Archive for the ‘Legal Issues’ Category

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Is Intellectual Property Overvalued?

August 16, 2007

by John Finlay

There is no doubt that we live in a knowledge economy where information dealers like Google rule and where patents and copyrights go for billions. Much of our economy is based on companies spending billions to protect their intellectual property.

But, could dumping all of these resources into such intangible assets really be good for the economy? A patent isn’t going to feed my children, and (especially in the software industry) it isn’t going to last more than a few years before it no longer has value.

But don’t I have to protect myself from copycats? Of course, intellectual property is not going to go away and it needs to be addressed and evaluated. What we need to remember however is that IP itself is just an idea and that on its own an idea has no value. An idea gains value only as it can be realized or implemented. How does an idea get implemented? It takes motivated and creative people to actually make it happen.

Also, where do these ideas come from? IP doesn’t just appear out of nowhere. It came from intelligent people thinking creatively.

Unfortunately companies and our culture tend to value the idea more than the creator or the implementor. If we switched that around and valued the implementor more than the idea, we would have an economy that really breads new ideas. We would have corporations where “intrapreneurship” is encouraged and we would have better patent laws.

Perhaps we should be moving towards the “knowledge worker economy” and moving away from just the “knowledge economy.”

–John

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Need an Experienced Startup Attorney? – Interview with Bob O’Connor, Wilson, Sonsini, Goodrich, & Rosati

July 18, 2007

by Daniel Vale

Bob is a lawyer for the law firm Wilson Sonsini Goodrich & Rosati (WSGR). According to Bob WSGR is the leader in IPOs in Utah. The company was founded in 1961 and its headquarters is located in Palo Alto California other locations include Austin, Texas; New York; Reston, Virginia; San Diego and San Francisco, California; Seattle, Washington and Salt lake City, Utah. Today WSGR has six hundred attorneys and is specialized in leading edge technology companies. The company represents more than three hundred public enterprises including 3com, Overstock. com and Hewlett-Packard.

According to Bob although hired as a lawyer most of the time he works a business advisor and sometimes even as a marriage counselor. This gives an idea of the scope of his work at WSGR. Bob said that entrepreneurs looking for advice often approach WSGR, although his company specializes in giving business advices for entrepreneurs WSGR is not interested in charging large amounts of money to small entrepreneurs. Their strategy consists in rather than charging money for business advice they invest their time in potential small entrepreneurs in exchange for a share of the company. Sometimes these small entrepreneur ventures become very successful companies and at this point WSGR get its return for investing time in the idea. Bob cited Google as an example, WSGR helped Google to incorporate its business today WSGR investment is paying off as Google IPO came to be very successful.

Bob said that sometimes all what it takes to get a business advice from him or other lawyers in his firm is to invite him for a lunch. According to Bob most of the time this is how he gets to know many new entrepreneurs. Basically Bob is interested in learning about the idea, he also likes to see the entrepreneur’s business plan. Often Bob meet an entrepreneur with a good idea and a good plan, this is the time when Bob helps the entrepreneur with his network of business associates and friends. If the entrepreneur starts to grow and is interested in more advanced advice, often related to expansion, WSGR comes in and invest in the idea.

In his presentation Bob, also talked about the top ten legal mistakes of early-stage companies. As many small companies start to grow they often oversee legal factors that might influence the overall situation of the company in the future. These are some of the most important mistakes I noted in his presentation. Bob started describing the mistakes from the least threat to a business to the most common and dangerous for small business. He started talking about not properly licensing technology patented by others. According to Bob many companies use patented technologies developed by other companies, often these companies do not license the technology and are sued by patent holders for large amounts of money. The next legal mistake is to incautiously hiring former employees of a competitor. Usually what happens in this case is that most of the time these employees signed contracts with former employers preventing them to work for a competitor for a given amount of time. Sometimes the new company might be hold responsible and sued by the former employee employer.

Not conducting a timely trademark search was the next point Bob talked about. This refers to the fact that companies do not spend due time in researching trademark rights. Often companies are sued for this matter as other entities might have registered a trademark before them. This might cost immense amounts of money for these companies as they might have to pay ~or the right of the trademark or change their trademark altogether. The next mistake is to not properly maintain organizational records. Many times Bob encounters companies wanting to become a public corporation or to just expand, often these companies were not effective in recording organizational documents and activities. This becomes a problem as information such as stockholder share and amount of shares issued is not clearly defined. This can become a very serious problem for the future of the company, as it might not be able secure investments in the future.

Another important mistake described by Bob was related to the fact that companies often fail to institute a trade secret program. Bob said that if your companies do not protect its trade secrets the government will not do it for you. This relates to the fact that many companies do not take the effort to protect their trade secrets, often other companies use these secrets for their own profit. If your company doesn’t protect it from these other companies the government might not intervene and you might loose your secrets. Finally Bob talked about the biggest mistake a company can make. According to him the biggest mistake a small company can make is to create a “Cheap Stock” problem. Usually companies fail to properly evaluate its stock. By offering a cheap stock to investors the company might be sending a wrong signal to other investors about the real value of the company. The cheap stock value start to become the real value of the company.

This was one of the most interesting presentations we had this semester. It was interesting to see that not only VCs specialize in one particular investment strategy. Law firms such as WSGR also specialize in one specific segment; in their case they are interested in leading edge technology companies. No wonder their headquarters is located in Palo Alto. It was also interesting to see how entrepreneurs might get help from such firms by just using some of their time in exchange for a share of the company. This is a valuable information since many entrepreneurs today might need such help and don’t realize that these law firms might be their best option.

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Young Entrepreneurs of America invites students and entrepreneurs to share their articles about entrepreneurs and entrepreneurship. Read more entrepreneur profiles and related articles here. Be sure to sign our guest book or leave your comments below. Be sure to follow Ian on our blog as he works throughout the summer to build his business.

Copyright 2007, Brian Acord, Ascend 6 – Consulting for Startups

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The Proper Categories for this Blog – Simple vs. Complete

July 11, 2007

If you had to boil every entrepreneurial topic and every entrepreneurial issue down to ten categories, what would they be? Could you reduce the list to five instead of ten? At what point does simplifying categories have a noticeably negative effect on clarity?

I would like to keep the comments on this blog focused on all topic entrepreneurial but I would also like to keep things simple and organized. I am going to begin by posting roughly 15 categories that should be broad enough to cover most things entrepreneurial. Over the next few months I will monitor the various postings on this site and use your feedback to shift and consolidate where appropriate. I would like to eventually narrow down the topic list to roughly ten and then find one contributing blogger that will be responsible for each specific category (although I would still like to see five or more contributing bloggers working in each category).

Take a minute to review the categories currently in place on this site and please send me your thoughts and suggestions on what should be added / removed / changed etc. Also, when you are posting your blogs, please try to limit the number of categories you choose for your postings to one or two.

Now…let’s get to work!