Exit Strategies for Interactive Companies

Exit Strategies for Interactive Companies1

Presentation to Affiliate Summit West 2012

EXIT STRATEGIESFOR INTERACTIVE COMPANIES

January 9, 2012

Gary A. Kibel

[email protected] @GaryKibel_law

© 2012 Davis & Gilbert LLP


TODAY’S TOPICS

»Seller’s Concerns

»Buyer’s Concerns

»Protecting / Exploiting Intellectual Property

»Equity Compensation

»Vendor / Client Contracts

»Internal Controls

»Privacy


SELLER’S CONCERNS

»Why sell?

- Growth

- Career Goals

- Cash-Out

- Out of Necessity

- Estate Planning

»When to take on investors


SELLER’S PREPARATION

»Corporate structure (s-corp vs. c-corp vs. LLC)

»Legal audit

- Mini due diligence exercise

»Engage advisors

- Caution with brokers

»Valuation

»Day to day practices


BUYER’S CONCERNS


BUYER’S CONCERNS

»What are you buying:

- People

- Client Relationships

- Technology / Intellectual Property

- Eliminating Competition

»Deal Structure

- Asset vs. Stock

- Earn Outs

- Restrictive Covenants


BUYER’S CONCERNS

»Post-transaction integration

- PR and Messaging

- Economies of Scale

- Staffing Issues

- Corporate Culture


PROTECTING / EXPLOITING INTELLECTUAL PROPERTY


INTELLECTUAL PROPERTY PRIMER

Patent Copyright Trademark Trade Secret

Utility – inventions of

products or processes

Design – aesthetic,

ornamental designs for

industrial products

Original works of

authorship (literary works;

photographs, art work,

music; software;

architecture)

Any word, name, symbol

used in commerce to

identify or distinguish one

party’s goods or services

(logos; slogans; names)

Information (1) valuable

to owner; (2) not

generally known; and (3)

reasonable attempts to

keep confidential

Term =

Utility = 20 years, from

application date

Design = 14 years

Term =

Life of Author+70yrs

Work for hire=95 yrs from

publication

(or 120 yrs. from creation, if

shorter)

Term =

10 years (renewable)

Term =

as long as confidentiality

maintained


INTELLECTUAL PROPERTY PRIMER

» Reasons for Registration

- Patent - Exclusivity. Period. (vs. Trade Secret)

- Copyright - Statutory Damages; Prima Facia evidence; Filing suit

- Trademark – Exclusive rights for goods and services described in the registration

» Those funny symbols

- Patent Pending

- Patent No. XXXXXXX

- ©

- TM

- ®


EXPLOITING INTELLECTUAL PROPERTY

»Enhancing Company Products / Services

»Licensing

»Defensive Strategies

»Offensive Strategies


COMPENSATING / RESTRICTING EMPLOYEES


COMPENSATING / RESTRICTING EMPLOYEES

»Real Equity

- Stock Options

- Restricted Stock

- Buy-back / Tag-along

»Phantom Stock

»Bonuses

»Employment Agreements

»Restrictive Covenants


VENDOR / CLIENT CONTRACTS


CLIENT CONTRACTS

»Exclusivity

»Term / Cancellation

»MFN

»Assignment or “Change of Control”


»IP Ownership

- Data

- Triggered on sale


VENDOR CONTRACTS


»Term / Evergreen

»Recurring Charges

»Assignment or “Change of Control”

»Real Estate


INTERNAL CONTROLS


INTERNAL CONTROLS

»Confidentiality / Leaks

»Time Drain

»Employees and intellectual property

- W-2 employees

- contractors

Social Media and Privacy Law19


PRIVACY / FTC INVESTIGATIONS


GENERAL PRIVACY PRINCIPLES

»FTC Fair Information Practice Principleshttp://www.ftc.gov/reports/privacy3/fairinfo.Shtm

- Notice

- Choice

- Access

- Security

- Enforcement

»It’s all about transparency and consumer expectations

http://www.ftc.gov/reports/privacy3/fairinfo.Shtm


RECENT FTC ACTIONS

»Google (3/20/2011) – Google Buzz

»Twitter (6/24/2010) – ID/password security

»Chitika (3/14/2011) – Behavioral advertising opt-outs

»Facebook (11/29/2011) – Social Media privacy disclosures


FTC INITIATIVES

»Privacy Framework

»Update COPPA

»Update Other Policies

»Privacy / Data Security Enforcement Actions

»Customary Investigations – Unfair or Deceptive Practices

Exit Strategies for Interactive Companies

Business

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