Hooli is suing Pied Piper (Episodes 9 and 10) continued

Last post I mused that had Richard taken certain steps in the first season of Silicon Valley, he might now have ammunition to use against Hooli’s lawsuit. What am I talking about? To very crudely recap what happened last season, Richard invented Pied Piper, a music copyright search service that hid within it amazing lossless compression technology. Richard shared his software with two “brogrammers” at Hooli, who (being slightly smarter than they appeared) realize the importance of Richard’s compression technology and informed Gavin Belson (Hooli’s CEO). After Richard refused to sell Pied Piper to Hooli, Hooli reverse-engineered Pied Piper and used Pied Piper’s technology as the basis of Hooli’s competing product called Nucleus.

Click here to read the full article posted on our Video Game blog, Law of the Level.

Hooli is suing Pied Piper (Episodes 9 and 10)

HBO’s “Silicon Valley” has quickly become a must watch for all budding entrepreneurs, but the second season has opened up with a multitude of real world risks and roadblocks that could be faced by real world entrepreneurs.  Here, we take a light look at the legal issues arising from the latest episodes.

Click here to read the full article posted on our Video Game blog, Law of the Level.

SAFEs and KISSes Poised to Be the Next Generation of Startup Financing

Overview

In late 2013, startup accelerator Y Combinator unveiled its Simple Agreement for Future Equity (“SAFE”) investment instrument as an alternative to convertible debt.  While SAFE templates surfaced in different varieties, the purported goal was to create a standardized set of basic funding terms between startups and investors while deferring decisions about valuation, liquidation preferences and participation rights until later-stage rounds of financing.  In mid-2014, another accelerator, 500 Startups, introduced a competing document, dubbed the Keep It Simple Security (“KISS”).  Although investors were initially nervous about accepting either of the new investment forms, these alternatives to conventional notes (“note-alternatives”) have become an increasingly popular tool for investing in early stage companies. Continue Reading

A Change for the Better? The Arguments For and Against a Venture Exchange

With a total of 284 U.S. operating company IPOs in 2014, the U.S. securities market might appear to be on an upswing – after all, this was its biggest year since the dot com era ended in 2000.  Nonetheless, this figure does not compare with what it should be given our annual 3% GDP growth rate, which would have required 520 IPOs if the dot com era is used as the baseline.  Furthermore, the U.S. is no longer the world leader in IPOs – it has fallen to #2 in large IPOs and #12 in small IPOs, and has experienced a decrease to only 5,000 listed companies from 9,000 in 1997.  The shrinking U.S. IPO market brings associated potential problems: lackluster employment opportunities, decreased innovation and failure of the U.S. to sustain itself as a market leader. Continue Reading

S.E.C. Adopts Final Rules Amending Regulation A

On March 25, 2015, the Securities and Exchange Commission adopted final rules amending its Regulation A, i.e., the so-called “Regulation A+ Rules”. Regulation A has been a little used provision in the securities laws due to, among other shortcomings, the limit on offering size to $5 million in any 12-month period and the requirement that these offerings be cleared not just by the SEC but any state in which an issuer was planning to offer and sell the securities. From 2012 to 2014, there were only 26 Regulation A offerings. Instead, private companies have relied heavily on Rule 506 of Regulation D, which offers no cap on the amount that can be raised and federal preemption of state securities laws. Continue Reading

Toward a Transactional Exemption for Emerging Company Investments

In “Bringing the Individual Accredited Investor Definition into the 21st Century,” which was posted on December 18th of last year, it was suggested that there might be certain common venture capital transactional structures that  provide protections that could justify eliminating the additional disclosures and limitations required when non-accredited investors participate in an offering under Regulation D.  If any of these structures were utilized, all securities issued in the transaction would be exempt from the registration requirements of the Securities Act. This is not a concept foreign to the Securities Act.  For example, Section 3(a)(9) provides an exemption for “any security exchanged by the issuer with its existing security holders exclusively where no commission or other remuneration is paid or given directly or indirectly for soliciting such exchange.” The following are three additional types of transactional structures that could arguably sufficiently protect non-accredited investors and thus justify exempting the securities issued pursuant thereto from the registration requirements of the Securities Act.

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FDA Issues Guidance for Low-Risk General Wellness Products

On January 20, 2015, the FDA issued draft guidelines[1] designed to give developers whose products and applications promote healthy lifestyles (so-called “general wellness products”) direction on when such products qualify as medical devices under Section 201(h) of the Food Drug & Cosmetics Act (the “Act”) and are therefore subject to the Act’s regulatory requirements for devices.

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Bringing the Individual Accredited Investor Definition Into the 21st Century

On December 17, 2014, the SEC’s Advisory Committee on Small and Emerging Companies (the “Committee”) held its first meeting in over a year. The transcript and an archive of the webcast of the meeting are not yet available, but will be posted on the SEC’s website in the near future.

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Crowdfunding 2.0?

On October 24, 2013, the Securities Exchange Commission (the “SEC”) published proposed rules (Release Nos. 33-9470; 34-70741) to permit companies to offer and sell securities through “regulation” crowdfunding as proposed in the Jumpstart Our Business Startups Act (the “JOBS Act”), which we have written about here. The 90-day comment period on the proposed rules ended January 23, 2014 but comments are still being submitted to the SEC’s website, with the latest comment submitted on June 3, 2014. There is no indication as to when the SEC will publish its final rules relating to crowdfunding.

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Mobile Medical App Regulations on the Move – Proposed Bills To Further Alter the Regulatory Landscape of Mobile Medical Applications

Apple’s apps store lists close to a 100,000 health apps.  Together with wearable technology, direct-to-consumer testing services, and greater consumer participation in the decision to purchase health insurance, the healthcare market in the United States is undergoing a significant transformation.  Whether and how to regulate this evolving market is subject to substantial discussion and debate.

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