Article prepared by and republished courtesy of our colleagues in the Intellectual Property and Technology practice group of DLA Piper; originally published here:

President Barack Obama has announced a new executive and legislative initiative aimed at curbing patent infringement suits by “patent trolls,” who generate revenue through extortionate litigation, not real innovation.Continue Reading Obama Moves to Curb Patent Trolls

Interesting tax update courtesy of Bruce Thompson, a Senior Policy Advisor with DLA Piper.  He continues to see momentum for comprehensive tax reform and wrote the following summary of what that might mean for fund managers and partnerships:

“The Chairmen of the Tax Committees in the House and Senate—Rep. Dave Camp and Sen. Max Baucus—are committed to moving a major tax reform bill, and the House leadership has reserved HR 1 for the tax reform bill.Continue Reading Tax Reform Update: Impact on Private Equity, Hedge Funds, and Real Estate Partnerships

This article is appearing simultaneously on The Venture Alley and on Startup Law Blog

The below flowchart may be helpful to you in answering the question whether you qualify for the exemption for “venture capital funds” under Section 203(l) of the Investment Adviser’s Act of 1940 ( the “Advisers Act”), pursuant to the final rules promulgated by the SEC.1  In all cases you should consult with an attorney.  For more detailed information regarding the federal exemption, check here.  Note that the Washington State Department of Financial Institutions (DFI) has proposed rules that are going to require many fund managers to register with the State as investment advisors.  We plan to prepare a separate flowchart to help you understand those rules once they are finalized.Continue Reading “Venture Capital Fund” Flowchart for Exemption Under the Investment Advisers Act of 1940

As readers of this blog know, Washington State is proposing new rules that will require more fund managers to become registered investment advisers.  These rules were originally proposed in the second half of last year and, in response to preliminary comments, the Securities Division of the Washington State Department of Financial Institutions (DFI) proposed new rules for comment by May 21, 2013.  Quoting from the DFI’s Notice to Interested Parties dated March 27, 2013:

In August 2012, the Securities Division circulated an early draft of rule amendments to the interested parties list. We also conducted a small business economic impact survey. In response to comments received from interested persons, and in response to the results of the small business economic impact survey, the Securities Division made certain changes to the proposed rules compared to the earlier draft…

The Securities Law Committee of the Business Law Section of the Washington State Bar Association, representing attorneys practicing in this area throughout Washington State, submitted formal comments to the DFI’s request.  Their comment letter is included below.  Full disclosure, I’m not a member of the Committee, but they asked me to help them in drafting their formal response with respect to how the rules relate to private fund advisers.Continue Reading Comment Letter Response to Washington State’s Plans to Regulate More Fund Managers

This article is appearing simultaneously on The Venture Alley and on Startup Law Blog. Readers may feel free to re-post this content elsewhere as well.

The world is changing for venture funds and similar funds in Washington State, and not necessarily for the better.  It used to be the case that managers of venture or other private funds did not need to file anything with the SEC or state securities regulators (other than Forms D incident to their fundraisings).  Dodd-Frank changed all that – but provided that investment advisers solely to venture capital or other small private funds may be exempt (based on Congress’ belief that these funds posed no systemic risk to the nationwide financial system).

There are now SEC regulations that define the new exemptions for the managers of venture funds (discussed in more detail here) and for the managers of private funds with less than $150M management (discussed in more detail here).  Even if exempt, however, managers of venture funds and private funds with AUM of less than $150M now must publicly report certain high-level information, which becomes publicly available.  For example, here is the exempt reporting adviser Form ADV for Union Square Ventures.

These rules settled out a few years ago.  Right now, the bigger issue is with state regulators.  State regulatory regimes need to be updated in order to conform to Dodd-Frank.  The North American Securities Administrators Association (NASAA) created model rules for state regulators to follow, which adopted the same venture capital and private fund exemptions.  Many states, including California, have now adopted the NASAA model rules.Continue Reading Washington State to Regulate Fund Managers

Choosing the best type of entity for a company can be a challenge.  C corporations are the norm for most emerging growth businesses, particularly those raising money from investors.  However, LLCs are becoming more widespread, even for operating businesses.  Founders may want to have the tax benefits of LLCs, which are not subject to a company-level tax (as is the case with C corporations) and may enable more tax deductions.

This potential for tax savings does not, however, come without a cost.  LLCs tend to be more complicated and expensive to setup and manage, particularly for operating businesses.  LLCs can become even more tricky for businesses that want to issue equity to incentivize employees or other service providers.  This article addresses some of the ways LLCs can use equity to incentivize service providers, and the implications of each option (pardon the pun).Continue Reading Options for Issuing Employee Equity in LLCs

Article prepared by and republished courtesy of Ed Batts of DLA Piper; originally published here.

Negotiation fatigue is an age-old problem in completing any contract – and often, whether fair or not, the further back in the document the clause is positioned, the greater the fatigue.

A choice-of-law provision, which decides which jurisdiction’s law shall govern the contract, is almost always near the last clause in a contract. How often have dueling sets of lawyers (and more frequently, frazzled and puzzled clients who simply want a contract done before the end of the quarter) exhausted themselves on other provisions, only to trade away choice of law for a perceived gain elsewhere in the document?

Delaware Vice Chancellor Donald Parson’s February 22 decision in Meso Scale Diagnostics vs. Roche Diagnostics (Delaware C.A. No. 5589-VCP) highlights how important this seemingly mundane provision can be years later in a change-of-control situation. It also highlights a potentially critical divergence between Delaware and California state law.Continue Reading Delaware affirms that reverse triangular mergers do not trigger contract clauses generally prohibiting assignment

On March 12, 2013, the Federal Trade Commission issued its long-awaited update to its 2000 guidance on disclosures in online marketing and advertising.

The guidance, entitled .com Disclosures: How to Make Effective Disclosures in Digital Advertising, not only reaffirms many of the FTC’s longstanding principles for effective online disclosures, but also provides guidance as to how those principles will be applied to new technologies that have emerged since 2000, such as mobile phones and tablets with more limited space, banner ads and multimedia messaging, and social media platforms such as Facebook and Twitter.

The FTC has broad powers under Section 5 of the FTC Act to protect consumers from “unfair and deceptive acts or practices.”i Under the FTC Act, the FTC has long required effective disclosures for claims that would otherwise be deceptive or misleading without them. .com Disclosures is designed to help businesses comply with the FTC Act by providing examples and direction on how to avoid unfair and deceptive practices through appropriate disclosures in their online and mobile marketing.ii

Although the new guidelines do not carry the force of law, they provide insight into how the FTC will apply the FTC Act to online and mobile marketing disclosures. Advertisers and marketers are well advised to review and potentially modify their existing and future online advertising to ensure they are complaint with these guidelines.Continue Reading FTC Issues New Guidance for Advertising and Marketing in the Online and Mobile World

Article prepared by and republished courtesy of Alan Granwell and Witold Jurewicz of DLA Piper; originally published here

The US Treasury Department has issued the final FATCA regulations.

Although simplified and clarified, the Regulations are lengthy (544 pages) and more than 150 pages longer than the Proposed Regulations.

In drafting the Regulations, the US Treasury Department adopted a targeted, risk-based approach to implement FATCA by balancing policy considerations and administrative burdens and more fully incorporating local AML/KYC documentation practices. The Regulations detail the operational aspects of implementing FATCA – to reduce administrative burdens and clarify the interaction of the unilateral regulatory regime with the bilateral intergovernmental (IGA) regime.

Of particular importance is that the Regulations fill in many of the gaps that foreign financial institutions (FFIs) had as to how to implement FATCA. Nevertheless, FFIs, particularly global financial institutions, will have continuing challenges implementing the rules under the Regulations and IGAs within the current timelines among geographies, lines of business, clients and products.Continue Reading The final FATCA Regulations: Highlights

Asher Headshot - Resized.pngCONTRIBUTED BY
Asher Bearman



The Startup Company Starter Kit, available in our “Forms” section in the right hand column, provides forms to do any of the following: 

  • Create an offer letter for a prospective employee (state specific and will address confidentiality obligations)
  • Create an agreement that an existing or new employee will sign that protects and preserves the employer’s proprietary information and inventions (often called PIAAs, these are critical for employees involved with company IP)
  • Disclose confidential information TO someone else (for disclosures BY the company) 

Continue Reading Startup Company Form Agreements