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CAN MY VENTURE-BACKED STARTUP BENEFIT FROM A PAYROLL PROTECTION PROGRAM LOAN?

With so many companies’ runways depleting in these unprecedented times, many companies are seeking relief through the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). One attractive program falling within the U.S. Small Business Administration’s (SBA’s) Section 7(a) loan program is called the Paycheck Protection Program (the “PPP”), where a business can receive a forgivable loan in amount up to 2.5 X its average monthly payroll for the prior year.

To be eligible for an SBA loan a business must meet the size
qualifications for a “small business concern”, or
alternatively, in the case of PPP, employ fewer than 500 employees. A
businesses qualification as a “small business concern”, however, can be
frustrated by a business’s association with other companies or investors as
provided under 13 CFR §121.301.

These
affiliation rules consider the amount of control or power a third party has to
control the applicant. While the rules are somewhat nuanced and consider the
totality of circumstances, businesses can conduct a simple back-of-the-envelope
exercise to help determine eligibility:

  • Do
    any of our investors own 50% or more of the outstanding shares of our company?
  • Do
    any of our investors have the right to purchase (through options, warrants, or
    other means) 50% or more of the outstanding shares of our company?
  • Do
    any of our investors control a majority of our board of directors?
  • Do
    any investors have the right to prevent a quorum or otherwise block action by
    the board of directors or shareholders?

Where your
company has to answer any of these questions in the affirmative, you will
likely need to add in the number of employees and annual receipts of your
investor (and the investors affiliates) to determine your eligibility as a
“small business concern”. A notable exception to this rule applies where a
company is classified under NAICS Sector 72 (food services, etc.). Additionally,
there is some speculation that the Treasury will release guidance simplifying
the guidelines for PPP eligibility, and potentially loosening the affiliation
rules for these extraordinary circumstances such that a small business that is
not controlled by a single outside shareholder will be eligible. Accordingly,
if you fall into this camp, please stay posted.

Where your
company can answer all of these questions in the negative, and where your
company meets the prior referenced size qualifications, you company will
qualify as a “small business concern” eligible for the PPP and other SBA
Section 7(a) loans. In this case, we implore you to reach out to your SBA
approved lender as soon as possible to submit your loan application.

Please
acknowledge that this write-up is meant for informational purposes only and is
not intended as legal advice.

By David
H. Pierce

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Digital favorites

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Should My Company Have a Privacy Shield Certification?

We are now two months into Europe’s new General Data Protection Regulation (“GDPR”), which extends the jurisdictional scope of European data protection law. As a result, GDPR applies extraterritorially to any organization that can be reached by an EU citizen. GDPR imposes harsher data protection requirements that give way to substantial penalties for non-compliance, which include administrative fines up to 4% of annual worldwide revenue. These steep fines have forced businesses across the U.S. (and the world) to reconsider their EU business strategy. Additionally, many companies are compelled by their clients or partners to comply with GDPR. Fortunately, and for the time being, there is an alternative regulatory mechanism that allows U.S. businesses to conform to EU data transfer laws.

The EU-U.S. and Swiss-U.S. Privacy Shield

In July 2016, the U.S. Department of Commerce and the European Commission approved the EU-U.S. Privacy Shield Framework while the Swiss Administration approved the Swiss-U.S. Privacy Shield in July 2017 (collectively, the “Privacy Shield”). The Privacy Shield, which serves as an adequacy decision under GDPR, is a data protection framework that allows companies on both sides of the Atlantic to transfer personal data from the EU to the U.S. The Privacy Shield replaced the U.S.-EU Safe Harbor Framework (the “Safe Harbor”) after the Safe Harbor was struck down by the Court of Justice of the European Union in October 2015. The Privacy Shield’s purpose is to bridge the different privacy protections afforded to U.S. and EU citizens. The Privacy Shield Principles include the data subject’s right to be informed; limitations on the use of the data subject’s data for different purposes; obligations to secure the data subject’s data; obligations to protect the data subject’s data if transferred to another company; the data subject’s right to access and correct their data; the data subject’s right to file a complaint and obtain a remedy; and redress in case of access by U.S. public authorities. Companies may undertake Self-Certification (often with the assistance of counsel) and the U.S. Department of Commerce is in charge of issuing Self-Certification determinations. U.S. Participants in the Privacy Shield are subject to the Federal Trade Commission’s broad jurisdiction.

Should I Get Self-Certified?

In light of the stricter regulation of European data transfers to the U.S., not complying with the necessary data protection laws may impact your ability to adequately cater to European customers, or to partner with or provide services to other US entities that are subject to GDPR. Accordingly, for many businesses, there are significant motivators to comply.

A company may be eligible to certify to the Privacy Shield if it transfers EU or Swiss personal data to the U.S., or receives or accesses EU or Swiss personal data. At the core, seeking Privacy Shield Self-Certification is a business decision requiring an understanding of how and at what frequency your business interacts with EU data.

While thousands of companies are enjoying the benefits of the Privacy Shield, it is worth noting that on July 5, 2018, the members of European Parliament called for a suspension of the Privacy Shield unless the U.S. fully complies with GDPR by September. All eyes will be on the European Commission as the September Privacy Shield annual review approaches.

Compliance is a moving target. The regulatory framework for privacy worldwide is evolving. Numerous government and consumer agencies, as well as public advocacy groups, have called for new regulation coupled with changes in industry practices. Further, new laws and regulations will be adopted in and around the United States, as most recently seen in California, and existing laws and regulations may be interpreted in new ways. Navigating the data privacy regulatory landscape is complex and requires continual monitoring.

Contact the Authors at [email protected] and [email protected] to discuss these and other issued related to data privacy, intellectual property, and technology law.

 

Request a Free Consultation

 

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Should a New Company File Multiple Patents or One Big Patent?

A client recently asked: I have a few inventions and I’m wondering if I can save money by combining them into a single provisional patent application?

Your Patent Portfolio should always be developed with your business goals in mind. I passed the question back to the client and asked, what do you intend to do with these three innovations? If licensing is a potential goal, then combining all into one filing should be avoided.

In general, if you can afford to - file multiple applications. There are far more advantages that, depending on your financial situation, may outweigh the cost savings of filing a single provisional. The list of the advantages are referenced in Part 2/3 of my three part article about multiple patent applications.

If you are a cash-strapped start-up, having a master single filing serves a considerable purpose. A single ‘master’ provisional may also be split up into multiple non-provisional filings down the road (and you would be required to do so by the USPTO). There is, however, a distinct risk in combining filings: the subject matter of all three inventions enters the public domain at the same time. First - consider that provisional applications do not become publicly available until you convert the filing to a non-provisional filing. If you never convert to a non-provisional and let the provisional expire (12 months after filing), it will always be kept in confidence by the USPTO. This leads us to the risk: If you combined three inventions in a single provisional filing, and only choose to pursue one or two of those three in a non-provisional conversion, the third invention will still enter the public domain without any claim to protection (since it was mixed in with the other inventions in the single provisional filing). Thus, you’ll be out of luck if you decide to keep the subject matter of any one of the three inventions a ‘trade secret’ at any point in time after the ‘master’ provisional filing.

If you are interested in more detail related to your situation it is best to speak with an attorney.

Request a Free Consultation

Yuri Eliezer heads the intellectual property practice group at Founders Legal. As an entrepreneur who saw the importance of early-stage patent protection, Yuri founded SmartUp®. Clients he has served include Microsoft, Cisco, Cox, AT&T, General Electric, the Georgia Institute of Technology, and Coca-Cola.

yuri

 

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Why Is a Provisional Patent Important for Your Invention?

A provisional patent application is a 12-month place-holder for a utility patent. The USPTO allows you to label your invention as Patent-Pending during this 12 month period. If a utility patent is not filed within the 12-month period, your spot in line is lost! Once the utility patent is filed, your utility patent filing claims the patent priority date as the provisional filing date. The patent priority date is the date from which you have a legal claim as the first inventor to have invented the subject matter of your patent application. As such, the patent priority date is an important factor for the examination process through which the utility patent undergoes.

The provisional patent application never gets examined for patentability, it only serves as a place holder for examination – however, the patent examiner will carefully scrutinize the content of the provisional patent application during the non-provisional patent application process. So it’s important to have your provisional patent application compliant with all applicable laws in order for it to preserve the patent-priority claim – otherwise, the Examiner can withdraw the patent priority claim and inventors are put in a bad spot, thinking they were patent-pending during the provisional patent process when in fact their patent pending status gets withdrawn upon the examination of the non-provisional utility patent application!

So, a provisional saves your spot in line for a utility patent. It is especially important in our first-to-file patent system. It is especially important as you market and as you share your invention/idea with engineers, developers, or those with deeper pockets than you! It always preserves your claim to the invention as those engineers/developers further improve on the invention.

If you are interested in more detail related to your situation it is best to speak with an attorney.

Request a Free Consultation

Yuri Eliezer heads the intellectual property practice group at Founders Legal. As an entrepreneur who saw the importance of early-stage patent protection, Yuri founded SmartUp®. Clients he has served include Microsoft, Cisco, Cox, AT&T, General Electric, Georgia Institute of Technology, and Coca-Cola.

yuri

 

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How Do I Add Details to My Invention After I Filed for a Patent?

I’ve added additional details to my invention/idea but I’ve already filed for patent. Can I modify my patent application after I’ve already filed it?

A very common question indeed. The break down is quite easy to understand when following this logic:

ADDING NEW SUBJECT MATTER

  1. Any Patent-Pending Application, whether it is Provisional or Non-Provisional, cannot be modified to include additional details (referred to as “New Subject Matter”) after its filing date.
  2. To add New Subject Matter to any pending application (referred to as the “priority application”), an additional patent application for the New Subject Matter must be filed before the priority application is granted or expires.
  3. The additional patent application is known as a CIP Application.

CIP EXAMINATION

  1. The CIP Application, in its documentation, establishes a priority claim to the previously pending patent application to which the new subject matter relates.
  2. The CIP Application receives a separate patent examination from the priority application.
  3. During Examination, New Subject Matter receives a patent priority date even with the date of CIP filing while the Subject Matter Included in the Priority Application retains its earlier patent priority date.

CIP TIMING

  1. Therefore, the timing of the CIP filing is important. It should occur as soon as the new subject matter is conceived and the value of the subject matter is confirmed for patent filing.
  2. The CIP Application can be filed as either provisional (informally) or non-provisional application. However, filing a CIP as a provisional is only recommended if its priority application is also a provisional AND the applicant is still not prepared to convert the provisional patent application to a non-provisional patent application.

If you are interested in more detail related to your situation it is best to speak with an attorney.

Request a Free Consultation

Yuri Eliezer heads the intellectual property practice group at Founders Legal. As an entrepreneur who saw the importance of early-stage patent protection, Yuri founded SmartUp®. Clients he has served include Microsoft, Cisco, Cox, AT&T, General Electric, the Georgia Institute of Technology, and Coca-Cola.

yuri

 

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What Does International Patent Protection Mean?

A question I get asked rather often – what does International Patent Protection mean? Then, after I recommend the filing of an international patent application (known as a PCT application, but will get to that later), my clients frequently ask: “wait, I have to file for an international patent application and it’s not even a patent recognized around the world?” Yep, that’s right.

There is no single “Patent” that is recognized around the world. Rather, 148 countries (listed here: http://www.wipo.int/export/sites/www/pct/en/list_states.pdf) have entered into a Patent Cooperation Treaty (known as the PCT). Under the PCT, each country must recognize a single international patent application (known the PCT application) and its patent priority date.

A PCT application may be filed up to 12 months after a national application has been filed in any one of the 148 countries that are members to the PCT. This means within 12 months of filing either a US provisional patent application or non-provisional utility patent application, you may decide to step up and take your patent protection to the international level.

Prior to the PCT, if you were interested in international protection, you would have to file a patent application in each country all within 12 months of your national patent filing date under the Paris Convention for the Protection of Industrial Property (established back in 1883)! This would be rather difficult and expensive experience.

With the PCT, a patent applicant need only file a single PCT application within that same 12 month period. This single application is examined by a recognized international authority which issues a ‘patentability opinion’. This patentability opinion, however, does not serve as a granted patent or a patent right. The Applicant has the opportunity to persuade the international authority of the patentability opinion if the opinion is not favorable.

In order to convert the patentability opinion to an actual patent, the PCT applicant may take the opinion and present it to any of the patent offices of the 148 countries that recognize the PCT applicant. This must be done within 30 months of the applicant’s patent priority date (the date of the earliest national filing, if there was one).

If the patentability opinion issued by the international authority is favorable, the national patent office frequently adopts the opinion (subject to some local, national laws and exceptions) and grants a patent within its jurisdiction. Even if the patentability opinion issued by the international authority wasn’t favorable, the applicant may still submit it to the national patent office and attempt to persuade the national patent examiner of the application’s patentability on the national level.

If you’ve understood my explanation correctly – you’ll see that there is no such thing as an international patent. Rather, there is an internationally recognized patent examination process used to streamline the prosecution of patent rights when the patent applicant is seeking patent protection in many countries.

If you are interested in more detail related to your situation it is best to speak with an attorney.

Request a Free Consultation

Yuri Eliezer heads the intellectual property practice group at Founders Legal. As an entrepreneur who saw the importance of early-stage patent protection, Yuri founded SmartUp®. Clients he has served include Microsoft, Cisco, Cox, AT&T, General Electric, the Georgia Institute of Technology, and Coca-Cola.

yuri

 

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Co-Founder Divorce: Why It’s a Good Idea to Create a Prenup for Your Young Company

Founder disputes are one of the most common risks to a young company, but it doesn’t have to be that way. Whether it is a disagreement over a core issue or the waning interest some experience along the startup road, most companies face turnover in their early days, with key players rotating in and out.

While we know, considering the examples of Facebook and Snapchat, that companies can still go on to greatness despite an early founder breakup, that doesn’t detract from the problems that arise when founders leave while holding onto an equity stake.

Under these circumstances, ex-founders can create problems in one of two ways – either they can insist on maintaining influence in a company when they are no longer wanted or they can surface years down the road and claim a right to a company’s success that they had no part in creating. Either scenario is obviously problematic. But there are a few things companies can do to protect against the type of consequences that can arise due to a founder split:

  1. Don’t Rely On A Handshake: Step one may seem obvious, but it is surprising how often founders ignore the paperwork and barrel down the road in their haste to create the next big thing. The cost of engaging a lawyer to prepare an Operating Agreement for your LLC (or Shareholder Agreement for your corporation) is easily justified considering that you will have a mechanism in place to address issues like key voting decisions, how new members are admitted, or how distributions are divided. Even the task of sitting down with your team members and talking through some of these issues can be critically revealing and bring conflicts to the surface that are better to get out of the way sooner than later.
  2. Company Buy-Back: Especially for early-stage companies, consider a provision in your governing document that allows the company to buy out a member/shareholder upon majority or super-majority vote. This way, if one of the early members is not working out, there is an agreed upon mechanism to facilitate the breakup, with important issues such as the purchase price owed to the exiting member established by a pre-existing formula.
  3. Vesting And Reverse Vesting: Another protection for co-founders is to agree to a vesting schedule pursuant to which founder equity will be granted over time or upon the completion of certain milestones. For example, a founder is granted 16,000 units but she only receives them on quarterly intervals over 4 years, meaning she gets 1,000 shares a quarter. In that way, founders will not fully “own” their equity stake until they stay involved with the company over a certain period of time. A similar concept is known as “reverse vesting,” where a founder is granted his or her total equity allotment upfront, but the company is entitled to repurchase shares if the founder leaves.

If you are interested in more detail related to your situation it is best to speak with an attorney.

Request a Free Consultation

Megan K. Johnson is a business lawyer with over 7 years of experience. She helped champion securities crowdfunding at the local level and worked with the first company to successfully close an equity crowdfunding involving everyday investors. She is a partner at Founders Legal and can be reached at [email protected]

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Can I Get Trademark Protection For A Board Game?

Most savvy entrepreneurs know to apply for trademarks on their product names, company names, logos and slogans. Of those, inventors who make board games often go straight to patent filings and forget about the trademark analysis, as explored in my article here: This article considers a sub-category of trademark law that allows for some interesting board game protection: it’s sometimes known as Trade Dress protection.

Trade Dress protection serves to protect products that, on their face, remind consumers of the entity that provides those products. Take, for instance, a Coca-Cola bottle. Even if the trademarks Coca-Cola name didn’t appear on the bottle, the appearance of the bottle itself instantly reminds consumers of the brand the bottle belongs to. -OR- How about this car

You don’t need an emblem or a name tag to recognize this design as the legendary Lamborghini.

Trademark law is meant to protect a company’s branding. Of times, the product design goes hand-in-hand with the company’s brand. In those instances, where the product design can be shown to remind consumers of the origin of the product itself – Trade Dress protection can be granted.

So, what does it mean for your board game? It means that, even if you can’t get a patent on your board game, getting a trademark on the board design can still be an option. And, unlike patents that expire within certain periods of time (20 years of utility patents and 14 years for design patents), a trademark lasts for as long as the company uses the mark (which, in this case, is the design itself).

Here is a good example of a board game that has been granted Trade Dress protection.

In some cases, you can even file trade dress on particular “Hexagons” of your board:

IN JAIL JUST VISITING

FREE PARKING

GO TO JAIL

If you are interested in more detail related to your situation it is best to speak with an attorney.

Request a Free Consultation

Yuri Eliezer heads the intellectual property practice group at Founders Legal. As an entrepreneur who saw the importance of early-stage patent protection, Yuri founded SmartUp®. Clients he has served include Microsoft, Cisco, Cox, AT&T, General Electric, the Georgia Institute of Technology, and Coca-Cola.

yuri

 

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Are Templates And Forms Protected Under Copyright Law?

Here is a common question I get from clients: I invented a new type of diagram design related to social sciences. How can I legally prevent anyone else from teaching and displaying my diagram? Let’s say I was the first to invent the Venn diagram. Can I obtain a copyright or a patent prevent anyone from using or displaying it?

You are right to gather that the law surrounding copyrights of diagrams is difficult to generalize. Typically, a “template” or “fill-in-the-blank” diagram is not copyrightable. So a “Venn Diagram” man not be protected by copyright law, since it can be regarded to as a ‘template’.

When a completed diagram (e.g., on that is ‘filled-in’) is copied, as a whole, without much ‘transformation’, it may be considered a copyright infringement. The extent of transformation required relative to the original work is typically assessed on a case-by-case basis.

In general, blank-forms or templates are not considered a work of authorship sufficient for copyright protection. This is because such templates/forms reflect general IDEAS. Ideas are not copyrightable. Rather the Expression of the Idea is copyrightable. Your words/illustrations/creations used to bring an Idea to life are considered the copyrightable expression. This is why, in general, blank forms are not protectable under copyright law whereas completed-filled-in forms would be protectable.

If you are interested in more detail related to your situation it is best to speak with an attorney.

Request a Free Consultation

Yuri Eliezer heads the intellectual property practice group at Founders Legal. As an entrepreneur who saw the importance of early-stage patent protection, Yuri founded SmartUp®. Clients he has served include Microsoft, Cisco, Cox, AT&T, General Electric, the Georgia Institute of Technology, and Coca-Cola.

yuri

 

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Can I Infringe on a Patent Application That Is Currently Pending?

Clients often present to me some ‘patents’ they found through Google and ask me if they infringe the subject matter of the patent. This is a very loaded question and difficult to answer. But before even getting to the answer, it’s important to understand what the “patent” document cited by the client actually is.

First, it is important to distinguish a granted patent from a patent application publication. A granted patent entitles the patent owner 20 years of rights to exclude others from making, using, and selling the patent invention (as listed in the patent claims portion of the publication). A patent application publication (which is what you listed) only discloses to the public that the patent applicant has applied for a patent. It does not mean that a patent has been granted.

Both patent applications and granted patents are published. This means that a single patent filing will publish twice if it passes examination: first prior to commencement of the patent examination and again after examination has determined that the patent application is to be a granted patent. The first publication is mean to put the public on notice of a patent-pending examination, while the second publication is meant to put the public on notice of an actual granted patent.

Almost every non-provisional patent application that is filed to the USPTO gets published 18 months after its earliest filing date (whether the filing date of a related provisional or the filing date of the non-provisional patent filing itself). Sometimes, and for strategic reasons, the patent application may request that the patent application remain unpublished unless a patent is granted (in which case publication occurs post patent-grant).

Until a patent is granted, it is hard to determine what activity would constitute an infringement – simply because we do not know 1) whether the patent application will be issued as a patent by the patent examiner; and 2) what scope of patent protection will ultimately be granted to the patent application. This is an important distinction as the subject matter a patent applicant hopes to obtain patent (and as applied for in the published patent application) usually differs from the subject matter that is actually granted patent (due to patent examination requirements).

So, if you are trying to determine if you would be potentially infringing a patent application - It is important you monitor this application, and any other related application, to see what might issue to patent. Until then, you may act at your own discretion, knowing that there is a risk of patent infringement if the patent is to be granted. Until a patent is granted, infringement cannot occur.

If you are interested in more detail related to your situation it is best to speak with an attorney.

Request a Free Consultation

Yuri Eliezer heads the intellectual property practice group at Founders Legal. As an entrepreneur who saw the importance of early-stage patent protection, Yuri founded SmartUp®. Clients he has served include Microsoft, Cisco, Cox, AT&T, General Electric, the Georgia Institute of Technology, and Coca-Cola.

yuri

 

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If I Withdrew My Patent Litigation Claim, Can I Re-File It Later on?

In general, there is no statute of limitations on a claim for patent infringement. However, the Patent Act specifies a time limit on monetary relief for patent infringement claims - damages are available only for infringement that occurs within the six years prior to the filing of the complaint. In general, a voluntary dismissal (unless it’s the second such dismissal associated with that particular claim) just serves to wipe the slate clean - it is as if the suit was never filed. In that sense, it does not serve to toll any limitation period.

In the event the suit has been dismissed twice, the claim is most likely barred by res judicata as the second voluntary dismissal of an action operates as a dismissal with prejudice.

One other issue to point out on the topic of time limitations associated with patent infringement claims, while there is no formal statute of limitations, a defendant can still assert the affirmative defense of laches to prevent a patent holder from pursuing a claim, asserting that the delay in bringing suit is unreasonable, and the defendant will suffer material prejudice due to the delay. There is no formal time for the application of laches - it just depends on the situation.

If you are interested in more detail related to your situation it is best to speak with an attorney.

Request a Free Consultation

Megan K. Johnson is a business lawyer with over 7 years of experience. She helped champion securities crowdfunding at the local level and worked with the first company to successfully close an equity crowdfunding involving everyday investors. She is a partner at Founders Legal and can be reached at [email protected]

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Intellectual Property 102 - Identifying, Securing, Capitalizing, and Early Stage Enforcement

Legal mistakes can doom even the best startup concepts and founding teams. It is important to know who owns the IP, the proper timing for registration, and how to enforce your legal rights. This presentation gives you a legal road map to successfully safeguard your product or idea.

If you are interested in more detail related to your situation it is best to speak with an attorney.

Request a Free Consultation

Yuri Eliezer heads the intellectual property practice group at Founders Legal. As an entrepreneur who saw the importance of early-stage patent protection, Yuri founded SmartUp®. Clients he has served include Microsoft, Cisco, Cox, AT&T, General Electric, the Georgia Institute of Technology, and Coca-Cola.

yuri

 

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How Long Does It Take to Register a Trademark?

The length of the U.S. Federal trademark registration process can vary. Once filed, an application is typically assigned to an Examining Attorney within about 3 months. The Examining Attorney will firstly review the application to make sure that the applied-for mark can be registered at all. The Examining Attorney will then review the selected classes and sub-classes in the application, make sure that the specimens are acceptable, and that ‘use’ of the mark is proper. Finally, the Examining Attorney performs a search to find possible conflicting marks – including those that look or sound substantially similar to the one in the application.

If the applied-for mark can be registered, no issues are found in the application itself, and if no conflicts are found, then the Examining Attorney will issue an ‘allowance’. An allowance simply means that the mark has passed the USPTO’s internal review, which is oftentimes the biggest hurdle for registration. It is not atypical for this process to take 1-4 months after the application is assigned to an Examining Attorney.

Once the mark is allowed, the application is published for opposition – a period of 30 days during which third parties can ‘oppose’ the mark, if they reasonably believe that registration of the mark in the application will harm them. If no third party opposes the application, then a registration is typically issued 1-2.5 months after that.

Therefore, a period of approximately 8 months from filing to registration is not unusual. There is a possibility that a registration may be granted within 6 or 7 months. It is also worth mentioning that a registration can require much more time (possibly years) if the Examining Attorney issues a refusal or if a third party files an opposition to the application.

If you are interested in more detail related to your situation it is best to speak with an attorney.

Request a Free Consultation

Andrei Tsygankov is the Co-Founder and COO of SmartUp® and a partner at Founders Legal (Bekiares Eliezer LLP). As an attorney, Andrei specializes in corporate, commercial, trademark, and international business matters.

andrei

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LLC or Corporation: What Is Best for Your Startup?

The most significant difference between an LLC and a Corporation is in a) structure and b) governance.

Generally speaking, the way a Corporation is structured and run is well-defined, with little room for variance. An LLC is structured and run by contract between the LLC and its owners (the Members), which makes it very fluid and adaptable.

A Corporation is very rigid – the way in which it is set up and run is defined by law and practice, so there is little room to change things. The benefit of a rigid structure is predictability – everyone involved (investors, lenders, advisors, employees etc.) knows exactly how a Corporation works. This rigid Corporate structure is also highly scalable.

An LLC, however, is a much newer type of entity, and it is designed to be very flexible. The state laws and rules that define LLCs are typically very broad – and purposefully so to allow for variation.

The LLC can be structured, governed and taxed exactly like a Corporation, but can be set up for the Members (owners) to run the LLC directly, without a board. The roles can be defined by contract (Operating Agreement) between the LLC and its Members.

The obvious benefit is that an LLC can be tailored to meet the exact needs of a specific business. There is however, a drawback: Since the baseline laws are broad, the governing documents must be very well done to avoid nasty surprises.

The most important document in an LLC’s toolbox is the Operating Agreement – which is the contract that defines how the company is run.

If you are interested in more detail related to your situation it is best to speak with an attorney.

Request a Free Consultation

Andrei Tsygankov is the Co-Founder and COO of SmartUp® and a partner at Founders Legal (Bekiares Eliezer LLP). As an attorney, Andrei specializes in corporate, commercial, trademark, and international business matters.

andrei

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Can You Add Another Person to Your Patent Application?

“If I filed for a provisional patent as the sole inventor, is it possible to add another inventor when filing for the nonprovisional patent if he makes a contribution to the invention?”

You may add additional inventors to your non-provisional application. The non-provisional must have at least one inventor in common with the provisional patent application.

It is important to understand, however, that the inventors listed must correspond to the subject matter stated in the patent claims, not the patent specification. An inventor is someone who contributed to the conception of a patent claim. Patent claims are not required provisional patent application, but they are required in the non-provisional… so you must carefully assess who may or may not be listed as an inventor in the non-provisional patent application.

In addition, if you are adding an inventor because the inventor contributed additional subject matter after the provisional patent filing – you must be careful. Adding new subject matter in the patent claims that was not covered in the provisional may cause the patent examiner to decline your priority claim to the provisional application. This is because the provisional patent application must at least anticipate the subject matter claimed in the non-provisional application.

As such, you must file a non-provisional patent application with the same subject matter as the provisional and then, you must file a continuation-in-part application to cover the new subject matter not covered by the provisional. This will enable you to preserve your priority claim to the provisional – else, you risk losing your claim!

I would strongly advise that you retain a licensed attorney for the non-provisional filing. I have not met an inventor who has obtained enforceable and defensible patent protection without the support of a licensed patent attorney. There is a high risk of abandoning your patent rights to the public domain.

If you are interested in more detail related to your situation it is best to speak with an attorney.

Request a Free Consultation

Yuri Eliezer heads the intellectual property practice group at Founders Legal. As an entrepreneur who saw the importance of early-stage patent protection, Yuri founded SmartUp®. Clients he has served include Microsoft, Cisco, Cox, AT&T, General Electric, the Georgia Institute of Technology, and Coca-Cola.

yuri

 

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