The High-touch Legal Services® Blog • For Startup/Early-stage Companies

On the evening of Wednesday, February 10, 2010, the Silicon Valley Association of Startup Entrepreneurs’ East Bay Series will present Raising the First Round at the beautiful Crow Canyon Country Club (delicious buffet dinner included!).

Description: Whether it comes from VCs, angels, or friends and family, that first round of funding often is the toughest one to raise. Listen to experienced investors as they explain what they are looking for in early-stage companies, and to successful entrepreneurs as they describe what works and what doesn’t. Learn how to identify the right early-stage investors, where to find them, and ways to structure the first round so you don’t make it difficult to raise the next one!

This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.

In an article yesterday (Asset-Based Lending Grows in Popularity), the Wall Street Journal reported that asset-based lending – loans secured by the borrower’s assets as collateral – surged during 2008 and 2009

The reason: Businesses that lack the credit rating, track record, or patience to seek traditional sources of capital can get loans by pledging their equipment, inventory, accounts receivable, or other liquid assets as collateral.

Downsides: Relatively high interest rates; if a payment is missed, the collateral may be seized by the lender.

Related post: Realistic Financing Options for Startup Companies

This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.

Several months ago (Copyright Registration: Whether, When and Why), I wrote about the benefits of registering a copyright. A recent case in the U.S. District Court for the Northern District of California (Dongxiao Yue, et al., v. Chordiant Software, Inc., et al.) shows that if you are going to register a copyright, you should register it right away.

Plaintiffs accused defendants of copyright infringement with respect to two pieces of software that were covered by registered copyrights.  The defendants moved for a summary judgment that plaintiffs were not entitled to statutory damages and attorney fees because the alleged infringement began before the plaintiffs registered their copyrights.

Plaintiffs countered that because defendants distributed plaintiffs’ software with a different defendant software package, and copied plaintiffs’ software to a different directory, after the registration date, defendants committed two new types of infringement after that date. The court disagreed, stating that, as a matter of law, these acts were not materially different from the earlier alleged infringement (i.e., unauthorized distribution of the same file), so the “new” acts did not create a separate date for commencing infringement.

The court, thus, granted the summary judgment, which was highly detrimental to the plaintiffs because:

• Instead of the having a right to statutory damages of up to $30,000 per infringement (or $150,000 in the case of intentional infringement), plaintiffs will have to prove actual damages – which might be quite limited, and in any event could be expensive to prove.
• Plaintiffs will have to pay their own attorney fees without the possibility of recovery from defendants.

Important lesson: If there is any likelihood that you will want to enforce your copyright in a work against an infringer, register that copyright with the U.S. Copyright Office – and do so right away.

This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.

I recently had a conversation with an attorney in Louisiana, who mentioned that in that state, the annual interest rate on a promissory note was limited to 12%. I told him that in California story is much different.

Article 15 (Usury) of the California Constitution states (simplifying a bit) that the annual interest rate on a loan or forbearance (refraining from requiring payment for a period of time) is limited as  follows:

• If arising from money or goods supplied for personal, family or household purposes, the maximum interest rate is 10%.
• If arising from money or goods supplied other than for personal, family or household purposes, the maximum interest rate is the greater of (a) 10% or (b) 5% plus the rate charged by the Federal Reserve Bank of San Francisco on advances to its member banks.
• If the agreement between the parties does not specify an interest rate, it will be 7%.

Key point #1: The constitutional usury rate does not apply in situations other than loans and forbearances. So, for example, a promissory note executed in connection with the purchase and sale of a business, or late-payment terms in an agreement for the performance of professional services, may have whatever interest rate the parties may decide is appropriate.

Key point #2: In addition to the Constitutional requirements, there are quite a few situations where statutes prescribe maximum interest rates in specified circumstances, such as shared-appreciation loans, secured transactions, corporate securities, financial lenders, and government. So even in a business or professional context, there may be a restriction on the applicable interest rate.

Graphic credit: Microsoft Office Online

This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.

Cover from "Finding Rin Tin Tin" DVD

Those of a certain age will recall watching “Rin Tin Tin” on TV as kids. The venerable canine recently was the subject of a trademark infringement suit (Rin Tin Tin, Inc., et al. v. First Look Studios, Inc., et al.).

Rin Tin Tin was a German Shepherd dog found in France during World War I. He became famous through movies and remains well-known to this day.

Plaintiffs breed German Shepherds descended from the original Rin Tin Tin and manage related business endeavors. Rin Tin Tin, Inc. obtained federal trademark registrations for “Rin Tin Tin” pertaining to puppies and dogs of the Rin Tin Tin lineage.

Defendants distributed a movie on DVD titled “Finding Rin Tin Tin: The Adventure Continues.” The movie is based on the life of the original Rin Tin Tin and features German Shepherd puppies and dogs with that name. The movie and the DVD cover make no reference to the plaintiffs and do not claim any affiliation to the Rin Tin Tin bloodline.

Plaintiffs brought suit in the U.S. District Court for the Southern District of Texas, alleging that unauthorized use of the name “Rin Tin Tin” will cause confusion as to the origin, sponsorship and nature of the movie, thereby injuring or diluting plaintiffs’ trademarks. Plaintiffs asked for  destruction of all unsold DVDs, an injunction against  use of the Rin Tin Tin name, and various damages, incidental costs and attorneys’ fees.

Defendants countered that their use of the name falls under the “fair use” defense. The court agreed, noting that all three elements of fair use were satisfied:

• Defendants’ use of the name Rin Tin Tin was descriptive of the historical dog, rather than a reference to plaintiffs or their products.
• Defendant’s use of the name was fair in that it was the most precise way to describe the subject matter of the movie.
• Defendants acted in good faith because they did not use the name Rin Tin Tin to indicate the source of the movie (defendants clearly stated that they were the source).

Bottom line: This case illustrates that if one properly uses a mark in in a descriptive fashion, rather than as a reference to another’s company, products or services, the trademark fair use defense is available to protect such use.

Photo credit: Flixster

This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.