Thursday, July 25, 2013

Latest Trademark Email Scams

Do you ever notice how scams seem to run in cycles?  One week you’ll get three offers for a pre-approved loan upon the payment of an upfront fee, and then a couple of weeks later, you win four different jackpots in the Swedish lottery.

The last few weeks, there has been a flutter of solicitation activity among our trademark clients.  These are interesting in that they don’t appear to be complete frauds.  They generally offer to perform legitimate services, although perhaps unnecessary or at inflated prices.  They typically come on official looking letterhead (or email-head) from an organization whose name includes “agency” or “office.”  They frequently – but not always – expressly state (usually in the small print) that the communication is a solicitation, and not an authorized communication of the United States Patent and Trademark Office.  

Information regarding pending applications and registered trademarks is publicly available and easily accessed over the Internet.  Everything needed to identify and locate the trademark owner, identify the mark by its serial or registration number, and determine due dates for required maintenance and renewal filings is set forth at the USPTO’s web site (as well as the official sites of states and foreign countries).    This information is perfect for enterprising folk looking for easy money.  

There are the notices offering to register marks with U.S. Customs and Border Protection or private trademark listings or directories.  While recording a mark with the CBP may have some value to certain trademark owners, they are of little value to most businesses, and registration alone is generally not enough to prevent the importation of counterfeit or grey goods.  Since registered trademarks are already of public record, there is no apparent value in also having a separate commercial listing.

While there is little value in the services offered under these solicitations, there is little risk if the services are not actually performed.  That is not the case with solicitations to provide services in connection with required maintenance or renewal filings.  If those services are not actually performed, the trademark owner not only loses its money, but potentially risks losing its registration.   If those services are performed, there could still be problems with faulty specimens or inaccurate representations that might not be discovered until after it is too late to correct (for example, when challenged by a third party or upon attempting to file a subsequent renewal).

I don’t know of anyone using such a service, so I can’t say that any are outright scams (although the one claiming that renewals are due every five years – actually it is ten years – is highly suspect).  If any readers have had any experience with one of these organizations, I would be interested to know if the filings or recordations were actually made, and if made, whether there were any problems encountered in connection with the services.

P.S.  If you like the content of entreVIEW (my posts or those of my fellow authors), please consider nominating us to the ABA annual list of top 100 Blawgs.

Monday, July 22, 2013

British Royal Baby Billionaire

As I write this post, most of the world is holding their collective breath waiting for the royal baby to arrive.  The Brits and much of the world are fixated on the fact that the next royal heir is about to enter the world.  I, on the other hand, keep thinking about how filthy rich this baby already is!  Do the royals pay inheritance tax?  What will the baby inherit?!

According to data from Wealth-X, an organization that tracks wealth information for ultra high net worth individuals, it is estimated that the royal baby will inherit approximately £1 billion (or about $1.5 billion U.S.) based on the estimated fortunes of other family members.  Queen Elizabeth II’s fortune is estimated at $660 million, with about $58 million in annual income.  And these figures don’t even include the crown jewels or other family heirlooms.  Even young William is estimated to be worth at least $20 million.

I was also surprised to learn that until 2011, if the Duke and Duchess of Cambridge gave birth to a girl, she may not have inherited the throne.  With Queen Elizabeth II having recently celebrated her diamond jubilee and 60 years on the throne, this very recent change to the law shocked me.  The leaders of the 16 Commonwealth countries actually had to agree to amend the succession laws to allow succession to the throne based only on birth order, and so now a daughter can inherit the throne, and not only when there are no sons (as was the previous rule). Now, whether a boy or a girl, the royal baby will be third in line to the throne.

Second surprise of the day: the monarchy is EXEMPT from inheritance tax (at a whopping 40% rate)! Apparently the Queen made an agreement in 1993 that leaves her exempt from this otherwise steep tax. Convenient.

Finally, just because I think it is entertaining (and I feel like I am writing part of Game of Thrones), the royal baby will inherit the following obscure items

The Dutchy of Lancaster, 46,000 acres of land with various structures worth about $300 million and earning about $13 million per year in revenue;

The use of numerous royal establishments, including Buckingham Palace, Clarence House, Hampton Court Mews and Paddocks, Kensington Palace, Marlborough House Mews, St. James’s Palace, and Windsor Castle;

The use of the crown jewels (tiara party, anyone??); and

Fishes Royal, or any sea life captured within 3 miles of shore.  Seriously.  This is based on a statute from the 1300s, and technically could still apply. What baby doesn’t want a dolphin for a pet?

This plan is slightly different from my parents’ estate plan, but then I guess I didn’t grow up in Buckingham Palace!

Thursday, July 18, 2013

Business Lending to Female Entrepreneurs on the Rise


A recent article related to female entrepreneurs caught my eye.  In connection with National Women’s History Month this past March, Wells Fargo announced its plans to commit to lend a total of $55 billion to U.S. women-owned businesses over the next seven years. While I was excited to read about this commitment from our country’s premier small business lender, I was more interested to learn that this isn’t the first time a bank like Wells Fargo has made such a pledge. 

Apparently, Wells Fargo began making lending commitments targeted at businesses owned and operated by women almost 20 years ago, in 1995, when it strived to lend $1 billion to this segment over a three-year time span. Their goals have continually increased, with this most recent target being the most aggressive yet.

And Wells Fargo is not the only national bank that caters to specifically women-owned businesses. For example, PNC Bank has a training program tailored specifically to bankers who want to work with women-operated small businesses, and there are reportedly 900 “PNC-Certified Women’s Business Advocates” currently, nationwide. KeyBank reported in 2009 that it had provided more than $3 billion to women-owned companies since 2005, and touts its “Key4Women” mentorship program that offers members relevant publications, networking opportunities, and sponsored “relationship managers” to foster development and growth. And the Citi Foundation supports investment in organizations that seek to create opportunities for women without access to traditional credit and funding sources through its sponsorship of the “Women Investing in Women Initiative (WIN-WIN).”

These programs are credited with increasing the prevalence of female-owned businesses in the U.S. According to an article related to the Wells Fargo announcement, female-owned businesses are one of our country’s fast-growing groups. The number of women business owners in the U.S. apparently increased by approximately 20% between 2002 and 2007, and women are currently billed as owning approximately 30% of U.S. businesses. Resources provided by specific lending programs have been recognized for assisting women in obtaining the financing they need to achieve their goals. 

However, there is still room for improvement. A report also published this past March highlights the problems women continue to face in owning a business and obtaining financing. The study found that female-owned companies were up to 20% less likely to be approved for an SBA loan in the last half of 2012. Interestingly, while the statistics reflected that women-owned businesses had generally lower annual revenues and higher operating expenses, an analyst connected to the study explained that this may be because women are more likely to own retail business which historically reflect lower margins and higher operating costs. In reflecting on the findings of the study, this analyst emphasized that being approved for quality small business loans is critical for any entrepreneur – alternative lenders may have higher cost borrowing terms, or founders may even turn to using personal credit cards, both of which could lower credit scores and exacerbate the problem of finding a quality loan. 

Overall, however, the focus on financing for women-owned businesses is promising news for any female entrepreneur. The commitment from large players like Wells Fargo to help develop and grow this segment of our country’s business population is exciting, to say the least.  

A Post by Karen Wenzel, Guest Blogger

Tuesday, July 16, 2013

And now for something completely different

The Book: Linda Greenlaw, The Hungry Ocean (Hyperion, 1999)

Why: From a time before Deadliest Catch began to dominate the Discovery Channel, a swordfish captain’s musings about what it’s like to depend on the sea for one’s livelihood.

Summertime in Minnesota: heat and humidity rising, leading into that short period each year when I truly do understand why other people have central air conditioning in their homes. Normally, I’m a fresh air kind of guy—I prefer the ecologically friendly open window to the steady hum of a cooling unit, but I have to admit that there are times when cooled-air relief would be mighty welcome.

This past holiday weekend was one such time. So, sitting on my three-season porch sweating, in my imagination I enjoyed refreshingly cool sea breezes reading Linda Greenlaw’s The Hungry Ocean, a memoir of sorts about her experiences as the captain of a fishing crew pursuing swordfish off the Grand Banks of Newfoundland.  

Greenlaw, known to many as the female fishing captain who was friends with the doomed captain in the book and movie The Perfect Storm, reminds us that entrepreneurialism comes in many forms, shapes and sizes. She also reiterates that, for most entrepreneurs, money is a secondary motivator. Most simply love what they are doing, and she is no different. 

Her recipe for success?  “Better bait, better fish, better price, better paycheck. The buck starts here.” The specifics change, but most entrepreneurs will recognize the general concept.

Thursday, July 11, 2013

Finally, SEC Adopts Regulation to Permit General Solicitation in 506 Offerings—Worth the Wait?

Yesterday, the SEC adopted its final rules to eliminate the prohibition on general solicitation in Rule 506 Offerings as well as rules that prohibit certain “bad actors” from relying on Rule 506 exemptions. As detailed in my prior post, over 10 months ago the rules were proposed and that was only about two months after they were required to be adopted under the JOBS Act. I’m not sure that Captain Kirk would consider this warp speed….

Undoubtedly, there will be hundreds (maybe even thousands) of summaries of the rules written over the next couple of months. Having reviewed all 116 pages of the release adopting the rules as well as a related 185-page release regarding proposed rules to change the Form D filing requirements (more on that later) plus still managing a slalom waterski run (gotta love the length of the days in Minnesota this time of year), here’s my quick summary of what you really need to know about the final rules:

The rules aren’t effective for another 60 days, so don’t run out and buy that remnant TV ad time from your local cable operator just yet.

The rules don’t really impact existing 506 offerings (now Rule 506(b)), other than some of the proposed rules relating to Form D. If you want to do a 506 offering the “old fashioned” way (without general solicitation or advertising), you still can.  

Also, if you want to commence (or continue) a 506 offering before the new rules are effective, you can later use general solicitation in a “new” 506(c) offering without affecting your exempt status—as long as you comply with the new rules, once effective.

The SEC adopted its general “facts and circumstances” approach to how issuers in Rule 506 offerings using general solicitation must take reasonable steps to verify accredited status.

The general approach requires issuers to consider certain factors (nature and available information about the investor, nature and terms of the offering, manner of solicitation, and investment amount).  However, doing everyone a favor, the SEC added a non-exclusive list of four methods for verifying that a natural person is accredited that are deemed to meet the reasonable steps requirement:

o Issuers can review IRS filings to confirm annual income, along with a written representation from the investor regarding their expectation of reaching the necessary level of income in the current year.

o In verifying net worth of a potential investor, issuers can review certain listed types of documentation (bank and brokerage account statements, independent appraisal reports, certificates of deposit, and similar items) to determine the total assets and are required to review at least a credit report (from one of the nationwide reporting agencies) to determine liabilities, along with representations from the investor that all liabilities have been disclosed.

o Issuers can get written confirmation from any of the following types of individuals that they have taken reasonable steps to verify the accredited status of the investor within the prior three months:

Registered broker-dealer
SEC-registered investment advisor
Licensed attorney
CPA

o Finally, if there are existing shareholders that invested in a prior Rule 506 offering as accredited investors, issuers can meet the verification requirement by having such individuals re-certify accredited status for the current offering.

Because there will be a new box to check on the Form D (and it looks like the proposed regulation on Form D amendments will make the filing mandatory for 506 offerings with some penalties for non-compliance—see below), you’ll need to decide whether you are going to use a general solicitation and comply with the verification requirements to confirm that all investors are accredited or rely on the existing rules (without using any general solicitation).

There are also final rules regarding the use of general solicitation by private funds, the adoption of the proposed amendments to Rule 144A for offerings to qualified institutional buyers, and how the new offerings related to offshore offerings and Regulation S (it’s a whole alphabet of fun for securities lawyers), but those are probably not as important to the entreVIEW reader as the rest of what’s detailed above.

The Good News—adding specific enumerated ways (albeit non-exclusive) to meet the verification requirement to the rules as originally proposed should at least provide some certainty for entrepreneurs raising capital.

The Bad News—as promised above, there is a whole set of new proposed amendments to the Form D filing requirements for Rule 506 offerings (some which would apply even to offerings that don’t use general solicitation). Just for fun, the SEC seems to be making life more difficult with these proposals for those raising capital right on the heels of adopting final rules which were supposed to make it easier.  I’m not going to detail all of the proposed rules here (because most readers of this blog probably had only the attention span to get through about the first two paragraphs anyway), but the key points are:

A Form D filing would be required before any general solicitation happens (rather than after the sale of securities as is the current requirement).
Updated “closing” Form D’s would be required for all 506 offerings once they terminate.
Requiring certain legends and other disclosures in offerings that use general solicitation (not a huge deal, because much of this is typically covered already in offering materials).
Require (at least for the next two years) that written general solicitation materials be filed with the SEC.

Perhaps of most importance in the proposed rules, the disqualification of an issuer from using Rule 506 for future offerings if it has failed to make required Form D filings within the last five years.  I guess the cavalier practice of some securities lawyers (you know who you are) to advise clients there isn’t any reason to make the filing could become a thing of the past, although the proposed rules have already drawn some critcism from a couple of commissioners who think it undermines Title II of the JOBS Act.  I can't say I disagree. 

Stay tuned to see what happens with these proposed rules (and the Crowdfunding rules, which haven’t even been proposed yet).  Congress giveth and the Regulators taketh away…