Optima Law Group Blog

CU New Venture Challenge R&D Track

The University of Colorado Boulder held its 9th New Venture Challenge (NVC) R&D Track Finals competition recently! 

The New Venture Challenge is a competition that gives aspiring entrepreneurs within the CU Boulder campus including students, faculty and staff the unique opportunity to work with business mentors in the area to develop and bring their innovative ideas to reality! Competitors then go head-to-head with other creative teams for the winning spot to receive awards, cash prizes and vouchers.

Optima Law Group sponsored the $5000 Grand Prize for the winner of the competition and Optima Law Group’s own Tom Jurgensen, served as both a judge and mentor for this year’s NVC. The competition featured amazing entrepreneurs and companies in all R&D related disciplines.

CONGRATULATIONS to Reform for winning this track of the competition. Now onto the finals for all tracks held this week on April 6, 2017.

 

For more information on participation, sponsorship and mentorship please visit:

http://www.colorado.edu/nvc/

Why You Should Not Wait to File Your Trademark Application

There are so many benefits to registering your trademark. The ability to protect your brand, distinguish your goods and/or services from potential competitors, and to build an increasingly valuable asset makes it a wonder why companies would ever risk waiting to file a trademark application. The costs to obtain a registered trademark are significantly less than the costs to obtain a patent, but they are equally important. Furthermore, the detriment of having to rebrand and pay damages for inadvertently infringing on another’s trademark rights far exceeds the monetary cost of trademark registration. Obtaining trademark protection should be looked at as a preventative measure to safeguard your company’s prospective success in addition to the benefits listed below. Being proactive early will help ensure your brand is not vulnerable and left without a leg to stand on should the use of your mark be contested.

 

1.      Receive immediate significant benefits.

  • When you register your trademark, you are automatically entitled to the legal presumption that you are the owner of the mark and have the exclusive right to use the mark. It notifies the public of your trademark’s ownership and lists the mark in the USPTO’s database which helps prevent a company picking a trademark too similar to yours. It prevents the importation of counterfeit foreign goods - U. S. customs will not accept any imported goods that may infringe upon your trademark. A registered trademark gives you the right to bring legal action concerning your mark in federal court. You can use your U. S. registered trademark as a basis for applying for registration in other countries. Finally, you can use the ® symbol to identify your mark as a federally registered trademark with the USPTO.

 

2.      Be the first one to the finish line.

  • Luckily the U. S. adheres to a “use-based” system, whereas most other countries follow a “first-to-file” system. With that said, If you do not register your mark and someone else comes along, who has been using an identical or similarly registered trademark in commerce prior to you, you could not only have to stop using your trademark, making your inventory, marketing materials, domain names worthless, and losing goodwill and online presence associated with your trademark, and you could be sued and ordered to pay pecuniary damages for infringing on the registered owner’s trademark rights. This could have all been avoided by way of a trademark search for conflicting or similar marks, had you first sought to register your trademark at the beginning.

 

3.      Increase value to your company.

  • The longer a trademark is registered the stronger it becomes and the less vulnerable it becomes to attacks from a third party claiming rights to that trademark or a third party claiming that your trademark infringes upon their trademark rights. Having a registered trademark increases the value of your company, regardless. Having a very strong trademark due to it being registered for many years makes it even more valuable to, for example, a potential acquirer of your company.  In fact, well known trademarks (Google, Apple, Facebook, Coca-Cola etc.) are easily worth in the multiple tens of billions of dollars.

 

4.      Squatters.

  • U. S. trademarks only provide protection in the United States, so the risks of waiting to file your trademark application for registration is not exclusive to the country you do business in, especially if you ever plan to expand and do business overseas. “Bad-faith trademark filing” or “trademark squatting” is a party that purposely and actively seeks registered trademarks in a country and then turns around and registers that trademark in one or more other countries where the trademark has not yet been registered, giving them ownership and the exclusive rights to use that trademark. The intention is to get monetary compensation from the true trademark owner when they expand to that market.

 

Being proactive and vigilant is key to the protection and branding of your company. Waiting to file a trademark application not only puts your company at risk, but it is a missed opportunity to create value and stability.  

Let us help you with your trademark needs so that you can start enjoying the benefits of a registered trademark and avoid the dangers of waiting too long to file your trademark application.

We would love to hear from you.  Please contact us at 858-964-4697 or info@optimalawgroup.com.

 

2016 SEC Crackdown

2016 proved to be a busy year for the U.S. Securities and Exchange Commission (SEC) – breaking records for filed enforcement actions in many areas and allocating the most money to whistleblowers in a single year. Accordingly, it is more important than ever to ensure compliance with applicable securities laws when raising capital and engaging in other securities related transactions. 
 
The results can be attributed to former SEC Chair Mary Jo White’s promise to make big companies and executives as well as minor violators accountable for illegal actions, coupled with new data analytics implemented in 2016 used to uncover fraud.
 
 
2016 was also a year of firsts for the SEC as the following violations were never charged before then:
 
a firm solely for failing to file Suspicious Activity Reports when appropriate 
an audit firm for auditor independence failures predicated on close personal relationships with audit clients 
municipal advisors for violating the fiduciary duty for municipal advisors created by the 2010 Dodd-Frank Act and the municipal advisor antifraud provisions of the Dodd-Frank Act
a private equity adviser for acting as an unregistered broker; and an issuer of retail structured notes for misstatements and omissions
 
Other areas the SEC focused on in 2016 include:
 
Combating Financial Fraud and Enhancing Issuer Disclosure
Holding Gatekeepers Accountable
Ensuring Fairness Among Market Participants
Rooting Out Insider Trading Schemes Through Innovative Uses of Data and Analytics
Uncovering Misconduct by Investment Advisers and Investment Companies
Fighting Market Manipulation and Microcap Fraud
Halting International and Affinity-Based Investment Frauds
Policing the Public Finance Markets
Cracking Down on Misconduct Involving Complex Financial Instruments
Combating Foreign Corrupt Practices
Standing Up for Whistleblowers
Demanding Admissions in Important Cases Enhancing Public Accountability
Successful Litigation
 
 
With the SEC’s compliance enforcement practices increasing and rigorous prosecution of violators, it is imperative that businesses stay compliant with the ever-changing standards.  
 
We would love to answer any questions you may have about federal or state securities compliance to ensure that your business is adhering to SEC and state laws. 
 
Please contact us at 858-964-4697 or info@optimalawgroup.com.
 
For more information please visit the SEC’s website: https://www.sec.gov/news/pressrelease/2016-212.html
 

The Dangers of Waiting Too Long to File Your Patent Application

You are an inventor, and you think you have developed the NEXT BIG THINGTM. You are sure that your product will be popular, and so you think you will want to file a patent to protect it eventually, but you are less sure that you want to file for a patent right now. You have spoken with friends and poked around online and you think you have a pretty good idea of when you would like to file your application. While lot of the “advice” in this area isn’t inherently wrong, it does tend to gloss over or ignore many of the dangers that are associated with waiting too long to file a patent application. Below, we attempt to clearly articulate the biggest problems that can arise if you wait too long to file your application.

1.       Getting scooped.

  • Under the new “first inventor to file” system in the United States, if someone independently comes up with your invention, or some critical part of it, they will be free to file for a patent of their own. If they do so, not only will it prevent you from patenting your idea, it will prevent you from profiting from it AT ALL. This is obviously the worst case scenario, so you need to ask yourself, what are the odds that no one else IN THE WORLD is trying to solve the same problem that you are?

2.       The Ticking Clock.

  • If you want to earn an enforceable patent in the United States, you must file your application within one year of the day you publically disclose your invention. The problem is that it is very easy to accidentally disclose your idea.
  • Have you described it in a printed publication, used it in public, or offered to sell it? All of these will likely start the 1-year clock. The important thing to remember is that whether or not something counts as a disclosure is very “fact dependent.” Did your Kickstarter campaign count as a sale or offer to sell? What about the market research you did using your prototype? Or what about your discussions with a potential manufacturing partner? Depending on the facts, any or all of these scenarios can start the clock. For this reason, it is always a good idea to call a patent attorney before you tell anyone new about your invention.

3.       Global rights.

  • Unlike the United States, most foreign countries do not have a one-year grace period following a public disclosure. If you disclose your idea, even accidentally, before you file a patent application, you will NEVER be able to protect that invention in those countries. While you can certainly still try to sell your invention in those foreign markets, there will be nothing to stop your local competition from swooping in and knocking off your product.

While there are certainly good reasons to wait before filing a patent application, it can be helpful to know the risks involved in doing so. The good news is that there are a number of options available, beyond a standard Utility Patent Application, which can help you avoid these problems without a substantial upfront cost. A good patent attorney will be happy to walk through your options and help you avoid the potential pitfalls described above. While it may still be in your best interest to delay in filing your patent application, it is never too early to fully explore your options.

Don’t hesitate to contact us about your NEXT BIG THING. We would love to hear from you at 858-964-4697 or info@optimalawgroup.com.

(Employee) Stock Option Plan

THINGS TO THINK ABOUT WHEN MAKING DECISIONS ON A STOCK OPTION PLAN FOR YOUR COMPANY

 

A stock option is a benefit awarded by a company in the form of an option to another party, typically an employee or consultant, to buy stock in the company at a stated fixed price within the predetermined terms and schedule of the plan or upon meeting certain corporate goals.

Simplified example: An employee is given 100 options to purchase 100 shares at $10 per share for a period of one year starting in three years. If after three years the stock price has risen, say to $15, the employee can exercise the options and purchase the shares at the exercise price and realize a gain of $500 upon sale of stock, or can choose to hold the stock for larger potential future gains.

 

Basic terminology to know:

  • Exercise: is the payment of the Exercise price of an option and the subsequent issue of the share(s) subject to the option
  • Exercise price (strike price): the specified contract price at which the holder can buy the share(s)
  • Spread: difference between exercise price and market value at the time of exercise
  • Option term: the period or duration of time the employee can hold the option before its expiration or exercise of the option
  • Vesting period: the required time that a holder must wait before a holder can exercise an option

 

  • Attracts talented employees for the long term: Stock options can be gifted or granted with employment packages to attract talented individuals and incentivize them to perform well while also ensuring that they share a common interest with shareholders in boosting the company’s stock value and staying with the company at least until such time that they are able to exercise the option. Offering stock options can be especially appealing to startups who do not have the financial means to offer large salaries at the beginning of employment as it allows them to be competitive with established companies. Stock options are not just for employees – they can be used to compensate service providers, contractors and attract talented board members.

 

  • Choosing shares and options: There is some flexibility when it comes to deciding how many shares and options you want to offer employees. Typically, 5% to 20 % of outstanding shares are set aside for employee stock options, but it is ultimately up to the company’s board and / or equity holders to determine the percentage. There are two kinds of stock options: incentive stock options (ISOs – reserved for employees) and nonqualified stock options (NSOs – used for all others).  The difference between the two is the tax benefit of ISOs in which taxation can be deferred and may potentially qualify for capital gains rates rather than normal income tax rates. A stock option plan can contain other tools as well that the board may use instead of stock options, such as Stock Appreciation Rights and Restricted Stock and outright stock grants. A good stock option plan will provide the board with tools to fit any situation.

 

  • Determine particulars: A party or parties should be assigned the responsibility of overseeing the deployment of the stock option plan, and the vesting schedule should also be determined as well as the amount of the exercise price and transferability specifics, typically by the Board.

 

  • Dilution: The main disadvantage of offering stock option plans to employees is the possibility of dilution of existing shareholders. This can happen when employees exercise their options causing the number of existing shares to increase which thus, decreases the percentage ownership provided by each share.

 

  • Address end of employment: A good stock option plan will clearly address what happens to the options in the event the employee is terminated, voluntarily leaves, passes away, and like situations. You don’t want options continuing to vest after an employee leaves or is terminated.

 

  • Compliance: The issuance of options and underlying shares requires compliance with federal and state corporate and securities laws; therefore experienced corporate legal counsel should be consulted throughout the entire process.

 

  • Transferability: Most stock option plans do not allow for the transfer of options during the life of the employee. The transferability of the stock resulting from the exercise of the stock option will depend upon factors including whether the company is public or private. Experienced legal counsel will be helpful with these issues. 

 

For more detailed information on the taxation of stock options click on this link: http://www.sdbizadv.com/blog/taxation-of-employee-stock-options/41795

 

If you have any questions about stock option plans, please do not hesitate to reach to us. We would love to hear from you at 858-964-4697 or info@optimalawgroup.com.

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