Wednesday, September 17, 2014

10th Year of Minnesota Cup Another Success

This past Wednesday, I had the privilege of attending the final awards event for the Minnesota Cup. The awards event concluded the 10th year of the Minnesota Cup, which is a statewide competition for early stage businesses in Minnesota. Gray Plant Mooty has been a sponsor of the Minnesota Cup for most of those 10 years, as we’ve found it to be an excellent supporter of Minnesota’s entrepreneurs and start-up community.

At the event, which I thought was the best yet, they provided some interesting statistics. During the 10 years of the event:

Over 9,000 businesses have participated.
Greater than $1,000,000 in prize money has been awarded.
Division winners have raised in excess of $160 million in private capital!

This year’s event, like the last few years, was hosted at the McNamara Alumni Center on the University of Minnesota campus. The room was filled with past participants and winners, entrepreneurs, students, business and political leaders, and others interested in Minnesota’s entrepreneurial community. Even our state’s two US senators sent video congratulations to the winners and participants.

Each of the seven division winners and runners-up gave one minute “elevator” pitches of their businesses.  The pitches were great, and displayed a variety of interesting business ideas. Among the elevator pitches by the division winners, the audience liked the presentation from Jonny Pops the best, and voted for them to win an extra $1,000.  Jonny Pops, which makes all natural smoothie-sicles on a stick, was also handing out samples of their product at the event. I thought they were quite good and will plan to buy a box soon for my kids to try.

At the end of the evening, the judges selected 75 Fahrenheit (75F) as the grand prize winner of this year’s Minnesota Cup. In addition to receiving $50,000 for being the grand prize winner, 75F also won $30,000 as the clean tech/water division winner, and received a $25,000 grant from the Southern Minnesota Initiative Foundation – total prize money of $105,000! 75F has developed an interesting technology that allows users to regulate building temperatures in an environmentally friendly way by using wireless zone controllers to monitor airflow temperatures in building zones.  

The other division winners were equally as impressive as 75F. I imagine the judges had a very difficult decision in picking a winner.  

For any aspiring entrepreneurs who were not able to participate this year, I suggest that you give strong consideration to participating in next year’s competition. Just by submitting an application, you are forced to think through some issues in your business plan that you might not otherwise consider. If you are chosen to be a semi-finalist in the competition, you will have access to mentors, advisors, investors, and others in the entrepreneurial community who can help you further refine your business strategy.  Even if you don’t win any of the prize money, the Minnesota Cup provides a great opportunity to make valuable connections for your business that you might not otherwise have. 

Congratulations to all of this year’s participants, and especially to the winners.  We’ll be looking forward to next year’s competition.

Friday, September 12, 2014

Wikimedia makes monkey out of photographer (or is it vice versa?)


Last month, Wikimedia (the operator of Wikipedia) again refused the request of British photographer David Slater to remove a picture of a monkey from the Wikimedia Commons database of publicly available photographs. Wikimedia’s refusal was based on its position that the photograph is not subject to copyright.  


The photo is a “selfie” of a crested black macaque taken in 2011. Slater was in Indonesia on a wildlife shoot and preparing to photograph – or in the process of photographing – several of these animals when one borrowed his camera. The camera was recovered/returned with “tons” of pictures, most of which were out of focus, but with a couple, such as the one above, looking very professional. Slater posted the photo online and it became very popular.
  
Earlier this year, the photo was posted to Wikimedia Commons. Slater reports having made several requests for the photo to be removed from this public database, but only last month received an explanation as to why his requests were refused. Wikimedia denied Slater’s request, claiming that the photograph was not subject to copyright because it was the work of an animal.  

Wikimedia is not making this up. Believe it or not, the U.S. Copyright Office expressly states in its Compendium of U.S. Copyright Office Practices,Third Edition that it will not register works produced by nature, animals or plants, and it doesn’t appear that other countries have gone on record with contrary policies. Experts agree that since this photo was taken by the monkey, the photographer does not own the copyright. If there is no copyright owner, it seems logical that the photo is in the public domain.  

This makes perfect sense – at least to me.  

The photographer, on the other hand, is claiming that he should own the copyright because he had creative input and direction over the photograph. There might have been some validity to such a claim had the photographer intentionally set out to shoot monkey “selfies”  and made creative or technical choices regarding such things as the setting, the lighting or the lens before handing the camera to the monkey.  But that banana has been peeled.  Slater himself — at least in initial reports — suggested no such planning or involvement on his part, and certainly no control over the photography work performed by the monkey.

There are others who say that Slater should own the copyright because he paid for the trip to Indonesia and owned the equipment used by the macaque to take its own picture. But would these same persons make that argument if they used their friend’s phone (having left their own at the hotel) to take a perfect picture of a cathedral that their friend later sold for commercial use? Probably not. While many aspects of copyright law can be complex, there are certain basic rules. The creator – the person actually creating the original work – owns the copyright effective automatically upon creation, unless it was created in the scope of their employment (in which case copyright belongs to the employer), or they have entered into a written agreement for creation as a “work for hire” or expressly assigning the rights to another party. Ownership of equipment, payment for services, or even payment for a particular outcome does not transfer copyright ownership. You need the employment relationship or the written agreement.  

And then there are those who think this is just another big business (the nonprofit Wikimedia?) or government (Copyright Office) conspiracy to… to…to…what? Enrich Wikimedia? Steal from the individual to benefit the masses? Or my favorite – take rights away from the monkeys?

Wednesday, September 3, 2014

Should You Consider Forming A Public Benefit Corporation?

Did you form your business to benefit the public and is it designed to operate in a responsible and sustainable manner? Does your business focus on pursuing a net material positive impact as well as making a profit? If so, you may want to consider forming a public benefit corporation, which is a business form that accommodates both a public mission and private commercial ambition (e.g., TOMS or FEED Projects).

The Minnesota legislature recently enacted legislation that allows for the formation of public benefit corporations. The Minnesota Public Benefit Corporations Act will become effective on January 1, 2015, and the Minnesota secretary of state’s office will not accept filings of organizational documents for a public benefit corporation until then. An entity organized as a Minnesota corporation can elect public benefit corporation status and a Minnesota limited liability company may merge into a newly created public benefit corporation at the beginning of the next calendar year.

Types of Public Benefit Corporations

There are two types of public benefit corporations: a general benefit corporation and a specific benefit corporation. A general benefit corporation is a public benefit corporation that elects in its articles to pursue a general public benefit, and it may state in its articles a specific public benefit purpose that it elects to pursue. A general public benefit means a net material positive impact from the business and operations of a general benefit corporation on society and the environment. A specific benefit corporation is a public benefit corporation that states in its articles a specific public benefit purpose that it elects to pursue. A specific public benefit means one or more positive impacts–or a reduction of negative impact–on specified categories of natural persons, entities, communities, or interests other than shareholders.

Requirements

Each public benefit corporation that is organized in Minnesota is required to file an annual report with the secretary of state that details how the corporation pursued its general or specific public benefit goals in the previous year. The annual report must refer to an independent third-party standard selected by the board of directors (although no audit or certification is required from the third party that created the standard). The Act authorizes the secretary of state to revoke a corporation’s public benefit status if it fails to file an annual report. 

The Act does not set forth a uniform standard or set of standards by which public benefit corporations must operate, nor does it create a standards board or any other review body to evaluate a public benefit corporation’s compliance with its stated mission.

Board of Directors

In making decisions on behalf of the corporation, the board of directors of a public benefit corporation must consider the public benefit purposes set forth in the corporation’s articles, the interests of shareholders, and the interests of non-shareholder constituencies. The Act provides that shareholder profits are not to be given presumptive priority over the other considerations.

Tax Status

A public benefit corporation will be taxed as a regular business corporation, either as a C corporation or–if it qualifies and makes an election–as a Subchapter S corporation. 

Shareholders’ Right to Enforce Compliance

The Act does not grant any government body or third party the right to enforce a public benefit corporation’s compliance with its stated public benefit purposes. However, shareholders have a right to bring an action if the corporation fails to pursue its public benefit purposes, and the annual report filed with the secretary of state is subject to penalties of perjury if it is not accurate. 

Summary

In traditional corporations, prioritizing a public benefit over profits would violate the fiduciary duties owed to the company’s owners. A public benefit corporation modifies this, allowing the board of directors and officers of the company to prioritize a social benefit over profits. If the purpose of your company is to have a positive impact on society, then forming a public benefit corporation may be the right entity form for your business.

Thursday, August 28, 2014

Small Business Certifications: Where Do I Start?

For many small, privately held businesses, navigating the world of small business certifications can be a daunting task.  Certification options abound for women, minority, veteran-owned, and small disadvantaged businesses.  What does it all mean, and where does one start?

The website of the U.S. Sm
all Business Administration (SBA) explains it well: “Small business certifications are like professional certifications; they document a special capability or status that will help you compete in the marketplace.”  Here, I address women-owned business certifications, a topic on which our office receives frequent inquiries.

Women-owned businesses may seek certification through both governmental and private entities, and while certification requirements vary, both generally require that one or more women own at least 51 percent of the business and manage the business.  In other words, a woman holding a 51 percent or greater ownership interest in a company in which her husband is CEO isn’t going to cut it.  She must be responsible for both the long-term decision making and day-to-day management of the company.  

Typically, a business primarily focused on serving as a supplier to governmental entities will want to become certified by a governmental agency, whereas a business that primarily works in the private sector and with large, publicly traded companies should seek certification from a third-party certifier.  For Minnesota businesses, governmental certifiers include (i) the SBA, (ii) the State of Minnesota, and (iii) the City of St. Paul.  Third-party certifiers include the Women’s Business Enterprise National Council (WBENC) and the National Women Business Owners Corporation (NWBOC).  

The SBA administers the Women-Owned Small Business Federal Contract Program, which authorizes federal contracting officers to set aside certain federal contracts for eligible women-owned small businesses.  

The State of Minnesota and its agencies administer the Targeted Group/Economically Disadvantaged Small Business Program (the TG Program) and the United States Department of Transportation Disadvantaged Business Enterprise Program (the DBE Program).  Upon certification under the TG Program, the business is added to the state’s vendor list, and the TG may be eligible for up to a 6 percent preference in selling its products or services or bidding on construction projects to the State.  The DBE Program is a federally-funded certification program intended to help disadvantaged people, including women, participate in the planning, construction and management of the country’s transportation system.  The Minnesota Unified Certification Program (MnUCP) makes certification decisions with respect to participation in the DBE Program.
   
The Central Certification Program (CERT) is a small business certification program administered by the City of St. Paul and recognized by Hennepin County, Ramsey County, and the City of St. Paul.  Certification makes you eligible to participate in activities specifically designed for certified vendors.    

Two of the most prominent third-party certifiers are the WBENC and NWBOC.  Each certification provides women-owned businesses with access to supplier diversity and procurement executives at major corporations and federal, state and local government entities.  The application fees for these certifications start at $350, and certifications are usually valid for just one year.  

This is merely a high-level overview of the reasons companies may seek certification and the types of certifications available to Minnesota companies.  As you consider whether certification may be right for you, keep in mind that the process is lengthy and rigorous.  Numerous document requests must be fulfilled and on-site visits may be required.  Recertification may also be required on an annual basis, but the numerous benefits that accompany certification may make it all worthwhile.

Tuesday, August 26, 2014

What Would Brandeis Think?

In 1890, Louis Brandeis and Samuel Warren wrote their seminal Harvard Law Review article “The Right To Privacy,” suggesting that government and the media had gone way too far in invading the privacy rights of individuals and arguing that legal remedies were necessary to combat the then-intrusive technology known as “photography.”

What would Brandeis think about Snowden, the Internet, Google Glass® and drones?

I am not sure what his views would be on new technology or government surveillance, but I do believe that Brandeis would have enjoyed A Legal Guide to Privacy and Data Security, a Minnesota CLE class presented this past Monday, and that he would have found the presentations and discussions intriguing.  

The CLE, attended by over 150 lawyers, covered issues from the origins of privacy rights to issues of data breach and security. Topics also included big data as well as key federal, state, and global privacy laws and regulations. The Privacy Guidebook prepared by Gray Plant Mooty was used as the written material for this CLE. 

In setting the stage for the day, I invoked Brandeis as an early champion of privacy rights, as evidenced by both his law review article and his dissent as a Supreme Court Justice in Olmstead v. United States (1928). In Olmstead, the Supreme Court found that wiretapping the phones of a bootlegger was not a violation of the Fourth Amendment. There was no trespass since the phone lines were tapped from outside the bootlegger’s home. Brandeis disagreed, stating that it should make no difference where the physical connection with the telephone wires was made. According to Brandeis, the Constitution “conferred, as against the Government, the right to be let alone—the most comprehensive of rights and the right most valued by civilized men.”

Brandeis became a champion of the right to privacy during his tenure as a member of the Supreme Court from 1916 to 1936.  Jurists have continued to expand upon his early views on privacy and still look to his Olmstead dissent and his law review article as support for further legal protection of privacy. 

While you may have missed your opportunity to attend a live presentation of this CLE, there will be two video replays in Minneapolis—September 4 and September 23—with others scheduled at later dates in Duluth, Mankato, St. Cloud, Marshall, and Moorhead.  Click here to view the CLE brochure and information on the video replays.

Wednesday, August 20, 2014

Someone Finally Did Things Right! Lessons from Robin Williams’s Estate Plan

Last week we tragically lost an entertainer who played a major role in my life, and, I am sure, in the lives of many others as well. Most of the time when I write about celebrities and their estate plans it is to point out something they may have done wrong, but today I am pleased to report that I am able to discuss one celebrity who may have done things right.  Early reports, citing TMZ (seriously, where do they dig this stuff up and how ridiculous is it that I am citing it?), indicate that Robin Williams may have used a revocable trust as his primary vehicle to transfer his assets at death. 

There are a number of reasons a revocable trust may be the perfect estate planning tool, but primary among them is privacy: a revocable trust is a private document that normally will be unavailable to the public, an important consideration for a public figure. In contrast, consider the cases of Phillip Seymour Hoffman and James Gandolfini, among others, whose wills and dispositions from their large estates were on public display.  A will is a public document, filed with the court in a probate proceeding, and as such is available to the public; a trust is not automatically subject to probate or court jurisdiction.  If a client-say a celebrity, an athlete, or even a resident of a small town full of nosy neighbors—ever has a need for privacy, the revocable trust is the preferred instrument.

A revocable trust can also reduce (but not eliminate) the possibility of intra-family drama surrounding the estate plan.  A revocable trust avoids a probate proceeding, without which no notice to family members and heirs is necessary.  Only the named beneficiaries need to get notice of the distribution from a trust, unlike in probate where all defined heirs, along with named beneficiaries, are required to receive notice.  This means that a child or someone else who intentionally may have been excluded as a beneficiary will receive notice and will be an interested party in a court-supervised probate proceeding.  It is still possible to bring action to determine the validity of a trust, or to contest distributions from a trust, but a party who might wish to press such claims may never even receive notice that the trust exists.

Just because Robin Williams appeared to use a revocable trust instead of a will as his primary estate planning vehicle doesn’t mean his estate plan was perfect, but it does mean he was able to ensure that the division of his assets will remain private.

One caveat: revocable trusts are only helpful if you have actually transferred your assets to the trust.  In many jurisdictions if you have more than $50,000 or $100,000 in assets titled in your own name, and not in the name a trust or a designated beneficiary or in common ownership with another person, a probate proceeding will be necessary even if a revocable trust exists.

Wednesday, August 13, 2014

What: T. J. Stiles, The First Tycoon: The Epic Life of Cornelius Vanderbilt (Alfred A. Knopf, 2009)

Why:  How one man, starting with little but his ambition, built a transportation empire and shaped the infrastructure of the American economy in the process.

It is not unheard of for entrepreneurs with whom members of our Entrepreneurial Services Group work bemoan how they are hampered by legal regulation at almost every turn. How much more they could achieve if only the government would keep its nose out!

So what was it like in the good old days? Enter T. J. Stiles, whose biography of Cornelius Vanderbilt quite justifiably won the National Book Award for nonfiction in 2009 and the Pulitzer Prize for Biography in 2010. In the interests of full disclosure, I note that I take a certain vicarious pleasure in these achievements, as both Mr. Stiles and I were history majors at the same small Midwestern liberal arts college, he being of somewhat newer vintage than me.

Stiles gives us a front row seat to the development of an economic empire that began with a ferry plying its trade between Staten Island and Manhattan and ended—many, many millions of dollars later—with a near-monopoly in the railroad industry. All mostly accomplished by Vanderbilt’s drive to run any business in which he was involved better than any of his competitors.

Along the way, we witness the growth of the stock market, the transformation of the corporation from a vehicle for public works to an engine of private business, and the boom in transportation that drove American economic growth in the 19th century. Vanderbilt was a part of it all, and himself played a crucial role in the transformation of the United States from an agrarian-based society to an industrial giant.

In all of this, the law lagged behind the growth, but the growth clearly drove the law. Vanderbilt himself resorted to the courts only rarely, preferring to use his economic power to punish rivals. Vanderbilt’s obituary quotes a letter he purportedly sent to partners who had double-crossed him. The letter actually never existed, but perfectly captures Vanderbilt’s attitude: "Gentlemen: You have undertaken to cheat me. I won't sue, for the law is too slow. I'll ruin you. Yours truly, Cornelius Vanderbilt."

Perhaps Vanderbilt’s life is best summarized by this dust-cover blurb: “He was a visionary who pioneered business models. He was an unschooled fist fighter who came to command the respect of New York’s social elite.” This is an excellent read, an inspiration for any entrepreneur, but at some 585 pages not for those adverse to commitment or faint of heart.