Monthly Archives: May 2012

Protecting Ideas Expressed as Software

The founders of startups that provide software products or services often believe that their company’s software is not patentable. An innovative idea embodied in software, however, is generally patentable in the U.S. In fact, if a device or system such as a biomedical, electronic, or robotic device includes a software component for control, calibration, measurements, or analysis, for example, that software component may be patentable.

Those who do seek patent protection for software may not be aware of the legal requirements that are somewhat unique to protecting innovative ideas expressed as software. For example, in HTC Corp v. IPCOM GmbH, the Court of Appeals for the Federal Circuit stated in dicta that in order for a software patent to be valid, the patent must sufficiently disclose the algorithms that implement the claimed functions. In doing so, it is not necessary to provide the actual code, but the patent must describe the key steps in the algorithms.

As the software development community recognizes, many software solutions are often novel combinations of known techniques. Typically developers modify one of those known techniques to solve the problem at hand. This modification may significantly improve performance or may even be essential to the desired final result. Often, however, the developers only consider the patentability of their combination of known techniques. It is critical, however, for the company to consider any modification to a known technique because such a modification may provide commercial advantage over a competitor’s products. In light of the legal requirement to disclose algorithms for functions claimed in the patent, a patent application should clearly identify and describe the algorithms to implement those modifications so that the patent obtained is commercially valuable and protects the company’s products.

This post on Patents was authored by Suhrid Wadekar.

Founders Flash

This week’s articles explore fundraising challenges for female entrepreneurs, discuss the increase in popularity of business accelerators, provide advice on getting through the first year as an entrepreneur, and share tips for small business owners on limiting person liability.

Why Women Entrepreneurs Don’t Receive Funding – Candida Brush, Forbes

A study comparing women’s and men’s entrepreneurship in 59 economies around the world found that women tend to close their businesses because they have challenges in getting funding.

Start-Ups Crowd ‘Accelerators’ – Sarah Needleman and Emily Maltby, Wall Street Journal

Applications to some of the roughly 200-plus business “accelerators” world-wide have more than doubled in the past two years.

How to Survive Your Start-up’s First Year – Penelope Trunk, Inc.

Tips on how to make your first year as an entrepreneur less terrifying.

The Beginner’s Guide to an LLC – Nellie Akalp, OPEN Forum

Six ways to make sure your corporation or LLC stays in compliance for years to come.

This post was authored by Founders Workbench.

Facebook IPO Anticipated to Spark Investment in Tech Start-Ups

The Facebook IPO is expected to be a good thing for the start-up community. On May 18, Facebook shares, offered at $38 per share, saw their first day of trading on the NASDAQ Global Select Market under the symbol “FB.” The Facebook IPO is expected create about 850 new millionaires, which could create a new class of angel investors looking to invest in other startups and help them build on the popularity of Facebook.

That’s already been the case with several former Facebook executives who have turned to investing in start-ups, backing companies such as Instagram Inc., Spotify Ltd. and Flipboard Inc. In addition to their new millions of entrepreneurial dollars to invest, Facebook employees, current and former, have a wealth of experience and connections to offer to the start-up community, including knowledge on integrating a product or service with Facebook, ensuring that the social aspects of a business are working with Facebook, or knowing the relevant people.

According to PrivCo, a research firm that specializes in private companies’ financial data, of Facebook’s 3,700 employees, about 600 are expected to become millionaires from the IPO and an additional 250 former employees are millionaires or soon will be. That’s a good thing for the tech start-up scene!

This post was authored by Amina Kaal.

Founders Flash

This week’s articles provide advice on intellectual property for start-ups, discuss how entrepreneurs can appeal to investors, highlight NYC’s fast-growing tech industry, and present a model for raising venture capital.

5 ‘IP’ Mistakes Start-ups Should Avoid – Antone Johnson, Wall Street Journal

To maximize future value, founders should try to lay a solid intellectual property foundation even before a new start-up is incorporated.

How To Appeal To Investors: Top VCs Reveal The Anatomy Of A Successful Entrepreneur – Rip Empson, TechCrunch

A new book, called Venture Capitalists at Work, sets out to provide entrepreneurs with real insight into how some of the top investors in the game evaluate, invest in, and mentor their startups.

Technology Industry Seen Growing Fastest in New York – Patrick McGeehan, New York Times

According to a new study, New York City’s budding technology industry is growing rapidly by attracting investors and engineering talent despite spotty access to a reliable broadband network.

6 Steps To Raising Venture Capital — Hint: Preparation Matters More Than Your Pitch – John Greathouse, Forbes

An ideal approach to raising capital from sophisticated investors.

This post was authored by Founders Workbench.

Tread Lightly When Investigating Applicants’ Social Media Activity

Social media activity can reveal a great deal about an individual and many prospective employers now routinely review public posts, photos and other applicant web activity. Recently, however, some employers have demanded login credentials to enable review of non-public social media material.

It’s understandable that companies wish to have a complete picture of a prospective candidate’s background. But, there are reasons to be cautious of conducting in-depth background checks into applicants’ private social media activity, and, in particular, for demanding account user names and passwords:

Employer’s need to ensure that their proposed screening activities will not violate the terms of services of the applicable social media service. Facebook, for example, has asserted that the actions of some employers would constitute and has even asserted that it could consider legal action against employers who make such demands of employment candidates.

The practice may also violate law. Recently, Maryland became the first state to pass legislation that prohibits companies from requesting applicants to provide them with their social media passwords. Other jurisdictions seemed poised to follow, with legislation under consideration at the federal level and in a number of states, including Illinois, New Jersey and California. Also, senators from New York and Connecticut have asked the Equal Employment Opportunity Commission and the Department of Justice to investigate the controversial practice.

Some commentators have suggested that reviewing private activity on an applicant’s social media accounts could also leave a company vulnerable to employment discrimination claims, since such an investigation might allow an employer to learn facts on which it is not permitted to make employment decisions. This is another potential risk that employers should take into account when considering this type of background checking.

Finally, and perhaps, most importantly, many individuals have a negative view of the practice. Companies that engage in such in-depth reviews of candidates private social media activity may find themselves with a more limited pool of qualified applicants.

For all of these reasons, founders and companies should tread lightly when investigating a candidate’s online activities, especially their private conduct on social media sites, and should seek counsel on any background checking activity that they propose to conduct.

This post on Privacy, Social Media and Employment Practices was authored by Jacqueline Klosek.

Founders Flash

This week’s articles discuss how crowdfunding will affect VC’s, highlight the trend of employees leaving hot start-ups to fund new ones, profile Andreessen Horowitz’s stealth scout program, and examine Zuckerberg-like stock structures that give founders more votes than new shareholders.

Fred Wilson: What Crowdfunding Means for the VC Business – Ki Mae Heussner, GigaOM

Fred Wilson believes that balance of power in the start-up ecosystem is shifting and, as it does, venture capitalists must rethink their role.

A Circle of Tech: Collect Payout, Do a Start-Up – Somini Sengupta, New York Times

Every public offering creates a new circle of tech magnates with money to invest.

Andreessen Horowitz Confirms Its Scout Program, Calls Out Lazy Angels Who Hate Competition – Sarah Lacy, PandoDaily

Andreessen Horowitz Partners confirmed that it has been operating a stealthy scout program.

Zuckerberg Grip Becomes New Normal in Silicon Valley – Jeff Green and Ari Levy, Bloomberg

Mark Zuckerberg’s majority control over Facebook Inc. has become the new normal in Silicon Valley as entrepreneurs’ desire to hold sway trumps shareholder power.

This post was authored by Founders Workbench.

Founders Flash

This week’s articles discuss crowdfunding under the JOBS Act, profile a start-up that succeeded without investors, question whether entrepreneurs should pitch VCs, and explore the possibility of a tech bubble in Silicon Valley.

Be Careful, Entrepreneurs: Crowdfunding Securities Offerings Aren’t Yet Legal – Chris Manderson, PEHub

Amid all the excitement over the JOBS Act’s creation of an exemption for crowdfunding, few have noticed that crowdfunding securities offerings are not yet lawful under the Securities Laws.

Smart Education: How Lynda.com Hit $70M In Revenue Without A Penny From Investors – Rip Empson, TechCrunch

Lynda.com co-founders started their business with $20K from their savings and haven’t taken a penny of outside funding since.

Entrepreneurs Shouldn’t Pitch Their Ideas To Venture Capitalists – John Greathouse, Forbes

If you are fortunate to pitch a sophisticated investor in person, assume they already believe in the veracity of your idea, the market and the underlying technological trends.

Disruptions: With No Revenue, an Illusion of Value – Nick Bilton, New York Times

If there is a tech startup bubble in Silicon Valley, it’s likely to be tied to the practice of creating disruptive technology for no other reason than to get acquired.

This post was authored by Founders Workbench.

VIDEO: How to Raise Your First Round of Capital: Fundraising Tips from Jeff Bussgang

VIDEO: How to Raise Your First Round of Capital: Fundraising Tips from Jeff Bussgang

On April 3, Flybridge Capital General Partner and HBS Senior Lecturer, Jeff Bussgang, presented a Skillshare class entitled “Mastering the VC Game: How to Raise Your First Round of Capital” at the Harvard Innovation Lab.

A former entrepreneur, Bussgang says he is “passionate about creating transparency between entrepreneurs and investors.”

To watch the Skillshare class, please click here.

Jeff’s blog, “Seeing Both Sides,” is a also a great resource for both entrepreneurs and VCs.

This post was authored by Founders Workbench.

VIDEO: Tech Start-Up Legal Issues: Hiring a Lawyer

Goodwin Procter partner Caine Moss recently spoke with Bloomberg Law’s Spencer Mazyck about hiring legal counsel for technology start-ups and attorney’s fee arrangements.

Moss shares his insights as part of a Bloomberg Law series, “Technology Start-Up Legal Issues.”

This post on Start-up Legal Issues was authored by Founders Workbench.

Privacy Developments

The first quarter of 2012 saw many legal developments in the mobile app industry regarding consumer privacy and privacy policies. Some highlights include:

White House’s Consumer Privacy Bill of Rights. On February 23, the Obama administration announced a Consumer Privacy Bill of Rights (CPBR) focused on how private-sector entities handle personal data in commercial settings in the digital economy. The CPBR applies to all commercial uses of “personal data,” meaning any data that can be linked to a specific individual or device. The CPBR adopts seven general principles as a guide for future rule-making and legislation, including key principles such as transparency, data security, rights of consumers to review data for accuracy and accountability. Click here to read the CPBR www.whitehouse.gov/sites/default/files/privacy-final.pdf.
Agreement with App Stores. On February 22, the California Attorney General announced an agreement with leading operators of mobile application platforms to bring the industry in line with a California law requiring mobile apps that collect personal information to have a privacy policy. The six companies include Amazon, Apple, Google, Hewlett-Packard, Microsoft and RIM. Read more here http://oag.ca.gov/news/press_release?id=2630. On February 27, in Europe, Vodafone Group, Deutsche Telekom, France Telecom, Orange and others announced voluntary app privacy guidelines. See http://www.law360.com/articles/313747/european-mobile-giants-agree-to-app-privacy-standards.
Request for U.S. House Committee Briefing Regarding Apps and Privacy. On March 14, U.S. Representatives Henry Waxman (D-CA) and G.K. Butterfield (D-NC) requested representatives of Apple to brief the staff of the Energy and Commerce Committee about Apple’s efforts to protect the privacy and security of its mobile device users, and specifically the manner in which apps can access photographs on the company’s mobile devices and tools provided by the company to consumers to prevent unwanted tracking. Read more here http://democrats.energycommerce.house.gov/index.php?q=news/ranking-members-waxman-and-butterfield-seek-more-answers-on-privacy-concerns-with-apple-product.
Class Action Lawsuit Against Tech/Social Media Companies. On March 14, a class action lawsuit was commenced against 13 companies, including Twitter,, Apple and Facebook, alleging that the technology and social networking companies “surreptitiously harvest, upload and illegally steal the owners’ address book data without the owners’ knowledge or consent.” Read more here http://techcrunch.com/2012/03/14/austins-other-event-a-class-action-mobile-app-privacy-lawsuit-filed-against-facebook-twitter-apple-15-others.
Given these developments, stakeholders in the mobile app industry should think through privacy implications of the technology they create and be proactive and incorporate privacy protections into the design and use of mobile apps.

This post was authored by Amina Kaal.