THE THOUGHTFUL ENTREPRENEUR PODCAST

1933 – Legal Hacks for Entrepreneurial Success with Grellas Shah LLP’s Seth Kugler

Unveiling the Legal Landscape of Entrepreneurship

In this episode of The Thoughtful Entrepreneur Show, host Josh Elledge speaks with Seth Kugler, a legal expert from the renowned law firm Grellas Shah LLP. They explore the intimidating legal challenges entrepreneurs face and offer guidance for navigating these complexities with confidence. Seth's experience provides listeners with a unique perspective on the legalities of starting and running a business.

Seth delves into the critical importance of protecting intellectual property, understanding contracts, and ensuring compliance with industry regulations. He shares strategies for safeguarding ideas and services, highlights what to look for in contracts, and discusses how to avoid common pitfalls. Seth also emphasizes the necessity of staying current with legal requirements to prevent costly penalties and ensure the longevity of a business.

The conversation with Seth Kugler leaves entrepreneurs with valuable lessons: prioritize IP protection, carefully negotiate contracts, and maintain compliance with laws. His insights demystify legal concepts and empower entrepreneurs to approach legal matters with greater assurance. The legal side of entrepreneurship, while complex, can be navigated successfully with the right guidance and resources.

About Seth Kugler:

Seth Kugler is an experienced business litigator in the tech space with focuses on corporate governance and fiduciary duties, unfair competition and the developing law surrounding the business of artificial intelligence.

About Grellas Shah LLP:

Grellas Shah is a founder-focused law firm, dedicated to providing legal services to emerging ventures and other early stage and middle-market businesses, as well as founders, entrepreneurs, executives, directors, officers, key employees, and others associated with such business clients.

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Links Mentioned in this Episode:

Want to learn more? Check out Grellas Shah LLP website at https://grellas.com/

Check out Grellas Shah LLP on LinkedIn at https://www.linkedin.com/company/grellas-shah-llp

Check out Seth Kugler on LinkedIn at https://www.linkedin.com/in/seth-kugler-2218747

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Transcript

Speaker 1 (00:00:05) - Hey there, a thoughtful listener. Are you looking for introductions to partners, investors, influencers and clients? Well, I've had private conversations with over 2000 leaders asking them where their best business comes from. I've got a free video you can watch with no opt in required, where I'll share the exact steps necessary to be 100% inbound in your industry over the next 6 to 8 months, with no spam, no ads, and no sales. What I teach has worked for me for over 15 years and has helped me create eight figures in revenue for my own companies. Just head to up my influence comm and watch my free class on how to create endless high ticket sales appointments. Also, don't forget the thoughtful entrepreneur is always looking for great guests. Go to up my influence. Com and click on podcast. I'd love to have you. With us right now, it's Seth Coogler. Seth, you are an attorney with Gorillas Shaw LLP. Your website is Grizzlies.com. Your law firm based in California. And, do a lot of important work for a lot of good business leaders out there, which I'm excited to talk about.

Speaker 1 (00:01:26) - And I'm hoping, Seth, that as we're chatting, maybe we can come up with some great ideas so that we don't have to do business with you, that.

Speaker 2 (00:01:34) - That's exactly what I'd like to talk about today. Thanks so much for having me, Josh.

Speaker 1 (00:01:38) - Absolutely. Well, tell us about gorillas.

Speaker 2 (00:01:41) - well, we're, we're a full service law firm catering mostly to, small and medium sized startups in Silicon Valley, New York and across the country. I'm largely a business litigator. I handle a wide variety of business disputes. breach of fiduciary duties, theft of trade secrets, breach of large scale contracts. but I'd say the number one thing that I handle and what I'm going to talk about today are disputes between directors and founders of companies, internal disputes. and but also, in addition to the litigation work that I and my team do, Greg Shaw has, a corporate side that helps structure deals, structure companies and essentially do the type of planning work in advance that for a small upfront investment, stops people from having to pay the big bucks for me later on.

Speaker 1 (00:02:44) - Yeah. you know, before we get into that and kind of talk about best practices, have I think that there's been recently some headlines in terms of some major changes to laws. I know certainly on non-compete. Is that something that's ever does that come up for you?

Speaker 2 (00:03:01) - yeah. And you know, I'm going to talk about non-compete, so I'm going to touch on that a little bit today as, something that could have helped, the Winklevoss twins when dealing with Mark Zuckerberg in the Facebook founding. but yeah, I've been I've been writing on that issue lately, too. A lot of people are interested in that. I will say, I don't think that the FTC rule banning non-compete is ever going to get implemented. I would expect that to, to be stayed by the court in Texas based on based on the, the lawsuit there by the Chamber of Commerce. And, ultimately, I would expect that the Supreme Court is going to overturn that as exceeding the power of the FTC.

Speaker 1 (00:03:49) - That's amazing. That's fascinating.

Speaker 1 (00:03:52) - I had no idea. I just I heard that and I thought, wow, that's that has what? And I don't know if you want to just kind of, you know, kind of think, you know, industry wise, if that doesn't get stayed, what is the are there are there some real negative implications there?

Speaker 2 (00:04:08) - I mean, I don't know, it depends how you look at it, I think. Yeah, ultimately. People that have no bargaining power to begin with. Probably the non competes don't matter too much. And if you do have bargaining power you know an engineer, a C-suite executive and they can't hold you to a non-compete anymore. Really. That's just one less thing that you're going to be able to offer in contract negotiations. And you know, California has non competes. But they're a lot tougher here. And I think. The rest of the country is going to have to follow the California model, which which still works. You know, there are other ways to protect your trade secrets.

Speaker 2 (00:04:58) - There's the federal Defense Trade Secrets Act. I handle litigation with that all the time. And, you know, just because you don't have a non-compete doesn't mean that you're entitled to steal your former boss's business when you leave.

Speaker 1 (00:05:13) - Yeah, yeah. so what was that? What would be some of the, you know, kind of the main areas of law or I would say, you know, when you're called in, like the most common complaints or issues that are going on, you're like, all right, time to get to work. Is that.

Speaker 2 (00:05:31) - I mean, every case is a little bit different, but as I mentioned, founders disputes tend to be the bulk of my practice and some of the most interesting cases that I work on. Yeah. You know, a lot of times people found companies with their friends, or so they think. And then all of a sudden, for a variety of factors, money, power, new players providing influence to one of the founders. People start changing their behavior, and maybe they're not as friendly as they used to be.

Speaker 2 (00:06:09) - you know, the the Facebook example is, is very illustrative. most people have seen the social network and they, they see what happened to Andrew Garfield's character, Eduardo Saverin in that movie. you know, he put a lot of weight on the relationship that he had with Mark Zuckerberg. Ultimately, he ended up assigning his voting rights to Mark Zuckerberg, and Mark Zuckerberg, in part used that assignment of Eduardo Saverin voting rights to issue additional stock to everybody but Eduardo Saverin, diluting him down.

Speaker 1 (00:06:50) - Yeah. I mean, when I watched The Social Network, I was shocked that that you could do that. I mean, which is. So how do we protect ourselves from that happening?

Speaker 2 (00:06:59) - So, what Eduardo Saverin could have done is been a little less trustworthy, a little less trusting at the beginning. but, you know, also. A lot of times you want to cut a founder like that out of the business, and it's good to look at things from Mark Zuckerberg's perspective there. Eduardo Saverin was no longer doing work for the business, and he had been he had been replaced essentially as the finance founder with, Sean Parker, the former Napster founder, who was played by number, like in the movie.

Speaker 2 (00:07:39) - so the reason that Mark Zuckerberg got caught up in litigation is because Eduardo Saverin got all of his ownership and power in the company right up front. And when they wanted to make structural changes, they needed sovereign's input in order to do that. So, Facebook had to use some machinations that led to a lawsuit to get Savarin out. But generally, the way you'd want to set it up is that there's a vesting schedule, and maybe Savarin owns 25% of the company, but there's a repurchase right to 24% of that. And then that number goes further and further down the longer he's with the company. But if he only does a few months of work, then it's easier to get him out.

Speaker 1 (00:08:33) - Seth, thinking about nearly any. Let's say they're not. You know, maybe it's just they're just bootstrapping a business, I don't know. you know, if there's any, like, if you were to come up with a list of, like, you know, two or 3 or 4 things, you're like, listen, regardless of, you know, if you're seeking or working with investors or issuing shares or whatever, listen, at the very least, every business leader, even if you're a solopreneur, needs to do this, this and this and anything come to mind on that? Obviously, articles and kind of separating it as separating entities, I would hope.

Speaker 1 (00:09:06) - But I'll let you kind of take the lead on that.

Speaker 2 (00:09:08) - Yeah. I mean, separating entities and separating your finances from the entity in case the entity gets sued. You don't want, you don't want the person suing you to be able to do what's called piercing the corporate veil. Yeah, and come after your personal assets. but also, the same thing goes the same general rule goes for any business, and that's that's paper, your deals. I going back to the Facebook example, what happened to the Winklevoss twins? Could happen to anybody. Which is they hired somebody to do work for their business, and that person ended up. Taking the idea for their business and starting a competing business. And they had trouble enforcing that because all they had with him was a handshake deal. You know, that's again people work with people that they trust and maybe there's even a long term relationship there. But then when an opportunity for a lot of money and power comes in, some people just get greedy. So I would recommend that everybody always, always pay for your deals.

Speaker 2 (00:10:23) - And if somebody is contributing ideas to your company, make sure that they're assigning that intellectual property to the company. Yeah.

Speaker 1 (00:10:33) - You know, I wonder if if often or if you hear this where they say, you know, we thought about doing it, but we didn't want to make it weird, you know, or just like, whatever excuse that, that they come up with. you know, and I'm just thinking about maybe how we can present that, you know, for us, like, you know, even when we work with clients, like, even if there is something that it maybe does or doesn't require a contract, we don't require it, but we still have a memorandum of understanding. Right. And it's even if we don't consider it enforceable. Anyway, I'm just thinking like the way that you present that could just say, you know, listen, just just for clarity's sake, why why don't we just kind of put it down on paper and, and then everybody knows kind of what the deal is like.

Speaker 1 (00:11:17) - I'm just thinking that there's no one should not get paper. Right. so I'm just wondering if maybe there's any kind of rules of the road for, just doing it anyway. Like how you would tell someone to present that.

Speaker 2 (00:11:33) - In my experience, the way to handle it is to just have have a standard that you use for everything. And you can tell somebody, look, it's it's not personal. I trust you, but this is my standard contract that I use for everything. If you have any issues with any of the terms, let me know. We can. You know, this is negotiable. If you need it to be. But, generally, our lawyers make us do. This is agreement on.

Speaker 1 (00:12:00) - The lawyers, I like it. Yeah.

Speaker 2 (00:12:02) - Blame it on the lawyers. We're happy to take the blame.

Speaker 1 (00:12:06) - Okay, so aside from, you know, anything else immediately come to mind that you think is just good? Best practice, for anyone in business, for themselves.

Speaker 2 (00:12:17) - I'm planning.

Speaker 2 (00:12:18) - I think, you know, it doesn't need to be legal planning. Always be planning what you're going to do next. plan for contingencies. And plans can change when new information comes. But if you've done that background work to think about what you're going to do in a situation, you're not going to be caught flat footed. Yeah.

Speaker 1 (00:12:42) - When, you know, and I think that there's something to be said, you know, my background in PR, I mean, that's the whole purpose of crisis comms is that you make your decisions ahead of time. When you've got a clear mind, you've got you can spend some time and think about it. When you're in the middle of something, you may or may not make optimal decisions. But if you've already thought o out all of these situations, then I feel like we're, you know, again, making better decisions overall. Yeah. Agreed. yeah. Big agreement. let's talk about, where you come in. So, when, when clients typically approach you at Galatia.

Speaker 1 (00:13:24) - so most common complaints, again, we would say kind of founder director disagreements.

Speaker 2 (00:13:29) - Yeah. and that can happen while people are still at the company, or it can happen when somebody leaves. often when somebody leaves early on, the investors want them off of the cap table. They don't want them to own any any stocks still, or at least a very small amount because it's it's going to be harder to raise later rounds and they're going to have some element of control. And there's always the threat of litigation as long as somebody owns shares. So. One of the problems that can happen there is. When a founder leaves a company and they don't want to give up their stock, the investors might put pressure on their co-founder to find any excuse to sue them, or even just concoct reasons to sue them for leverage. so I see that a lot. but again, I mean, all sorts of crazy things happen. I've seen people who who secretly, are being charged with a crime. And want to cover that up, and will start a dispute with their co-founder to try to push their co-founder out to help them cover up their crime.

Speaker 2 (00:14:57) - Oh. So,

Speaker 1 (00:15:00) - Yikes.

Speaker 2 (00:15:00) - Yeah. I mean, my point there is just about anything can happen. And and that's that's really one of the things I enjoy most about my practice is every case is pretty different.

Speaker 1 (00:15:15) - I have a question. so let's say someone's listening to us, and, you know, the opportunity is going to come, where they're going to need counsel from, from an attorney that specializes some of these more complex business situations. let's say that they're not working. Like, do you recommend, like, any best practices for choosing an attorney? Like what to look for, what to ask? anything that you'd recommend there?

Speaker 2 (00:15:44) - Oh, definitely. look for an attorney.

Speaker 1 (00:15:47) - Hoping you'd say that.

Speaker 2 (00:15:49) - Look for an attorney that doesn't just tell you what you want to hear. Because if an attorney is telling you what you want to hear when you come into their office with a dispute, they're looking at you like a big bag of money. And what you want is somebody who's willing to tell you that you don't have a case, even if maybe you have a case at the beginning but don't have a case later.

Speaker 2 (00:16:11) - So, you know, there you're going to want somebody who tells you all of the weaknesses of your case right up front.

Speaker 1 (00:16:20) - Yeah. And in fact that, that, you know, if, if they don't do that, I, you know, I wonder like, what what are good questions we could ask. So I'm just thinking that it might be helpful to say, hey, tell me why my case sucks. Tell me why my case is great. And just kind of listen to how they answer both of those, you know, as you're kind of shopping around, should you, should you plan on talking with more than one attorney? And during that process, I would, I would imagine, but what's your rule of thumb on that?

Speaker 2 (00:16:52) - Yeah, that was going to be my suggestion. The easiest way to deal with that is just to talk to a lot of different attorneys to figure out who you want to hire. and that's, that's true even for transactions, but especially for litigation. but also.

Speaker 2 (00:17:09) - I think you raised an excellent point, Josh. You can just ask somebody, what are the weaknesses of my case? And every case has weaknesses. At the very least, somebody can tell you, well, the defendant has a right to go to a jury and anything can happen with a jury. At the very least, the lawyer should tell you that.

Speaker 1 (00:17:32) - Yeah. Yeah. so your website, south is grizzlies.com as grizzlies.com. it looks like you have some resources here as well. Do you mind maybe sharing, like, you know, a friend that's been listening to our conversation right here, and they want to learn a little bit more about gorillas and, you know, maybe kind of dig into content or anything that you're any thought leadership that you're sharing, anything that you'd recommend that they take a look at.

Speaker 2 (00:18:00) - yeah. I think they should take a look at the Gorillaz blog. I know that, with regards to the transactional work and the planning that I was talking about, one of the partners at our firm has a regular column in entrepreneur magazine.

Speaker 2 (00:18:17) - and, Mitchell and, another partner, David Siegel and I are all, are all frequent writers and, are frequently interviewed. but, you know, beyond just gorillas, I would recommend that, people, people read things like Entrepreneur Magazine and Fast Company and, you know. Maybe don't read it cover to cover. But if you, look at the front and see which articles are relevant to you, you might want to grab something. additionally, guerrillas and many other law firms blogs, as I mentioned, can keep you up to date on what the the latest legal developments are that might be relevant to your business.

Speaker 1 (00:19:01) - I'm going to shoehorn one last question in here that should have been asked earlier. just simply because I found it on your blog and that is, legal issues having to do with generative AI. you know, one thing that immediately comes to mind. I was just kind of putting together a post of, like, if Mitch Hedberg were still alive, you know, give me 25 Mitch Hedberg jokes.

Speaker 1 (00:19:24) - And so, through several prompts, I came up with a pretty good list. And I thought, I think some of these are as actual jokes. And it wasn't until like, I fact check it with the generative AI. I'm like, he said this, right? And they're like, oh yeah, no, I'm sorry. Yeah, that is actually one of his jokes. Now I share that example in that. if you're just taking the default, just as an IP issue, like you could be infringing on someone's copyright because AI is just grabbing from whatever it happens to know, and that can sometimes be copyrighted. You know, stuff, I guess. And I don't know if that's something that that's been coming up or any other issues around AI that you're like, hey, you might want to be careful about this, this and this.

Speaker 2 (00:20:09) - In terms of what entrepreneurs who are just using AI rather than developing it should be concerned about. I think you hit the nail on the head. the legal landscape is still developing, but the main area of exposure for your average user of AI is going to be if they use AI generated content and present it as their own, but it's actually copyrighted by somebody else.

Speaker 2 (00:20:34) - So yeah, the way that I recommend dealing with that is just, you know, hey, I can save you a lot of time by putting something together, but at least take the time to check it to make sure that this is, not something that that belongs to somebody else and that they might see you over.

Speaker 1 (00:20:53) - Yeah. Yeah, absolutely. Well, listen. Great conversation. Seth Kluger, Coogler again. you're an attorney with Greg Shaw. Your website grizzlies.com. one last, when someone goes to the website, what do they click on? Or if they want to have a conversation with you, like, what's that process?

Speaker 2 (00:21:10) - well, you can, go through the website info portal, or you can just directly email info at grizzlies.com. And that's a great place. Com or you can email me directly Skoog eller at Gillis. Com.

Speaker 1 (00:21:28) - We are going to have all those links in the show notes to our friend that's listening. Just kind of click around in your podcast app and you'll see exactly where that's all linked up again.

Speaker 1 (00:21:35) - Seth Coogler, attorney Greg Shaw, on the web at Grizzlies.com. thank you for joining us.

Speaker 2 (00:21:41) - Thanks so much for having me, Josh.

Speaker 1 (00:21:49) - Thanks for listening to the Thoughtful Entrepreneur show. If you are a thoughtful business owner or professional who would like to be on this daily program, please visit up my influence. Com and click on podcast. We believe that every person has a message that can positively impact the world. We love our community who listens and shares our program every day. Together, we are empowering one another as thoughtful leaders. And as I mentioned at the beginning of this program, if you're looking for introductions to partners, investors, influencers, and clients, I have had private conversations with over 2000 leaders asking them where their best business comes from. I've got a free video that you can watch right now with no opt in or email required, where I'm going to share the exact steps necessary to be 100% inbound in your industry over the next 6 to 8 months, with no spam, no ads, and no sales.

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