The Venture Alley - A blog about business and legal issues important to entrepreneurs, startups, venture capitalists and angel investors.

CONTRIBUTED BY
Asher Bearman
asher.bearman@dlapiper.com

Startup companies often have to protect their intellectual property (IP) on a budget.  Here are some fundamental legal protections all startups should have:

1. Employee Agreements.  All employees should sign non-disclosure agreements obligating them to keep the company’s information confidential.  In addition, all employees.  Most venture capitalists will require prior invention assignment agreements (PIAAs) from all key employees prior to investing in the business.  Forms for this are available in our free Starter Kit.
2. Consulting Agreements.  Sets the terms of consulting relationship and obligates the consultant to protect the confidentiality of the company’s information.  This agreement generally will also obligate consultants to confirm their consulting relationship (understanding that this may not control if the relationship is substantially that of an employee); care should be taken in properly categorizing employees vs. independent contractors.  Forms for this are available in our free Starter Kit.
3. Nondisclosure Agreements.  Before providing or accepting confidential information from others, you should enter into a simple confidentiality agreement to make sure that the information will be kept confidential.  Forms for this are available in our free Starter Kit.  Internally, a company should restrict access to confidential information to those with a need to have it.
4. Company Name.  Run name searches to check the availability of the company name in the state of incorporation and other states where the company will do business.  Run a trademark search on the name and reserve the appropriate domain names.
5. Educate.  Management should educate employees on the need for IP protection and encourage disclosure of any significant IP developments.

CONTRIBUTED BY
Andrew Ledbetter
andrew.ledbetter@dlapiper.com

The SEC has made official what we blogged about yesterday:  Late yesterday it removed from its agenda for today’s meeting the consideration of general solicitation in Rule 506 and Rule 144A offerings.  The SEC also released a separate meeting notice for August 29, 2012, which states it will consider whether to propose rules to eliminate the prohibition against general solicitation and general advertising in securities offerings conducted pursuant to Rule 506 and Rule 144A.

Since the SEC’s action would be to propose rules, it will follow the typical rulemaking process of accepting comments, considering them, and thereafter adopting final rules.  While the fact that the SEC has been soliciting and receiving comments on this issue might facilitate this process, it takes several months.  Some predictions are that final rules will not be in place until 2013.

We will keep you posted.

CONTRIBUTED BY
Asher Bearman
asher.bearman@dlapiper.com

Many of us are anxiously awaiting the SEC's implementation of the rules that will allow funds and companies to engage in general solicitations as part of their fundraising efforts.  The SEC was directed to implement those rules within 90 days of the JOBS Act's passage.  Although not much of a surprise, the SEC is now confirming that it will not be able to meet the 90 day deadline.

In a hearing on June 28, 2012 before the House Oversight TARP and Financial Services Subcommittee, SEC Chairman Mary Schapiro provided an update on the Staff's progress in drafting proposed rules lifting the ban on general solicitation and implementing the crowdfunding exemption under the JOBS Act. 

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CONTRIBUTED BY
Megan Muir
megan.muir@dlapiper.com 

Join us for a complimentary webinar regarding the Jumpstart Our Business Startups Act (the "JOBS Act").  This one-hour webinar for venture capital investors, private equity firms, startup entrepreneurs, late stage companies and management of portfolio companies will cover the following provisions of the Act:

The IPO “on-ramp”

• Reduced initial and ongoing reporting requirements for “emerging growth companies”
• Confidentiality of SEC registration statements
• Easing of restrictions on issuance of research reports by participating underwriters

Private offerings

• Relaxation of prohibition on general solicitation in private offerings to accredited investors
• Increased stockholder thresholds before public company reporting requirements are triggered

New small offerings regime (up to $50 million)

Which changes take effect immediately

Presenters

• Christopher C. Paci, Chair, Capital Markets Group – New York
• Peter M. Astiz, Global Co-Chair, Technology Sector – Silicon Valley
• Andrew P. Gilbert, Co-Managing Partner – Florham Park, New Jersey
• Megan L. Muir, Chair – Seattle Corporate and Securities Group

Register for the webinar here.

CONTRIBUTED BY
Megan Muir
megan.muir@dlapiper.com 

Yesterday (March 22), the Senate passed the Jumpstart Our Business Startups Act (JOBS Act), which could make it easier for startups and other small businesses to raise capital.  The bill now goes back to the House, which passed a similar bill two weeks ago, for the reconciliation process, which may occur as early as next week.  Some of the proposed changes to federal securities laws in the bill would:

• Exempt, for up to five years, “emerging growth companies” (those with under $1 billion in annual gross revenues) from certain financial reporting obligations, auditor attestation of internal controls, and requirements of the Dodd-Frank Act, allowing such companies to conduct an IPO and become a public reporting company at a lower cost, with the expectation that more companies will be willing and able to go public;
• Permit general solicitation and advertising in private offerings under Regulation D to “accredited investors”, with the goal of allowing emerging companies to locate investors more easily;
• Reduce (or postpone) public disclosure requirements for private companies, by allowing up to 2,000 shareholders (instead of the current limit of 500) before requiring registration with the SEC, with the goal of allowing private companies to go public when they desire rather than being forced to do so when they exceed the existing 500 shareholder limit;
• Increase to $50 million from $5 million the amount by which securities may be offered/sold in so-called Regulation A offerings; and
• Exempt crowdfunding (use of the Internet to obtain small investment amounts) for equity investments conducted by certain intermediaries registered with the SEC, with the intent to allow small businesses to access more investors.