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Feb/March 2010 firm newsletter

Tech Firms Face Paramount Legal Concerns

Visions: a publication of the albany-colonie regional chamber of commerce Throughout Tech Valley, innovative technologies are being developed every day, from cutting-edge semiconductors to advanced nanotechnology and biotechnology applications to treat disease and improve heart functions to dynamic software to map crime or maintain inventory. More than ever, protecting and preserving new technologies is crucial for an entrepreneur’s success and sustainability. In fact, new legal strategies have emerged – addressing several issues considered vital to tech companies – that are designed to ensure a technology’s viability and ownership. Protecting innovation Inventors and entrepreneurs must be vigilant in protecting their technologies and inventions if they expect them to bear fruit in the future. Intellectual property protection, patent and trademark issues headline their concerns. “A company hates to train individuals or disclose proprietary methods and have them jump ship,” said Bob May, Technology Practice partner at Lemery Greisler LLC. “Increasingly in this economy, an entity’s ability to protect its IP is very important because of investors’ increased scrutiny in a tight market,” said Andrew C. Rose, Esq., partner at Nixon Peabody LLP. “Now, investors often want a patent application to be confident the company has rights to its technology and to ensure it won’t be infringed upon.” “Intellectual property protection is very important because when people leave their jobs, they tend to invent more, and that’s what stimulates the economy – continued invention,” said Arlen Olsen, patent attorney and partner at Schmeiser Olsen & Watts. Olsen says his firm has recently seen an increase in biotechnology patent work, while the software and hardware industry has remained strong. “In the last few months, we’ve seen a significant increase in work, particularly intellectual property and patent work,” said Jeff Rothenberg, Esq., managing partner at Heslin Rothenberg Farley & Mesiti PC’s Nanotechnology Group. “With the economy improving, we’ve seen an upsurge specifically in nanotech invention disclosures and patent applications.” Martin Ricciardi, partner at Whiteman Osterman & Hanna LLP, also believes tech companies should protect themselves to bar unfair competition. “I counsel my clients to be certain they have all the rights they need and agreements with their employees and contractors to protect their trade secrets,” he said. Particularly in today’s global marketplace – where technology transcends continents in seconds – the recently enacted Madrid Protocol Implementation Act offers trademark protection in dozens of countries. The international agreement permits U.S. trademark owners to file one application with the World Intellectual Property Organization for trademark protection in 57 countries. “The Madrid Protocol Act will have a dramatic effect on the ability of companies locally and throughout the U.S. to protect their trademarks overseas in a less expensive and easier manner,” said Rothenberg. Going for the green Researching a new technology and commercializing it often takes substantial financial backing. Securing investments is perhaps one of the greatest challenges a company can face. Deal structures and terms merely compound that challenge. “The structures of the deals change and that is difficult to keep up on,” said Rich Honen, managing partner at Honen & Wood PC. “A few years ago, most venture capital investments were in the form of preferred stock. Recently, more deals are being done as convertible note deals.” Honen says such deals afford the investor the protection of a lender, and if the company does well, the investor can convert its debt into stock. “It gives the investor protection on the down side and reward on the upside,” he said. Meanwhile, valuation methodologies have also changed, he noted. “Now, valuations are more compressed and exit events are more dramatic. The formulas are being adjusted to ensure the investor gets a higher percentage if, for example, the invested company is sold,” Honen said. Tech Valley’s attainment of financing deals remains a hot topic. “We have a great foundation in terms of finance organizations but we should welcome additional organizations into Tech Valley,” said Charles Haviland, partner at Whiteman Osterman & Hanna LLP. “The more funding that is available, the greater opportunity our companies will have to achieve the growth they’re trying to obtain.” Technological evolution Lastly, Tech Valley’s development as a hub for high tech has been affirmed. What remains unseen, however, is the rate at which area communities will support technology- related growth. Will they accept technology growth that creates economic stimuli, or will they have a “not in my backyard” sentiment? The proposed Luther Forest Technology Park in Malta is one example of a business park facing scrutiny from area residents over such issues as traffic and noise. “Siting and development issues are at hand as growth continues, as does the need for research and development and manufacturing facilities and housing, which raise environmental and other issues,” said Nixon Peabody’s Rose. “It’s an issue lawyers will likely get involved with to strike a balance between economic development and the quality of life we all enjoy here.” ?? VISIONS July 2003 rg/12/'>lung cancer systoms