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  1. 1. IRS Circular 230 Disclosure: To ensure compliance with the requirements imposed by the IRS, we inform you that any tax advice contained in this communication, including any attachment to this communication, is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to any other person any transaction or matter addressed herein. Roger Royse Royse Law Firm, PC Palo Alto, San Francisco, Los Angeles rroyse@rroyselaw.com www.rogerroyse.com www.rroyselaw.com Skype: roger.royse Twitter @rroyse00 IP, Big Data and Issues Surrounding Tech in Agriculture
  2. 2. Recent Activity in AgTech Financings Source: AgFunder, AgTech Industry Takes in $1.04 Billion in Q1, available at http://agfundernews.com/agtech-industry-takes-1-04-billion-q1.html
  3. 3. Select financings from 2015: Asilomar Bio $3 million series A Main product (not yet released) will increase drought tolerance in crops Hortau $5 million funding Product can determine the precise amount of water required for a particular crop or orchard 3D Robotics $64 million series C Manufactures drones for mapping and technology Skyward $4.1 million series seed Develops software that maps and logs drone flight paths DroneDeploy $9 million series A Provides cloud-based software platforms for drone operations accessible through tablets and smartphones Recent Activity in AgTech Financings
  4. 4. Customer data Is the data truly anonymized? Is the data accurate and presented in a useful way? Who owns the data? Data and privacy standards Use of drones Benefits/problems Legality Regulatory issues Market Issues Overview of Due Diligence Issues
  5. 5. Anonymity of customer data Most agriculture technology providers (ATPs) collect data Data is used to provide info to farmers Data is sometimes monetized through aggregated data or reports Data privacy laws Personal information or business information? Personal information usually gets higher degree of protection, but line is often blurred with family-run farms Data often tagged with GPS information Has the data truly been anonymized? Could users guess who the data belongs to as a result of the information provided? (Netflix) Customer Data
  6. 6. Accuracy of the data Collected by humans or machines? Does the data rely on input by humans? Susceptible to errors and possible manipulation Some farmers provide their data to dealers who then pass it on to the ATP Is all the data being uploaded or just select data? How reliable is the data collected by machines? Connectivity/network issues in the fields could cause gaps in the data Customer Data
  7. 7. Presentation of data Is the data presented in a format that is useful to the end user? Many farmers collect data but dont use it because it is nor presented in an understandable format Are there multiple parties involved in collection and presentation of data? Do all the parties understand the needs of the end user? Customer Data
  8. 8. Ownership of data Farmers want to retain ownership of their data Can they take the data with them if they discontinue use of the service? Do all the parties have the appropriate rights to use the data? Farmers are concerned about who ends up with the data Wall Street traders could manipulate market prices EPA could look for potential regulatory violations Retailers could use the information to sell new parts when an existing part needs replacing or to set prices Customer Data
  9. 9. Farmers are becoming increasingly aware of the need to protect their data and enforce their ownership rights Stakeholders are trying to implement a common set of data and privacy standards to guide ATPs, farmers, and other contracting parties on what are appropriate contract terms Privacy and Security Principles for Farm Data released in November 2014 Prepared by groups representing farmers and ATPs, including American Farm Bureau Federation, National Farmers Union, The Climate Corporation (division of Monsanto), John Deere, and DuPont Pioneer Data and Privacy Standards
  10. 10. Standards include the following key provisions that should be incorporated into contracts: Easy to understand language Farmers should own information generated through their farming activities and any use of that data by the ATP is only with the explicit and affirmative consent of the farmer ATPs shall notify farmers how their data is to be used, with whom it will be shared, and for what purpose Farmers should be able to retrieve their data for use with other systems ATPs shall not sell or disclose a farmers data to other parties without notifying the farmer and without that other party agreeing to the same terms as the farmer ATPs shall use reasonable security safeguards to protect against risk of loss or theft of data Data and Privacy Standards
  11. 11. The standards provide strong protections for farmers, but may not be workable Many farmers are not able to negotiate terms and may feel like they are in a take it or leave it position The business model of some ATPs is the collection and presentation of data and a subscription model is common The ATP will not want to let farmers take this data with them once they are no longer paying for the service The contract terms are necessarily complicated because of the multiple agreements in place Not easy to reduce the terms down into something easily digestible Data and Privacy Standards
  12. 12. Use of drones for agriculture Monitor land for weeds and weather damage Collect data on land Concerns/problems with the use of drones Privacy issues Not a huge concern with farmland, but some farmers are concerned that environmental groups will use drones to monitor their farms Drones
  13. 13. Concerns/problems with the use of drones cont. Safety issues Possible collisions Pilots of small aircraft fly over farms to spread seeds National Agricultural Aviation Association wants drone users to have to obtain a pilots license and mark drones with bright colors Use problems Cost of entry Battery life Connectivity Presentation of data Drones
  14. 14. Legality Commercial use of drones is still illegal As with other disrupted industries (e.g. taxis, hotels, etc.) technology is moving quicker than the law FAA has power to levy fines, but rarely does so FAA jurisdiction has been challenged FAA issued a fine of $10,000 on a photographer who was hired to fly a drone over the University of Virginia Photographer claimed the FAA lacked jurisdiction Photographer and FAA settled at $1,100 fine Drones
  15. 15. Legality cont. FAA has granted some exemptions to permit specific persons to fly drones Already a long waiting list for exemptions (>1,000) A farmer has obtained permission to fly drones over land to determine measurements and health of crops Strict conditions on use imposed Drones
  16. 16. Legality cont. Proposed rules In early 2015, the FAA released proposed rules on the commercial use of drones Rules are open for comments from the public and interested parties Not likely to be finalized until 2016 at the earliest (more likely 2017 or later) Drones
  17. 17. Legality cont. Proposed rules cont. Operational limitations on drones Weigh less than 55lbs Remain in the operators line of sight at all times Maximum airspeed of 100mph Maximum altitude of 500 feet Operator limitations Pass an initial aeronautical knowledge test at an FAA-approved testing center Be vetted by the Transportation Security Administration Obtain an unmanned aircraft operator certificate Pass a knowledge test every 24 months Drones
  18. 18. May be anti-trust issues with ATPs that collect and share data on prices of products or inputs Knowledge of prices could reduce competition in the market and stabilize prices which is often seen as bad for consumers Anti-Trust
  19. 19. Contracts ATPs must balance complex contracts with the need to provide farmers with straightforward information Lots of inherent complexity, especially when the ATP sells combined hardware and software For example, there could be software on the hardware, separate software sold to the farmer for use on a personal computer, and a SAAS subscription all as part of one service All the software will have different terms of use Farmers often work with dealers Dealers sometimes collect and input the data Who has the relationship with the dealer? The farmer or the ATP? Need to ensure all the parties have the correct licenses ATPs should consider using FAQs on their website to answer questions from farmers Need to ensure answers to FAQs are consistent with privacy policies, end user agreements, etc. IP Issues
  20. 20. Monetization Sale of software and add-ons Patents Hardware and software Big Data Reports Aggregated data Must have rights to use the data in this way Subscription services IP Issues
  21. 21. A business and tax law firm delivering Service, Value and Expertise to its clients A 6 month innovation network program matching AgTech companies to markets and investors The premier AgTech law practice in Silicon Valley 15 RoyseLaw AgTech RoyseLaw AgTech Incubator Royse Law Firm, PC RoyseLaw Legal Wizard
  22. 22. www.rroyselaw.com @RoyseLaw PALO ALTO 1717 Embarcadero Road Palo Alto, CA 94303 LOS ANGELES 11150 Santa Monica Blvd. Suite 1200 Los Angeles, CA 90025 SAN FRANCISCO 135 Main Street 12th Floor San Francisco, CA 94105 Palo Alto Office: 650-813-9700 Contact Us