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  • 8/4/2019 Startup Package Rimon-6

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    Startup Package

    Menu of Flat Fees

    For full description of packages and fees,please view the appropriate section.

    Entity Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 2 Full organizational package $1,200 plus state fees Operating Agreement or Bylaws $900

    Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 6

    Basic employment agreement: $450 Nondisclosure agreement: $450 Non-competition agreement: $425 Package of all three agreements $1,250

    Employee Incentive Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 8 Stock Option Plan and Agreement $2400 Restricted Stock Purchase Agreement $875

    Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 11

    Full Trademark Package $3,075 and abovePatents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 15

    Preliminary, knock out search $1,500-2,500 Patentability search & due diligence $5,000 per independent invention Patent preparation & Filing $6,000-15,000 plus govt fees

    (fees will depend on size & complexity)

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    NEW YORK | SAN FRANCISCO | SILICON VALLEY | TEL AVIV | WASHINGTON, D.C.

    RIMON LAW GROUP, INC.

    220 SANSOME STREET, SUITE 310, SAN FRANCISCO, CA 94104 P: 800.930.7271 415.683.5472www.rimonlaw.com

    2

    A Primer on Entity Formation

    Why form a limited liability entity (Corporation or LLC)?

    A limited liability entity (a corporation or an LLC) provides both financial benefits andprotection from liability. Among the financial benefits is the ability to deduct more businessexpenses from annual revenue when calculating taxable income than would be possible withoutan entity. Forming a limited liability entity also helps protect your personal assets in the event ofa lawsuit or from debtors in a situation where your businesss liabilities exceed its assets. This

    means that as the owner of limited liability entity, your personal assets will not be placed at riskbecause of the actions of your company, provided you maintain the company's assets andactivities separate from your personal ones This requires the corporation or LLC to: 1) makesure the company is adequately capitalized (it has the money necessary to cover the reasonablypredictable legal and business responsibilities of the business); 2) that the company keeps cleanaccounting books and has accounts that are separate from the personal accounts of its owners oremployees; and 3) that all legal documents are adequately maintained and the company complieswith corporate governance laws.

    Forming a corporation or LLC also usually makes it easier for a business to borrow money andto sell all or parts of the business in the future. It is important to note that the longer a business

    operates without a legal entity, the more complicated and expensive it becomes to transform itinto one. For this reason it is very important to form a legal entity as soon as feasible.

    What is the difference between an LLC and a Corporation?

    A corporation is made up of three groups of people the shareholders, the board of directors andthe officers, although the same person can hold multiple positions. The board of directors isformally elected by the shareholders and represents their interests. It is the board of directorsthat hires the officers of the company, also known as the management. The managements job isto oversee the day-to-day operations of the company. Major decisions, however, require theapproval of both the shareholders and the board of directors. A corporate structure is thus ahighly organized and rigid structure of governance that can often be quite burdensome. Acorporation requires a slew of corporate governance documents that must be frequently updated.It also requires that annual meetings be held for shareholders and the board of directors.

    LLC stands for limited liability company. Generally it provides the same legal protectionsfrom personal liability as a corporation, however it is governed more like a partnership than acorporation. Whereas a corporations owners are called shareholders, the owners of an LLC areknown as members. An LLC does not require a board of directors or even officers and cansimply be managed directly by its members, if so desired. It can also be structured more like a

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    NEW YORK | SAN FRANCISCO | SILICON VALLEY | TEL AVIV | WASHINGTON, D.C.

    RIMON LAW GROUP, INC.

    220 SANSOME STREET, SUITE 310, SAN FRANCISCO, CA 94104 P: 800.930.7271 415.683.5472www.rimonlaw.com

    3

    corporation, with managers that are distinct from its owners. LLCs allow for significantly moreflexibility than do corporations. For instance, the owners of an LLC can allocate distributions in

    whichever way they see fit. Even if the ownership of an LLC is split 60/40, the owners candecide to split the profits 50/50 - something that is not possible in a corporation without asignificantly more complicated structure.

    Should my business be a Corporation or an LLC?

    If your business only has a few investors and you do not anticipate receiving outside financing inthe near future, an LLC is probably best for you because of its flexibility, simplicity, and pass-through taxation (see below). This is especially true if you do not meet the S-corp electionrequirements (also see below). However, if you want a board of directors that is distinct fromthe officers and/or shareholders of the company, or if you are looking for institutional investors,then a corporation is probably a better form of entity because of its more organized andestablished structure of governance. There are also fairly complex differences on how franchisetaxes are calculated for S-Corps and LLCs depending on the jurisdiction, revenue, and profit ofthe company, so you should consult with an attorney and/or accountant to see what fits yourspecific financial situation.

    What is pass-through/flow-through taxation?

    In a pass-through (or flow-through) entity, the entitys income and expenses "pass through" theentity and are treated as the income and expenses of its owners. LLCs and S-Corporations (seebelow) are pass-through entities. This differs from a C-Corporation (which is the default form ofcorporation) which is taxed a corporate income tax at the end of the fiscal year in addition to the

    personal income taxes and dividend taxes that its owners and employees pay. Federal corporateincome tax is about 15% to 35% of profits, and most states also have corporate income tax. Thismeans after a C-Corporation has paid its expenses for the year, it will be taxed at least 15%-35%of whatever is left above the amount the company started with that year. If the company is anLLC or an S-Corporation, there is no corporate tax, and indeed the owners can even apply lossesof the company against their personal income.

    What is an S-Corporation and what are its requirements?

    S-Corporations are corporations that elect to be treated as pass-through entities by the IRS byfiling an S-Corp election. In order to qualify for S-Corporation status a corporation needs tosatisfy several conditions, including the following: 1) all shareholders must be residents of the

    United States; 2) the corporation may only have one class of shareholders and may not havemore than 75 shareholders; and 3) the companys shareholders must be any of the following:individuals, estates, certain trusts, certain partnerships, tax-exempt charitable organizations, andother S corporations (but only if the other S corporation is the sole shareholder). This means S-Corporations may not be owned by other C-Corporations, LLCs, or foreign residents. If any ofthe requirements are not met at any time, the corporation automatically loses its S-Corporationstatus and will be treated as a C-Corporation.

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    NEW YORK | SAN FRANCISCO | SILICON VALLEY | TEL AVIV | WASHINGTON, D.C.

    RIMON LAW GROUP, INC.

    220 SANSOME STREET, SUITE 310, SAN FRANCISCO, CA 94104 P: 800.930.7271 415.683.5472www.rimonlaw.com

    4

    What are the tax benefits of making an S-Corporation Election?

    Many small business owners incorporate their businesses not only for legal protection, but alsoto reduce owners payroll taxes through S-Corp tax election with the IRS. One advantage of anS-Corp over a sole proprietorship, partnership, or disregarded entity is that it gives businessowners the ability to reduce their self employment taxes. Any small business owner who has notmade an S-Corp election and uses Schedule C for their personal tax return for 2010 is subject to

    both employer and employee FICA and Medicare payroll taxes at 15.3% up to $106,800, 2.9%Medicare for Schedule C net income greater than $106,800, and California SDI for 1.1% up to93,316. If the owner of an S-corporation pays himself/herself a reasonable salary, the rest ofthe net income is not subject to these payroll taxes.

    Can an LLC get the tax benefits of an S-Corp Election?

    An LLC can be treated as an S-Corporation for tax purposes if it makes an S-Corporationelection as long as the entity meets the IRS criteria to be taxed as an S-Corp, files an S-Corpelection and gets approved by the IRS to be taxed as an S-Corporation. Without an S-Corporation election, single member LLCs default to be taxed as sole proprietors and a multi-member LLCs defaults to be taxes as partnership since they are considered disregarded entitiesunable to get the tax benefits of an S-corp election. However, if a single or multiple memberLLC agreement meets the IRS criteria to be classified as an S-Corp (see above), and the S-corpelection is filed and approved by the IRS, then for tax purposes (not legal purposes), the entity istreated like an S-Corporation.

    Where should I form my entity?

    This can be a very complex question. If you are looking to grow the company and get outsideinvestment, then you should probably form an entity in Delaware. If your entity will have realestate holdings Nevada might also be a good option. Otherwise, it might make the most sense tosimply form the entity in the state where you will be conducting most of your business.

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    NEW YORK | SAN FRANCISCO | SILICON VALLEY | TEL AVIV | WASHINGTON, D.C.

    RIMON LAW GROUP, INC.

    220 SANSOME STREET, SUITE 310, SAN FRANCISCO, CA 94104 P: 800.930.7271 415.683.5472www.rimonlaw.com

    5

    Rimon offers the following flat-fee packages:

    1. Full organizational package (including Charter, BoardConsents, Bylaws/Operating Agreement, etc.): $1,200 plus state fees

    2. Operating Agreement or Bylaws: $900

    THIS IS ONLY A SIMPLE OUTLINE. WE STRONGLY RECOMMEND YOU SPEAK

    TO A LAWYER TO LEARN WHAT IS BEST FOR YOU.

    For a free consultation, or to learn more about our entity formation services,please contact us:

    Email: [email protected] Telephone: 800.930.7271

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    NEW YORK | SAN FRANCISCO | SILICON VALLEY | TEL AVIV | WASHINGTON, D.C.

    RIMON LAW GROUP, INC.

    220 SANSOME STREET, SUITE 310, SAN FRANCISCO, CA 94104 P: 800.930.7271 415.683.5472www.rimonlaw.com

    6

    A Primer on Employment, Non!

    Disclosure, and Non!

    Competition Agreements

    Once an employment relationship exists, a company is required to adhere to applicable

    labor laws, regardless of whether a newly formed company has one employee or more.

    Three agreements are basic to a company.

    1. Employment or Service Agreements. A new company should determine which of itsworkers are employees and which are independent contractors. The workers status willdetermine what benefits he or she is owed during employment and at its conclusion. A newcompany is building its reputation not just for its product, but for its staff and for fairness as an

    employer as well. To this end, a company should have a written agreement to clarify for itsworkers and itself a positions expectations, benefits and responsibilities. A written contractdelineates scope and hours of work, how the relationship is to continue, and how it is to beterminated.

    2. Nondisclosure Agreements. Your companys ideas, methods, organization, and products areentitled to varying degrees of protection. With products and secrets more esoteric and virtualthan ever before, it is essential that expectations and responsibilities are set forth in black andwhite.

    A nondisclosure agreement serves a dual purpose: it educates the employee or contractorand it protects the company. A clearly written nondisclosure agreement will tell your workerswhat his or her responsibilities are toward the company and what the law considers to becompany property.

    3. Non!competition Agreements. Can a part-time employee hold another job while workingfor you? Can he or she work for a direct competitor a year after he involuntarily leaves hisemployment? Does this change if he owns part of your business? What if the competitor isanywhere in the world instead of in the same country? Different states have different lawsregarding the strictures that will be enforced once a worker leaves your company. These lawsare affected by the stability of the economy. It is important for your companys future andstability that you take full advantage of whatever protections the applicable law affords.

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    NEW YORK | SAN FRANCISCO | SILICON VALLEY | TEL AVIV | WASHINGTON, D.C.

    RIMON LAW GROUP, INC.

    220 SANSOME STREET, SUITE 310, SAN FRANCISCO, CA 94104 P: 800.930.7271 415.683.5472www.rimonlaw.com

    7

    Rimon offers the following flat-fee packages. All fees include a client consultation. Additionalrevisions and work are at the hourly rate:

    Basic employment agreement: $450 Nondisclosure agreement: $450 Non-competition agreement: $425 Package of all three agreements $1,250

    THIS IS ONLY A SIMPLE OUTLINE. WE STRONGLY RECOMMEND YOU SPEAK

    TO A LAWYER TO LEARN WHAT IS BEST FOR YOU.

    For a free consultation, or to learn more about our services,

    please contact us:

    Email: [email protected] Telephone: 800.930.7271

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    NEW YORK | SAN FRANCISCO | SILICON VALLEY | TEL AVIV | WASHINGTON, D.C.

    RIMON LAW GROUP, INC.

    220 SANSOME STREET, SUITE 310, SAN FRANCISCO, CA 94104 P: 800.930.7271 415.683.5472www.rimonlaw.com

    8

    A Primer on Stock Option Agreements and Restricted Stock Agreements

    Why have a stock option plan?

    Startups often prefer to compensate using stock options because it does not require a cash outlay.In addition, employees may prefer the favorable tax treatment associated with stock options.Stock options also often give employees a stake in the long-term success of the company thatsalaries or bonuses often do not.

    What is a stock option?

    A stock option is the right to acquire a certain number of shares of stock for a specific price(exercise price). Usually, the employer does not permit an employee to exercise the right topurchase immediately on the date the stock option is issued. Rather, the right to purchase stocktypically vests or accrues over a period of time or upon meeting certain company performancegoals. This encourages employees to remain with the company for the rest of the vesting periodor helps the company meet its goals.

    Tax consequences of Incentive Stock Options and Nonstatutory Stock Options

    There are two forms of stock options: incentive stock options (ISO) and nonstatutory stockoptions (NSO). ISOs are different from NSOs in that ISOs receive favorable federal taxtreatment if the option meets certain requirements of the Internal Revenue Code.

    When granted, both ISOs and NSOs should have an exercise price that is not less than 100percent of the fair market value of the underlying stock. Neither ISOs nor NSOs are taxable upongrant to the employee or when the option vests. The difference between them lies in the taxconsequences when the option is exercised. When an NSO is exercised, the employee recognizescompensation (ordinary) income in an amount equal to the spread at exercise. An employee doesnot recognize taxable income on exercise of an ISO. However, the spread at exercise isincludible in the employees federal alternative minimum taxable (AMT) income and may giverise to AMT tax liability.

    If stock acquired upon exercise of an NSO is held for more than one year, any gain realized on

    the disposition of the stock is taxed at favorable long-term capital gain rates. ISOs must be heldfor at least two years from the date of grant and at least one year from the date of exercise toqualify for favorable capital gain tax rates. Otherwise, the employee recognizes compensationincome that is taxed at ordinary income tax rates.

    The other difference between ISOs and NSOs is in the benefit to the employer: for NSOs, theemployer can take a deduction equal to the amount recognized by the employee upon exercise of

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    NEW YORK | SAN FRANCISCO | SILICON VALLEY | TEL AVIV | WASHINGTON, D.C.

    RIMON LAW GROUP, INC.

    220 SANSOME STREET, SUITE 310, SAN FRANCISCO, CA 94104 P: 800.930.7271 415.683.5472www.rimonlaw.com

    9

    the NSO. For ISOs, there is no deduction. The different aspects of ISOs and NSOs provideflexibility in tailoring an equity compensation plan to fit a companys needs.

    What is restricted stock?

    Instead of issuing stock options, some companies issue restricted stock. Restricted stock refersto stock that is transferred to an employee as compensation for services, subject to a vestingschedule. The employee usually is not required to pay for the stock. If the employee does notremain with the employer until the end of the vesting period, the stock must be returned to theemployer. If the employee has paid any amount for the restricted stock but then fails to becomevested, the employer usually refunds the purchase price to the employee. A discussion of the taxconsequences of restricted stock is beyond the scope of this primer and requires a detailedconversation with a tax attorney.

    Given the complex legal, accounting and tax issues, a company should seek advice beforeimplementing an equity compensation plan.

    Rimon offers the following flat-fee packages:

    1. Stock Option Plan and Agreement $2400 Initial Client Interview* Stock Option Plan Stock Option Agreement Board of Directors and Shareholders Approvals Spousal Consent Exercise Notice Filing the 25102(o) Notice with the Commissioner of Corporations

    * Additional revisions at hourly rate** Filing fee is calculated by the value of the shares in the Plan. The filing fee is additional.

    2. Restricted Stock Purchase Agreement $875 Initial Client Interview* First Draft of Stock Purchase Agreement Stock Powers and Assignment Exercise Notice Spousal Consent 83(b) Election Information Filing the 25102 Exemption with the Commissioner of Corporation**

    * Additional revisions at hourly rate** Filing fee is additional ($25-$300)

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    NEW YORK | SAN FRANCISCO | SILICON VALLEY | TEL AVIV | WASHINGTON, D.C.

    RIMON LAW GROUP, INC.

    220 SANSOME STREET, SUITE 310, SAN FRANCISCO, CA 94104 P: 800.930.7271 415.683.5472www.rimonlaw.com

    10

    THIS IS ONLY A SIMPLE OUTLINE. WE STRONGLY RECOMMEND YOU SPEAK

    TO A LAWYER TO LEARN WHAT IS BEST FOR YOU.

    For a free consultation, or to learn more about our option agreement services,

    please contact us:

    Email: [email protected] Telephone: 800.930.7271

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    NEW YORK | SAN FRANCISCO | SILICON VALLEY | TEL AVIV | WASHINGTON, D.C.

    RIMON LAW GROUP, INC.

    220 SANSOME STREET, SUITE 310, SAN FRANCISCO, CA 94104 P: 800.930.7271 415.683.5472www.rimonlaw.com

    11

    A Primer on Trademarks

    Introduction

    Every business owns trademarks, which are used to identify and distinguish a business, product,and/or service in the marketplace. Trademarks may be comprised of words, names, symbols, ordevices or any combination thereof. Trademarks often are a businesss most valuable asset. Forexample, the Coca Cola brand alone was valued at more than $67 billion dollars in 2009!

    Clearing a name for registration with the Secretary of States office is not the same as conductinga trademark search and the mere act of corporate formation does not confer any trademark rights.The trademark search and registration (aka trademark prosecution) process can be long (typically

    1.5 to 2 years) and complicated.

    Trademark Basics

    There are four basic facts to keep in mind when dealing with trademarks:

    1. U.S. trademark rights are governed by a system of priority or superiority -- the firstperson /entity to use a mark in interstate commerce can prevent all others from using anidentical or similar mark for identical or similar services.

    2. Common-law trademark rights (those not associated with any state or federal trademarkregistration) are geographic in scope and limited to the locations in which the mark has

    been used. Common law trademark rights are more difficult, and therefore more costly, toprove than rights associated with a state or federal trademark registration.

    3. U.S. trademark rights also may be obtained by filing an Intent to Use (ITU) federaltrademark registration application, though the mere filing of an ITU application does notconvey any trademark rights; registration must be obtained for trademark rights to accrue.

    4. Trademark infringement occurs when it is likely that consumers would be confusedregarding the source or origin of a product or service. Infringement also exists whenconsumers would perceive an association between products, or a sponsorship betweencompanies, that does not really exist. This is what trademark professionals refer to as a

    likelihood of confusion.

    Trademark SearchingInvestigating a trademarks availability by conducting a full trademark search before adopting amarkgreatly reduces the chances of being involved in a costly trademark infringement dispute.Trademark infringement matters often result in the infringer having to change its mark, includingceasing any and all use of the infringing mark on letterhead, business cards, brochures, products,packaging, phone listings, signage, domain names and in all marketing, advertising, and

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    NEW YORK | SAN FRANCISCO | SILICON VALLEY | TEL AVIV | WASHINGTON, D.C.

    RIMON LAW GROUP, INC.

    220 SANSOME STREET, SUITE 310, SAN FRANCISCO, CA 94104 P: 800.930.7271 415.683.5472www.rimonlaw.com

    12

    promotional materials. Further, the infringer also has to bear the cost of purchasing all newmaterials to associate with its new mark. If a trademark infringement dispute results in federal

    court litigation, the infringer may be liable for three times the trademark owners damages, aswell as the trademark owners attorneys fees and costs of bringing the suit, in addition to havingto pay its own attorneys fees and costs. Moreover, many insurance policies do notcovertrademark infringement lawsuits, even under an advertising injury rider.

    Trademark Registration

    Once the trademark search process is complete and the mark is cleared (meaning that its deemedavailable by competent trademark counsel), it is wise to federally register the mark. Provided thatthe mark is used in interstate commerce a trademark owner can protect it in every state in thecountry simply by federally registering it. It also is wise to pursue federal trademark registration

    because such registration evidences the marks validity and the owners exclusive right to use themark nationwide for the goods /services listed in the registration. A certificate of federaltrademark registration serves as a title or deedto the trademark asset. This is especiallyimportant if one plans to sell its business, whether now or in the future, as most purchasers wantevidence that the seller owns the assets that the purchaser seeks to acquire.What are some of the advantages of registering a trademark?

    International Classification System and Recitation of Goods & Services

    The Nice Agreement is an international trademark treaty that sets forth 45 InternationalClassifications of goods and services. All U.S. applicants must use this classification systemwhen applying for trademark registration. The PTO charges a $325 filing fee per International

    Classification. It is important to determine in which International Classes the mark is / will beused before conducting the trademark search, as you want the search to be as accurate aspossible. The PTO initially refuses to register 70% 80% of all registration applications filedwith it. The majority of the refusals to register are based upon the applications recitation ofgoods and services (how the applicant describes what it does under the mark). There is a PTOManual of Acceptable Identifications of Goods and Services on the PTOs website, with whichthe applicants must comply whenever possible. It is often helpful for applicants to review theregistration records of their competitors to determine what recitations the PTO may accept.However, it is also important to know the PTO examiners mantra Just because anotherexaminer (or 10,000 examiners) did it, does not mean it was right. In other words, just becauseanother examiner allowed a certain recitation does not mean that you will be able to use it as

    well. Additionally, once an application is filed, the PTO only allows the applicant to narrow orclarify its recitation of goods / services; adding to or substantially altering the recitation is notallowed.

    ConclusionTrademarks often are a businesss most valuable assets. Trademarks are the tools that consumersuse to identify what they want and distinguish it from what they dont (i.e., competitors products/ services). While the search and registration process can be costly, especially for a start-up

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    NEW YORK | SAN FRANCISCO | SILICON VALLEY | TEL AVIV | WASHINGTON, D.C.

    RIMON LAW GROUP, INC.

    220 SANSOME STREET, SUITE 310, SAN FRANCISCO, CA 94104 P: 800.930.7271 415.683.5472www.rimonlaw.com

    13

    company, it is always more cost effective to act diligently and pro-actively in the beginning,rather than scrambling to do damage control down the road. Trademark infringement disputes

    ALWAYS cost more than trademark prosecution; thus, it pays to search, clear and registermarks initially rather than to wing it and hope for the best.

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    NEW YORK | SAN FRANCISCO | SILICON VALLEY | TEL AVIV | WASHINGTON, D.C.

    RIMON LAW GROUP, INC.

    220 SANSOME STREET, SUITE 310, SAN FRANCISCO, CA 94104 P: 800.930.7271 415.683.5472www.rimonlaw.com

    14

    Rimon offers the following flat-fee package for Trademarks:

    Trademark Search Services

    Preliminary, knock-out TM search $300.00

    FULL outside TM search (words only) $625.00Review search report; draft opinion letter $750.00TOTAL TRADEMARK SEARCH ESTIMATE $1,675.00

    Trademark Fees

    Drafting and filing of application with USPTO (up to three classes) $525.00

    (Each additional class) $125.00Response to Office Action $300.00 (per hour)Review Notice of Publication (up to three classes) $125.00(Each additional class) $125.00Draft Statement of Use $325.00Federal Registration (up to three classes) $125.00MINIMUM ATTORNEY FEES FOR TM PROSECUTION $1,700.00

    **Intent-to-Use Applications will incur additional attorney and government fees. Otheractivities, including responding to USPTO office actions are billed at an hourly rate of$300/hour. Please ask for details.

    Government Filing Fees

    USPTO Filing Fee (per class) $325Statement of Use Filing Fee $100

    THIS IS ONLY A SIMPLE OUTLINE. WE STRONGLY RECOMMEND YOU SPEAK

    TO A LAWYER TO LEARN WHAT IS BEST FOR YOU.

    For a free consultation, or to learn more about our trademark services,

    please contact us:

    Email: [email protected] Telephone: 800.930.7271

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    NEW YORK | SAN FRANCISCO | SILICON VALLEY | TEL AVIV | WASHINGTON, D.C.

    RIMON LAW GROUP, INC.

    220 SANSOME STREET, SUITE 310, SAN FRANCISCO, CA 94104 P: 800.930.7271 415.683.5472www.rimonlaw.com

    15

    A Primer on Patents

    A patent is a legal document that defines a set of exclusive rights to a new technology, product orservice.

    The exclusive rights are granted to the patent owner for a limited amount of time and can beleveraged in a variety of ways to support a business strategy and add value to a business.

    Patents have many strategic uses. Patents can be used to create a legal barrier to competition, toestablish a portfolio of assets that can be used to generate revenues through licensing or IPtransfers or to augment the value of a business for purposes of raising seed or venture funding.

    Patent Basics - What types of innovations are patentable?

    Under U.S. patent law, any person who "invents or discovers any new and useful process,machine, manufacture, or composition of matter, or any new and useful improvement thereof,may obtain a patent."

    Virtually anything made by man under the sun can be patentable.

    Utility patents can protect inventions that are novel (new), nonobvious, and useful including the

    following types of subject matter:

    Process or method (e.g., method of making or using a product or computer-basedprocesses)

    Machine (something with moving parts or circuitry) Article of manufacture (such as a tool or another object that accomplishes a result with no

    moving parts, such as a new hammer)

    Composition of matter (such as a new pharmaceutical, food, or toothpaste) Or an improvement of any of the above items. Most patents are for incremental

    improvements made to known or pre-existing technology - thus typically evolution ratherthan revolution.

    Even if the invention falls into one of the above categories, there are certain subject matters thatcannot be patented including mathematical formulas, naturally occurring substances, abstractideas, or laws of nature.

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    NEW YORK | SAN FRANCISCO | SILICON VALLEY | TEL AVIV | WASHINGTON, D.C.

    RIMON LAW GROUP, INC.

    220 SANSOME STREET, SUITE 310, SAN FRANCISCO, CA 94104 P: 800.930.7271 415.683.5472www.rimonlaw.com

    16

    What does a Patent contain?

    Patents typically contain:

    > Background of the Invention

    > Summary of the invention

    > Detailed Description of the Invention

    > Example(s) (Actual or Prophetic) (Optional)

    > Must include at least one claim.

    The Claims

    The claims define the exclusive property right provided by a granted patent. Patents include oneor more independent claims and may include one or more dependent claims that further narrowthe independent claims. Dependent claims are helpful in the event the broader independentclaims are later found to be invalid.

    Provisional Patent Application

    Rimon Law Group recommends first filing provisional applications since they are less expensive

    to file compared to non-provisional applications and can be updated less expensively throughoutthe following year. However, the provisional application should be as complete as possible sothat it can ultimately support any patent claims issuing based on that initial filing. That is, theprovisional application should not be considered a shortcut but is instead an opportunity tosecure an initial filing date at a reduced cost.

    Accordingly, we strongly recommend drafting the provisional application as if a regular non-provisional application (including claims and drawings), but filing provisionally.

    Design Patents

    In general terms, a utility patent protects the way an article is used and works, while a designpatent protects the way an article looks. Both design and utility patents may be obtained on anarticle if invention resides both in its utility and ornamental appearance.

    Design patents may be granted for any new, original and ornamental design for an article ofmanufacture and protects only the appearance of the article and not its structural or utilitarianfeatures.

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    Patent Prosecution

    After the patent application is prepared and filed, there is usually at least one office action issuedby the patent office that requires a written response and other formalities to comply with (e.g.,the filing of information disclosure statements). Patent prosecution costs can range from $2,000to $5,000+ depending on the complexity and the office actions involved. Currently, prosecutionwithin the US Patent Office typically does not start until at least 12 months after the filing of thenon-provisional application.

    Rimon Patent Services

    Rimons IP attorneys provide value-added services to clients by combining creativity withextensive experience and expertise in key areas. We help our clients secure valuable patent

    assets, monetize those assets through licensing or business transactions and develop strategies toenforce patent rights through litigation.

    Rimons IP attorneys help clients secure valuable patent assets and develop business and legalstrategies for using those assets.

    Our patent services include:

    ! Advising on the patentability of inventions.! Preparing and prosecuting patent applications to issuance.! Managing and developing strategies for patent portfolios.! Training personnel to help identify and protect patentable inventions.! Performing patent audits to confirm patent assets are optimized for a clients business

    strategy in a cost-effective manner.! Generating patent landscapes for product lines and development roadmaps.! Preparing non-infringement and invalidity opinions.! Developing design-around strategies.! Managing infringement matters or other disputes.! Reviewing, negotiating and drafting complex intellectual property, corporate and

    commercial agreements or other transactions.! Advising on merger and acquisition transactions and conducting due diligence relating to

    intellectual property issues.

    Our clients include multi-national corporations, small businesses, early-stage startups andindividual inventors.

    Our IP attorneys also provide do it yourself training for cost-conscious clients who wish toprotect their patent assets at reduced cost.

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    Rimon offers the following flat-fee or reduced fee Startup Packages for Patents:

    Patentability Searches - Determine whether an invention is patentable or a third partys pendingapplication or granted patent is valid.

    Preliminary, knock-out search $1,500-2,500

    Patentability search & due diligence $5,000(per independent invention)

    Opinion $350.00/hour

    Patent Application Preparation Fees

    There are three categories of expenses for the typical patent application: (1) attorney fees; (2)filing fees; and (3) drawing fees.

    Attorney Fees (generally) $350.00/hour

    Attorney Fees (flat fee options*):

    Preparation and filing of original application with single inventiveconcept/focus (10 page specification, 10 claims) $6,000

    Preparation and filing of medium sized application $8,000(20 pages, 20 claims)

    Preparation and filing of large complex application $10,000-15,000+

    Design Patent Application $750(plus drawings and govt fees)

    * Requires inventor(s) assistance in drafting process, which may further reduce fees.

    Drawing fees $25-100/sheet

    Government Filing Fees Large Entity Small Entity

    Provisional Application Filing Fee $220 $110

    Provisional Application Size Fee $270 $135(each 50 sheets over 100 sheets)

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    Non-Provisional Application Fees

    Basic filing fee $330 $165Basic filing fee- Utility (electronic filing) $82

    Independent claims in excess of three $220 $110Claims in excess of 20 $52 $26

    Application Size fee (each 50 sheets $270 $135over 100 sheets)

    Search Fee $540 $270

    Examination Fee $220 $110

    Surcharge for late filing fee, search fee, $130 $65examination fee, or oath or declaration

    Extension of Time fees (1-5 months) $130-2350 $65-1,175

    Issue Fee $1,510 $755

    Patent Maintenance Fee (3.5 years) $980 $490Patent Maintenance Fee (7.5 years) $2,480 $1,240

    Patent Maintenance Fee (11.5 years) $4,110 $2,055

    PCT Patent Application

    Transmittal Fee $240

    Search Fee $2,080

    Preliminary Examination Fee $600 (US was ISA)

    $750 (US was not the ISA)

    Design Patent

    Filing Fee $220 $110For each additional 50 sheets $270 $135that exceeds 100 sheets

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    Search Fee $100 $50

    Examination Fee $140 $70

    Issue Fee $860 $430

    Maintenance Fees Not Required for Design Patents

    For updated fee information or information about other patent related government fees, pleasesee http://www.uspto.gov/about/offices/cfo/finance/fees.jsp