Fourth Chicago Based IPO to over a Billion in Valuation! Are Startup and Tech Deals Coming back to Chicago?

Following in the success of LinkedIn, Groupon, Envestment’s IPOs, the Chicago startup, GrubHub went public on April 4, 2014, with shares soaring to over $40 dollars a share well above their $26 dollars per share Initial Public Offering (“IPO”) price.  The New Company was formed through a merger between Chicago based “GrubHub” and New York based “Seamless.”  Will the surge in IPO’s for tech companies continue?  Is there real value there for investors?  Many experts expect the shares to do fairly well, as the initial expected offering rose from the range of $20-$22 per share, all the way up to $26 per share late Thursday night before the Friday morning offering.

The IPO is great for GrubHub, but more importantly, the Chicago Startup community at large.  Chicago is beginning to build a reputation in recent years for its successful tech companies with even better IPOs.  GrubHub is the third recent, Chicago based Tech Company, to have an IPO valuation of over a billion dollars, nearly, $3 billion.  Groupon, the digital coupon and bargains merchant went public in 2011, and is currently, valued at $5.4 billion dollars.  While, a lesser known IPO for Envestnet, a local tech startup that produces software for financial advisors has led to a current valuation of $1.35 billion dollars.

All this success helps aids in Chicago’s current effort to rebrand the City as a Startup and Entrepreneurship HUB.  An effort shared by President Obama, who awarded Chicago, a coveted federally funded high tech hub on February 25th of this year.  Hopefully, this will continue to keep Chicago on the map as not only, a distribution network for products and commodities, but also a thriving City for innovation.  Does this mean more deal and intellectual property work for lawyers? Certainly, seems so as Entrepreneurs are starting to find success and providing a return on investment to Angels, VCs, Private Investors and public shareholders!

The City of Chicago received a total of $70 million for a Pentagon-led institute that focused on high-tech digital manufacturing and design.   The Startup Community in Chicago is flourishing, and there’s no better place or time for individuals with a dream and an idea, to start looking to make them into a real business.  If you or someone you know has an amazing idea for a startup business and is looking for investors, look no further than the Entrepreneurs and Executives Bruch Club’s Startup Competition (EEBC-It’s Just Brunch!).

At the EEBC’s 2014 Spring Competition, Startups were presented with the chance to pitch their businesses to actual equity and angle investors.  During the March 2014 Competition $2,000.00 in actual seed money was awarded to the top three teams by the EEBC-It’s Just Brunch!  See the Winners:  EEBC Its Just Brunch Spring 2014 Competition Winners Final

Meet the Panelists and Investors:  EEBC Startup Competition Special Thanks to Panelists_Final Proof_032514

The next EEBC Quarterly Competition takes place in June 2014 and the EEBC is currently, looking for qualified teams to compete.

Visit http://eebrunchclub.com/ for more information, http://www.chicagostartupattorney.com, or go to www.vrplawgroup.com

Buying or Selling a Company or Substantially All of the Company’s Assets!

Many people do not realize that an asset transaction or purchase may not be an asset purchase if, it includes substantially all of the assets of the Company may become a sale of business transaction.  It does not matter what form the assets are in or where they are located, if the purchase is a transaction involving substantially all of the Company’s assets, then it is not necessarily a simple asset transaction.  You may want to make sure that the Company is still operational and able to conduct some form of legitimate business activity using the remainder or excludes assets.

However, this often gets a bit more complicated, because of having to define substantially all of the Company’s Assets, what does that mean?  Honestly, there is some disagreement between state and federal courts, and disagreement between the judges of those courts.  However, generally, substantially all of the Company’s assets really does have to do with maintaining the business of the Company as an ongoing concern after the asset purchase.

So, you purchasing the most valuable asset or the assets that generate the most revenues, gross or net profit generally, does not qualify as a sale of substantially all of the company’s assets or a sale of business transaction as long as, the business of the Seller or Selling company is still an ongoing concern.  This is where people sometimes fail to recognize the impact of negative covenants, non-competition, confidentiality, or intellectual property provisions on the Seller’s ability to continue as an ongoing concern.

If restrictive covenants, non-competition and non-solicitation provisions are overly broad the Seller may be overly cautious in light of your agreement, and you may be opening the door to a sale of business transaction or a sale of substantially all of the Company’s assets. Be vary of doing so. Not, because of the Seller possibly, asserting that the transaction was a sale of business transaction, but because the Creditors of the Seller may want to find a way to satisfy outstanding claims.  So, successor liability from a sale of business transaction or a sale of substantially all of the assets of the Company may be a method of satisfying those Creditors.  For example,

1) The IRS or IDOR back taxes the Seller or the Company of the Seller owes for employee withholdings, corporate taxes, penalties and interests, and affordable health care act penalties;

2) The employees looking to collect unpaid wages, bonuses, commissions or retirement benefits;

3) The contractors or sales representatives looking to acquire their commissions or payments;

4) The lenders looking to satisfy outstanding balances on loans, lines of credit, or credit card companies;

5) The suppliers or vendors holding unsatisfied accounts receivables;

6) The IP holder holding an IP infringement claim or breach of a licensing agreement; and many more.

So, thanks for identifying the risk or problem, but what is the solution?  Well, creative lawyers, legal teams and professionals looking to problem solve and make a deal happen is the first thing, the Buyer will require.  As for some potential solutions, the Buyer, may, want a requirement that the Seller continue business operations for a reasonable period after the closing of the transaction.

Maybe, tie the reasonable period to an earn out payment that is paid to the Seller based on milestones for reaching time periods set out by the Buyer.  Maybe, have the Buyer place an order(s) or agree to order a certain percentage of the raw materials, or supplies needed from the Seller for a reasonable period to ensure sales and operations as an ongoing concern.  Have the Buyer pay a consulting fee to help streamline operations procedures and incorporation of Seller’s Assets into the business of the Company. If you require other options, then feel free to contact us at: http://www.vrplawgroup.com or check out http://www.corporateacquisitionsattorney.com

Copyright Extensions, Mickey Mouse, Bill Clinton and Pioneering Copyrights?

What do Mickey Mouse and copyrights have in common? Well Walt’s Mickey Mouse is one of the longest running Copyrighted Characters in U.S. history!  Most people have grown up with Mickey Mouse – he’s been around for a long time.  Now, he is in danger of falling into the public domain, where anyone can use him or alter him.  Copyright law, however, might be able to protect him forever.  This is news that has some people excited, but others don’t see the point.

While copyrights may seem to last forever, this was not always the case.  In the early 1900s, copyright protection lasted for 28 years, which was later doubled.  Then, in 1976, Congress changed the law again; protection then lasted for the life of the author plus 50 years.  Today, copyrights last for the life of the author plus 70 years.   After protection ends, the work falls into the public domain, where anyone can use it.

So, what does this mean for Mickey Mouse?  The 1976 change originally made him available to the public domain in 2003, but President Clinton signed an extension of copyright, so he is still protected.  This is a source of constant debate of copyright attorneys, authors, singers, musicians and film makers.  On one hand, if copyright is weakened, then others can use works in the public domain and creativity may actually flourish from the increase in derivative works.  However, it makes sense to protect the hard work of authors like Walt Disney and others that provided so much contribution and enriched our experience and the experience of our kids.

Some believe that copyrights should never expire.  This may make sense for certain types of Works that have been ground breaking and the source of creative inspiration for others.  Perhaps, there should be a pioneering copyright like pioneering patents?  What do you think should there be stronger and extended protection for some copyrighted works over others?

The New Generic Top Level Domains (GTLDs) and what do they mean for online consumers and retailers!

When we browse the internet, we know how to get to the websites we want to go to.  We know to type in, for example, “amazon.com,” and know that by doing so we will be able to shop on Amazon.  This has already started to change, however, as the Internet Corporation for Assigned Names and Numbers (ICANN) has decided to make over 1,400 new top level domain names available for purchase.

Now, we will likely have to go to “movies.amazon” or “books.kindle” in order to get to the site we want. In essence , we will have to relearn how to find products and services on the web.,  Moreover, consumers will have to understand the new top level domain and which TLD and URL will enable them to find the products or services they want.  On line retailers will have to understand how the new TLDs may impact their SEO process. consequently, the new TLDs may or may not lead to a better online distribution means.

These new domain names have been met with mixed reviews.  On one hand, companies are excited; these new names allow them to advertise their brands even more, encourage competition and innovation, and assist consumers in getting to the correct site.  On the other hand, however, people worry about the cost of registration and upkeep, not to mention the potential for trademark violations and cybersquatting.  Registration for one name costs $185,000.00, and in most cases, it makes sense for companies to register multiple names.  This is a defensive maneuver, as it will keep others from registering names that will cause consumer confusion or infringe on trademarks.

While ICANN has developed a database to protect trademarks, called “Trademark Clearinghouse,” it has its drawbacks.  For one, it costs $150.00 a year, per trademark.  Further, it may not be the most effective; it only protects against identical matches of trademarks.  This does not include misspellings or names that are very similar to trademarks.  So, companies will have their work cut out for them when purchasing the top level domain names and protecting them from competitors.

The first seven new top level domain names went live on the Internet on January 29th, 2014.  So far, we have seen the addition of .bike, .clothing, .guru, .holdings, .plumbing, .singles, and .ventures.  More are expected to come out on February 5th, 2014.  For more go to http://www.vrplaw.com

Understanding the Naked Licensing Doctrine and Its Impact on Advertising, Business, Licensing, Marketing and IP Protection Strategies!

The Naked License Doctrine is often overlooked by many business owners, corporations, franchisers, advertising, marketing and licensing professionals.  For example, there are often times when there is no oversight over how your brand, design, logo, business name or trademark is used by different departments, suppliers, vendors, and other third parties.

Many times, it is an employee using your brand, design, logo, business name or trademark to assist non for profits or promote events for others; however, there is no license of your mark or how the mark is used by the non for profit.  Other times, the advertising and marketing department rolls out a new version of your mark, but does not acquire approval to make the modifications or recognize how it might affect the commercial impression of your original mark.  Sometimes, there is a negative response from consumers and it may actually lead to a dilution or tarnishment of the original mark.

In other cases, the advertising and marketing professionals are too eager to acquire other distribution channels by encouraging use of the mark on a third party’s website, store fronts, advertising and/or marketing brochures without having the third party sign any agreement or license to use your mark.  The worst cases are when franchisers do not take the time to see how their franchisees are using the brand or mark.  This is a significant problem even if, the franchise agreement has some provisions relating to licensing and use of your brand or mark.

The key is are there any actual methods or means for a brand or trademarks owner to prevent a third party or licensee from changing the colors, design, layout, location, font or quality of the products or services sold under its brand or mark.  Is there some process to have a third party or licensee submit its modification to the original brand or mark owner?  Is this process actually utilized?  Is there any means of monitoring or overseeing the third party or licensee’s activities to determine if, your brand or mark is being misused?

If there is no practical means to ensure that your brand or mark is not used, in any way that dilutes, tarnishes or changes the commercial impression of your original brand or mark, then you may be subject to losing your trademark rights.  Even if, you have a license, this situation is ripe with others being able to assert that the license is in essence a naked licensee, thus, you should not be allowed to retain trademark protection of your brand or original mark.  It is always a good idea to consult a trademark attorney prior to licensing and instituting trademark policing policies.

Of course, if you have any concerns or questions, then please contact us at: http://www.vplawgroup.com

The Illinois Right of Publicity Act and the Commercial use of Another’s Identity!

There are many forms of intangible rights that protect individuals from those that may be looking to trade of your identity.   In Illinois,  your identity, such as your name, likeness,  image, voice, alias and other features that serve to identify who you are protected from rip-off artists and scammers.  A nice feature for artists, entertainers, actors, musicians, authors, designers, film producers, videographers, photographers, speakers, professors,  doctors, attorneys,  judges and politicians.

The statute provides for 1000 in statutory damages per violation, plus allows for the recovery of legal fees and costs for the prevailing party.  It is a codification of one of the oldest forms of intellectual property rights, your Likeness.   This was recognized at common law long before the existence of copyrights, patents, and trademarks. Other than trade secrets, it may be the oldest form of intangible right or asset a person can own.

The Act requires strict compliance and a written authorization from the person before any aspects of his or her identity can be used by another.   Working with an attorney that understands how your Identity is related to your business and personal affairs is vital to making sure you protect against all rip off artists.   If someone is misusing your photographs, image, voice, alias or other intangible features of your identity, then please contact us at http://www.vrplawgroup.com

TTAB Cancellation Proceedings, Timing of Motions for Summary Judgment, and Motions for Reconsideration!

It is surprising how often clients will not realize that the TTAB Opposition and Cancellation Proceedings are litigation proceedings.  They are administrative in nature, but the Federal Rules of Civil Procedure and Federal Rules of Evidence still apply.  Thus, filing a summary judgment can often be an effective method of resolving cancellation and opposition proceedings with the TTAB.   The TTAB’s rules do have some nuisances, such as the requirement that the parties exchange 26 (a) (1) disclosures before filing a summary judgment motion.

However, even in most Court proceedings the parties will not file a summary judgment motion, until after both sides have had an opportunity to complete discovery.  Unfortunately, the TTAB and its attorneys are not necessarily used to making rulings on evidentiary issues, motions in limine, and a variety of other areas of trial practice.  Thus, often times the TTAB does make mistakes on key evidentiary issues, standards of law and application of trial standards to TTAB cancellation and opposition practice.

Moreover, over often times, many TTAB Attorneys do not realize the need for a summary judgment to be decided based on admissible evidence.  The same standard applies to summary judgment motions in front of TTAB.  Thus, it is not unusual for the TTAB to make an error of law and require a party to file a motion for reconsideration.  In fact, many times this can be good opportunity to create your record for an appeal to a federal court that may be more comfortable with ruling upon evidentiary issues and deciding summary judgment motions based on Federal Rule of Civil Procedure 56.

Parties are allowed to appeal final decisions from the TTAB to their local Federal Courts, D.C. Circuits or the Federal Circuit and the Supreme Court.  Moreover, the parties may even be allowed to offer new or evidence that was excluded from the TTAB proceedings.  However, the TTAB does offer an Accelerated Case Resolution Process that can be used to have summary judgment motions be used for trial purposes. This can often be a cost saving and effective strategy for dispositions of the TTAB proceeding for both parties.

Thus, working with a Trademark Attorney that has Federal Court Litigation and Trial experience is vital to the success of a TTAB cancellation or opposition proceeding.  If you have any concerns or questions, then please feel free to contact us at http://www.vrplawgroup.,com

Business Owners, Small Franchisees, and Franchise Operators and breach of contract and fraud claims!

It is common place for there to be disputes between Franchisees and Franchisors. Often times, the dispute involves continued use of trademark licenses without paying royalties, claims of fraud involving financial information, and breach of contract or the franchise agreement.  However, there is some measure of protection from the unhappy or disappointed with their purchase of a franchise or a franchise store.  The franchisee often claims that the financial ;projections of the past performances of the franchise stores or operators.

There is often disagreement about what financial information was provided by the Franchisor and how much of it is mere puffery, opinion or an accurate reflection of the historical performance of different franchise stores.   However, in a recent Ruling the Illinois Appellate Court for the First District provided a finding that allowed Ace Hardware to defeat the claims asserted by Avon Hardware.  Avon Hardware asserted that Ace Hardware was liable for providing fraudulent or misleading sales and financial information to Avon Hardware.

Ace Hardware was found to have provided a variety of opinions and financial information to Avon Hardware, but was found to be not liable to Avon Hardware.  The primary reason for the First District Court’s dismissal of the common law or statutory fraud was the inability to overcome the language in the parties’ Franchise Agreement cautioning about the financial and sales data and the opinions contained therein.  The First District Court dismissal of the fraud claims were based on the Franchisees failure to plead and prove materiality and reasonable reliance on the Financial Sales and Data.

Thus, it is crucial for Franchisees to make sure that they verify sales projections and ensure that the Franchisor is required to provide audited financial and sales data.  This will help curtail the risk of being provided unnecessarily inflated financial information and sales data.  Moreover, it will help ensure that you do not have Buyer’s remorse.   Of course, if you have any concerns or questions, then please contact us at http://www.vrplaw.com

Patents, first to file, first to invent, and derivation proceedings!

The America Invents Act or the AIA changed our patent filing system from a First to Invent to a First to File system.  However, it also introduced derivation proceedings into the United States Patent and Trademark Office (USPTO) or Patent Office process. This may still allow many First to Invent Applicants to establish superior patent rights by demostrating that that First to File Applicant derived his, her or its invention from the Second Applicant.

This concept is similar and analogous to a copyright holder’s right to derivative works.  However, it is unclear what the scope of these patent derivation proceedings will be.  In addition, will an applicant be able to create a presumption of derivation by showing reasonable access to his or her invention and substantial similarity?  How will this impact the policy of permitting improvement patents that are not anticipated and nonobvious?

Can all improvements to a patented invention be challenged in derivation proceedings? What impact will this have on granting pioneering inventions greater protection? Will Courts still allow a broader or greater scope of protection in interpreting the claims of a pioneering patent? Will the Patent Office also in effect give broader or greater rights to a pioneering inventor in derivation proceedings?

We will just have to wait and see how the Patent Office and Courts interpret the changes brought about by the AIA.  If you have any concerns or questions, then please contact us at http://www.vrplaw.com

The art of Negotiating Commercial Agreements and Making Sure You manage Legal Risk without Pissing off your Customer or Partner!

Negotiating commercial agreements requires a certain combination of preparation, skill, art, anticipation, guess work and sometimes just dumb luck to ensure that you are able to come to terms that are satisfactory to both sides.  If you push too hard and you ask for too much, then you are likely to meet stiff resistance and encounter more obstacles to working out a deal or reaching an agreement.   Preparation is key in this respect, know the industry, know what is standard, know what you do not know, know the other side’s hot buttons and concerns, know your bottom line and know your risk tolerance, and lastly be creative–not everything has to be the same as it was before.

There are many ways to negotiate around and draft around concerns that both parties have.  Foster an atmosphere of frank and open discussion about the issues that both sides are trying to manage.  Understand when the other side is making a reasonable request.  Make sure you are not being unreasonable, but do not be afraid to ask for what you want.   A good negotiator and a contract draft can usually find a way to appease both sides.   However, if the parties are not willing to discussing business points and openly air their concerns, then it is hard to identify the business driver for the negotiations.  In this case, it is really hard for both sides to come to terms and agreement, because neither, sides are discussing the real obstacle to the deal.

While it is true that sometimes you may be able to get what you want, because the other party is lacking in sophistication, the reality is that anyone can play hide the ball or withhold information.  It doesn’t take a genius to recognize when the other side is not being forthcoming or is being less than candid with you.   Thus, it inherently leads to a scenario where the other side reacts and conducts him, her or itself in the same manner.  Often times, the sophisticated party doesn’t realize that they have fell for the oldest trick in the book.  No matter what concerns or risks you are trying to manage the more frank and candid you are the more likely that you are to bridge the gap and come to an agreement.

Often times, concerns surround legal ease or boiler plate that is outdated and unenforceable.  In fact, sometimes the more you overreach the less protection the law and contract interpretation principles will award you.  Many times, I have advised clients to just not worry about something that is unenforceable, but being a litigator it makes it easier for me to know what will work and withstand scrutiny by a Court.   It is often better to just leave overreaching language in a contract, because you know it will give you grounds to invalidate the contract.   However, there is a bit of art involved in this, because the language has to be interpreted by a court in the manner that you would like it to render it unenforceable.

I always suggest that if somebody is playing hardball take on hardball posture and allow them to feel like they have the upper hand and are getting some very tough language to protect their interests, but then pick certain issues that truly are risks that need to be managed and you can discuss frankly.   In fact, you may get more than you should in certain areas, because the other party believe it has gotten everything it wants in areas that are truly not a concern for you.   However, this requires careful preparation and a nuanced understanding of the law, the industry, and the clients risk tolerance.

If you have any concerns or questions about negotiating a commercial agreement, acquisition, divestiture, sale of your business or the purchase of your business, then please do not hesitate to contact us at http://www.corporateacquisitionattorney.com