BizTech Law Blog

No matter the reason, when selling a business, it is important that the business owner and advisors understand the broader reasons for the sale to ensure that the deal is structured to achieve the seller's goals.

Earlier in the pandemic, our team identified the economic crisis caused by COVID-19 as a growth opportunity for businesses with the vision and the resources to take advantage. One such opportunity is the chance to diversify or grow by acquiring distressed competitors, suppliers, or customers.

The short answer is that it depends, but it is usually advisable and sometimes required. Let’s dig deeper.

Initially, let’s discuss what a PPM is. A PPM is a document that discloses information regarding the company that is seeking to raise investment capital. In some ways, it is like a business plan, but with detailed additions for investment risk factors, securities law provisions, and the proposed terms of investment. PPMs go by a variety of names – including confidential information memorandums (CIMs) and offering memorandums.

The list below highlights some of the frequent legal mistakes made by start-ups. Blunders and mistakes are certainly a part of life and starting a business. But, we hope that the advice below will help you avoid a few.

In a previous blog post, we discussed the key highlights of the new Title III crowdfunding rules. In short, businesses are now permitted (subject to certain rules and restrictions) to use equity crowdfunding to offer and sell securities to non-accredited investors.

One of the key investor protections of Title III is that crowdfunding transactions must take place through an SEC-registered intermediary – either a funding portal or a registered broker-dealer. Broker-dealers are likely to be hesitant to serve as an intermediary in a Title III crowdfunding campaign. The reason is that broker-dealers are subject to extensive rules and regulations. Broker-dealers usually pass along their regulatory compliance costs to customers. However, Title III crowdfunding campaigns involve such small amounts (i.e., $1 million or less) that broker-dealers will likely find it unprofitable to serve the market. 

The long awaited SEC Title III crowdfunding final rules have arrived.

The new rules will open the equity crowdfunding gates to non-accredited investors. Non-accredited investors include individuals: (A) with a net worth less than $1 million, or (B) who have an annual gross income of less than $200,000 (or $300,000 together with their spouse). In other words, businesses will now be permitted to utilize crowdfunding to raise capital by selling their securities to “everyday folks.”

Below are some of the key highlights from the new rules.

What is crowdfunding? Is it legal? Learn the response to these questions and much more in this short video clip:

On October 22, 2014, Governor Snyder signed Public Act 355 of 2014 into law.  The cardinal rule of securities laws is that a person cannot sell a security unless the security is: (A) registered, or (B) exempt from registration.  Public Act 355 creates a new exemption for secondary sales facilitated by a Michigan Investment Market.

Kickstarter is a crowdfunding platform for creative projects. It has helped a wide range of people fundraise to help finance a variety of projects. Often time people overlook the tax implications to successful Kickstarter campaigns. Check out our Tax Law Blog post to learn more about the tax implications>

Since the passing of the Crowdfunding Act in December 2013, many questions concerning the applicability of the law have surfaced. This past month, the Michigan Municipal League launched CrowdfundingMI.com, a website pertaining to crowdfunding in Michigan. It is an excellent resource intended to answer basic questions and importantly, aimed to help local businesses connect with investors. The website provides general information, along with frequently asked questions, and tutorials regarding the benefits of crowdfunding

Part 1 and 2 of this series discussed the basic requirements that must be met to utilize Michigan’s new intrastate crowdfunding exemption.

This post will discuss the definition of an “accredited investor.” The distinction between accredited and non-accredited investors is important. Non-accredited investors cannot invest more than $10,000 under Michigan’s new intrastate crowdfunding exemption. Accredited investors, on the other hand, are not subject to the $10,000 investment cap.

Part 1 of this series discussed the 12 basic requirements that must be met to utilize Michigan’s new intrastate crowdfunding exemption.

This post will take a deeper look at Requirement 2. As noted in Part 1, Requirement 2 states that the offer must meet the requirements for the federal exemption for intrastate offerings under Section 3(a)(11) of the Securities Act of 1933 (the “1933 Act”).

Note: This post is Part 1 of a multi-part series regarding Michigan's new crowdfunding law

It's official, crowdfunding is legal in Michigan. So, what does that mean for your business? Let's start with the basics.

Federal and state law prohibit a business from selling a security unless: (A) the security is registered with the SEC, or (B) an exemption from registration is applicable. Registration is expensive, so nearly all businesses try to satisfy an exemption from registration. Historical exemptions have made it difficult for businesses to receive investment from "non-accredited" investors and flat out prohibit "general solicitation" (i.e., public advertising of the investment, including advertising on the Internet). Those historical difficulties, however, have recently been eased.

Business owners are increasingly turning to cloud storage as an alternative to maintaining their own servers. The three most popular cloud storage services are Dropbox, Google Drive and SkyDrive. Each service comes with a specific amount of free storage and allows users to upgrade for a fee. For a helpful comparison of these three choices, see here. Cloud storage providers are promising upgraded security, but there are certain steps business owners can take themselves to protect their data.

The days of carrying around a work phone and personal phone are quickly dwindling, if not already gone. Instead, businesses are implementing bring-your-own-device ("BYOD") policies that allow employees to access corporate information from their personal mobile device. On one hand, providing employees with mobile access to information increases productivity by allowing employees to work from anywhere. On the other hand, allowing corporate information to be accessed on devices that are mobile and capable of falling into the wrong hands produces a host of new security issues. This creates a difficult balancing act for employers who want their employees to be productive, but still want to maintain control over the information being accessed.

Lansing-based XG Sciences, Inc. has launched a new generation of anode materials for lithium-ion batteries with four times the capacity of conventional anodes. The new anode material is produced through proprietary manufacturing processes and uses XG’s xGnP® grapheme nanoplatelets to stabilize silicon particles in a nano-engineered composite structure. The material displays dramatically improved charge storage capacity with good cycle life and high efficiencies.

This is great news for applications like smartphones, tablet computers, and other products that use rechargeable lithium-ion batteries. XG is working with battery makers to translate this exciting new technology into batteries with longer run-time, faster charging capabilities, and smaller sizes.

Click here for more information about this exciting development.

The White House has declared that the results of government funded research, with certain exceptions for classified data, will be available to the public for free within in a year. Such results include peer-reviewed publications and digital data.

Michigan’s new law, the Internet Privacy Protection Act (IPPA), protects employees, potential employees, students and applicants from giving employers and educators access to their personal social media accounts. Under the new law, accounts such as Gmail, Facebook, Twitter, Tumblr or Twitter are covered. Employers and school administrators can’t discharge, fail to hire or admit or otherwise penalize their current or potential employees or students for refusing their request.

It might be illegal to sell those treasures.

The excitement of the hunt for the perfect item at the flea market or the thrill of selling your relative’s antique lamp at a great price could soon be dimmed by the Supreme Court of the United States. 

Many people love having an application on their iPhone that can convert nearly anything they say into text.  But what does Apple do with what you say to Siri?

Most people are unaware that everything you say to Siri is sent to a data center in North Carolina.  It is sent to Apple in order to convert what you say into text.

Are your e-mails going astray? Do customers claim they have sent an e-mail that you didn’t receive or can’t find

It could be that they were never sent or it could be that a “doppelganger domain” name has been set up to steal e-mails that are supposed to be going to you or other employees of your business.

In 2011, the Internet Corporation for Assigned Names and Numbers (ICANN) removed most restrictions on the names of generic top-level domains.  A top-level domain name is the letters after the “dot” in a website address.  The most common top-level domains are “.com” and “.org”.  Internet domains can now be any phrase and contain non-Latin characters (for example, Chinese, Arabic, etc.).

The applicability of sales tax in Internet transactions is a contentious issue in the state tax arena.  Many Internet retailers do not collect sales tax on their sales unless they have a physical presence in a state.  As a result, states have alleged that they are losing millions in tax dollars and brick-and-mortar retailers are operating at competitive disadvantages to their online competitors that do not impose sales tax.  Although states have encountered Constitutional difficulties in taxing out-of-state retailers, the pendulum may be swinging in favor of the states.

Let's revisit a previous posting regarding the scope of the Fourth Amendment in the digital era. 

Last year, the Department of Justice requested the U.S. Supreme Court to approve the warrantless and covert attachment by law enforcement of a GPS tracking device to an individual's vehicle. The DOJ’s request arose from a U.S. Court of Appeals decision, which vacated the life sentence of a convicted drug dealer.  In that case, the Court of Appeals held that law enforcement violated the individual’s Fourth Amendment rights by secretly attaching a GPS tracking device to the individual’s vehicle without a warrant.

Smartphone usage has skyrocketed in the past few years.  Physicians are no exception to the trend - with more than 81% of physicians using smartphones.  Disturbingly, the number of health data breaches has risen in tandem with increased smartphone usage, and most experts agree that the increase is no coincidence.

Recent reports have indicated that 96% of all health care organizations have experienced at least one data breach during the past two years. Although the report did not detail the number of data breaches attributable to mobile devices, there is agreement that the widespread use of mobile devices is putting patient data at risk.

The Commercial Felony Streaming Act (S.978) is pending introduction to the United States Senate.  If S.978 is passed, it would make the unauthorized streaming of copyrighted material a felony punishable by up to five years in prison.

The potential passage of S.978 has sparked fears that artists like Justin Bieber (who began his quest toward pop stardom by singing covers on YouTube!) could end up in jail. DemandProgress.org has even argued that S.978 could shut down Twitter, YouTube! and other popular sites.

Facebook has reached a settlement with the Federal Trade Commission regarding charges that it violated users' privacy rights.

Why Facebook was under investigation?

In December 2009, privacy advocates filed a complaint with the FTC following certain changes to Facebook privacy policies.   Specifically, the FTC complaint alleged that Facebook made aspects of its users' profiles - such as name, picture, and friends list - public by default and without user consent. The FTC stated that such actions violated user expectations of privacy and threatened the "health and safety" of users by exposing "potentially sensitive affiliations" such as political views and sexual orientation.

The FTC complaint also alleged other situations where Facebook "made promises that it did not keep," such as promising that it would not share information with advertisers or retain data that it promised users was deleted.

With the holiday shopping season gearing up, let's take a look at a common scenario.  Frank, a "last minute" shopper, purchases a great gift from an Internet merchant's website.  The Internet merchant states that the item will be delivered to Frank in 3-5 business days.  Unfortunately for Frank, the item is delivered 5 days late. Does Frank have rights under the law?  Is the Internet merchant required to notify Frank of the late delivery? Read on.

Groupon, Inc. is in the midst of a class-action lawsuit, the result of which could alter the foundation of mobile couponing.  For the uninitiated, Groupon is a group buying website that offers large discounts on local goods and services. Groupon sends subscribers daily emails with promotional offers.  If a specified number of people sign up for the offer, the deal becomes available to all.  For example, a Groupon offer might permit a subscriber to purchase an $80 massage for $40.  The "Groupons" are valid for a certain period of time. According to Groupon's "terms of service," after a "Groupon" reaches its expiration date, it loses its promotional value; however, it can still be redeemed for the price paid.

Cellular phones continue to play an increasing role in our daily lives, allowing us to stay "connected" 24/7.  That "connectivity", however, blurs and erodes the traditional notions of privacy in an individual's daily life.  Now, your boss, email, customers, and friends are never more than a button's push away.

Earlier this year, the Internet Corporation for Assigned Names and Numbers (ICANN), the body responsible for managing top-level domain name spaces (e.g., .com, .org, .edu and .gov), approved .xxx as a new top-level domain name space.  .xxx top-level domain names are intended for adult content.  However, as noted in a prior posting, the .xxx top-level domain could result in unwanted affiliation between your brand and the adult entertainment industry or create an opportunity for brandjackers to register "www.YourCompany.xxx."

What is "intellectual property" and why should it matter to your business? At the most basic level, "intellectual property" is one of an organization's most valuable assets. Intellectual property frequently differentiates extraordinary companies from "average" organizations. For that reason, IP must be zealously protected.  IP breaks down into four areas: patents, trademarks, copyrights, and trade secrets.

Trademark infringement is a reoccurring problem for many businesses.  Recently, Apple, Inc. was denied an injunction prohibiting Amazon.com from using its mark: "App Store." Amazon.com utilized the name "Amazon Appstore for Android."  Despite similarities between the parties' marks and services, the court found that a likelihood of confusion did not exist and Amazon.com did not infringe on Apple's mark.

With that in mind, let's take a look at the basic elements regarding trademark infringement.

Recently, I received a phone call from a client asking for advice on a reoccurring issue.  The client asked: “Do I have legal recourse against a competing website that is utilizing my trademark in its domain name?” 

The short answer is yes, but let's look at the reasons why.

Simply put, a domain name is a Web site's unique address on the Internet.  It can be used to identify organizations and other entities on the Web (e.g., http://www.nike.com).  Like any other advertising message, signage, or other communication, a domain name can infringe upon a trademark.  However, a claim of trademark infringement involves more than simply proving that your trademark is being used in another’s domain name.

The applicability of sales tax in Internet transactions is in the spotlight and one of the most contentious issues in the state tax arena.  With states strapped for cash, some legislatures are focusing on a perceived subsidy that benefits Internet retailers to the detriment of "brick-and-mortar" retailers. Case and point, when you travel to the mall and buy the latest Harry Potter book, sales tax will be charged. However, order that same book via an Internet retailer, such as Amazon.com, and no sales tax is charged. So what gives?

As noted in a previous posting, on June 23, 2011, the America Invents Act (H.R. 1249) passed the U.S. House of Representatives. The U.S. Senate approved a similar bill in March (S. 23).  However, since the bills were not identical, the issue of patent reform must go before the U.S. Senate again. But what are the chances of that happening anytime soon? 

The Internet Corporation for Assigned Names and Numbers (ICANN), the body responsible for managing top-level domain name spaces (e.g., .com, .org, .edu and .gov), recently approved .xxx as a new top-level domain name space.  .xxx top-level domain names are intended for adult content.  However, the .xxx top-level domain could result in an unwanted affiliation between your brand and the adult entertainment industry or create an opportunity for brandjackers and cybersquatters to register “YourCompany.xxx” in order to trade off your company’s brand or extract payments.

In West Virginia v. Dellinger, the West Virginia Supreme Court held that a juror's failure to disclose her MySpace "friendship" with the criminal defendant violated the defendant's constitutional right to a fair and impartial jury.  In Dellinger, the defendant, a sheriff, was convicted of multiple felonies relating to the fraudulent administration of a grant program.  The juror in question was a MySpace "friend" of the defendant and posted a message on the defendant's MySpace page one week before trial.  During voir dire, the juror was asked whether she had any social relationship with the defendant. However, the juror did not acknowledge her MySpace "friendship," and the defendant did not realize that the juror and his MySpace "friend" were one in the same until after the trial. 

Cloud computing and its various delivery methods continue to grow at an impressive rate.  A potent example of this growth is "software as a service," or SaaS, a product that allows consumers to access software remotely over the Internet for a fee.  For example, Google Docs, Google’s “software as a service” office suite, allows users to create documents, presentations, and spreadsheets via software stored remotely on Google’s servers.

The Fourth Amendment protects an individual from unreasonable searches and seizures.  As it stands today, unless an individual has a reasonable expectation of privacy, local and federal law enforcement are not required to obtain a warrant prior to conducting a search. Does a person reasonably expect that law enforcement will attach a GPS tracking device to a vehicle to clandestinely monitor that person’s every movement?  The Department of Justice (DOJ) thinks so.

A new land-grab is occurring on the World Wide Web.

There are presently more than 90 million domain names registered with the .COM extension. Now, 25 years after the launch of the .COM domain extension, domain space is crowded and availability is sparse; thereby, making the selection of a suitable domain name difficult.

Recently, however, a new .COM domain name competitor has entered the fray. On July 20, 2010, in a described "landrush event," the ".Co" domain became available worldwide via participating registrars (e.g., Go Daddy). In the first 24 hours, nearly 250,000 .Co domain names were registered.