Category Archives: Firm News

Stubbs Alderton & Markiles Represents Client RPM Services and Rentals, LLC in Acquisition by Hugg & Hall Equipment Company

RPM Services Logo(Los Angeles – July, 2016) – SAM Client RPM Services & Rentals (“RPM” or the “Company”) has been acquired by Hugg & Hall Equipment Company. The Stubbs Alderton attorney who led the deal was Joe Stubbs.

RPM was established by Terry Gold in 2008 and grew quickly to become one of the largest independent equipment rental companies in the Southeast. The Company rents a variety of construction equipment to customers principally serving the region’s onshore industrial markets. The Company operates from locations in Bourg, New Iberia, Morgan City and Gonzales, Louisiana.

Terry Gold, President, stated, “We are thrilled to join the Hugg & Hall team.  This transaction presents fantastic synergies for both companies.  Hugg & Hall will bring tremendous resources to our employees and loyal customers and together we will execute a smart growth strategy for South Louisiana.”

About Hugg & Hall Equipment Company
Hugg & Hall Equipment Company, headquartered in Little Rock, Arkansas, has been family owned and managed since 1956 and is one of the largest materials and personnel handling equipment dealers in the Mid-south. With 12 full service locations Hugg & Hall is an authorized dealer for Bobcat, Combilift, Crown, Doosan, Enersys, Extreme, Genie, JLG, Manitou, Sellick, Skyjack, Taylor, Terex, Toyota, and Volvo. Hugg & Hall sells new and used equipment, has a rental fleet of 5000 pieces of equipment, and services all makes of industrial and construction equipment with over 6 million dollars of replacement parts in stock and a team of 190 trained ASE certified mechanics. The company recently started a Utilities Services division which focuses on the rental, sales and service of a broad range of generators, air compressors, lighting equipment, and portable cooling and heating equipment

About Stubbs Alderton & Markiles, LLP
Stubbs Alderton & Markiles, LLP is a business law firm with robust corporate, public securities, mergers and acquisitions, entertainment, intellectual property, brand protection and business litigation practice groups focusing on the representation of, among others, venture backed emerging growth companies, middle market public companies, large technology companies, entertainment and digital media companies, investors, venture capital funds, investment bankers and underwriters. The firm’s clients represent the full spectrum of Southern California business with a concentration in the technology, entertainment, videogame, apparel and medical device sectors. Their mission is to provide technically excellent legal services in a consistent, highly-responsive and service-oriented manner with an entrepreneurial and practical business perspective. These principles are the hallmarks of their Firm.

Media Contact:

Heidi Hubbeling
Director of Marketing
hhubbeling@stubbsalderton.com
(310) 746-9803

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Preccelerator Program Presents: “The Art of Fundraising Episode I: 5 Types of Funding” – July 21st

Join the SAM Preccelerator Program
for this exclusive event!

 

 

 “The Art of Fundraising Episode I:  5 Types of Funding

 

Thursday, July 21, 2016

 5:30pm-8:00pm

 **Food, Drinks & Networking Included!**

Stubbs Alderton & Markiles, LLP
1453 3rd Street Promenade, Suite 300
Santa Monica, CA 90401

 

Register!

Parking

4th Street/Broadway ramp or in the Santa Monica Place Mall

 

 

Featuring

 

Moderator:

Delilah PanioDelilah Panio, Founder, Stiletto Dash

I love helping entrepreneurs realize their dreams… just like I am!

As the founder of Stiletto Dash, I am passionate about helping women build their dream companies and achieve economic independence through entrepreneurship. Through my one-on-one consulting and soon to be launched online courses, I work with clients on their business planning and getting investor-ready.

I am leading the L.A. chapter of SheEO’s Radical Generosity program in which 1000 women invest $1000 to provide low interest loans to 10 local women-led companies. I am also a Co-Founder of We Are Enough, a non-profit that educates women on why and how to invest in women-owned businesses. As well, I am active in the LA entrepreneur community, including as the Co-Chair of Women in LAVA (Los Angeles Venture Association) and coach for local pitch competitions.

My background is as a capital markets expert with 10 years in business development at the Toronto Stock Exchange, including as the Director, Business Development & Strategy. I have advised many companies on the going public process and can provide an understanding of private and public financing options in Canada and the United States.

Panelists:

Sarah MoretSarah Moret, Crosscut Ventures – Venture Capital

Sarah is an Associate at Crosscut Ventures. Her role includes meeting with startups, evaluating investment opportunities, and helping to manage fund operations. Prior to joining Crosscut, Sarah was at Formation8 Partners, a Venture Capital fund in San Francisco, where she focused on finance, operations, and due diligence for the fund’s hardware investments. Prior to that, Sarah worked in PwC’s Transaction Services Consulting Practice, advising clients on M&As, IPOs, and various other capital market transactions.

evan markilesEvan Markiles, FlashFunders –  Crowdfunding

Evan is the Business Operations Manager at FlashFunders, an equity crowdfunding platform. An attorney, Evan works with companies that are interested in raising equity funding on FlashFunders, and manages companies’ offerings from the onboarding stage to closing.

 

frank obrienFrank O’Brien, Silicon Valley Bank – Lending

Frank O’Brien is currently a Senior Associate with the SVB Technology and Life Sciences Teams based in Orange County, CA, focused on companies from the pre-revenue stage though over $100MM in revenues. Areas of focus include Big Data, Analytics, SaaS Platforms/Infrastructure, Medical Device, and Pharmaceuticals.

Mr. O’Brien joined SVB in early 2011 as an Associate, where he was responsible for financial analysis, business analysis, credit underwriting, portfolio management and new client development.

 

Alfred MirandaAlfred Miranda, Analog – An Idea Company, Inc. – Angel Investor

Angel Investment Firm owned by my partners and I to provide: Funding, Guidance, Technology Acumen, and Mentorship to promising Start-ups.

 

 

Andy TomatAndy Tomat, Teradyne – Strategic Investor

Andy was hired by Teradyne in the Fall of 2008 as the first head of Corporate Development to grow and diversify Teradyne’s business outside of semiconductor equipment through acquisitions, joint ventures and strategic partnerships. Areas of particular focus include Green Tech, Medical Equipment, Wireless and Optical Communication products.

Prior to Teradyne, Andy was the Sr. Director of Product Management at Peerless Systems Corporation where he led a team to deliver high performance color imaging products to market and enabled the company to become the 3rd best performer on NASDAQ in 2005. He was also with Peerless in the mid-1990’s where he helped coordinate their successful IPO.

As a consultant with the Adrenaline Group in Washington DC, he performed technology due diligence for a unit of NASDAQ (now FINRA); and in partnership with McKinsey & Co. helped a Nortel spin off (now Bill-Me-Later) re-position their online payment processing system to appeal to Amazon.com and Dell.

Andy has over 20 years of experience in strategic planning, finance, M&A, and new business development at large organizations like Canon and Perkin-Elmer, and as co-founder of several startups in the imaging space. He holds multiple patents in digital imaging and content management and has participated in various international standards groups.

 

 

Special Thanks to our Sponsors!

 

SAM-High-Res-Logo-1Stubbs Alderton & Markiles, LLP is a business law firm with robust corporate, public securities, mergers and acquisitions, entertainment, intellectual property, brand protection and business litigation practice groups focusing on the representation of, among others, venture backed emerging growth companies, middle market public companies, large technology companies, entertainment and digital media companies, investors, venture capital funds, investment bankers and underwriters. The firm’s clients represent the full spectrum of Southern California business with a concentration in the technology, entertainment, videogame, apparel and medical device sectors. Our mission is to provide technically excellent legal services in a consistent, highly-responsive and service-oriented manner with an entrepreneurial and practical business perspective. These principles are the hallmarks of our Firm. www.stubbsalderton.com

Capital InVenturesCapital InVentures is a New York-based boutique investment bank serving middle market companies in the $5-mm to $100-mm range. The firm performs consulting and investment banking services within the global financial community.  Through its association with other investment banking houses, underwriters and other private and public, domestic and offshore financial sources, Capital InVentures handles venture capital deals, bridge and mezzanine financing, syndications, mergers and acquisitions, leveraged buyouts, corporate capitalization, technology transfer, commercial debt and other creative business structures. www.CapitalInventures.com

 

 LAVALosAngelesVenturaAssociationLogo.pngSince 1985 the Los Angeles Venture Association has been providing forums where entrepreneurs and executives of start-up, emerging growth and late stage venture funded companies actively meet and learn from fellow executives, investors, bankers, financial advisors and other providers of professional services.

Our extensive slate of monthly Strategic Interest Group meetings and panel discussions feature exceptional presentations by prominent members of our investment, entrepreneurial, business and academic communities. Our annual Meet the VC conference, First Look LA and the LAVA Awards Dinner are our region’s premiere forums on investment capital. We also co-produce events with many of our affiliated organizations. www.lava.org

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SAM Encourages You to Attend: IDEAS – Los Angeles – June 15 & 16

IDEAS_Los_Angeles

SAM is proud to be a sponsor for IDEAS Los Angeles 2016.

What is IDEAS- Los Angeles?  2 Days 2 Tracks running simultaneously focused on the future of Digital Technology in Media & Entertainment and Lifestyle & Health. They will explore the new and emerging paradigms in content creation, consumption, diagnostics, service, and distribution.

IDEAS features hundreds of attendees including entrepreneurs, investors, executives, professionals and academics, with 70+ speakers including global business leaders, futurists, studio heads, movie and television producers, healthcare providers, doctors, thought leaders, entrepreneurs, Tel Aviv University administrators, professors, and alumni.

The venue is the newly expanded world class performing arts center, The Broad Stage, in Santa Monica, CA. They have access to 2 state-of-the-art buildings featuring an array of meeting spaces including 2 stages, a workshop lounge, media lounge, outdoor networking plaza, café, atrium style lobby, and more.

To register and for more info, click here:  http://www.ideaslosangeles.com/register/

 

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Don’t Miss This! June 30th – EXPOSED: Digital Imagery, Drones, Publicity And Privacy

shutterstock_373521769

EXPOSED: DIGITAL IMAGERY, DRONES,
PUBLICITY AND PRIVACY

 

What: 

Join us for a discussion with industry experts about the issues related to Video, Photography, User Generated Content (UGC), and Privacy on the Internet and how it relates to companies here in the Los Angeles entertainment community and Silicon Beach.

When: 

Thursday, June 30th 2016
5:30pm – 8:00pm
Register!

Where:

Parking is in Lot #5 on the corner of 4th Street and Broadway or in the Santa Monica Place Mall

Who:

 

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Stubbs Alderton & Markiles’ Client HelloTech Merges with Geekatoo

hellotech(Los Angeles, CA – May 2016) – SAM client and Los Angeles-based startup HelloTech and rival in-home tech support company Geekatoo have merged, in a sign of consolidation in the hotly competitive on-demand sector.

HelloTech will combine its network of about 150 college students who provide on-demand tech repair to Southern California consumers with Geekatoo’s U.S. network of about 5,000 technicians, the companies said in a joint statement.

The merger connects HelloTech with Geekatoo’s national market and provides Geekatoo with more access to venture capital funding, HelloTech co-founder Richard Wolpert said in an interview.

SAM attorneys that represented HelloTech in this transaction were Scott Alderton and Caroline Cherkassky.

To read the full press release in Fortune Magazine, click here.

About HelloTech

HelloTech is a new on-demand tech support service provided by our fully-vetted team of techs. Each HelloTech Hero is hand-selected, background-checked and completes a variety of tests and assessments. In addition to a complete range of tech support services, we also provide new technology consultation and training. We not only fix problems, we educate and help architect a home’s tech eco-system.

In today’s world of connected devices and the Internet of Things, our mission is to make the newest in technology available and understandable to all. We’re making technology in the home simple.

About Geekatoo

Geekatoo.com offers at-home tech support at prices up to 75% off of Geek Squad. They offer a range of fix-priced services and an auction model for custom jobs.

They work with 6,000+ providers across the US ready to provide service and troubleshoot issues such as smart home product installation, computer repair, virus removal, camera and printer repair, building websites, and home theater installation.

Providers are ranked on Geektitude score, which affects their ability to get work. This score is based on previous job satisfaction, certifications and education.

About Stubbs Alderton & Markiles, LLP

Stubbs Alderton & Markiles, LLP is a business law firm with robust corporate, public securities, mergers and acquisitions, entertainment, intellectual property, brand protection and business litigation practice groups focusing on the representation of, among others, venture backed emerging growth companies, middle market public companies, large technology companies, entertainment and digital media companies, investors, venture capital funds, investment bankers and underwriters. The firm’s clients represent the full spectrum of Southern California business with a concentration in the technology, entertainment, videogame, apparel and medical device sectors. Our mission is to provide technically excellent legal services in a consistent, highly-responsive and service-oriented manner with an entrepreneurial and practical business perspective. These principles are the hallmarks of our Firm.

_______________________

For more information about our Mergers & Acquisitons practice and Emerging Growth practice, contact Scott Alderton at (818) 444-4501 or salderton@stubbsalderton.com

Press Contact:

Heidi Hubbeling
Director of Marketing
(310) 746-9803
hhubbeling@stubbsalderton.com

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You’re Invited!! Preccelerator Program Demo Day – June 23, 2016

 

Preccelerator Demo Day Homepage

THE DEAL

Clear your calendar – It’s going down! Preccelerator® Program Demo Day kicks off on June 23rd @ 5:30pm, and you’re invited to take part in the festivities. SAM Preccelerator® Program (1453 3rd Street Promenade, Suite 300) is our meeting spot to showcase the Preccelerator®’s current class of all-star companies to investors and the start-up community. Party on the Patio to follow! 

 

WHEN

June 23, 2016
5:30-8:00pm – Presentations
8:00-9:30pm – Endless Summer Party on the Patio!

 

WHERE

SAM Preccelerator Program
1453 3rd Street Promenade, Suite 300
Santa Monica, CA 90401

TO REGISTER:

Register!

 

 

 

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INCENTIVE COMPENSATION IDEAS

Incentive Compensaton PlanThere are a number of types of instruments that an employer can issue key employees and independent contractors (employees and independent contractors are referred to collectively as “service providers” to signify that the benefit discussed applies to independent contractors as well as employees) to give the service providers a piece of the upside in the enterprise.  This article will a summary of most of the popular ones, their standard terms and their tax treatment for the employer and employee or contractor.

What can be issued depends in large part on the type of entity that the employer is.  There are some instruments like options that both a corporation and a limited liability company (LLC) may issue and some that only one or other may issue.

CORPORATIONS

Corporations may issue incentive instruments that are geared to the value of their stock, like options and stock appreciation rights.  An option is the right to purchase a share of the employer’s stock at an agreed price.  The exercise price should not be less than the stock value as of the date of issuance of the option.  Failure to do so will result in income inclusion to the recipient service provider under Section 409A of the Internal Revenue Code (the “Code”). That income would be able to be included in the year of receipt and annually as the spread between stock value and exercise price increases.  (Treasury Regulation §1.409A-1(b)(5).)  The need to value the stock of closely held employers to maintain compliance with Section 409A has created a demand for “409A appraisals” within the valuation industry.  Treasury Regulation §1.409A-(b)(5)(iv)(B)(2)(iii) affords a safe harbor for an employer that bases its valuation on a good faith written valuation report.

There are two kinds of options that a corporation may issue, incentive stock options (“ISOs”) and non-qualified options (“NQOs”).   The benefits of ISOs are (a) the exercise of an ISO does not result in ordinary compensation income for the option holder and (b) income, in the form of capital gain, is not recognized until the stock is disposed of.  (Code Section 422(a).)  If the optionee holds the stock for at least two years from the date of issuance of the ISO and at least one year from date of exercise of the ISO, the gain on the sale of the stock would be long term capital gain.

To be an ISO the option must have been issued to an employee (not an independent contractor or outside director) of an employer corporation; the option must have been issued pursuant to a plan approved by the corporation’s shareholders within 12 months of the adoption of the plan by the corporation’s board;  the option may not have more than a 10 year term from the date of issuance; the option may not be transferable and may not be issued to a 10% or more shareholder (the option must have an exercise price of more than 110% of the stock’s value on the date of issuance if the option is issued to a 10% or more shareholder).  (Code Section 422(b).)

Exercise of an NQO results in income for the service provider in the difference between the value of the stock and the exercise price on the date of exercise.  That benefit is tempered by the inclusion of the difference between stock value and exercise price of an ISO in alternative minimum taxable income, potentially implicating the alternative minimum tax for the option holder.

A stock appreciation right (SAR) is the right of a service provider to receive a cash bonus in the amount of the stock value on the date of exercise over the stock value on the date of issuance.  Exercise of the SAR may be limited to certain events or may exercisable at any time by the service provider, both employee and independent contractor.  To avoid the reach of Section 409A, the SAR must be based on appreciation over the value of the stock on the date of issuance of  the SAR.

Phantom stock rights and restricted stock units (RSUs) are the right to receive a cash bonus equal the value of the employer’s stock.  (“A RSU provides a right to receive an amount of compensation based on the value of stock that is payable in cash, stock, or other property.”  (Treas. Dec. 9716 (Apr. 1, 2015).)  Because Section 409A applies to the right to receive a cash bonus, payments with respect to phantom stock rights and RSUs effectively have to be limited as follows:

(1) the service provider’s “separation from service”, subject to a six-month delay requirement for separation from service of a “specified employee” (generally an officer or highly compensated employee of a public company);

(2)  the date the service provider becomes “disabled”;

(3)  the service provider’s death;

(4)  a specified time or fixed schedule specified under the plan at the date of the deferral of the compensation;

(5)  a change in the ownership or effective control of the corporation, or in the ownership of a substantial portion of the corporation’s assets; or

(6)  the occurrence of an “unforeseeable emergency.”

Grants of equity or any property (options are excluded from the term property for this purpose) to a service provider result in compensation income upon the earlier of issuance of the property or the lapse of any restrictions on the grant.  (Code Section 83(a) and Treasury Regulation §1.83-3(a)(2).)  The recipient service provider has the ability to include the value of the unvested equity grant in income as of the date of receipt.  (Code Section 83(b).)  In a start up, the election is almost always made to include the value of the equity grant in income as of the date of issuance, despite the risk that the vesting requirements might never vest, but with any gain on the sale of the equity eligible for long term capital gain treatment if the holding period of one year is met.

 

LIMITED LIABILITIES COMPANIES

Limited liability companies (LLCs) as well as limited partnerships and general partnerships may offer all of the incentive compensation instruments that a corporation can except for ISOs.  But, LLCs may offer profits interests which are probably the best incentive compensation instruments available.

A profits interest is an interest in an LLC that by definition would yield the recipient no share of the proceeds if the LLC’s assets were sold at fair market value and then the proceeds were distributed in a complete liquidation of the LLC. This determination generally is made at the time of receipt of the LLC interest.  (Revenue Procedure 93-27, 1993-2 C.B. 343.)  The profits interest treatment is only open to interests granted for services to the LLC.  The concept of a profits interest as not being includible in the recipient’s income on receipt is beneficial as the benefit is not dependent on the valuation of the interest granted, but on the assets of the LLC.

When a profits interest is granted, the LLC values its assets and sets that value as the “base value” or the “threshold amount.”  Once the LLC has made cumulative distributions equal to the base value/threshold amount, the profits interest participates along with the other holders of the class of LLC interest granted.  If the LLC sells an asset and recognizes long term capital gain, the profits interest holder recognizes long term capital gain as well.

Unlike an ISO in the corporate context, there is no income on grant of the profits interest (either for regular tax or alternative minimum tax purposes).

____________________________________________

Michael Shaff joined the firm in 2011 as Of Counsel. He is chairperson of the Tax Practice Group. Michael specializes in all aspects of federal income taxation. Mr. Shaff has served as a trial attorney with the office of the Chief Counsel of the Internal Revenue Service for three years. Mr. Shaff is certified by the Board of Legal Specialization of the State Bar of California as a specialist in tax law. Mr. Shaff is a past chair of the Tax Section of the Orange County Bar Association. He is co-author of the “Real Estate Investment Trusts Handbook” published annually by West Group.

For more information about the Incentive Compensation Plans and the Tax & Estate Planning Practice at Stubbs Alderton & Markiles, LLP, contact Michael Shaff at mshaff@stubbsalderton.com

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Preccelerator® Program Company Jambo Launches in Android and iOS App Stores

Jambo FeatureGraphic_1024x500

Congratulations to SAM Preccelerator Company Zero Mass Energy (“ZME”) on the launch of their first product Jambo in the Android Google Play and iOS App Stores. Jambo is a chat app that combines social productivity with integrated social gaming.  “Jambo’s approach is to allow these games and tools to be utilized right within your chat threads without having to leave the app” says founder and CEO, Carey Chico.   While this first version allows the user to play games, send real-time character animation, as well as voice and photos – future releases will add a large number of entertainment and productivity functions.

ZME has also launched their new Jambo Chat Platform, that is a licensable platform to help businesses scale and retain their user base by utilizing a diverse set of social productivity and social play features. Companies that have a large number of apps or sites, can take these fragmented user bases and combine them into a single community promoting engagement and retention.  “We see an opportunity to create a pervasive chat platform that goes where you want to go, rather than you having to go to it.  There are so many isolated and siloed app experiences that we think could benefit greatly from our technology.”

Get it On Google Play

App Store

To learn more about Zero Mass Energy, visit http://www.zeromassenergy.com/

For more information about the Preccelerator Program contact Heidi Hubbeling at hhubbeling@stubbsalderton.com or visit www.preccelerator.com.

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Stubbs Alderton & Markiles’ Client Zephyr Receives $31M Investment from Frontier Capital

Press Release_Frontier-Capital-investmentLos Angeles, CA – May 13, 2016 Stubbs Alderton & Markiles announces that it represented its client D-Software, d/b/a Zephyr, one of the software industry’s fastest-growing providers of real-time, on-demand enterprise test management solutions, in an investment deal of  $31M from Frontier Capital.

Based in Newark, Calif., in the epicenter of the software industry, Zephyr provides more than 8,500 customers in over 100 countries with innovative applications, seamless integrations and unparalleled, real-time visibility into the quality and status of their software development projects. With additional operations in London and Bangalore, the company has more than doubled its customer base in the past 12 months by helping companies like LG Electronics, Adobe, HSBC, Honda, Oracle, Citibank, Amex, GE, Starz and Hyundai drive down costs and bring higher quality software to market faster.

The $31 million investment from Frontier Capital will be used to fund key growth initiatives for the company like enhancing the product portfolio and scaling sales and marketing capabilities, according to Zephyr founder and CEO Samir Shah.

“Partnering with Frontier Capital will help us realize our potential by investing in the critical business functions that will fuel our growth,” said Shah. “Their business acumen and experience helping similar next-stage growth companies achieve their goals will be just as, if not more, valuable to us than the money they have invested. We are excited to have Frontier on board as an engaged partner and look forward to working with them to build a market leader.”

SAM Partner Scott Alderton has represented D-Software, d/b/a Zephyr, since its inception and Stubbs Alderton as a whole is very proud of their success.  SAM Partners that led this deal include Scott Galer, Scott Alderton, Nick Feldman and Adam Bagley.

To read the full Zephyr press release, click here.

About Frontier Capital

Frontier Capital is a Charlotte-based growth equity firm focused exclusively on software and technology-enabled business services companies. Founded in 1999, Frontier partners with management teams that can benefit from capital to accelerate growth, fund acquisitions or generate shareholder liquidity. The firm makes minority and majority equity investments in high growth companies and has built an excellent track record of delivering returns to both investors and management partners. For more information, please visit frontiercapital.com.

About Zephyr

Zephyr is a leading provider of on-demand enterprise test management solutions, offering innovative applications, seamless integrations and unparalleled, real-time visibility into the quality and status of software projects. Zephyr products are the fastest-growing agile test management products in the world, with more than 8,500 global customers in over 100 countries. Their feature-rich products address today’s dynamic and global needs across a variety of industries including finance, healthcare, media, automotive, IT services and enterprise software. Zephyr is headquartered in Newark, Calif., with offices in Europe and India. For more information, please visit www.getzephyr.com.

About Stubbs Alderton & Markiles, LLP

Stubbs Alderton & Markiles, LLP is a business law firm with robust corporate, public securities, mergers and acquisitions, entertainment, intellectual property, brand protection and business litigation practice groups focusing on the representation of, among others, venture backed emerging growth companies, middle market public companies, large technology companies, entertainment and digital media companies, investors, venture capital funds, investment bankers and underwriters. The firm’s clients represent the full spectrum of Southern California business with a concentration in the technology, entertainment, videogame, apparel and medical device sectors. Our mission is to provide technically excellent legal services in a consistent, highly-responsive and service-oriented manner with an entrepreneurial and practical business perspective. These principles are the hallmarks of our Firm. For more information, please visit www.stubbsalderton.com.

Media Contact:
Heidi Hubbeling
(310) 746-9803
hhubbeling@stubbsalderton.com

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SAM Alert- Employers Must Now Provide Notice of Whistle Blower Immunity

Important Business News
from
Stubbs Alderton & Markiles, LLP

Employers Must Now Provide Notice of Whistle Blower Immunity

New Federal Trade Secrets Law Requires Immediate Changes to Employee and Contractor Agreements

Starting May 12, 2016, all agreements with employees and individuals that are independent contractors or consultants governing the use of trade secrets or confidential information must include a notice of immunity for the disclosure of a trade secret to the government or in a court filing.  Under the Defend Trade Secrets Act (“DTSA”), the disclosure of a trade secret will be immunized from civil and criminal liability if it is made (i) in confidence to a Federal, State or local government official, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law or (ii) in a lawsuit complaint or other court documents filed under seal.  Failure to comply with this new legal requirement may preclude a company from recovering punitive damages or attorneys’ fees in a lawsuit against an employee or contractor for trade secret theft.  Also, it is possible government agencies could bring regulatory enforcement actions and employees could bring class action lawsuits against companies that fail to provide this notice.

Our recommendation for adapting to the new law:

  • Update agreements with employees, independent contractors and consultants. The required notice must be included in any contract or agreement with an employee or individual that is an independent contractor or consultant that governs the use of a trade secret or other confidential information.  This includes employee confidentiality and intellectual property assignment agreements, independent contractor agreements, consulting services agreements, professional services agreements, advisory board member agreements, intern agreements and nondisclosure agreements, and any amendments and renewals of such agreements entered into prior to the date the new law went into effect.  Instead of stating the immunity notice in each agreement, the agreement may cross-reference to a policy document (e.g., employee handbook) containing the company’s reporting policy for a suspected violation of law.

How Stubbs Alderton & Markiles, LLP can help.  We are a business law firm with expertise in intellectual property law. Our standard employee, independent contractor, nondisclosure and advisory board member agreements have been updated to comply with the DTSA’s notice of immunity requirement.  We can help update your employee and independent contractor agreements.

Kevin_DeBre
Kevin D. DeBré
leads the firm’s Intellectual Property and Technology Transactions Practice Group advising entrepreneurs and growth companies on how to use technology and intellectual property in building successful businesses.  For more information, email Kevin at kdebre@stubbsalderton.com.

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