A Guide for Technology Businesses

Missouri is fast becoming the midwest's most attractive locale for high-tech businesses. The state has already dedicated resources and is offering numerous programs and incentives to attract the best and the brightest entrepreneurs and "cutting edge" technology companies. In an effort to complement the region's recently launched initiative to attract high-tech business here, Armstrong Teasdale is expanding its services to meet the needs of high-tech, emerging companies.

Whether you are a new, emerging or established technology business, you will likely need to address the following areas:

• Financing
• Organizing Your Corporate Structure
• Protecting Your Technology
• Employment Issues
• Real Estate and Facilities
• Litigation
• International

FINANCING

Finding investors, corporate partners and adequate financing to get you started or to further grow your business is frequently the most important, yet often most difficult hurdle. Those who have forged close relationships with banks and other financial service companies can often help identify sources of funding. Raising start up capital, in particular, is certainly one of the greatest challenges facing high tech firms. A new program in Missouri establishing Certified Capital Companies promises to help. And, traditional venture capital companies are also a common funding source. Many legal issues enter into such arrangements including negotiating the terms of financing, stock and investment strategies, overall plan structure, negotiation of how investors are represented on the company board, exit strategies, and more. Later, when a business has matured, public and private offerings of common stock, preferred stock and debt instruments may be considered. At each stage of your business you will want quality advice, but it is particularly crucial at inception to have representation that will enable you to more easily transition to successive levels of growth.

ORGANIZING YOUR CORPORATE STRUCTURE

How your business is structured will significantly affect how you do business. Choice of entity affects your benefits, responsibilities, tax treatment, and more. Identifying the appropriate structure for your business can strategically position your future growth, or limit it. Do you want a corporation, a sole proprietorship, a partnership, or a limited liability company (LLC)? Articles of Incorporation, bylaws and initial filings with the Secretary of State will follow. Keep in mind that where and how you incorporate can affect your taxes, where you do business in the future, and more. It is also important early on to protect your investment and future business and earnings through solid and binding agreements, including partnership agreements, buy-sell agreements, franchise agreements, distributorship and agency agreements, joint venture agreements, and others relating to stockholders and employees.

PROTECTING YOUR TECHNOLOGY

You have worked diligently to develop an idea or product. Ideas, products and trade secrets, if not adequately protected through patents, trademarks and copyrights, are often at risk to piracy from others. If you have not patented your technology innovations, others may use your ideas for their own gain. Similarly, advice should be sought regarding preparing and negotiating licensing and technology agreements, distribution agreements, documentation of intellectual property involved in mergers and acquisitions, advertising compliance, and engineering and technology issues related to production and negligence claims. These are just some of the issues to be considered to protect your technology.

Negotiating and documenting licensing, royalties, and purchase and lease arrangements for a variety of computer technologies, including hardware, software and databases should be considered. Oftentimes, negotiation and preparation of vendor/purchaser arrangements, outsourcing, and other related contractual agreements are also necessary. Internet issues, like domain names, security issues, patent applications covering algorithms for providing services via the internet, and privacy issues, must be addressed, too. Many companies are also being affected by "Year 2000" computer issues. Major companies are devoting tens of millions of dollars to solving this problem, but who will ultimately bear the responsibility and associated costs? Some businesses have already initiated lawsuits to recover these substantial costs from consultants, and hardware and software developers. Many companies, consultants and vendors have also modified related clauses in their current contracts. And still others are ensuring future protection with newly prepared contracts that more clearly address this problem.

EMPLOYMENT ISSUES

Who owns the work created by employees? Generally, such work is owned by the company under the U.S. copyright statute "work for hire." However, to avoid potential misunderstandings and lawsuits, agreements should be executed before employees are hired. In addition, work contracted with consultants and vendors who are non-employees must be protected, as well as their knowledge of your trade secrets. Also, loss of valuable information resulting from employees leaving and joining competitors, or starting their own business, and from pirating company ideas, products and trade secrets, should be guarded against. Confidentiality and non-compete agreements offer protection and can help avoid, or at least minimize, such occurrences and will strengthen your case in court. Many businesses now offer employee benefits and incentives, like stock options, and qualified plans and bonuses, to encourage loyalty and help retain valuable employees.

REAL ESTATE AND FACILITIES

Arrangements concerning real estate and facilities use may become necessary to house your offices, equipment and products. Negotiation and preparation of documents relating to the leasing of facilities or purchase of real estate adequate to your current needs and potential future growth are often warranted. Financing may also be necessary if one is considering purchasing real estate, or alternatively, construction of new facilities. Creative financing techniques do exist that offer joint venture arrangements, equity sharing and income sharing, among others.

LITIGATION

Dispute resolution is a necessary component of the business of technology today. Ideas, inventions and other technology are clearly at risk for piracy and infringement by others who seek to profit from your research and development. Sometimes matters can be resolved through strategic planning, negotiation or alternative dispute procedures, while others require more vigorous methods in court or before relevant agencies. It is important to assess each dispute to ascertain which of these avenues is warranted and to engage an experienced lawyer who can not only appropriately advise you, but if necessary, vigorously defend your rights or prosecute your case to the fullest extent.

INTERNATIONAL

Successful technology can lead to marketing and distribution in foreign countries. This involves a host of foreign laws and venues, and requires related knowledge concerning other countries' requirements with respect to advertising, distribution, customs, duties, import and export controls, immigration, technology licensing and transfer, as well as patent and copyright issues. Likewise, investments, partnerships and joint venture arrangements must be negotiated with individuals, businesses and government agencies of different cultures and ways of doing business.

OUR TECHNOLOGY LAW PRACTICE

Armstrong Teasdale's Technology Law practice has grown to fifteen attorneys who have dedicated their practices to those areas primarily affecting technology businesses, including corporate structuring, financing, patents, trademarks and copyrights, licenses, employee benefits, employment law, real estate and facilities, initial public offerings, corporate and product development partnerships, joint ventures, venture capital, and more. We help high-tech entrepreneurs and businesses structure their relationships with investors, research institutions, corporate partners and others, to assure future growth. Collectively, Armstrong Teasdale attorneys have technical backgrounds in chemical, electrical, genetic and mechanical engineering, physiology, biomedical, computers and software. Four of our attorneys, and one patent agent, are licensed to practice before the U.S. Patent and Trademark office.

Many of our attorneys are also active in efforts to develop initiatives and assistance for new and emerging technology companies and are members of the Innovation Industry Committee of St. Louis 2004, the Licensing Executives Society, and related technology industry associations. Our technology lawyers Chair or serve on technology related bar association committees, including the Biotechnology Transactions Committee of the American Bar Association Science and Technology Section.

Our technology clients include inventors, software developers, biotech firms, and equipment manufacturers. These clients range from the development stage to prominent manufacturers whose products already carry world famous trademarks.

For additional information, contact Dan Godar or John Cowling.