCDPED provides a number of services to business start-ups or expanding companies that are either already located in Greene County or companies that are planning to locate in Greene County. GCPED provides: financial incentives, deal structuring and technical assistance for acquisition or expansion, low-interest loans and other sources of competitively priced financing for capital expansion or relocation, training, recruitment, job fairs, employee enhancement programs, business consulting referrals for marketing, operations or strategic planning needs, interactive online web maps to assist with your site selection process, and permit, regulatory and planning process assistance. Greene County Department of Planning and Economic Development Greene County Office Building 411 Main Street Catskill , New York 12414 T: (518) 719-3290 F: (518) 719-3789 E: [email protected] www.greeneplanning.com Harriman Research & Technology Campus Located adjacent to Albany NanoTech, with dedicated highway access, this is an ideal location for high tech growth. The park offers a 300 acre campus with existing infrastructure and amenities. Existing buildings are available immediately, and development sites with fast-track construction options are also available. Michael Phillips


http://www.greeneida.com/


http://www.greeneida.com/index.php?id=16


http://www.greeneplanning.com/

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W. A. Harriman State Office Campus 1220 Washington Avenue Building 7A - Suite 200 Albany, New York 12226 T: (518) 457-4444 F: (518) 457-8185 www.harrimancampus.com High Peaks Venture Partners High Peaks Venture Partners is an early-stage venture capital firm that partners with entrepreneurs to build world class technology companies. High Peaks Venture Partners is located in the Capital Region and invests primarily in New York based businesses. High Peak Venture Partners 10 2nd Street Troy, NY 12180 T: (518) 720-3090 F: (518) 720-3091 E: [email protected] www.hpvp.com Hudson Valley Foodworks Hudson Valley Foodworks is a 40,000 square-foot building with six large production spaces. The facility is staffed by knowledgeable professionals who can help solve problems and improve processes. Foodworks is located in downtown Poughkeepsie and provides easy access to New York City, Boston, Albany and other nationwide distribution networks. Hudson Valley Foodworks 372 Main Street Poughkeepsie, New York 12601 T: (845) 471-9478 F: (845) 471-9479 E: [email protected] http://hudsonvalleyfoodworks.org Hudson Valley Technology Development Center (HVTDC) HVTDC helps small to medium-sized manufacturers, businesses, inventors, and entrepreneurs in the Hudson Valley area to become more competitive in the marketplace. HVTDC provides direct assistance or locates outside resources to help with business development, operations, sales and marketing, workforce development, technology advancement and integration, and entrepreneurial initiatives. Hudson Valley Technology Development Center, Inc. 300 Westage Business Center, Suite 280 Fishkill, NY 12524 T: (845) 896-6934 F: (845) 896-7006

http://www.harrimancampus.com/


http://www.hpvp.com/


http://hudsonvalleyfoodworks.org/

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www.hvtdc.org Hyde Park Chamber of Commerce P.O. Box 17 Hyde Park, NY 12538 T: (914) 229-8612 F: (914) 229-8638 Website: http://hydeparkchamber.org Imperial Industrial Park 94 Main Mill Street Plattsburgh, New York 12901 Contact: David Bray T: (518) 563-3898 F: (518) 563-4246 E: [email protected] www.imperialindustrialpark.com Incubator for Nanotechnology Ventures, Emerging Sciences, and Technologies (INVEST) at Sage INVEST is a nanotechnology incubator created by Russell Sage College and Evident Technologies of Troy. The incubator provides space and resources to help high tech companies grow and expand, while advancing Sage's programs in science, technology and business. INVEST at Sage 140 New Scotland Avenue Albany, New York 12208 T: (518) 244-2246 www.sage.edu/rsc/invest Industrial Effectiveness Program (IEP) New York State can provide assistance in identifying, developing and implementing improved management and production processes to enhance efficiency, expand market share and promote job growth through the IEP. The IEP provides grants of up to $50,000 to manufacturing firms. The IEP also provides direct assistance to companies through: product design and development, manufacturing process and quality improvement, market expansion and product commercialization, information systems upgrades, supplier development projects, project management, technical awareness seminars, and assistance with regulatory requirements. New York State Department of Economic Development Empire State Development 30 South Pearl Street Albany, NY 12245 T: (800) 782-8369 www.nylovessmallbiz.com

http://www.hvtdc.org/

http://hydeparkchamber.org/


http://www.imperialindustrialpark.com/

http://www.evidenttech.com/

http://www.sage.edu/rsc/invest


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InfraGuard Albany InfraGard Albany is a non-profit corporation and is part of the InfraGard National Members Alliance. They provide a forum for exchanging knowledge, experience, and information to help protect our nation's infrastructure from both physical and cyber threats. InfraGard Albany c/o FBI Albany Division 200 McCarty Avenue Albany, New York 12209 T: (518) 465-7551 E: [email protected] www.infragardalbany.org Integrated Electronics Engineering Center (IEEC) (Binghamton U) The IEEC administers laboratory facilities equipped for analyzing electronics packaging technology products. The facilities are useful for performing physical, chemical, surface, and electronic analysis of products and materials. They are available for use by local small businesses engaged in electronics packaging. The services provided include the following: measurement of material properties, use of instruments for design and testing, skill and advice in operating equipment and facilities, and product analysis. The facilities serve a dual role in assisting local industry and in providing educational opportunities for graduate and undergraduate students. Binghamton University—IEEC P.O. Box 6000 Vestal Pkwy. East Binghamton, NY 13902-6000 T: (607) 777-4332 F: (607) 777-4683 www.ieec.binghamton.edu/ieec Internal Revenue Service (IRS) The Internal Revenue Service requires a corporation to obtain an Employer ID (EIN) from the IRS website. Local Albany Office: Clinton Ave. & North Pearl Street Albany, NY 12207 P: (518) 427-4250 www.irs.gov/businesses International Alliance of Nanotechnology Regions (IANRegions) IANRegions is a not-for-profit organization dedicated to creating and sustaining a global network of nanotechnology hubs. IANRegions seeks to accelerate the pace of growth of the nanoelectronics and nanosystems industries by faciltating trade and research partnerships between regional hubs. IANRegions has administrative offices in Albany, NY and Wicklow, Ireland. www.ianregions.org

http://www.infragardmembers.org/

http://www.infragardmembers.org/


http://www.infragardalbany.org/

http://www.ieec.binghamton.edu/ieec

http://www.irs.gov/businesses

http://www.ianregions.org/

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Licensing Executives Society (LES) The LES is a professional society comprised of over 6,000 members engaged in the transfer, use, development, manufacture and marketing of intellectual property. The LES membership includes a wide range of professionals, including business executives, lawyers, licensing consultants, engineers, academicians, scientists and government officials. Many large corporations, professional firms, and universities comprise the Society's membership. The LES provides members with networking, education programs, mentoring and access to online resources. Licensing Executives Society Albany Chapter Health Research, Inc. One University Place Rensselaer, NY 12144-3456 T: (518) 431-1213 F: (518) 431-1234 E: [email protected] www.usa-canada.les.org/chapters/albany Linked Deposit Program (LDP) The LDP is a public-private partnership that provides businesses with affordable capital based on bank loans at reduced interest rates. These bank loans are subsidized by corresponding "linked" state deposits. The program provides the ability for eligible businesses to obtain low interest loans from commercial banks, savings banks, savings and loan associations, farm credit institutions and the New York Business Development Corporation. New York State Department of Economic Development Empire State Development 30 South Pearl Street Albany, NY 12245 T: (800) 782-8369 E: [email protected] www.nylovessmallbiz.com Luther Forest Technology Campus Located in the heart of a forest, this 1350-acre campus is only two miles from the highway and a short distance from Albany NanoTech. The park is designed for nanotechnology manufacturing, and research and development. With 60 percent green space, Luther Forest Technology Campus offers the latest in technology infrastructure in a peaceful and relaxed atmosphere. 28 Clinton Street Saratoga Springs, NY 12866 T: (800) 587-0945 T: (518) 587-0945 www.lutherforest.org Manufacturing Assistance Program The Manufacturing Assistance Program (MAP) was established to assist manufacturers investing


http://www.usa-canada.les.org/chapters/albany



http://www.lutherforest.org/

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in capital projects that will improve competitiveness or productivity. The program is designed to help increase the economic strength of this industry sector and safeguard jobs. MAP provides grants of up to $1 million to qualified New York State businesses and encourages manufacturers to invest in projects that will significantly increase the productivity and competitiveness of their operations. New York State Department of Economic Development Empire State Development 30 South Pearl Street Albany, NY 12245 T: (800) 782-8369 E: [email protected] www.nylovessmallbiz.com Marcy NanoCenter Located in the heart of New York's Mohawk Valley, Marcy NanoCenter is a 300-acre shovel-ready site on the State University of New York Institute of Technology’s (SUNYIT) campus in Oneida County. Marcy NanoCenter meets all Semi-NY infrastructure requirements with sewer, water, redundant electrical supply, gas and telecommunications in immediate proximity to the site. 153 Brooks Road Rome, NY 13441 T: (800) 765-4990 or (315) 338-0393 F: (315) 338-5694 www.marcynanocenter.com Mohawk Valley Applied Technology Corporation Mohawk Valley Applied Technology Corporation (MVATC) is a business development firm with the mission of assisting Mohawk Valley's small and medium sized manufacturing and high technology companies to increase their global competitiveness. MVATC serves Herkimer, Oneida, Fulton, Montgomery, Schoharie and Hamilton counties. Mohawk Valley Applied Technology Corporation 207 Genesee Street, Room 405 Utica, NY 13501 T: 315-793-8050 F: 315-793-8057 E: [email protected] www.mvatc.com National Institute of Government Purchasing Procurement guidelines for other states are available at the National Institute of Government Purchasing website. 151 Spring Street Herndon, VA 20170-5223 T: (703) 736-8900 or Toll Free 1-800-FOR-NIGP (1-800-367-6447)



http://www.marcynanocenter.com/


http://www.mvatc.com/

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F: (703) 736-2818 www.nigp.org/stwebsit.htm New Paltz Regional Chamber 124 Main St. New Paltz, NY 12561-1610 T: (845) 255-0243 F: (845) 255-5189 E: [email protected] http://newpaltzchamber.org New York Business Development Corporation (NYBDC) A number of loan programs are available through NYBDC to promote economic activity within New York State. NYBDC is a complement to conventional banking, working in partnership with banks to provide term loans, many of which do not meet the requirements for traditional financing. New York Business Development Corporation 50 Beaver Street Albany, NY 12207 T: (800) 923-2504 F: (518) 463-0240 www.nybdc.com New York Capital District WebSphere User Group (NYCDWeb) NYCDWeb is a professional group of more than 400 WebSphere users and developers in the Capital Region. The group shares thoughts, ideas and views on using WebSphere products and related Web technologies. Membership consists of IT Directors, IT Managers, IT users, and other IT professionals. E: [email protected] www.nycdweb.org New York State Biotechnology Association The New York Biotechnology Association is a not-for-profit trade association dedicated to the development and growth of New York State based biotechnology related industries and institutions. The Association offers assistance with technology transfer, financing, recruiting, and supply purchasing for member companies, institutions, and agencies in the New York area. NYS Biotechnology Association Administrative Office 25 Health Sciences Drive, Suite 203 Stony Brook, NY 11790 T: 631-444-8895 F: 631-444-8896 E: [email protected]



http://newpaltzchamber.org/

http://www.nybdc.com/


http://www.nycdweb.org/


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www.nyba.org New York State Contract Reporter The New York State Contract Reporter is the official weekly newsletter for announcements of contracting opportunities in the estimated amount of $15,000 or more with state entities, including but not limited to agencies, departments, boards, bureaus, commissions a majority of whose members are appointed by the Governor, divisions, offices, councils, committees and public benefit corporations and public authorities a majority of whose members are appointed by the Governor. www.nyscr.org New York State Energy Research and Development Authority (NYSERDA) NYSERDA offers financial and technical assistance to the State's businesses, industries, municipalities, and residents to address New York's energy and environmental needs. Incentives are available through a number of programs for various projects and initiatives such as new construction, commercial/industrial projects, energy efficiency improvements, wind and solar systems, energy audits, and much more. NYSERDA offers interest rate reductions on loans from participating lenders for energy efficiency improvements and renewable technologies New York State Energy Research and Development Authority 17 Columbia Circle Albany, New York 12203-6399 T: (866) NYSERDA T: (518) 862-1090 F: (518) 862-1091 www.nyserda.org New York State Forum The New York State Forum is a network of state and local government organizations, IT leaders and professionals concerned with information management, policy, and operations. New York State Forum’s mission is to promote policies and practices for effective, equitable and secure use and management of information resources in New York State at all levels of government. The Forum is a place for collaboration in a fully neutral environment, where state and local IT organizations and corporations come together to share knowledge and ideas that foster mutual understandings, and facilitate public sector progress. New York State Forum Rockefeller Institute of Government 411 State Street Albany, New York 12203 T: (518) 443-5001 F: (518) 443-5006 E: [email protected] www.nysforum.org New York State Foundation for Science, Technology and Innovation (NYSTAR)

http://www.nyba.org/





http://www.nysforum.org/

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NYSTAR is charged with promoting outstanding high technology research and commercialization efforts that contribute to the State’s economic development and create jobs. The two primary goals of NYSTAR. The first is to increase the number of high technology jobs and companies in New York through the commercialization of the research being conducted at the colleges, universities, and research institutions throughout the State. The second is to increase the total amount of Federal and private research dollars being attracted to New York State. NYSTAR 30 South Pearl Street, 11th Floor Albany, New York 12207 T: (518) 292.5700 F: (518) 292.5798 www.nystar.state.ny.us New York State Governor’s Office of Regulatory Reform (GORR) The Governor's Office of Regulatory Reform (GORR) Business Permit Assistance Unit offers an excellent source of information on specific permit requirements for NYS. GORR P.O. Box 2107 Albany, NY 12220-0107 T: (518) 486-3292 F: (518) 473-9342 www.gorr.state.ny.us New York State Office of Technology Small businesses should determine which NYS agencies may require their goods or services and contact those agencies directly to request placement on the agency’s bidders list. A complete list of NYS agencies is available on the Office of Technology website. New York State Chief Information Officer/Office for Technology State Capital Empire State Plaza P.O. Box 2062 Albany, NY 12220 T: (866) 789-4638 or (518) 402-2537 F: (518) 474-1196 www.oft.state.ny.us New York State Procurement Council In New York State, all procurements by state agencies for commodities, services, and technology must comply with the guidelines developed by the New York State Procurement Council (Guidelines). These Guidelines apply to all procurement contracts with the exception of printing contracts, construction contracts, and contracts with architectural, surveying or engineering services or with not-for-profit organizations. The Guidelines are available on the Office of General Services website.

http://www.gorr.state.ny.us/


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www.ogs.state.ny.us/procurecounc NYS Department of State The NYS Department of State provides Certificate of Incorporation forms and similar documents. Procurement Services Group Customer Services 37th Floor, Corning Tower Empire State Plaza Albany, NY 12242 T: 518-474-6717 F: 518-474-2437 E: customer.service @ogs.state.ny.us www.dos.state.ny.us/corp NYS Office of General Services The NYS Office of General Services website provides a variety of information concerning contracting and bidding opportunities. Procurement Services Group Customer Services 37th Floor, Corning Tower Empire State Plaza Albany, NY 12242 T: 518-474-6717 F: 518-474-2437 E: [email protected] www.ogs.state.ny.us NYS Small Business Development Center Through a network of 23 regional centers, the New York State Small Business Development Center delivers free business counseling and training to New Yorkers who want to start a business or improve the performance of an existing business. NYSSBDC business advisors can help companies find new locations, perform demographic or business research, develop marketing strategies, improve efficiency, educate or train employees, prepare business plans, and locate sources of funding. http://www.nyssbdc.org/ Contact: (Serving the counties of Albany, Columbia, Greene, Rensselaer, Saratoga, Schenectady, Schoharie, Warren, Washington, Fulton, Hamilton, and Montgomery) Small Bus Dev Center, Harriman Business Center, Building 7A, Suite 500, 1220 Washington Ave Albany, NY 12226 T: (518) 485-7647 F: (518) 485-8223 Contact: (Serving the counties of Dutchess, Orange, Schoharie, Ulster, Greene, Delaware, and



http://www.dos.state.ny.us/corp

mailto:[email protected]?subject=Procurement%20Services%20Question

http://www.ogs.state.ny.us/

http://www.nyssbdc.org/Locations/locations.html

http://www.nyssbdc.org/

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Sullivan) Business Resource Center One Development Court Kingston, NY 12401 T: (845)339-0025 F: (845)339-1631 Contacting the North Country SBDC State University of New York College at Plattsburg 194 US Oval Plattsburgh, NY 12903-3900 T: (518) 564-2042 F: (518) 564-2043 Onecle Onecle is a website that offers hundreds of sample business contracts from SEC filings. http://contracts.onecle.com Orange-Ulster BOCES Incubator The Orange-Ulster BOCES Incubator has traditionally operated as a brick-and-mortar structure that offered services for emerging businesses. Now, the Incubator is expanding and enhancing services to serve micro and small businesses, while seeking a new location. Orange-Ulster BOCES Incubator 92 Seward Avenue Middletown, New York 10940 T: (845) 342-0661 F: (845) 342-0477 E: [email protected] www.ouboces.org Pace University SCI2 Incubator Located in the former Alexander Smith Carpet Mills in Yonkers, the Pace University SCI2 incubator targets high potential early stage technology companies. Priority is given to ventures in the technology and media industries. Benefits include access to university resources and state of the art facilities. Pace University SCI2 Incubator 163 William St, 3rd Floor New York, NY 10038-2602 T: (212) 346-1064 or 1-800-821-2456 F: (212) 346-1116 E: [email protected] www.sci2.org

http://contracts.onecle.com/


http://www.ouboces.org/


http://www.sci2.org/

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Plattsburgh North Country Chamber The Plattsburgh North Country Chamber is an official resource center of the U.S. Small Business Administration, and provides support services for small and home based businesses in the Plattsburgh - North Country Region. Services include business referrals, networking opportunities, business counseling, and a lending library. Plattsburgh North Country Chamber of Commerce 7061 Route 9 P.O. Box 310 Plattsburgh, New York 12901 T: (518) 563-1000 F: (518) 563-1028 E: [email protected] www.northcountrychamber.com Poughkeepsie Area Chamber of Commerce: The Poughkeepsie Area Chamber of Commerce is comprised of both large and small businesses, as well as private individuals. Representing approximately 1,500 businesses, the Chamber is Dutchess County's largest business organization. Poughkeepsie Area Chamber of Commerce One Civic Center Plaza Poughkeepsie, NY 12601-3117 T: (845) 454-1700 F: (845) 454-1702 http://dev.iic.com/www.pokchamb.org/index.php Poughkeepsie Journal 85 Civic Center Plaza Poughkeepsie, NY 12601 T: (845) 454-2000 www.poughkeepsiejournal.com Pre-Seed Workshop - New York Judy Albers email: [email protected] telephone: (585) 389-6104 Mark Wilson email: [email protected] telephone: (585) 482-5524 website: http://www.psw-ny.com The Pre-Seed Workshop offers an intense 2 1/2 day bootcamp for high-tech ideas that think they might want to become startup companies. The process is specifically targeted to help move university technologies closer to commercialization through a fast-paced dose of reality and a


http://www.northcountrychamber.com/

http://dev.iic.com/www.pokchamb.org/index.php

http://www.poughkeepsiejournal.com/

http://www.psw-ny.com/

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team of entrepreneurial souls from the community. Press Republican MAIN OFFICE Press-Republican P.O. Box 459 170 Margaret Street Plattsburgh, NY 12901 T: (518) 561-2300 www.pressrepublican.com Queensbury Industrial Park Queensbury Industrial Park is located in Glens Falls, NY, 30 minutes north of the Luther Forest Technology Park. Queensbury Industrial park offers 40 acres available for sale or build to suit, Empire Zone location benefits, proximity to growing Glens Falls area medical device cluster & regional tech assets. Economic Development Corporation Warren County 234 Glen St. Glens Falls, NY 12801 T: (518) 761-6007 E: [email protected] www.edcwc.org Rensselaer County Chamber of Commerce The Rensselaer Chamber of Commerce has been recognized as “one of the top 3 chambers in the nation” by the American Chamber of Commerce Executives. The Chamber’s membership ranges from single-employee businesses to thousand-member corporations, in industries ranging from farming to high-tech manufacturing. Rensselaer County Regional Chamber of Commerce 255 River Street Troy, NY 12180 T: (518) 274-7020 F: (518) 272-7729 E: [email protected] www.renscochamber.com Rensselaer County Economic Development Agency The Rensselaer County Economic Development Agency is dedicated to promoting economic development and vitality within the County. The Agency offers sales and property tax incentives, grants and low-cost capital to attract and retain businesses, including to following: taxable or tax-exempt bond financing and sale/leaseback, empire zone benefits, job development programs, SBA 504 programs, SBA prequalification loan programs, machinery and equipment bond programs.

http://www.pressrepublican.com/

http://www.ceg.org/[email protected]

http://www.edcwc.org/


http://www.renscochamber.com/

http://www.discoverrensselaer.com/benefit/taxable.cfm

http://www.discoverrensselaer.com/benefit/taxable.cfm

http://www.discoverrensselaer.com/benefit/zone.cfm

http://www.discoverrensselaer.com/benefit/jdp.cfm

http://www.discoverrensselaer.com/benefit/sba504.cfm

http://www.discoverrensselaer.com/benefit/sba504.cfm

http://www.discoverrensselaer.com/benefit/sbapilot.cfm

http://www.discoverrensselaer.com/benefit/bond.cfm

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Rensselaer County Economic Development Agency 1600 7th Avenue Troy, N.Y., 12180 T: (518) 270-2914. www.discoverrensselaer.com Rensselaer Incubator The RPI Incubator Program’s goal is to augment the University’s special role of providing a fertile environment for the growth and development of new ideas, and additionally to create opportunities for the application and further evolution of those ideas into the greater community through the channels of commercial activity. The Incubator Program offers access to individual offices ranging from 150 to 1500 square feet, internet connections, electricity and heat, conference room, copy machines, fax machines, LCD projectors, a mail room, receptionist services, teleconference phones, and Idealab where tenants, students, and the Entrepreneur Club can meet to discuss and research their business plans. Office of Technology Property, Technology Transfer, and New Ventures

110 8th St. 3210 J Building

Troy, NY 12180-3590 T: (518) 276-6658 F: (518) 276-6380 www.rpi.edu/dept/incubator/homepage Rensselaer Office of Technological Commercialization The Office of Technology Commercialization at Rensselaer Polytechnic Institute supports researchers in protecting intellectual property and bringing inventions into the commercial marketplace. The Office is dedicated to building relationships with commercial partners to benefit Rensselaer and the broader community through the following services: evaluating new technologies for patentability and marketability; advising researchers throughout the intellectual property protection process; prosecuting patents, copyrights and trademarks; identifying industry fit and potential licensees for technology; and extending licenses for patents, copyrights, trademarks and end use software. Rensselaer Polytechnic Institute OTC Department - J Building 110 8th Street Troy, NY 12180 T: (518) 276-6023 F: (518) 276-6380 www.rpitechnology.com/index.php Rensselaer Technology Park Rensselaer Technology Park is set in a park-like environment, and is equipped with state-of-the-art infrastructure and backed by Rensselaer Polytechnic Institute. The Park is home to more than 50 global and promising startup companies, making it is a unique environment for technology ventures focused on the interface between industry and education. The Park offers over one million sq. ft. of high tech offices on 1400 acres, Empire Zone benefits, and access to the interstate,

http://www.discoverrensselaer.com/

http://www.rpitechnology.com/index.php

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rail stations and Albany International Airport. 1600 7th Ave. Troy, NY 12180 T: (518) 270-2914 www.discoverrensselaer.com Research Foundation of SUNY's Technology Transfer Office The Technology Transfer Central Office is located in Albany and administers the intellectual property activities of 27 campuses. There are also four University Centers which have local Technology Transfer Offices to handle their own intellectual property activities. Each Office is staffed by a small group of professionals who evaluate, market, and license inventions. Further information on technology transfer activities may be obtained by contacting the Director of the appropriate Technology Transfer Office. These Offices provide the vital expertise and guidance throughout the technology transfer process by working with research entrepreneurs and partners from business and industry to steer SUNY inventions from the university lab bench to the marketplace. Central Office 35 State Street Albany, NY 12207 T: (518) 434-7167 F: (518) 434-8351 University at Albany University Hall Room 307 University at Albany 1400 Washington Avenue Albany, NY 12222 T: (518) 956-8171 F: (518) 956-8175 Saratoga County Chamber of Commerce The Saratoga County Chamber of Commerce’s mission is to initiate and provide programs and services which will enhance members' ability to successfully conduct their business and to enhance and promote a healthy climate. Saratoga County Chamber 28 Clinton Street Saratoga Springs, NY 12866 T: (518) 584-3255 F: (518) 587-0318 E: [email protected] www.saratoga.org/chamber/index.asp Saratoga County Industrial Development Agency The Saratoga County IDA is a public benefit corporation created in 1971 to promote, develop,

http://www.discoverrensselaer.com/

https://portal.rfsuny.org/portal/page?_pageid=1158,1867357&_dad=portal&_schema=PORTAL

http://www.albany.edu/research/TechDevindex.htm


http://www.saratoga.org/chamber/index.asp

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encourage and assist in the construction, expansion, and equipping of economically sound industrial and commercial facilities in Saratoga County. The Agency's primary role is to provide financial assistance to the business community in order to maximize private capital investment in Saratoga County’s economy. Saratoga County IDA 50 West High Street Ballston Spa, NY 12020 T: (518) 884-4705 F: (518) 885-4780 www.saratogacountyida.org Saratoga Technology + Energy Park (STEP) Saratoga Technology + Energy Park is the nations first park dedicated to clean-energy and environmental technologies. The Park has a campus-like atmosphere with 77% green space and green-building construction and offers Empire Zone economic benefits, and long-term round leases for new construction. NYSERDA 17 Columbia Circle Albany, NY 12203 T: (518) 862-1090 x3270 E: [email protected] http://step.nyserda.org Saratoga Technology Accelerator The Saratoga Technology Accelerator is a technology accelerator for technology based companies with a proven business plan and established cash flow. The Accelerator offers shared office space and support services and shared management expertise. Saratoga Technology Accelerator 125 High Rock Avenue Saratoga Springs, NY 12866 T: (518) 581-7200 F: (518) 581-7201 www.staccel.com/home.html Schenectady Business & Technology Center The Schenectady Business and Technology Incubator is a business incubator with a focus on software and nanotechnology.

Schenectady Business & Technology Center One Broadway Center, Suite 750 Schenectady, New York 12305 T: (518) 393-7252 F: (518) 393-8687

http://www.saratogacountyida.org/


http://step.nyserda.org/

http://www.staccel.com/home.html

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Schenectady Chamber of Commerce The Schenectady Chamber of Commerce’s mission is to create a strong business climate throughout Schenectady County. The Chamber has more than 950 member businesses of all sizes and from every type of industry. Members represent Schenectady County as well as all parts of the Tech Valley Region. Chamber of Schenectady County 306 State Street Schenectady NY 12305 T: (518) 372-5656 F: (518) 370-3217 www.schenectadychamber.org Schenectady County Community Business Center The Schenectady County Community Business Center is a resource center for new, growing and challenged small businesses in Schenectady County. The programs of the Center are intended to serve the broad range of needs for both new and existing businesses. The Center offers free programs and services that are tailored to potential business owners, and existing businesses. Programs and services are offered for business mentoring and consulting, education, counseling, and loan programs. Schenectady County Community Business Center 920 Albany Street Schenectady, NY 12307 T: (518) 382-3069 F: (518) 688-2028 E: [email protected] www.sccbc.org Schenectady Local Development Corporation (SLDC) SLDC administers a revolving loan fund for small businesses located in the City of Schenectady. Businesses are eligible for the loans by creating jobs for low or moderate-income persons, or by serving a residential area of low or moderate-income persons. The SLDC also has a special loan program targeting low or moderate-income persons who want to start their own businesses. The SLDC finances loans up to $50,000 below market rates with flexible terms; the average loan is approximately $20,000. The staff is experienced with business financing and can package loans to incorporate banking or SBA financing to reach the total funding available to the business.

Schenectady Local Development Corporation City Hall, Room 14 Jay Street Schenectady, NY 12305 T: (518) 382-5147 F: (518) 382-5275 www.cityofschenectady.com Schenectady Metroplex Development Authority

http://www.schenectadychamber.org/


http://www.sccbc.org/

http://www.cityofschenectady.com/

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The Schenectady Metroplex Development Authority's cooperative efforts and investments are focused within the Metroplex Corridor, with a particular emphasis on the downtown Schenectady area. Schenectady Metroplex Development Authority Center City Plaza 433 State Street, Suite 401 Schenectady, NY 12305 T: (518) 377-1109 F: (518) 382-2575 www.schenectadymetroplex.org Service Corps of Retired Executives (SCORE) SCORE is composed of 10,500 volunteer business mentors who counsel businesses from 389 chapter offices throughout the country. SCORE volunteers hail from every facet of the business community. SCORE offers free counseling, business planning and borrowing, and counselor networking. SCORE Albany: 1 Computer Drive South Albany, NY 12205 T: (518) 446-1118 Glens Falls NY T: (518) 798-1761 E: [email protected] www.scorealbany.org SCORE Plattsburgh: 7061 Route 9 Plattsburgh NY 12901 T: (518) 563-1000 F: (518) 563-1028 E: [email protected] www.scoreplattsburgh.org Severino Center (RPI Lally School) The Severino Center for Technological Entrepreneurship creates a platform for budding and successful entrepreneurs to recognize how the transformative power of technology affects the way human beings labor, live and learn. Through outreach programs, education, collaborative research, and publications, the Severino Center responds to the call of the new economy by supporting the work of aspiring entrepreneurs. The Center’s mission is to educate future entrepreneurs who will guide organizations in converting technical ideas into new businesses, products, and solutions, and provides a broad-based platform for entrepreneurs to transition from concept to commercialization. E: [email protected] http://lallyschool.rpi.edu/public/faculty-research/centers/severino

http://www.schenectadymetroplex.org/




http://www.scoreplattsburgh.org/


http://lallyschool.rpi.edu/public/faculty-research/centers/severino

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Small Business Development Centers (SBDC) SBDCs provide management assistance to current and prospective small business owners. SBDCs offer assistance to individuals and small businesses by providing a wide variety of information and guidance in central and easily accessible branch locations. The program is a cooperative effort of the private sector, the educational community and federal, state and local governments. The program is an integral component of Entrepreneurial Development's network of training and counseling services. NYS Small Business Development Center 22 Corporate Woods Building, 3rd Floor Albany, NY 12246 T: (800) 732-SBDC www.sba.gov/aboutsba/sbaprograms/sbdc/index.html Small Business Innovation Research (SBIR) SBIR is a Federal program administered by 12 federal agencies for the purpose of helping to provide early-stage research and development funding to small technology companies. Solicitations are released periodically from each agency and present technical topics of R&D which the agency is interested in funding. Companies are invited to compete for funding by submitting proposals that answer the technical needs of the agency's solicitation. Each participating agency lists solicitations on the SBIR website. U.S. Small Business Administration

Office of Technology - Mail Code 6470 409 3rd Street SWWashington, DC 20416

T: (202) 205-6450

F: (202) 205-7754 www.sba.gov/SBIR Small Business Technology Investment Fund (SBTIF) The Small Business Technology Investment Fund (SBTIF) provides start-up high-tech companies throughout New York State with a source of venture capital to promote new job creation and economic growth. The Fund makes early stage equity investments in companies that have developed innovative technology products or services. It also offers technical and managerial services to growing technology-based business ventures. 30 South Pearl Street 11th Floor

Albany, New York 12207

T: (518) 292-5700 F: (518) 292-5798 E: [email protected] www.nystar.state.ny.us/sbtif.htm Small Business Technology Transfer (STTR)

http://www.sba.gov/aboutsba/sbaprograms/sbdc/index.html

http://www.sba.gov/SBIR


http://www.nystar.state.ny.us/sbtif.htm

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STTR is a federal government program similar to SBIR but smaller in scale. This program is administered by only six federal agencies for the same purpose as SBIR. The major difference between the programs is that the small business is required to work with a not-for-profit research institution or national laboratory on the proposed project. T: (301) 435-0714 E: [email protected] http://grants.nih.gov/grants/contacts.htm SmartStart UNYTECH Venture Forum SmartStart Unytech Venture Forum is an early-stage venture forum where the best companies from across the state present to investment firms from New England to the Mid-Atlantic regions. Start-up businesses are identified and vetted for participation an annual program which provides exposure to the state’s best venture capital investment. Additionally, the program also presents university spin-off companies. www.smartstartvf.com Soucy USA, Inc. (Cross between Incubator and Tech Park, NYSTAR has it listed as a Incubator) Soucy USA operates a business incubator in Champlain, New York. The complex offer 286,000 square feet of usable space including 69,725 square feet for production and associated activities. The complex also offers numerous docking bays and contains warehouses equipped with a variety of machinery for materials handling. Soucy USA, Inc. 100 Walnut Street Champlain, New York 12919 Contact: Robert E. Morgan T: (518) 298-3099 F: (518) 298-2744 E: [email protected] www.soucy-group.com Southern Ulster Chamber of Commerce 20 Milton Ave

Suite 3

Highland, NY 12528

T: (845) 691-6070

F: (845) 691-9194 E: [email protected] www.southernulsterchamber.org SUCCESS Magazine Ltd. Success Magazines LTD

One Fairchild Square - Suite 101 Clifton Park, NY 12065


http://grants.nih.gov/grants/contacts.htm

http://www.smartstartvf.com/


http://www.soucy-group.com/


http://www.southernulsterchamber.org/

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T: (518) 877-9200 E: [email protected] www.successmagazinesltd.com Sullivan County Chamber Sullivan County offers generous incentive programs to help new employers establish and expand their businesses. The Sullivan County Partnership for Economic Development offers an assistance program for site selection, energy savings, permits, and approvals. Sullivan County Chamber of Commerce 452 Broadway Monticello, NY 12701 T: (845) 791-4200 F: (845) 791-4220 E: [email protected] www.catskills.com Tech Meadows at Glens Falls Tech Meadows at Glens Falls is located off of exit 18 of the Adirondack Northway (I-87) and consists of eight, five-acre lots which are zoned light industrial. Economic Development Corporation Warren County 234 Glen St. Glens Falls, NY 12801 T: (518) 761-6007 E: [email protected] www.edcwc.org Tech Valley .NET Users Group Tech Valley .NET Users Group’s goal is to share Object Oriented and Data-Centric ASP.NET and .NET knowledge and experience with members of the user group through group presentations, discussions and other means. www.tvug.net/Home/tabid/36/Default.aspx Tech Valley Angel Network TVAN seeks growth-oriented technology companies that are located within 150 miles of Albany, New York and are seeking $1 million or less in investments. All those seeking investment must fill out a Business Review Form in order to be considered. Tech Valley Angel Network 63 State Street Albany, NY 12207 T: (518) 465-8975 F: (518) 465-6681 www.techvalleyangels.com


http://www.successmagazinesltd.com/


http://www.catskills.com/

http://www.ceg.org/[email protected]


http://www.tvug.net/Home/tabid/36/Default.aspx

http://www.techvalleyangels.com/

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Tech Valley Business Publications The Hudson Valley Business Journal 86 East Main Street Wappingers Falls New York, 12590 T: (845) 298-6236 F: (845) 298-6238 Tech Valley New Tech Meetup Tech Valley New Tech Meetup is open to anyone who is curious about new technologies. The group arranges regular meetings to discuss and demonstrate new technologies. The format is simple: 4-6 new tech companies get 5 minutes each to demo their latest and greatest, which is followed by 5 minutes of comments from the audience. http://newtech.meetup.com/57/ Tech Valley Ruby Brigade Tech Valley Ruby Brigade (TV.rb) is a network of professionals and enthusiasts interested in the Ruby language and cutting edge web development. The group meets to discuss technology, the web, entrepreneurship, and the zen of programming. The mission of the organization is to help local programmers get to know each other, help keep each other up to date on the latest Ruby tips and tricks, provide a place to contact local Ruby programmers regarding contracts and job offers. Additionally, the group focuses on mentoring and encouraging local software startups, providing a place for software startups to find angel investors, offering a way for recruiters to find local talent, and showcasing the expertise of local software developers E: [email protected] www.techvalleyrb.org Mailing List: http://groups.google.com/group/techvalleyrb TechConnex TechConnex is dedicated to building and supporting a broad-based technology community by providing comprehensive connections to IT and professional resources in the Tech Valley. TechConnex has over 600 IT companies with more than $650 million in annual revenue. These companies employ over 5,200 professionals locally. TechConnex offers programs such as CEORoundtable and Fiestas. CEORoundtable is a private forum created for top corporate executives in Tech Valley. The program gives technology leaders an opportunity to get together for networking and idea sharing. TechConnex Fiestas are an informal, networking meeting and seminar dealing with issues concerning software companies. The "Fiestas" provide a unique forum for technical, business and social interaction among members of the region's software industry that includes software executives, developers, and personnel. TechConnex Center for Economic Growth 63 State Street

http://newtech.meetup.com/57/


http://www.techvalleyrb.org/

http://groups.google.com/group/techvalleyrb

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Albany, NY 12207 T: (518) 465-8975 www.techconnex.org Technology Roadmap The Technology Roadmap is an online resource that highlights the technical assets in Tech Valley. It provides an informal network and hub to connect to these assets and a gateway to learn more about regional technology and related service organizations. The Roadmap enables technology stakeholders to communicate strengths, learn about each other, generate ideas, identify potential business, collaborate, and uncover unexpected ways that regional resources can be connected to create mutual benefit. The goal of the Roadmap is to provide a quick and efficient connection to the technology resources and knowledge professionals in Tech Valley. www.technologyroadmap.org Technology Transfer Incentive Program (TTIP) The TTIP is specifically designed to help business make the rapid transfer of new ideas and new technology from the research lab to the marketplace. This program helps New York companies commercialize high-tech innovations through partnerships with colleges and universities. The Program supports a wide array of activities associated with bringing new technologies to the marketplace including: improvement of product prototypes and existing commercial products, new product development, development of manufacturing processes to commercialize prototypes, and filing patent applications. NYSTAR 30 South Pearl Street, 11th Floor Albany, New York 12207 P: 518.292.5700 F: 518.292.5798 www.nystar.state.ny.us/ttip.htm TechValleyTimes.com TechValleyTimes.com is a portal for the news about developments in the Tech Valley Community. Tech Valley Times encourages community participation and allows individuals to submit stories and classified ads. www.Techvalleytimes.com Town of Bethlehem Industrial Development Agency The Town of Bethlehem Industrial Development Agency is a public benefit entity that seeks to actively promote, encourage, attract and develop job and recreational opportunities and economically sound commerce within the Town of Bethlehem’s borders. The Agency provides financial assistance to eligible projects in order to promote the economic welfare, prosperity, and recreational opportunities for the residents of the Town. In addition to financial assistance, in some cases the Bethlehem IDA can assist companies with grant applications, business plans, access to agencies and markets and other business and marketing issues.

http://www.techconnex.org/

http://www.technologyroadmap.org/

http://www.nystar.state.ny.us/ttip.htm

http://www.techvalleytimes.com/

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Bethlehem Industrial Development Agency 445 Delaware Ave Delmar, NY 12054 T: (518) 439-4955 x1159 E-mail: [email protected] www.bethlehemida.com U.S. Small Business Administration (SBA) The U.S. Small Business Administration (SBA) is an independent agency of the federal government, created to aid, counsel, assist and protect the interests of small businesses. The SBA helps Americans start, build and grow businesses. SBA Answer Desk T: (704) 344-6640 T: (800) U-ASK-SBA [email protected] www.sba.gov/index.html

U.S. Small Business Administration 504 Program Used in conjunction with partnership programs or conventional lending institutions, SBA 504 loans enable growing businesses to secure long-term, fixed-rate financing for major capital assets. This low-cost second mortgage financing may be exempt from the mortgage recording tax. Empire State Certified Development Corporation is the Tech Valley’s local SBA certified lender. Empire State Certified Development Corporation 50 Beaver Street Albany, NY 12207 T: 1-800-923-2504 F: (518) 463-0240 www.nybdc.com Union College U-Start Incubator U-Start is a business incubator near Union College. Their mission is to support and encourage promising entrepreneurs to grow their ideas in Schenectady County. U-Start offers rental space at competitive rates, “drop in” offices, meeting rooms, Internet access, shared administrative services and equipment, and a superb mentor network of business and technical advisors that provide strategic counsel to help you create a viable business. U-Start forms a dedicated Board of Advisors for your company based on your specific needs U-Start Business Incubator 4 Nott Terrace Schenectady, NY 12308 T: (518) 631-0472 E: [email protected] www.union.edu/Resources/Technology/U-Start United States Patent and Trademark Office (USPTO)


http://www.bethlehemida.com/


http://www.sba.gov/index.html

http://www.nybdc.com/


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Federal trademark searches may be conducted on the US Patent and Trademark Office website. www.uspto.gov Upstate Venture Association of NY (UVANY) The Upstate Venture Association of New York (UVANY) is a statewide organization formed to advance venture capital and private equity investments throughout upstate New York. UVANY seeks to advance the number, scale and quality of private equity investments across New York State by working with entrepreneurs, companies seeking funding, private equity firms and professionals to improve deal flow and facilitate greater availability of capital for all investment stages. Upstate Venture Association of New York, Inc. 136 Juergen Point Mayfield, NY 12117 T: (518) 863-7176 F: (518) 863-7100 E: [email protected] www.uvany.org Vendor Responsibility Questionnaire Start-up businesses wishing to obtain contracts with NYS agencies should ensure that they can meet the Guidelines’ definition of a responsible vendor. All vendors will be required to complete a Vendor Responsibility Questionnaire as part of their proposal. More information and a copy of the questionnaire are available at: Office of the State Comptroller

110 State Street Albany, NY 12236 T: (866) 370-4672 (toll-free) or (518) 408-4672 www.osc.state.ny.us/vendrep Venture Bplan Venture Bplan is a forum that runs in collaboration with the RPI Incubator Program. The program offers a first-look for the business community at the best and brightest early-stage growth companies in the Tech Valley region. Up to two businesses are presented each month in front of a panel of investment experts, followed by questions from the panelists on the business plan specifics. This forum is designed to get visibility for entrepreneurs to the region’s angel and institutional investors, business service providers, advisors, students, faculty, alumni and most of the early-stage business community. T: (518) 276-6658 E: [email protected] www.venturebplan.com Vista Technology Center



http://www.uvany.org/



http://www.venturebplan.com/

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Vista Technology Center is located eight minutes from Albany NanoTech and has over one million square feet of development planned. The location lends itself to technology development with 440 pristine acres sub-dividable into 15 properties. The natural surroundings of woods and streams create a setting ideal for work-life balance. Amenities to include a wellness center, conference facility, restaurants and trail system, and easy highway access. Vista Technology Center 302 Washington Avenue Extension Albany, New York 12203 T: (518) 465-8975 E: [email protected] www.nylovesnano.com/sites/sites_vista.php Warren County Economic Development Corporation (EDC) Warren County EDC is the economic development engine for Warren County, administering its Empire Zone Program, attracting new businesses to the area, and helping existing ones expand. EDC 234 Glen Street Glens Falls, NY 12801 Tel: (518) 761-6007 www.edcwc.org Watervliet Innovation Center The Watervliet Innovation Center is a technology and business accelerator focused on the rapid growth of emerging homeland and national security technology companies. In support of this mission, the Center is within the Watervliet Arsenal campus, co-located with the US Army's Benét Labs and an Army Material Command manufacturing center. The Center helps companies strategically align technology development efforts with the needs of their security and defense customers, enhancing opportunities for joint venturing, financing, and market acceptance. There is no requirement to physically reside at the Innovation Center in order to access the benefits of the program. Watervliet Innovation Center 44 Dalliba Avenue Watervliet, NY 12189 T: (518) 266-6051 E: [email protected] http://www.ceg.org/wic or www.watervlietinnovation.org


http://www.nylovesnano.com/sites/sites_vista.php



http://www.ceg.org/wic

http://www.watervlietinnovation.org/