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Ask FLCORPLAWYER Your Own Question
Category: Business Law
Satisfied Customers: 4634
Experience:  23 Years business & securities law, NY and FL bars. SEC all states.
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This is for an SEC experienced lawyer. I believe there is

Customer Question

This is for an SEC experienced lawyer. Wiil pay bonus for answer.  I believe there is a way but not sure but have included some thoughts below. What i'm trying to do is create a cross between Prosper, peer to peer loan, and Shark Tank. I have been doing this market for ten years and there is a gap in the market. I have had 3 infomercial deals and most people want to prey on inventors. I want to create a website that drives inventors to it , they pay small fee and list their idea/invention. Thats how we make our money along with advertising. I have a well known face person that really wants to do it. We could be in front of all kinds of tv and print at no cost right away. She is really big and good in that market. Overall - invention funding - inventors list invention people donate like prosper inventor gives small piece of patent and possibly royalty % I want to find a way to make it work so inventors can take their products to the next level. One step at a time. How can prosper do it? What can I do to create a mass market. Most people that donate are small dollars and an immaterial amount. We make money of website and advertising not money collected.What I'm looking to do is to sell part of a patent to raise money to take it to market. My initial thought was to set up website and sell say 10% of patent for $10k In return Inventor would give them part of the patent, register their name as partial assigned with patent office and also pay something like 3% on the sales. If we don't sell obviously don't pay but if sell pay them. Based on my research, I think it would be classified a stock, and not an asset, making it fall under the sec reporting guidelines. I have two other ways The first is to do it as a club. The club would be by invatation The club members say pick a patent out of a small listing (10 patents listed) and the people pick one patent, some could invest $20 others could invest $500, all picking that one patent they form a club, all that invested in the patent join a club with the investment being a portion of that particular patent. In return they own a hard asset the patent say 10% and get a 3% royalty when product actually sells. The other way is to have a listing of the patents the people pick one and as a group they decide to all be involved in that one. The investors DONATE the money into a irrevocable trust the trust distributes/buys the money to the inventor and then the inventor assigns the patent rights 10% and a 3% royalty to the trust. I should say that the grantors, investors, actually make a donation to the irrevocable trust, not a loan and not a purchase, but donation or non recourse payment. What you end up with is a irrevocable trust, that distributes initial money to patent holder, who in turns assigns the rights and payments, all the money is distributed at the end of the year. If there is no income all the tax returns are zero. the original investors are beneficiaries of the trust and the patent holder is not, Will the irrevocable trust work if it is a gift. All disclaimers will be in. Don't invest money you can't ;lose. But structure as a gift to trust, trust buys patent or revenue stream and if it works they get paid. hope its not too chopped up to understand but if we can figure out this could be really big. Not giving all details but more in depth than I said on our side but sticky issue with sec rules. have to be able to justify the position
Submitted: 6 years ago.
Category: Business Law
Expert:  FLCORPLAWYER replied 6 years ago.


Seling interests in patents on the internet is a pooling agreement and the entire scheme would have to be registered as a security. The SEC hates these deals because they were used to pool investors in packages of commercial mortgages in a manner that was supposed to circumvent the securities laws. The "club" is the same thing. So is your third idea. I have seen this work but what it involved is incorporating your company, issuing corporate debentures, and investing the money from the debentures into the patents, with the holders of the debentures getting a security interest in the patents. This still requires a Form D, blue sky filings in each state where it is offered, but you may be able to take advantage of the offeror exemption to registration. You need to sit down with a good SEC lawyer before you do anything. The liability for this type of scheme is enormous.