Come and Hear GPM at MobCon 2013

Gray Plant Mooty is excited to be a sponsor of this year’s MobCon conference, taking place next week (November 7th and 8th) at the Hilton in downtown Minneapolis. MobCon touts itself as the “premier mobile conference for executive, IT, and mobile strategy business professionals,” focusing on strategy, technology, and marketing best practices in the skyrocketing mobile industry. Organizers anticipate this year’s attendance to reach up to 800 individuals from across the country, who they hope will gain knowledge, share ideas, and become inspired by the event. 

In addition to presentations from over 70 speakers including Carl Schachter, one of Google’s Vice Presidents, Jeff Anderson, Director of Corporate Communications for the Minnesota Vikings, and Jason DeRusha, a news anchor for WCCO, attendees will hear from some of their favorite Gray Plant Mooty attorneys.  Chris Carlisle, a principal in our firm’s corporate group with a broad background in entrepreneurial services, Jennifer Debrow, a partner practicing intellectual property law with expertise in the technology space, and yours truly, will all be present – and presenting – for parts of the event. 

Specifically, Chris Carlisle will be participating on a panel with representatives from Lazard Middle Market, MentorMate (a mobile application development company), and StarTec Investments, LLC, on financing strategies for mobile companies (part of the “highlighted successes” theme at the event). Jennifer and I will be presenting a “best practices” session on “Avoiding the Legal Landmines of Mobile,” which will focus on key current legal issues in the mobile application space. These issues include development and protection of intellectual property, privacy and security concerns, advertising regulations and disclosures, and distribution matters such as developer and end-user license agreements. 

MobCon will also feature an application developer competition, “MobDemo,” with prizes of credit toward mobile development from MentorMate being awarded based on attendee votes. 

Last year’s affair apparently sold out, but it appears that registration for next week is still occurring through MobCon’s Eventbrite site.  Come and hear thought leadership on everything from innovative strategy to advanced technologies in the mobile space – and don’t forget to stop by and say hello to Gray Plant Mooty!

A Post by Karen Wenzel, Guest Blogger

Facing the Music

Every so often I notice a news item about a lawsuit being brought by ASCAP or BMI to enforce their music licensing rights against some small bar or restaurant.  ASCAP ( American Society of Composers, Authors and Publishers) and BMI (Broadcast Music Incorporated) are performing rights organizations (PROs), as is the much smaller SESAC (Society of European Stage Authors and Composers), each of which licenses and enforces the public performance rights of various music copyright holders.   The news articles frequently present the PRO as aggressive, maybe even bullying, and generally unreasonable in its demands, which could potentially endanger the very livelihood of its target’s business.

Having represented parties that are the subject of a PRO investigation and claim, I often wonder how the business owner has let the matter get to the point of litigation.  Yes, these PROs are tough, but in my experience, they don’t rush to sue.  Their goal is to get you under a license going forward.  

To be fair, there are good reasons for some business owners to be frustrated with the system.   Many copyright owners also have issues with the PROs.  But without the PROs, things could actually be worse.

The application of copyright laws to music is complex.  Separate rights in a single piece can be held by composers, lyricists, arrangers, performers, publishers and/or labels.  Each owner has the right, among other things, to determine who may perform the work.  Anyone desiring to play a particular composition in a piano bar or a recording as background music in their hotel lobby would - without PROs – be required to locate and negotiate a direct license with each copyright owner.  On the flip side, each copyright owner would have to independently watch and enforce its ownership interests.

The PROs operate as collectives to protect and administer performance rights for the artists and other copyright owners, while at the same time offering a convenient method to make performance rights available to the public.  Without them, you would either have complete disregard for the artist/performance rights, or very limited public access to much of the today’s available music.

The bad rap given the PROs relates to their reach (virtually any live music performance or non-private playing of recorded music, including such things as the use of a boom box for an aerobics class, musical background for trade shows and conventions, festival performances and contests, etc.), the mysterious calculation of license fees (which, depending on the license, may be tied a building’s square footage, percentage of revenue from entertainment, number of seats or hotel rooms, or the number of employees/students/parishioners), and the fact that a license can be demanded even though you have only unknown performers  (not members of any of the PROs) who perform only their own music.  The PRO’s argument is that a performer might sing someone else’s song, and then where would you be?  

But despite these things, they also give some uniformity and certainty to what could otherwise be a chaotic system.  My advice for those not under licenses:  Be pro-active. Check out the web sites of the various PROs – you might be surprised to find an applicable exemption or that your potential license fees are surprisingly affordable.

If you are contacted by a PRO, do not ignore them.  They will not go away.  If you are attentive and courteous, you may get by with nothing more than an admonishment and a reasonable license for future activity.  If you ignore them or make no effort to compromise, you will get sued, and in addition to demanding a license for future activity, the PRO is likely to claim damages for past unlicensed activity – up to the statutory damage amount of $150,000 per song.  And for the record – they always win.

What Could Be More Fun Than A 585-Page Release on Proposed Crowdfunding Rules?

After about 18 months of eager anticipation, the SEC just published its proposed rules regarding Crowdfunding under the Title III of the JOBS Act. The release is 585 pages long so I’d suggest it may be an ideal time to buy stock in companies that supply paper to law firms across the country!

Unlike the recent changes under Rule 506 detailed in this prior post, which permit raising capital from accredited investors only using general solicitation (if you jump through all the right hoops to verify accredited status), the Crowdfunding rules, once finalized, will permit the raising of small sums of money from a large number of investors (whether accredited or not).

Unless you’ve been living in a cave, you know that companies have been crowdsourcing capital (on sites like Kickstarter and indiegogo ) for a while. Of course, this capital hasn’t come with any equity strings attached (maybe just a T-shirt or beta test promise). Title III of the JOBS Act is supposed to change all of this by permitting up to $1 million in equity capital to be raised in any twelve-month period from all types of investors.

Since these are only proposed rules (it took almost a year to get from proposed rules to final rules on the Rule 506 general solicitation), I haven’t yet dropped everything else on my desk to pour through all the details. A couple of key things to know that haven’t changed since I wrote about the crowdfunding provisions of Title III back when the JOBS Act was originally passed:

·         These are still just proposed rules. You still cannot conduct a crowdfunded securities offering (general solicitation with unaccredited investors) until the final rules are adopted (likely a minimum of months from now). You don’t want to end up like the buy a beer company guys.

·         There are still many requirements in the proposed rules that could limit the usefulness of crowdfunding for most companies. These include certain financial disclosures (depending on the amount of total capital being raised), other mandatory disclosures, the use of a broker or "funding portal,"  along with some ongoing reporting obligations to the SEC. The bottom line may be what I said in my original post:  “You won’t be able to do it without the assistance of a skilled securities lawyer (and, depending on the amount you’re raising, an independent CPA).”

·         There’s still quite a bit unresolved about crowdfunded equity offerings. For example, state securities commissioners (like Ohio) appear openly hostile to equity crowdfunding.

As with every JOBS Act post, stay tuned for updates as the final Title III Crowdfunding rules develop.

L.C.—Laguna Beach Entrepreneur

Over the last week or so news broke that Lauren Conrad is engaged to budding lawyer, William Tell.  I am positive that almost no one reading this post knows who Lauren Conrad is, but to me she will always be the infamous L.C. on Laguna Beach and Lauren on The Hills, and she is now a notable fashion designer and author.  William is touted as a “normal guy” but he is another OC native, successful songwriter, and USC law student.  

Lauren is probably one of the only people to make money as a reality television star (during The Hills she was paid $2.5 million per year) and then successfully branch out into the real world as a successful business woman.  She currently has 8 published novels, a line of clothing, jewelry, and shoes with Kohls department stores, and a line of bedding.

I bring up Lauren for three reasons: (1) I shamelessly loved Laguna Beach and The Hills, and it is nice to see someone with a publicly tragic love life end up happy, (2) she is a young entrepreneurial woman who has turned her fame into a budding empire, and (3) she serves as another reminder of why successful entrepreneurs (or ones who expect to be someday) should consider some thoughtful premarital planning.

If you have business interests that are growing or will be inherited after your marriage, especially if you are active in the growth of that company (you are running the company, you are the face of the company, you supply the ideas of the company, anything like that), you should know that from the date you are married, one-half of that growth belongs to your spouse.  Even more so in a community property state (like California), where from the date you are married half of everything you acquire, including half of appreciation on any assets you brought to the marriage, will belong to your spouse.  Of course, this assumes the business will grow, but the same applies if businesses decline.  In the same way that appreciation belongs to your spouse, debt or other credit obligations can become responsibilities of your spouse and could subject their separate assets to your (or your company’s) debts.  Any personal guaranties or other obligations could become your spouse’s obligations without a marital agreement.  

A marital agreement (prenuptial and postnuptial) could address and opt out of this treatment of premarital business assets, and any other premarital assets, and are a critical tool in an entrepreneur’s toolbox.  If you want to partner in a business with your spouse (I wouldn’t recommend it), draft a good partnership agreement.  Don’t fight this out later in a divorce court; that is ugly for you, the business, and its employees. Remember them?

Musings From Copenhagen

On September 12 I had the privilege of speaking in Copenhagen at a business forum on navigating intellectual property issues when doing business in the United States. I was invited by the Danish American Business Forum and Biopeople, an organization established and funded by the Danish Ministry of Science, Innovation, and Higher Education.  

Here are a few reflections on my trip:

The Danes are extremely healthy and very, very good looking! This may be a result of their extensive use of bikes as a primary mode of transportation, or perhaps because they walk (and walk everywhere). Everyone looks like they just stepped out of Vogue or some other fashion magazine. It is amazing to watch the Danes jump on their bikes after work wearing finely tailored clothes.

American lawyers are treated with great respect by Danish businessmen and women. This may be because we are more experienced than Danish lawyers in handling disputes or identifying the potential risks and issues in putting together a business deal. There is just not as much litigation, or as many business disputes, in Denmark.

I shared the podium with two Danes. One was a Danish intellectual property lawyer and the other was the director of intellectual property and technology transfer at a Danish university. Interestingly, Danish universities face the same issues as tech transfer offices at American universities. How do you commercialize the results of research and development undertaken by students and professors? There was a professor and some graduate students in attendance so the discussion was lively. They were especially interested in the Myriad case, the United States Supreme Court decision that human genes cannot be patented.

You can view our powerpoints on the Biopeople website and watch a video that was prepared during a break in the workshop.

Biopeople is also organizing a trip to Minneapolis for interested Danish businesses on November 18-22. Some of those who attended the September workshop in Copenhagen may be taking this trip.  They will be visiting Medtronic, St. Jude, and other local life science related businesses.  On November 20, they will attend the Life Sciences Alley Conference Healthcare Transformation—Surviving the Shift. 

Now for some travel tips:

One of the most beautiful museums in the world is Louisiana, a one hour train ride from Copenhagen.

Forget about the Little Mermaid.  She is very little and not worth any extra effort to visit. If you feel compelled to see her, continue walking to Kastellet, a beautiful public park. 

Skip Tivoli Gardens unless you have kids and are looking for a Danish version of Disneyland. Tivoli is actually what inspired Walt Disney to open a similar clean and orderly amusement park in California.

Skip the hotels and find a nice apartment in one of the neighborhoods such as Vesterbro or Frederiksberg.  These websites usually offer many options.    

Forget the car. It is easy to get around the city by bus, metro, train or bike and you can walk to just about any point of interest. Purchase a city pass for unlimited rides on all public transit—including canal boats!

Go biking in Dyrehaven - the royal hunting ground and park where you will encounter large numbers of red and fallow deer. It is also home to the Hermitage Palace.  

See the Islamic Art that is part of the David Collection. 

Stroll through Frederiksberg Park, one of the largest green spaces in Copenhagen. 

If you are unable to get a reservation at  Noma, one of the top restaurants in the world, dine at any of the wonderful outdoor cafes at Nyhavn or go to Mother, an Italian restaurant in the meatpacking district that features the best pizza I have ever had.

Other fun eating options (assuming again you can’t get a reservation at Noma) include: 

• Organic hot dog from a street vendor on Stroget
• Breakfast at the cafe at the NY Carlsberg Glytopek Museum
• Paradis ice cream 
• Danish licorice

The Book: Raymond Seitz, Over Here (London: Weidenfeld & Nicolson, 1998)

Why: From a former American ambassador to the United Kingdom, a fascinating comparison of the two countries, including the differences in social attitudes that encourage or hinder entrepreneurial activity.

What is it about the United States that nurtures the entrepreneurial spirit?  It doesn’t take great intellectual insight to posit that there must be something about our culture, and—at the risk of incurring Russian President Vladimir Putin’s wrath by making another claim about American exceptionalism - I’m not the only one who has made that connection.

  On the heels of sending my middle child off for another year of postgraduate work at a British university, I have just finished reading this memoir by Raymond Seitz, once the American ambassador to the United Kingdom.  Seitz’s book is fascinating—if somewhat dated—reading for anyone who might be curious about how two countries, sometimes said to be divided by a common language, can be so different. But it is especially illuminating in the way he shines a light on business as experienced on both sides of the Atlantic.

As a basic tenet, Seitz observes that “in Britain, economic questions have social answers” (unlike here, where I would argue the opposite quite often seems to be a fundamental premise). American-style competition is seen as “selfish in its pursuit of profit, too careless in its consumption of gain, and too callous in its disregard of wider responsibility.” To sum it up in one idea, “for the British, enough is enough; for Americans, enough is a beginning.” 

These attitudes can weigh heavily on those who seek to create, to expand, and to build, and “many British who go to America stay there precisely because they enjoy the invigorating sense of economic liberation.”

The American “can-do” spirit really seems a fundamental part of successful entrepreneurship. Why else would anyone even attempt to start a business against such staggering odds of failure?

CoCo Named Part of the Google for Entrepreneurs Tech Hub Network

Local coworking space CoCo recently received some really good news.  CoCo was named one of seven locations in the Google for Entrepreneurs Tech Hub Network.  This is great news for the Twin Cities and the tech entrepreneurs located here. As part of the tech hub network, CoCo and its members will receive funding from Google, discounts on Google products, and the ability to work with Google mentors. CoCo will also be able to participate in quarterly conference calls with the other tech hub networks to share their experiences and insights.

For those of you who don’t know, CoCo (which stands for coworking and collaborative space) has been operating two coworking spaces in Minneapolis and St. Paul, with a new location opening soon in Uptown. The CoCo location in downtown Minneapolis is on the old trading floor of the Minneapolis Grain Exchange (very cool ambience).  CoCo has “members” who purchase time to work out of one of CoCo’s locations. Some companies or people have permanent space at a CoCo location, while others have memberships that permit them to use a location on a less permanent basis.   

In its announcement, Google said that it wanted to support a changing trend it has noticed in entrepreneurship over the last several years. That trend involves entrepreneurs working alongside other entrepreneurs in accelerators and coworking spaces, rather than holing up in a garage alone or with a few other people. 

Gray Plant Mooty’s entrepreneurial services group recognized this trend and became a CoCo supporter last year. In fact, several of the authors of this blog regularly spend time at and work from CoCo. As one of those regular attendees, I can attest that it has an unmistakable and palpable creative energy. With so many eager entrepreneurs in one space, you can always find an interesting conversation with someone you’ve never met before.  Ideally, you’ll make a connection with someone that will allow you to advance your business or concept. And if not, at least the coffee is pretty good.  

Having CoCo named as a Google for Entrepreneurs Tech Hub Network is a big boost for our tech community and is validation of the great work that the CoCo team has done in creating a vibrant and inspiring environment for local entrepreneurs.