Chambliss Startup Group Joins Starting Block Chattanooga as ‘Founding Partner’

Posted by on Jan 21, 2021 in Startup

The Chattanooga Area Chamber of Commerce recently launched Starting Block Chattanooga, a resource for entrepreneurs looking for support as they start and grow their businesses. Starting Block Chattanooga helps entrepreneurs grow and succeed by providing small businesses with free and easy access to resources and information. Chambliss Startup Group is pleased to partner with Starting Block Chattanooga as they connect a large network of business-related service providers and resources, including business planning, financing, marketing/sales, licensing/permits, product development, training classes, government contracts, and operations. For more information on the network, you can view our profile on the Resources webpage and watch this video to learn more about Starting Block. “We are very excited to be named as a resource among many other respected organizations in the startup community,” said Willa Kalaidjian, Chambliss Startup Group chair. “Starting Block Chattanooga is a convenient and accessible ‘go-to’ hub for the needs of entrepreneurs and small business owners.” Founded in 2011, Chambliss Startup Group has continued to be deeply rooted in the startup community. The team of attorneys provide comprehensive 360 legal advice to entrepreneurs, emerging and high growth companies, and investors in a variety of industries. For more information about Chambliss Startup Group, the team, and the services we offer, watch Legal Insights for Emerging...

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Shout It From the Rooftops: The Ins and Outs of Patent Marking

Posted by on Aug 26, 2020 in Intellectual Property

Why Patent Marking? A patent owner may recover monetary damages for up to six years of retroactive patent infringement. However, subject to certain exceptions described below, damages do not begin to accrue until the alleged infringer has been given notice that it is infringing a particular patent. When a patented “article” (i.e., a product) is properly marked, alleged infringers are deemed to have “constructive notice” of the patent owner’s rights and can be held liable for damages from the date the infringement begins even if they do not have “actual notice” of the patent owner’s rights. On the other hand, if the patent owner fails to mark its patented articles, monetary damages begin to accrue only after the alleged infringer has received actual notice (e.g., via a cease and desist letter) of the patent owner’s rights, which could be years after the infringement began. For this reason, in many cases, without proper patent marking, the costs of litigation can outweigh the recoverable monetary damages. However, if the asserted patent only covers methods or if the patent owner never made, sold, or offered to sell a patented article, there is no marking obligation since there was nothing to mark. Thus, to maximize the potential monetary recovery for infringement, patented articles should always include an appropriate marking to show that those articles are patent protected. Articles may be marked “patent pending” once a patent application (i.e., a provisional or non-provisional patent application) covering that article has been filed. “Patent pending” does not provide any legal protection for the invention or impact potential monetary damage awards. However, it can deter competitors from copying a design that could potentially expose them to patent infringement liability. Many inventors file provisional patent applications and mark their articles “patent pending” with no intention of filing or prosecuting a corresponding non-provisional patent application. They might employ this strategy to attract customers and investment and deter competition without the (often) significantly higher costs associated with the preparation and examination of a non-provisional patent application. How to Mark Your Articles There are two options for properly marking patented articles: traditional and virtual. In either case, it is essential that “substantially all” patented articles (i.e., at least 65%, in some cases) be marked with the patent number, consistently and continuously. 1. Traditional Patent Marking Traditional patent marking requires that a marking be applied to the article itself or applied to the packaging if the article itself cannot be marked. The marking must include either the word “Patent” or the abbreviation “Pat.” followed by the relevant patent number(s). Below is an example tag that might be placed onto a patented article: The patent owner has an obligation to mark (and not to mismark) the patented article with only the patent number(s) that cover the article and to update all patent markings when the patent status changes (or to require its manufacturers, licensees, etc. to do so). For example, the marking must be updated to replace “patent pending” with the newly-issued patent number(s) or to remove “patent pending” if the application is abandoned. Failure to correctly mark patented articles or failure to update those markings could make the patent owner liable for “false marking.” 2. Virtual Patent Marking Alternatively, patented articles may include “virtual” markings that consist of the word “Patent” or “Pat.” followed by the URL of a...

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Insights for New and Emerging Businesses Leasing in the Pandemic

Posted by on Aug 5, 2020 in Startup

If you are a new or emerging business owner beginning the process of finding a suitable property to lease, it is important to be critical of the lease provided by the landlord. You should also attempt to negotiate each provision of the contract to ensure that the lease works practically and with the intended goal of your business. This blog post addresses a few of the key provisions that you as a business owner should pay close attention to and can help you determine how each provision aligns with your business goals. Especially while facing the impacts of the COVID-19 pandemic, it is imperative that business owners have an operative knowledge of their lease and know that it is likely negotiable. Key Commercial Lease Provisions Key areas and provisions to focus on when reviewing your business lease include: Lease Term: One of the most important aspects of your new lease is the structure of the lease term. Landlords typically prefer a longer term commitment from tenants, while most growing businesses prefer shorter, more flexible terms. If a growing business is unsure of how long they could remain at a particular property, they can negotiate stronger renewal rights into their shorter lease term. This will ensure that the business will be able to remain in the space if they choose to renew the lease. The drawback to this approach is that landlords may give less reimbursement for tenement improvements to the space, as the tenant will be in the space for a shorter expected period of time.Another approach is to agree to a longer term but negotiate early termination periods. Early termination periods allow tenants to purchase their way out of a lease at given periods within the lease. Pursuing this strategy will often allow tenants to negotiate portions of their tenement improvement costs as part of their termination. Keep in mind that this route includes the excess cost of having to “buy out” of the lease.Assignment Provision: In almost every commercial lease, there is an assignment provision that requires the landlord’s consent in order to sublease or assign the property. It is important to know what your company’s plans are moving forward and attempt to narrow the scope of the assignment provision accordingly. An important item to check is whether the definition of assignment in the lease includes an instance when you sell your company. If this is the case, it is important to build time into the sale process to account for getting the landlord’s approval. It is also important that buyers of your company who are assigned the lease have the option to extend. Depending on the needs of your business, it could be important to negotiate items such as no landlord consent required to assign to an affiliate, no landlord consent required to assign to a surviving entity of equal or greater net worth, or no landlord consent required to assign to a tenant that agrees to the use for the space as permitted in the lease. These are all items that can be negotiated into an assignment provision. A final item to be aware of is a “recapture” provision. Ensure that your lease does not allow your landlord to “recapture” your space if you request an assignment. These provisions can allow landlords to terminate the...

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COVID-19 Inventions Get “Fast Track”

Posted by on Jun 15, 2020 in Startup

Have you invented a product or process for preventing or treating the novel coronavirus commonly known as COVID-19? If you have, and you qualify as a small[1] or micro[2] entity, then you may be entitled to a “fast track” examination process recently announced by the U.S. Patent and Trademark Office (USPTO). According to the new Prioritized Examination Pilot Program (the Program), the USPTO will grant requests for prioritized examination to small and micro entity patent applicants without the payment of an additional fee. It is the Office’s intent to reach final disposition of such applications within six months if the applicant promptly responds to USPTO communications. While the Program may provide a “fast track” to patent issuance and possibly investment, it has its limitations and potential pitfalls. For example, the Program is limited to the first 500 applicants. The Program is also limited to inventions that are subject to FDA approval.[3] In addition, the accelerated examination process may result in heightened scrutiny, particularly for inventions that might not be fully developed and ready for patenting. [1] – A small entity is generally defined as one that employs no more than 500 employees and does not license the claimed invention to licensees having, in the aggregate, more than 500 employees. [2] – A micro entity is generally defined as one that has filed no more than four patent applications and has a gross annual income of no more than $189,537. [3] – U.S. FDA approvals may include, but are not limited to, an Investigational New Drug (IND) application, an Investigational Device Exemption (IDE), a New Drug Application (NDA), a Biologics License Application (BLA), a Premarket Approval (PMA), or an Emergency Use Authorization (EUA). Information on these items is available at Visit our COVID-19 Insight Center for our latest legislative and legal updates, articles, and resources. Visit Insight Center The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings, and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. In some cases, the underlying legal information is changing quickly in light of the COVID-19 pandemic. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship. Please contact your legal counsel for advice regarding specific...

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The Balance Between Risk Management and Client Relations

Posted by on May 15, 2020 in Startup

As businesses fight through the tough times created by the pandemic and government restrictions that impact their operations, it is imperative to be mindful of the situation your customers face, especially if you extend credit. This extension of credit can be as simple as shipping goods or providing services that are invoiced for payment after that. Offering credit can grow in complexity. All businesses need to be focused on whether they could withstand a default or a series of delayed payments from key customers. If your company identifies customers where such defaults would create serious financial hardship, you must be vigilant and consider whether there are options to better protect your business if you detect financial instability with these clients. If you know or suspect that a customer is in financial trouble, there are several steps you can take to minimize your risk in doing business with them, while trying to also be a good business partner. Here are some examples: You might talk to your customer about obtaining some security for the extension of credit, including a potential purchase money security interest in goods sold. For example, if you are selling machinery or other equipment that will remain identifiable, adding the documentation and proper filings needed to create a security interest will significantly increase your likelihood of obtaining payment or the return of the goods sold. Another option is to seek a letter of credit or a guaranty of a principal or parent corporation. If you are selling services or goods that are not readily recoverable once delivered because they are consumed or converted into other products, an irrevocable letter of credit creates a certainty of payment. Perhaps an owner or parent company has significant assets. If so, a guaranty of your customer’s debt will provide additional avenues for collecting what is owed. Or, you may require that the invoice be prepaid and that the goods are shipped or services rendered – only after payment is received. In short, it’s important to maintain open communication regarding finances with your customers. Your business can be understanding and flexible. However, you need to look out for your financial well-being, too, as there are risks associated with being flexible should your customer’s business fail. There are various options available that may allow your business to decrease risk created by doing business with customers suffering financial difficulties. A proactive business that is monitoring their customers and staying on top of their accounts receivable will be more likely to recognize the troubling signs of a client having difficulties and be able to position itself to be better protected against a bankruptcy filing or default by offering solutions. Visit our COVID-19 Insight Center for our latest legislative and legal updates, articles, and resources. Visit Insight Center The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings, and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. In some cases, the underlying legal information is changing quickly in light of the COVID-19 pandemic. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship. Please contact your legal...

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Insurance Claims for COVID-19 Business Interruption – Make Your Best Case

Posted by on Apr 15, 2020 in Startup

You probably anticipated that your business insurance would provide some relief for the impact of COVID-19, since it likely included coverage for general risk, business interruption, contingent business loss, or civil authority actions. However, when confronted with a novel event like the one we are experiencing now, your insurance providers may be construing these policies to deny coverage to you. You may have already experienced submitting a business interruption claim and having it denied on the grounds that COVID-19 does not constitute “property damage,” or your losses fall under certain policy exclusions. If you haven’t submitted a claim, we encourage you to consider doing so soon. It is important that each business understands its policy, as policy language varies widely, and coverage determinations are generally made on a case-by-case basis. Regardless of your policy, coverage for property damage or economic loss often requires direct physical loss. Many insurers are taking the position that exposure to the virus, or economic loss stemming from the virus, does not constitute “direct physical loss.” However, some courts in analogous situations have found that loss of use and function, as many businesses are experiencing now, may constitute physical damage when viewed in the overall context. In addition, your policy may contain additional coverage, such as decontamination coverage, public relations coverage, event cancellation coverage, or pollution cleanup, which may apply to COVID-19 related expenses and loss. Making your case for coverage requires your understanding all of the various provisions in your policy to allow you to maximize benefits. Do not give up just because the insurance company says there is no coverage. Recognizing the enormous impact of COVID-19 on businesses, the federal government and certain states have attempted to shift the economic burden of the COVID-19 crisis on insurers. In mid-March 2020, a bipartisan group of congressional representatives wrote to leadership at the American Property Casualty Insurance Association, National Association of Mutual Insurance Companies, Independent Insurance Agents and Brokers of America, and Council of Insurance Agents and Brokers, encouraging insurance companies to recognize financial loss due to COVID-19 as part of policyholders’ business interruption coverage. Seven states currently have proposed bills that would require commercial property insurers to retroactively cover losses that insureds have accumulated because of the pandemic. Nevertheless, insurance companies have remained steadfast in their interpretation of certain clauses as excluding the COVID-19 pandemic. We expect that the issue of whether mandatory COVID-19 closures constitute “physical damage” is one that will be litigated extensively in the near future. Visit our COVID-19 Insight Center for our latest legislative and legal updates, articles, and resources. Visit Insight Center The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings, and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. In some cases, the underlying legal information is changing quickly in light of the COVID-19 pandemic. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship. Please contact your legal counsel for advice regarding specific...

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Top Cybersecurity FAQs: Startups and Emerging Businesses

Posted by on Dec 2, 2019 in Cybersecurity, Intellectual Property, Startup

Q: Does my business need cybersecurity insurance? Due to the high level of cyber risk in today’s business environment and exclusions for cyber events in other types of insurance policies, most businesses need cyber liability insurance coverage. However, the terms and exclusions contained within cyber insurance policies vary widely, so businesses should select and review cyber policies carefully. Obtaining legal assistance in assessing policy terms is recommended to ensure the policy adequately addresses risks unique to the business. Furthermore, startups and emerging businesses should pay attention to exclusions, such as coverage exclusions for failure to obtain minimum security standards, to ensure that they do not fail to adopt necessary cybersecurity measures and thereby undermine the coverage they have purchased. Q: How do I put a cybersecurity policy in place? A cybersecurity policy should be specific to your business and may vary depending on your industry and the information your business collects. It is important to first assess your overall compliance and conduct a security audit of your IT assets and practices, as well as develop a thorough understanding of the data your business collects and stores. A cybersecurity policy should inform company employees and contractors of their requirements in protecting the IT assets of the company and identifying the primary threats to those assets. A policy will outline acceptable use of the company’s IT assets, including protocols related to password management, secure file transfers, software updates, malware scans, use of social media and privacy settings, and other security guidelines designed to protect your business from cyberattacks. Q: What are the best methods for protecting my business against ransomware attacks? Ransomware attacks are often delivered through phishing emails that appear as if they were sent from legitimate sources. Such phishing schemes are growing more sophisticated, and it is more important than ever to routinely train your employees and independent contractors on how to spot these and other cybersecurity threats. Businesses should implement mandatory trainings throughout the year (or on an annual basis at minimum) and follow such trainings with phishing simulations to test real-world response. Businesses can protect against the impact of interruption from a ransomware attack by regularly performing backups of their systems and important files. Backups should be stored separately so they cannot be accessed on the main system network. Q: What are some best practices to share with our team? There are several best practices that can be used as preventative measures when it comes to cybersecurity and attacks. The tactics below could make a huge difference. Install internal and external firewalls to protect your network systems, invest in antivirus and malware software, and regularly backup all data. Educate your employees on security protocols and how to recognize phishing emails and suspicious or unknown links. Require strong passwords for network access and mandate that employees change their passwords on a regular basis. Use multi-factor authentication for accessing sensitive networks or systems. Q: What is an incident response plan and tabletop exercise? An incident response plan is a game plan created to guide your organization in detecting, responding to, and recovering from cyber incidents. An incident response plan is necessary to help businesses quickly identify the individuals who need to be involved in incident evaluation and response, the issues they need to consider, and the steps that they...

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Hot Topics for Startup Employers

Posted by on Oct 15, 2019 in Employment, Limiting Liability, Startup

Employers today face constant hurdles in their day-to-day operations, and startups are no different. The liability for employment violations is not limited to large manufacturers or businesses; emerging businesses and companies in their infancy are likewise vulnerable and need to be aware of the laws so they can take appropriate action to ensure that they are protected.  Startups should be aware of two issues in particular: 1) wage and hour requirements and 2) protecting intellectual property and company goodwill.   Wage and Hour Regulations for Startups Employers of all sizes (including startups) need to be aware of the wage and hour requirements contained in the Fair Labor Standards Act (FLSA). The FLSA applies to employers whose annual sales total $500,000 or more, or who are engaged in interstate commerce. Practically speaking, this means that the FLSA applies to almost every employer. The FLSA governs overtime pay and minimum wages, which apply to employees who are “non-exempt.” Generally speaking, an employee is non-exempt (i.e., the employer is required to pay overtime and at least minimum wage) if he is not salaried, or, if the employee is salaried, the job does not have certain administrative or professional requirements (e.g., supervising two or more people, discretion in decision making, etc.). In contrast, employers are not required to pay overtime to exempt employees (those who are paid at least a certain salary and have certain job duties). Paying your non-exempt employees at least the federal minimum wage is easy. You likely already comply with this rule as long as you pay your employees at least $7.25 for each hour worked. But be sure to check your state’s laws as well. The FLSA is the floor, not the ceiling. Many states impose their own minimum wage that is in excess of $7.25 per hour (e.g., $12.00 in Washington). Overtime issues are more complicated. In its simplest terms, the FLSA requires that employers pay their non-exempt employees 1.5 times their regular rate for each hour they work over 40 in a given work week. But what is the “regular rate,” and what is a “work week?” A common misconception is that the regular rate is simply the standard hourly rate (e.g., $15.00 per hour) that an employer pays a given employee. It is not. The regular rate must include other forms of compensation, such as commissions and non-discretionary bonuses. Including this extra compensation will naturally affect the amount of overtime that an employee is entitled to receive. The workweek is likewise different than most assume, as it is not simply Monday through Friday. Rather, the workweek from which you determine an employee’s overtime is a seven-day period (e.g., Sunday at 12:00 a.m. to Saturday at 11:59 p.m.) over which an employee may work. As an employer, you should set out your workweek (whatever it may be) in your policies and, if at any time during the workweek (with some exceptions) a non-exempt employee works more than 40 hours, be aware that the employee is entitled to overtime compensation. Misclassifying an employee as exempt when he is non-exempt (and the subsequent failure to pay appropriate overtime) can result in severe legal problems in the form of back wages and attorneys’ fees, among other things. Classifying an employee as exempt is a fact-based inquiry based on an analysis of that employee’s salary and job duties. For guidance on whether you have properly classified...

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Major Ambiguities Remain, but Health Care Vendors Should Focus on California Consumer Privacy Act Preparedness

Posted by on Jul 26, 2019 in Limiting Liability, Startup, Update!

Are you a health care vendor that does business in California? If so—and keep in mind that the concept of “doing business” in California may be broader than you expect—there are new, expansive data privacy requirements that might start keeping you awake at night. California created waves in the information privacy space with its enactment of the California Consumer Privacy Act of 2018 (the “Act”) last summer. The Act, which will be operative beginning January 1, 2020, was hurriedly enacted to prevent a proposed ballot initiative from going to voters in November 2018. That process created a number of significant ambiguities, which remain present in the Act. There are significant questions regarding what types of businesses will be subject to the broad-reaching obligations of the statute and forthcoming regulations. Businesses that have, thus far, managed to avoid the application of the similar EU General Data Protection Regulation (the “GDPR”) may nonetheless fall within the scope of the Act and confront new and expanded compliance obligations similar to those imposed by the GDPR. Based on the current wording of the statute, a “business” subject to the Act’s requirements includes a for-profit entity that (i) collects the personal information of California residents, (ii) determines the purposes and means of processing that information, (iii) does business in California and, among other potential triggers, (iv) has annual gross revenues in excess of an inflation-adjusted amount of $25 million. It remains to be seen whether the forthcoming regulations will define the scope of revenue (which, at present, does not appear to be limited to a business’s California revenue), the meaning of information “processing,” and other related concepts.    With respect to applicability, the statute also contains a carve-out for commercial conduct that takes place “wholly outside of California. The present definition of this concept contains somewhat contradictory language, and it is not yet clear what any amended or clarified language will look like.  Businesses potentially subject to the Act should also be wary of the way that the Act ambiguously defines “personal information.” The Act does not apply to medical information governed by HIPAA, which will provide some relief to many health care vendors. However, the Act does apply to other categories of personal information, including IP addresses and other information concerning consumers’ (including patients’) interaction with a business’s website. Even more significantly, the Act appears to apply to (i) employee personal information contained in employment records and (ii) the personal information of client officers and employees that a business gathers in providing services to, and interacting with, its clients (i.e., not traditional “consumer” interactions). Absent some clarification to the contrary in any further statutory amendments or in the forthcoming regulations, health care vendors should prepare to comply with the Act in connection with these particular categories of information.    Due to the current broad scope of the Act, the potential applicability to information collected or disclosed in 2019, and the fact that the Act has significant “teeth” from an enforcement standpoint, health care vendors should not wait for these concepts to be fully refined. Rather, they should prepare now to comply with the Act’s core requirements by taking the following actions, among others: Determine what personal information the business collects, how it collects it, where it stores it, and how it manages, uses,...

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The Importance of Getting Your License Before You Start Your Own Construction Business

Posted by on Jul 24, 2019 in Governance, Limiting Liability, Practice Pointers, Startup, Your Entity

Are you thinking about starting your own construction business? If so, whether in the commercial or residential setting, it is imperative to find out if you are required to have a license. Keep in mind each state has its own requirements. If you’re in Tennessee, it’s highly likely you’ll need one. Under Tennessee’s Contractors Licensing Act, it is unlawful for any person or business to represent itself as a licensed contractor, or to act in the capacity of a “contractor” while not licensed. Now, you may be thinking “I am not a contractor. I am a designer, or a supplier, or a subcontractor, etc — so the contractors’ license requirement does not apply to me and my new business, right?” Well, not necessarily. The term “Contractor” is incredibly broad under the Licensing Act. “Contracting” includes, among other things, bidding, offering to engage, supervising, overseeing, scheduling, directing or in any manner assuming charge of construction, alteration, improvement, or negotiating a price for projects of $25,000 or more (including all labor, materials, and equipment). Electrical, mechanical, plumbing, HVAC, and roof contractors must also be licensed when working directly with any contractor to perform projects when the total cost of that portion on the project is over $25,000. Tennessee also regulates licenses for certain types of “home improvement” in most of the larger counties. For example, a home improvement contractor’s license is required for residential projects that range from $3,000 to $24,999 (i.e. projects designed for a residence or dwelling unit with no more than 4 units). Again, the term “home improvement” includes a vast array of construction-related work, all of which requires a license – such as repairs, replacement, remodeling, alterations, and more.  Obtaining the appropriate contractor’s license before you start working is extremely important from a risk management standpoint. In fact, contracting in Tennessee without the appropriate license can expose your new business and possibly you, personally to significant liability. For example, to represent yourself as a licensed contractor without the required license, or to act in the capacity of a contractor without the required license, constitutes an unfair and deceptive act under Tennessee’s consumer protection law. This is significant, particularly to a business in its infancy, as you could end up on the hook for a dissatisfied client’s attorneys’ fees and triple their actual damages.  While there are a variety of other matters that must be tackled before getting a new construction business off the ground, licensing is certainly an important box to check off the list. The guidance of an experienced construction attorney can help alleviate any worries you may have in navigating the laws that may apply to you. In addition, finding a well-versed construction attorney can assist a new business in a multitude of areas spanning from drafting of construction contracts, handling of construction defect claims, payment and lien disputes, and other related matters. If you have questions specifically related to construction or general startup matters, please contact me or a member of Chambliss Startup group.   *This blog post is brought to you by Logan...

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