Tuesday, July 16, 2019

Protecting Artificially Intelligent Technologies

By Shantal Pai and Amanda McAllister

Artificial intelligence (AI) is becoming increasingly integrated into modern life. From self-driving cars to smart toothbrushes, AI can and will change the way we interact with the world around us.

The proliferation of AI has some inventors and designers considering how they can protect AI-related technologies through intellectual property rights. There also has been much discussion around how to build, design, and protect AI-related technologies without reinforcing biases and while still ensuring due process rights. 

As AI technology evolves, it has been less and less clear how intellectual property protections will apply to these technologies. For instance, most AI-related technologies are ineligible for patents. Courts refuse patents for “abstract ideas,” including software, and consequently, critical components of AI technologies, including data compilations and source code, may be ineligible for patent protection. 

Consequently, many have been looking to trade secrets as a potentially viable way of protecting rights in AI-related technologies. Trade secrets law protects economically valuable secrets when reasonable measures have been taken to protect their secrecy. In order to protect an AI-related technology as a trade secret, an AI developer must be able to do two things: (1) articulate what the trade secret is, and (2) take steps to protect the secrecy of the technology. 

Wednesday, July 10, 2019

Advertising Law and Social Media Law – A Case Study for Entrepreneurs

By Jonathan Husted and Kirsten Donaldson

All startups and budding entrepreneurs want to get the word out about their business, and social media makes advertising extremely accessible even for entrepreneurs with low marketing budgets.

Like everything else though, advertising — including advertising done on social media — must be truthful and nondeceptive and abide by a certain set of rules. What potential pitfalls might be waiting for a new business advertising on social media? Let’s take a look…

Meet Sally. Sally is excited to launch into her second career — operating a mobile ice-cream food truck called “Scoops in the City!” Sally used some of her savings to purchase and refurbish a used food truck, and is employing her daughter Madison specifically to launch her new venture’s social media presence. Sally loves her city, and she wants her ice-cream truck to be associated with the same charming aspects of the city that makes her call it home, including the well-known local baseball team. And you really can’t miss the truck — Sally commissioned a friend of hers to paint the truck to look like an ice-cream sundae, with bright and sparkly sprinkles all around. Now Scoops is ready for business!

Scoops plans to park outside the local baseball stadium before games to catch families on their way to and from the ballpark. One morning, Madison suggests that they have an informal photo shoot that evening when Sally takes the truck to the stadium so she can post pictures on various social media pages. Madison’s friend, Sawyer, has a camera and considers himself a semiprofessional photographer, and he’d be happy to stop by the stadium to take some pictures for Sally as a favor — no photography contract needed among friends, he thought.

Tuesday, July 2, 2019

MN DEED Now Accepting Applicants for Minnesota Angel Tax Credit Program

Summer is in full swing and as you prepare to head to the cabin for the fourth of July, now is a good time to review exciting news for Minnesota entrepreneurs! After a several year hiatus, as of July 1, 2019, the Minnesota Department of Employment and Economic Development (DEED) once again accepts applications from businesses, investors, and funds to participate in the Minnesota Angel Tax Credit program. If you are an avid follower of this blog (and you should be), you probably are already aware of the historical popularity of the Minnesota Angel Tax Credit and some of its limitations. If you are not a frequent reader or are new to the entrepreneurial scene in Minnesota, below are some highlights of the 2019 Angel Tax Credit program.

  • Minnesota’s Angel Tax Credit provides a 25% credit to investors, or investment funds, that make equity investments in early stage companies (with a particular focus on high technology, new technology, or new proprietary products, processes, or services in select fields). 
  • The maximum credit is $125,000 per person, per year ($250,000 if filing jointly) and the credit is both refundable and available to residents of other states and foreign countries. 
  • For 2019, the Minnesota legislature allocated $10 million of tax credits for eligible investments. Until September 30, 2019, $5 million of that $10 million is reserved for businesses owned by women or minorities, or for businesses located outside of the seven county metro area. Beginning on September 30, 2019, any portion of that $5 million that has not been allocated will be made available for all other eligible investments.
  • If you are planning to use the Minnesota Angel Tax Credit for an investment in 2019, you should plan on becoming qualified as soon as possible. Many companies are submitting applications now, and some have even delayed financings that would have been otherwise completed at this point in the year.

As a reminder, the process requires that the company be certified as a qualified business and that the investor also be certified as a qualified angel. Both of these steps require filings with DEED. Once the company and investor are both certified, they must jointly submit a credit allocation application. 

Thursday, June 20, 2019

Summertime is a Great Time to Check Up on Your Business

This time of year, we get to dig deep into storage and pull out the summer lake toys, dust off the lawnmower, and laze in the sun, which appears to have finally come out of hibernation. But it’s also a great time to run a quick check-up on our businesses, and make sure they’re fresh and ready to go for the busy seasons ahead. I’ve put together a short list of the most common “forgotten items” I find in discussions with clients and friends. How are you doing on this list?

  1. Annual Renewals. In Minnesota, if you filed a Certificate of Assumed Name, Minnesota Business Corporation, Foreign Business, Non-Profit Corporation, Cooperative, Limited Liability Company, Limited Liability Partnership, or Limited Partnership with the Secretary of State, you must file an annual renewal, beginning the year after your original filing, or else risk being “statutorily dissolved” (no longer be recognized as existing in Minnesota). If your entity has been statutorily dissolved, you can usually have it retroactively reinstated, but you will pay a fee for this, so don’t be late! Annual renewals, which also are usually filed along with a corporate tax return, are easy and free on the Secretary of State's website
  2. Annual Elections and Actions. If your entity is governed by a board or managers, and if your entity has officers, it’s a good idea to hold regular “elections” for those people (or entities) in accordance with your governing documents and applicable. This helps prove the legitimacy of your entity (one important factor when it comes to protecting personal assets from corporate obligations), and keeps your paperwork in order in case you need to prove anyone’s position (for example, if you apply for a loan or engage in a transaction later in the year). Depending on your governance structure, you may also need to keep up on at least annual written actions to ratify your previous acts and attend to other required business.
  3. Insurance. Even if you keep the same insurers and policies, it’s smart to meet with your insurance agent and go over your coverage. Have you acquired any new assets and forgotten to notify your insurer? Has the number or status of your employees changed? You could save yourself money by reporting changes, and most importantly, ensure that you are properly covered.
  4. Agreements. Are you familiar with any expirations or renewal options that may be coming up in your leases, vendor contracts, licenses, or other agreements? Even if an agreement doesn’t expire for another six months or even a year, deadlines for exercising renewal options can sneak up on you. You don’t want to miss these if they mean more favorable rates or uninterrupted business (or simply retaining your space!). Take a look through the terms and calendar your action items ahead of time.
  5. Addresses and Personal Info. Do you have current contact information for all your employees? Do you have a W-9 or at least a social security number or tax identification number for any independent contractors? It’s much easier to collect these items while people are present and willing than after they’ve collected payment and disappeared, so approach them now.
  6. Required Employer Postings. State and federal laws mandate certain posters be placed in an easily visible location in the workplace for employees. These posters are updated from time to time and must be kept current to comply with law and mitigate exposure to employee or regulatory claims. Most states provide them for free; in Minnesota, you can download and print the state posters and access most of the federal posters online.

This is just a brief list of the most frequently overlooked items I see. What else have you remembered last minute, or forgotten until it lapsed? I’d love to see your reminders for fellow entrepreneurs in the comments below! 

Wednesday, June 12, 2019

FDA Food Labeling Requirements

What do a package of ground beef, a box of tortilla shells, a bag of Mexican style cheese, and a jar of salsa have in common? The best answer is that, together, they make a great meal. The second-best answer is — you guessed it — that they are all subject to the Food and Drug Administration’s guidance on food labeling. 

The FDA is responsible for ensuring that food products are properly labeled. The federal Food, Drug, and Cosmetic Act and the Fair Packaging and Labeling Act are the federal laws governing food products under the FDA's jurisdiction. Like a lot of regulations, these laws are long, dense, and detailed, and certainly don’t make for easy reading (although they are great if you are having a bout of insomnia).

Fortunately, in January 2013, the U.S. Department of Health and Human Services issued a 132-page Food Labeling Guide. The guide unpacks and summarizes those dense, detailed laws on food labeling in an easier-to-understand way. 

Friday, May 31, 2019

Musings of a Privacy Professional

My random hopes, fears, thoughts, predictions, advice, and personal observations on GDPR, CCPA, NSA, and other privacy and data security matters:

  • Despite the intense lobbying efforts of tech companies and others, Congress — fearful of the California Consumer Privacy Protection Act (CCPA), which becomes effective January 1, 2020 — will not pass a new comprehensive federal privacy and data security law this year.
  • Plaintiffs’ lawyers will start gearing up for the class action lawsuits they hope to bring under the CCPA. Lawyers who have already benefited enormously from the Telephone Consumer Protection Act (TCPA) private right of action for noncompliant text messages and robo calls will likely add this new lucrative specialty to their practices.
  • Regarding the General Data Protection Regulation (GDPR), fatigue has set in and, except for one large fine against Google, we have seen limited enforcement actions by the Europeans. Expect to see more actions against companies who have failed to comply with GDPR requirements regarding transparency, data breach, cross-border data transfer, and data access requests. It is never too late to consider a GDPR compliance review.

Thursday, May 23, 2019

Time to Reconsider Electronic Corporate Actions?

For some companies, formal recordkeeping of corporate actions is a burdensome task. Decisions must be made quickly, and officers and directors are spread across the country or even the world.

So it’s no surprise that companies are increasingly relying on technology to communicate with officers and directors and document corporate actions. But, as a decision earlier this year by the Delaware Supreme Court illustrates, operating on such an informal basis may have unintended consequences for a company.

In its decision, the Delaware Supreme Court held that a corporation may be required to produce emails and other electronic documents to satisfy a shareholder’s legitimate request to inspect corporate books and records pursuant to §220 of the Delaware General Corporation Law. This article summarizing the case quotes the Court as holding: 

…if a company observes traditional formalities, such as documenting its actions through board minutes, resolutions, and official letters, it will likely be able to satisfy a §220 petitioner’s needs solely by producing those books and records. But if a company instead decides to conduct formal corporate business largely through informal electronic communications, it cannot use its own choice of medium to keep shareholders in the dark about the substantive information to which §220 entitles them.”

Under this ruling, the inspection rights granted under §220 are not dependent upon the existence of pending litigation but simply require that a shareholder present a proper purpose(s) and demonstrate how the requested information is “essential” to accomplishment of that purpose.