The E2 (Investor) Visa and Intellectual Property in Lieu of Capital Investment

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The E2 Visa, The Investor Visa, has historically been an effective vehicle for foreign national entrepreneurs and company owners to both embark on a new commercial enterprise in the United States, and to obtain corresponding visas for themselves, as the principal investor, and to transfer essential employees.

Such essential employees must possess unique knowledge of the company, its product and its specialized services to obtain long term visas to come to the United States to develop the venture, and continue operating it in perpetuity; assuming they maintain the requisite equity position in the company, and assuming they continue investing in the enterprise.

Unlimited extensions, employment authorization for the spouse and ownership of your own employment entity are some of the driving motivations behind obtaining this coveted classification.

As a threshold matter, the E2 framework requires that

  • The applicant must be a citizen of a country that has a relevant treaty with the United States. PRESENTLY THERE ARE 80 SUCH COUNTRIES WITH E2 TREATIES IN FORCE.
  • The applicant must be coming to work in the U.S. for a company that he or she either owns or that is at a minimum 50% owned by other nationals of the country of origin.
  • The applicant must be either the owner or a key employee (executive or supervisor, or someone with essential skills) of the U.S. business.
  • The applicant or the company must have made a substantial investment in the U.S. business (there’s no legal minimum, but the applicant or company must be putting capital or assets at risk, be trying to make a profit, and the amount must be substantial relative to the type of business).
  • The U.S. company must be actively engaged in commercial activities and meet the applicable legal requirements for doing business in its state or region. It also cannot be merely a means to support the investor. The underlying goal of the treaty investor visa is to create jobs for U.S. workers.
  • The applicant must intend to leave the U.S. when his or her business in the U.S. is completed, although the person is not required to maintain a foreign residence abroad.

The limited purpose of this discussion is to address a unique occurrence that has emerged in the application of intellectual property in lieu of a traditional capital investment, as it relates to satisfying the “substantial at-risk investment” prong of the statutory criteria. According to the Foreign Affairs Manual:

Intangible Property Rights to intangible or intellectual property may also be considered capital assets to the extent to which their value can reasonably be determined. Where no market value is available for a copyright or patent, the value of current publishing or manufacturing contracts generated by the asset may be used. If none exist, the opinions of experts in the particular field in question may be submitted for consideration and acceptance. -9 FAM 41.51 N8.2-3

In the burgeoning world of start-ups, we have observed countless clients applying this theory to satisfy the substantial investment requirement. Formal valuations, quantification of user traffic as it relates to monetization and prospective job creation in the development, application and diffusion of the Intellectual Property has been proven to be a successful methodology for addressing this threshold concern, in lieu of hard capital. However, despite a series of successful filings using this interpretive model, we have begun to observe a trend towards the issuance of the dreaded Request for Evidence, with a targeted challenge to the “at-risk” component of this non-traditional investment structure.

Unlike capital, which can be lost in the tangible sense of the word, through a failed venture; with Intellectual Property, the risk of a conventional “loss” of the investment has been questioned using the theory that the investor still retains the investment “capital”, as the Intellectual Property cannot be lost, in fact, it can be re-modified for a distinct venture. While this development is far from a trend, it does signal a need for practitioners to frame close analysis of the criteria, and in much the same way that the “capital” is quantified for the purpose of qualifying the substantiality criteria of the investment, that same quantitative analysis must be employed in articulating the potential for loss of the investment, the “at-risk” component. By analyzing, and assigning a value to the expenses associated with the “start-up”, such as marketing, office lease, prospective employment, hardware, software, and user testing models, we have begun to structure models for projecting the potential for loss.

We have previously addressed the need for “outside of the box thinking” in the world of the H-quota. The foregoing discussion represents the growing paradigm shift in the practice of employment-based immigration in the new economy; one driven by innovation and the entrepreneurial spirit that defined this great country.