entreVIEW

The Wide World of Trademarks

2013-05-22T09:34:00.000-05:00

As I was digging around recently for some information regarding worldwide trademark activity, I ran across the 2012 State of Trademark Report from Thomson CompuMark and got caught up in the reports and statistics of the World Intellectual Property Organization (WIPO). The Thomson report includes 2012 information covering 186 countries and registrars, and the WIPO reports are based on survey results from approximately 150 national and regional IP offices around the world regarding IP activity, including trademarks. Complete WIPO statistics are only available through 2010; the 2012 reports are based on actual information for 2011 from about 100 offices and estimates for information not yet available. WIPO also has a really cool searchable data base where you can find out things like how many applications were filed in Bhutan by German nationals in a given year.

Without including boring details (go to the sources for that), here is some information that I found interesting:

• For the last several years, China has led the world in trademark activity (generally determined by the number of applications filed in that country). The U.S. is second and rounding out the top five spots in 2012 (according to the Thomson report) were Brazil, Turkey and France. (Germany was in Turkey’s place last year).

• German applicants filed the most applications worldwide (by class equivalents) based on 2011 WIPO data. The majority of new applications filed by German applicants, as well as French and U.S. applicants, were filed abroad. The bulk of applications filed by Chinese applicants were filed in China.

• Overall trademark activity has been more or less flat in the last couple of years, but is showing some signs of growth in a few countries, most notably the United Kingdom.

• On a worldwide basis, the leading classification for new applications was 35 (Advertising and Business Management Services). In second place was Class 25 for clothing. Other biggies: Class 5 (pharmaceuticals), 9 (scientific apparatus/equipment) and 41(educational services).

• China accounted for nearly 70% of the total volume of trademark applications in Class 25 for clothing and had nearly twice as many Class 5 applications (pharmaceuticals) as the U.S.

• The least active classifications on a worldwide basis have been 13 (firearms and ammunition), 15 (musical instruments) and 23 (yarns and threads for textile use).

• About 1/3 of the total applications filed worldwide in the last couple of years have been for services, with higher percentages of service mark applications filed in such countries as Australia, Mexico, Turkey, U.K. and the U.S. and the highest percentages in France, Germany and Spain (over 50%). Over 75% of the applications filed in China have been for goods.

• The most recent WIPO information shows that countries such as Curacao, Samoa, Sao Tome and Principe, and Tonga, each had less than 200 trademark applications in 2011.

• The Thomson Report identifies the top ten companies with published marks as Johnson & Johnson, Novartis, Nestle, LG, Unilever, Disney Enterprises, Procter& Gamble, Nissan, Sanofi and Philip Morris.

The data can be overwhelming, but the various charts and graphs in these materials do give a good picture of patterns and trends that can be useful in understanding today’s worldwide economy.

Leaning Way In

2013-05-10T09:40:00.000-05:00

Recently, the women lawyers in our firm have been leading discussion groups around the book Lean In by Sheryl Sandberg. Sheryl is the COO at Facebook and one of Fortune Magazine’s “50 Most Powerful Women in Business.” Her book about women in the workplace has received a ton of press lately—good and bad. Say what you will about the book, but there are some concepts that transcend gender roles at work and are good reminders to all of us.

1. We all need mentors and people to champion us. Sometimes the idea of mentors and a “mentoring program” is overused, and no one really understands what that means. We often overlook the real impact of having good and intentional mentors in our life. I think most of us have been in meetings where a group of people are trying to decide who to hire, who to fire, who to promote, or who to award a bonus to, and there are some people who have a little louder voice than the rest who seem to get behind a candidate. Especially when the candidates are similar, that person with a “champion” seems to stand out from the pack. We all need someone to champion us, no matter what our profession. How do we find someone to champion us? Often this is a mentor. Finding someone to seek advice from, to navigate your career path with, and to eventually champion you, is imperative in a successful career of both men and women. The book makes an excellent point in that your mentor does not have to be (and maybe shouldn’t be) your boss. This mentor can be an outsider to your business, can be a contemporary that you trust, or can be a person that you emulate. Just find one. A real one. Not just someone you with whom make small talk about the weather at fixed monthly meetings.

2. Careers aren’t ladders anymore; they are more like a jungle gym. Today people are much less likely to join a business after college or graduate school, work their way up the ranks, and end up CEO someday. People’s career paths aren’t straight and linear; they take diversions, they are sometimes horizontal, and they sometimes get off the jungle gym and take a break. The point is that we should be aware of every opportunity, not just the ones that appear upward and natural next steps. Some of the most successful people took a horizontal risk or took a trip down the slide for a year or two. You can still end up at the top of the jungle gym.

3. Have a real partner. The book points out that people really can’t get to the top of their professions, or achieve top business success, without support from a real partner. This doesn’t have to be a marital partner, but someone who helps take care of some of the other responsibilities and needs in life. Sometimes this is a whole village of people. Make sure the people in your life are real partners and not just another responsibility or task on your list.

4. Don’t leave the game before you have to. This was the chapter that resonated with me. This chapter discussed some of the subconscious decisions you may make that in effect lower your trajectory. I do this—all. the. time. This is the decision not to take the job in New York because eventually you might want to be close to family, the decision not to take that big project because you might want to take a trip next year, or the decision not to go away to college because this boyfriend might be the guy you marry someday (he never is—also see #3 above). Might, maybe, could be. Why are we planning for things that aren’t here yet? Why would you pass up an opportunity for a condition that isn’t present yet? The book’s point is a good one; don’t limit yourself unless and until you have an actual reason to do so.

Names, Numbers, Dates, and Signatures – Cleaning Up Your Legal Documentation

2013-05-08T09:30:00.000-05:00

As most of the entrepreneurial community in Minnesota is well aware, the funding still available under the state’s Angel Tax Credit program, which gives investors in tech start-ups a tax credit on qualified investments, is fast dwindling. I’m sure ours is not the only law firm in town working with clients that are still hoping to take advantage of the remaining allocation of credits, and reaching out to potential investors with their business summaries, financial information, and perfectly-crafted elevator pitches.

These aren’t the only requirements of the savvy investor, however. Potential business partners also often want to understand the precise equity structure of company in which they are investing, who comprises the company’s board of directors, what the requirements are of the governing documents (articles, bylaws, buy/sell or member control agreements), and other corporate matters. These issues, while often easy to discuss and agree upon in theory, are not technically (or legally) solidified unless they exist in writing, with appropriate names, numbers, dates—and signatures. For some of our entrepreneurial clients, who are often working at break-neck speed, these items exist in spreadsheets, word documents, or emails, but not in legally-binding agreements. And the need to step back and complete this documentation in order to present it accurately to investors seems like a frustrating, stilted, “lawyerly” process that just delays the finalization of key partnerships and funding.

Despite the seeming insignificance of some of these items, the importance of the technicalities surrounding these types of business decisions cannot be understated. Promising an investor that they will receive 10% equity in your company in exchange for their investment, without clear documentation illustrating who owns the other 90%, when they received it, and for how much, does not instill much confidence in the certainty of that 10% (or in compliance with applicable state and federal securities regulation). And promising an investor a board seat without confirming to them how much power this may yield (will they be one of two, or one of seven board members?) may not add the value to their investment that a company thinks it should.

According to West’s Encyclopedia of American Law, a signature is “a mark or sign made by an individual on an instrument or document to signify knowledge, approval, acceptance, or obligation,” with the purpose of “authenticat[ing] a writing . . . and bind[ing] the individual signing the writing by the provisions contained in the document.” I recently assisted a client who insisted that his company’s capitalization table reflected three current owners. However, the third owner had continually delayed providing his signature on the subscription documents evidencing his investment and ownership in the company. Ultimately, when push came to shove and the importance of reflecting the company’s ownership accurately was required, it became clear that there was no true meeting of the minds, and the company was left with its two, official founders. Signatures are the talismans that turn mere conversations (or that “hand-shake” deal) into something that companies – and investors – can rely on as permanent and secure.

I have also recently been working with a client that is attempting to raise money, and an investor inquired about composition of the company’s board of directors. The client had multiple notes as to who was supposed to have been on its board at different times throughout the company’s two-year history, but (much to the surprise of its super skilled legal team) had never followed the statutory process required for the election of directors, or properly documented decisions that had been made regarding the structure of the board. While getting these documents in order was not a very large undertaking, it did take additional time, delaying the company’s receipt of its equity capital and adding some undue headache to the process.

Dates are important as well. Providing a snapshot of your company’s capital structure requires that the documentation leading up to that point is dated and executed prior to the date of the snapshot. And as most business owners realize, subsequent investments dilute previous investors, so solidifying the order of who came in first, second, and third, is critical.

With the potential for at least one incentive to invest, the Minnesota Angel Tax Credit, appearing close to running out for the year (unless proposed legislation like this is passed to increase it), companies are realizing that any delay in communicating with an investor is a set-back. Getting your legal “house in order” with accurate and complete documentation can save time and energy down the road – when these attributes will surely be needed to polish that elevator pitch!

The Book: Steve Fischer, When the Mob Ran Vegas: Stories of Money, Mayhem and Murder (Berkline Press, 2005)

2013-05-01T09:30:00.000-05:00

Why: An engaging look at the dark side of the entrepreneurial spirit.

My copy of Webster’s defines “entrepreneur” as “one who organizes, manages, and assumes the risks of a business or enterprise.” My colleagues and I are accustomed to using the term to apply to someone who is effecting a positive result—someone who plays by the rules while developing new and innovative products or offering improved services that redound not only to the entrepreneur’s own interests, but also in some way (or perhaps it’s better to say more or less) to the public good as well.

But take another look at the dictionary definition. It is, in and of itself, morally neutral. This was brought home to me by one of the good guys (I’m looking at you, Damon), with whom I escaped from a lackluster legal seminar one afternoon to visit the National Museum of Organized Crime & Law Enforcement (better known as the Mob Museum) in Las Vegas.

The museum itself was a bit of a disappointment, but my friend suggested I read When the Mob Ran Vegas, and he helpfully passed along his own copy (autographed!). It proved a most illuminating read about entrepreneurism on the dark side. It is, in essence, a collection of stories about the people who built Las Vegas not as we now know it, but in an early, darker manifestation. Many of these people are famous (and infamous), most are now dead, but all contributed to creating an adult playground in the midst of a desert.

For me, though, this book is most notable for the arcane facts that I’m sure will someday, somehow, be useful for me to know. For example, I learned that “4,000 quarters is $1,000 and weighs exactly 10 pounds.” Of course, I knew the first part of that and, in case it isn’t obvious from all of my prior posts, I wasn’t even a math major. But the second half must be worth remembering, right?

Who Owns Social Media Accounts? Follow the Sage Advice of Noah Kravitz

2013-04-29T09:30:00.000-05:00

Your business has discovered the value of using social media platforms like Twitter, Facebook, and LinkedIn to market and promote products and services. But who owns these accounts and what happens when an employee with a Twitter handle, LinkedIn account, or legions of Facebook followers leaves? What monetary value can be assigned to “likes” and followers?

Until you’re able to get all the answers from the forthcoming Minnesota Small Business Assistance Office publication being authored by Gray Plant Mooty entitled “Legal Guide to Social Media,” a few recent cases may offer some guidance to businesses using social media (and who isn’t):

• In Eagle v. Morgan, Dr. Linda Eagle sued her former employer, Edcom, Inc., for its continued use of her Linked In account. She sought damages for lost business opportunities, damages to her reputation, and diminished value in her LinkedIn account. The Pennsylvania court found in her favor on several state claims, including unauthorized use of her name, invasion of privacy by misappropriation of identity, and misappropriation of publicity. The court noted that while the company had urged employees to create LinkedIn accounts and had guidelines covering on-line content, the company had never informed employees that their LinkedIn accounts were the property of the employer. Unfortunately for Dr. Eagle the court awarded no damages.

• In Phonedog LLC v. Noah Kravitz, Phonedog went after a former employee who continued to use a Twitter account that had been initially created for use by the company. Phonedog is a business that provides mobile news and reviews of products and services of mobile phone carriers through a website and uses a variety of social media , including Twitter, Facebook and YouTube, to market and promote its services to potential users. While an editor employed by Phonedog, Kravitz created a Twitter account. Kravitz used the handle @phonedog_Noah to disseminate Phonedog marketing material and reviews of mobile devices. Kravitz left Phonedog and simply changed his Twitter handle to @noahkravitz. At that time the Kravitz Phonedog Twitter account had reached 17,000 followers. Phonedog sued Kravitz alleging that the Twitter account belonged to Phonedog and included confidential business information. Phonedog also asserted the value of Twitter followers at $2.50 per follower per month and sought damages of $340,000. The parties reached a settlement agreement and Kravitz was allowed to retain custody of @noahkravitz. After the settlement Kravitz issued the following statement:

“If anything good has come of this, I hope it's that other employees and employers out there can recognize the importance of social media to companies and individuals both. Good contracts and specific work agreements are important, and the responsibility for constructing them lies with both parties. Work it out ahead of time so you can focus on doing good work together -- that's the most important thing."

Lessons Learned: Listen to Noah. Have a corporate policy in place governing use of social media. If your employees are asked to use social media to market and promote your business’s products or services, have written agreements that make it clear that the company owns the account, including customer lists, friends, and followers, and that the employee relinquishes any rights to the account when they leave.

I guess the settlement of the Phonedog case means we still don’t know what a Twitter follower (or a “like”) is worth…

Nail Down Your IP So You Can Sleep Soundly

2013-04-25T09:30:00.000-05:00

As I was reading this article in The Minneapolis/St. Paul Business Journal, I was reminded again how a failure to button down intellectual property (IP) often leads to later problems. The article describes a lawsuit against My Pillow, Inc. and Steve Lindell, the Company’s CEO and founder, by investors in a predecessor company, Night Moves Minnesota. The plaintiffs claim that they own 42% of My Pillow because that’s what they were promised by Night Moves when they loaned it $70,000 in 2006.

I don’t know much about My Pillow, although I do recall meeting Mr. Lindell several years ago when he was looking for angel investments at a conference put on by RAIN Source Capital. He seemed like a good guy and it seemed like an interesting product, although I can’t recall whether it seemed like a good investment at the time. I’m guessing some of the angels who turned him down may be wishing they got in on the business, now poised to generate almost $100 million in annual revenue from selling pillows! I haven’t slept on a My Pillow, but I understand it is different from the Sobakawa pillow, which a close friend once told me was so loud that it kept her awake at night. I may just have to get a pet pillow for the newest member of our family (see my recent post for more details).

Before all this talk of pillows puts you to sleep, let me get back to the issue at hand. Why would these investors in the prior company believe they own 42% of My Pillow? The lawsuit claims that they invested in and therefore own the intellectual property behind the pillow. Apparently, the patent was issued in Lindell’s name and never transferred to Night Moves and the trademark was originally registered by Night Moves and later transferred to the new company (allegedly without their consent).

These types of IP issues are common in early-stage ventures. Often, in an attempt to maintain control over technology, founder inventors will want to grant a “worldwide, perpetual, royalty free, transferable” license to the business, rather than assigning the IP outright. In my experience, savvy investors typically will not accept such a scenario and force an outright assignment before writing a check. They reason that any value in the IP, even if the enterprise fails, should be shared by the stakeholders, rather than having the IP revert to the inventor is so that s/he can monetize it.

It appears one key issue in the My Pillow litigation will be whether the investors knew the status of the IP ownership at the time of their investment. If they did, then they may be out of luck on the patent rights because the business didn’t own them. If they didn’t, I’m not sure it means that they own 42% of My Pillow, but they might have a claim relating to inadequate disclosure (something we lawyers call “securities fraud”). At a minimum, it is likely to cost a lot and cause plenty of distraction to figure it all out.

If everyone had focused on and dealt with these issues early, nobody would have to lose any sleep over them today...

Minnesota Angel Tax Credit Update

2013-04-23T09:30:00.000-05:00

If you saw my last blog post, you know that I’m a fan of the Minneapolis/St. Paul Business Journal. I recently saw another article in that paper that I thought would be interesting to readers of this blog.

The article is actually a summary of the 2012 Annual Report for the Minnesota Angel Tax Credit Program prepared by the Minnesota Department of Economic Development (DEED). Here is a link to the actual report.

I found a few things in the report interesting. First, it notes that 117 different companies received more than $46.1 million of investments, resulting in $11.4 million of angel tax credits being issued. In 2011, there were fewer companies receiving qualifying investments (113), but the amount of capital raised through qualifying investment was larger ($63.1 million) and more angel tax credits were issued ($15.8 million). Of course, in 2011 DEED had more tax credits available to issue than it did in 2012. So, the decline in the number of tax credits issued in 2012 is not a sign that the Angel Tax Credit Program is waning in interest. Rather it’s a reflection of the lower number of tax credits available in 2012. Indeed, the fact that more companies received qualifying investments in 2012 than 2011 suggests that the Angel Tax Credit Program is gaining in popularity and has better recognition among Minnesota’s entrepreneurial community.

As further evidence of the increasing popularity of the Angel Tax Credit Program, DEED’s website indicates that, as of April 17, 2013, $7.5 million of this year’s $12.7 million of tax credits available for allocation have already been issued, and only $5.2 remain available for issuance. So, if you were planning to utilize the Angel Tax Credit as part of your capital raising strategy for 2013, you had better begin that process now.

Another interesting thing is the concentration of investments by sector. Software received the largest amount of eligible investments, at $14.34 million, followed by medical device ($11.67 million) and biotechnology ($5.98 million). The number of clean technology companies receiving qualifying investments in 2012 (7) was down from 2011 (11), and the amount of qualifying investments made in clean technology companies in 2012 ($2.1 million) was substantially down from the amount made in 2011 $(13.0 million).

Those of us who work with clean technology companies know that capital raising activity in that space has become more challenging, and these numbers, unfortunately, provide further evidence of that difficulty. Hopefully those numbers will turn around for the clean technology space in 2013.

Blair Waldorf-ing Life

2013-04-18T09:22:00.001-05:00

A couple of weeks ago, I mentioned on Facebook that I was tired of Blair Waldorf-ing everything in my life. Blair Waldorf is a character in a show that I am a little embarrassed to admit I just watched all six seasons of in January. I didn’t mean Blair Waldorf in a blackmailing, yogurt throwing, mean girl kind of way. I also didn’t mean I wanted to give up headbands, colorful tights, Valentino, or macarons (my absolute favorite). I meant that I was tired of over-forcing and over-planning every aspect of my life.

Blair was famous for thinking she had to plan and manipulate everything that would happen to her, and she could accomplish anything with just the right amount of plotting. She went after everything that way and hardly ever took a break between plans.

Like any good type-A person, I am a little like Blair Waldorf. I am often so busy planning the next step or the new goal that I forget to enjoy any steps I have accomplished, or I fail to have the flexibility to deal with any setbacks. It is like planning to lose 40 pounds, losing 10 the first week, and being upset that you didn’t lose the whole 40. Or, thinking that if you could just get on the Biggest Loser, pick up mono, or buy a new scale, you would have to lose the 40 pounds. Ridiculous and unrealistic, and you will always be disappointed with the results (or lack thereof) of a plan like that.

This is why I know I deeply understand the drive and needs of entrepreneurs—but I will probably never be one. A new venture almost never goes according to plan. People who over-plan almost never become successful entrepreneurs. A person who over-plans takes a personality test in college that says she should be a lawyer, takes the LSAT when she is two years from graduating from college, and then promptly becomes a lawyer at 25. True story.

I know people like their lawyers to be planners, and I am certainly not advocating less planning. Don’t forego the buy-sell or the succession plan just to “see what happens.” My point in this is that I know there is another side to my brain that I too often neglect. I used to love to paint, I was a great figure skating choreographer in another life, and I am a Pisces for gosh sake. I know I have some creativity and a free spirit in me somewhere that is begging to be used at least some of the time.

Crowdfunding: Legal Eagles Take a Chicken Little Approach

2013-04-15T08:00:00.000-05:00

When it comes to crowdfunding, the legal community has taken a “sky is falling” view of the proposed funding mechanism for startup companies. Crowdfunding has created an enormous buzz within the startup finance community. In fact, my fellow authors on entreVIEW blog have written about it enough that it’s among the top 20 most frequent tags since we launched our blog for entrepreneurs a couple of years ago. However, regulators and practitioners have not only thrown cold water on the idea, they have also begun to squawk about its approaching perils. If you’re excitedly expecting that crowdfunding will fundamentally transform the way companies raise capital, the legal community is telling you to think again.

Unlike traditional donation-based Crowdfunding through sites like Kickstarter, equity Crowdfunding involves the sale of ownership interests in a company to a large number of investors via the Internet (or other means of “general solicitation”). Crowdfunding was included in the federal JOBS Act passed more than a year ago to facilitate capital raising of up to $1 million annually by early stage companies. Companies selling shares are currently prohibited from “general solicitation,” which involves the offer of shares to people you don’t know via public means such as offers made via the Internet, advertisements, or cold call. The enormous change proposed by Crowdfunding in the JOBS Act is the removal of the prohibition on general solicitation to unsophisticated potential investors . This means that companies could be permitted to offer shares of their stock on websites, billboards and radio ads, just like kitchen gadgets, life insurance and Viagra.

The startup and fundraising communities are excitedly waiting for Crowdfunding to become effective. However, the legal community is taking an entirely different view. I recently attended a national legal education seminar on private company financings. The expert panel included representatives of the SEC, which is responsible for adopting regulations to give effect to Crowdfunding but has not done so after more than a year of waiting. Also on the panel were state securities law administrators who are responsible for investigating fraudulent capital raising activities.

Simply put, federal and state regulators are horrified at the prospect of Crowdfunding. One state regulator acknowledged that she and her 49 state counterparts are “freaking out” about the impending rampant investor fraud and the lack of resources to address the problem, which they believe will lead to a decrease in investor confidence and less investment. State regulators view the world as being full of unscrupulous fraudsters waiting to prey upon unsuspecting widows and orphans. They have the right to be concerned as there are certainly a number of these fraudsters separating the elderly and unsophisticated from their retirement funds.

Representatives of the SEC made it clear that they are not in a hurry to adopt regulations that will commence Crowdfunding. If it were up to them, it seems to me that they would wait forever. Congress, on the other hand, has reportedly been getting impatient.

Whether Crowdfunding will have a significant positive impact on financing will depend on the scope of the regulations adopted by the SEC. Onerous regulations requiring audited financial statements, extensive offering disclosure documents and limits on amounts that can be invested (all telegraphed as possibilities by the JOBS Act legislation) will put Crowdfunding six feet under, similar to the Small Corporate Offering Registration (“SCOR”) adopted ten years ago for similar purposes. Burdensome requirements that eviscerate Crowdfunding seem like counterproductive overkill. Many practitioners believe the Crowdfunding regulations will be “unworkable.” Companies struggling to raise money could use a little help. But help from Crowdfunding does not appear likely.

Unlike the doomsday view of equity Crowdfunding the regulators and practitioners (much like my colleague, Dan Tenenbaum in this prior post) gave a much warmer response to permitting general solicitation of accredited investors under Rule 506, which was also part of the JOBS Act. Accredited investors are wealthy persons or entities who are viewed as being more sophisticated and able to sustain a loss of investment in risky ventures based on their income or assets. They can also be referred to as “angel” investors. Most companies raising capital in private securities offerings today do so exclusively from accredited angel investors. Permitting general solicitation to reach these persons is a logical extension. What is really important is that investors are actually accredited (and the SEC has proposed regulation for “verification” of accredited status) and not whether the investor learned about an investment from a web site or an advertisement. Based on the feedback of regulators and practitioners, general solicitation of accredited investors is likely to have a significant impact on startups raising capital in the future.

The unfortunate truth is that Crowdfunding may be DOA and startup companies will continue to face the challenges of raising capital through more traditional means. However, based on my more than 20 years of experience, unsophisticated investors gained through Crowdfunding will be more numerous, demanding, bothersome and litigious than accredited angel investors anyway. Perhaps the premature death of equity Crowdfunding is a blessing in disguise.

8th Annual MinneBar “Unconference” a Hit

2013-04-09T09:00:00.000-05:00

This Saturday I attended the 8th annual MinneBar conference held at the Best Buy Corporate Headquarters in Richfield. With over 80 panels, presentations, and sessions on technology and software scheduled in 50-minute intervals across the span of eight hours, and what was rumored to be over 900 attendees, there’s no doubt the organizers – and attendees – considered the conference an unqualified success.

Actually, the event is touted as a “Bar Camp,” or an “unconference” – terms I was not familiar with before Saturday. I have to admit, the loose plans for the event (anyone and everyone can sign up to present, and we weren’t given the schedule of sessions until less than a day prior to the start time) was initially a bit off-putting. However, from the moment I walked in, I noticed an energy and excitement that are not typically present at a traditional conference.

Apparently the idea for the “open space” format of unconferences was first developed in the mid-1980s by a man named Harrison Owen, though some compare the experience to science fiction conventions that have been held since the 1930s. The key characteristics dictate that an agenda is created by the attendees upon arrival rather than prior to the event, and anyone who wants to sponsor a discussion on a topic can set up a time and a space. The open discussion format works best when attendees are highly knowledgeable and experienced in the field around which the conference is centered. The term “unconference” wasn’t first officially used until almost 2000, and was popularized in the context of the BloggerCon convention first held in 2003. The phrase “Bar Camp” is a related term, referencing more specifically open-to-the-public forums centered around technology and the internet.

I was ultimately convinced that there is no better format to use for an entrepreneurial, unconventional crowd (pun intended). MinneBar’s website promoted the feel for this event, stating on their website that no “spectators” were allowed – only participants. The event was free for anyone to attend or make a presentation. And while we were somewhat nervous about who would show up to our law firm presentations on technology agreements and intellectual property basics, the first session, at least, had over 50 attendees, including those sitting on the floor and standing in the doorway. They were even kind enough to laugh at our jokes relating to source code (“Why would we need that if we’re buying a new software system and the vendor will soon be going out of business?”) and Lotus 1-2-3.

In fact, even the location for the event – the Best Buy corporate headquarters – catered to the entrepreneurial crowd and the unconference vibe. Despite obviously being a fortune 500 company with a 1.4-million-square-foot corporate headquarters, Best Buy is decidedly hip. Having worked there for two years in the mid-2000s, I was reminded upon returning that the company embraces its humble beginnings with a huge memorial wall, and its playful attitude with a large gaming area complete with multiple video game stations, pin ball, and a pool table. And as we’ve all seen in the news in recent weeks, Best Buy’s original founder is returning to the helm of the company, proving that no matter how big you get, an entrepreneurial spirit and founder attitude may be the best thing for a company, even one with annual revenue of close to $50 billion.

Needless to say, I have no doubt that the “conference” I will be most looking forward to in 2014 won’t be a conference at all. I will definitely be a participant in next year’s MinneBar!

Virus as Extortion

2013-04-02T09:30:00.000-05:00

I was looking forward to getting some work done at home last week when we were struck by a ransomware virus – a type of malware that restricts access to your computer unless you pay a “fine” to resolve the problem.

In this case, I was just opening the internet connection when the screen went black and there was an ominous message from the FBI stating that my computer was blocked for one of three reasons: (1) I have violated copyright laws by illegally using or distributing copyrighted content (citing a specific section of the “Copyright of the Criminal Code of United States of America;” (2) I have been viewing or distributing prohibited pornographic content (in violation of the Criminal Code of United States of America;) or (3) illegal access was initiated from my computer without my knowledge or consent in violation of “the law On Neglectful Use of Personal Computer”. I was pretty sure that I wasn’t guilty of the first two, but that third one…

To avoid fines from “two to five hundred minimal wages” (for copyright infringement) up to $100,000 (for the neglectful use of my computer) or “a deprivation of liberty” for anywhere between two and twelve years, I must buy a MoneyPak for $300 (available at Walmart and various convenience stores) and the FBI will remove the block. I was initially outraged by the demand for $300, but when you think about it, that’s not bad to avoid going to prison. If not for the fact that my computer had been turned into a big brick, this would have been funny.

This was the first time that my computer fell victim to one of these viruses, but I read about these scams all the time. I admit being surprised at the number of people taken in by them. Aside from poor grammar, bad spelling, odd phrasing such as “deprivation of liberty” instead of “imprisonment” or “jail,” and the just plain silly reference to a criminal penalty for “allowing” your computer to be infected – could anyone seriously believe that $300 would buy them out of a real crime? Sadly, the success of these scams means we are doomed to see more for some time.

If in doubt, it is easy to check on these matters. Simply type in some of the odd phrases and all of the articles exposing the scam pop right up – although this is admittedly problematic if your only access to the internet is locked. I used other electronic devices to find out what I could about this scam, and was pleased to find instructions for removing the block. Unfortunately, my computer had other issues that were accelerated by this virus and I was unable to fix it on my own. Now – five days later – the $300 MoneyPak is beginning to look like a bargain. Maybe that was the point all along.

…the “Talk”…

2013-03-27T09:30:00.000-05:00

Recently, I just about drove my truck off the road after hearing my daughter’s pre-adolescent voice, all the way from the back seat, direct “the question” to me. The question was, you know, the question that many parents dread because you have to talk about. It’s awkward, frustrating and frankly, it’s a coming of age that reminds you that your kids are no longer innocent and are getting older.

Many of you reading this can remember where you were when you had “the talk” with your parents. Some kids figure it out on their own; other more responsible parents (innocent of this charge) take the issue head-on by sitting down and talking with their kids. I’ve heard that some parents use charts and some even go to a class (with their kids!). I haven’t checked, but I’m pretty sure there must now be “an app for that”—parenting made easy, courtesy of Steve Jobs.

After collecting myself, we pulled into a parking lot and the talk ensued—quick, succinct and to the point. I didn’t have much time and I was going to do a brief overview with the full talk to occur later that evening with her mother who really has some strong feelings about the topic. “Do your friends talk about it?” I quickly asked, and sensing the concern in my voice, she politely said “no.” Thank goodness, I thought to myself, but she went on. “I heard you and mom talking about it last night” (uh-oh) “and mom was talking about it with the neighbor on the phone too.” (WITW!) “I think I heard her talking about it out loud after watching the news, too.” I was slack-jawed.

As you can imagine, this parent was overcome by youthful awareness and the pressing questions surrounding taxes.

Since that fateful ride in the truck and the parking lot crash course in taxation, I have been strafed with questions about why adults pay taxes, who made taxes, how are they collected, what are they used for, do we ever get them back…and the list goes on and on and on. Curiosity has also spread through the family. We have what is referred to in the world of geese as a gaggle of children. They are inquisitive and the conversation migrates quickly (and at times resembles honking), is painfully direct, and typically not restrained by common sense. Although my wife and I are affectionately referred to as “tax hawks,” I struggle to explain all the nuances of the how’s and why’s of taxes, especially the rates.

About the time of the initial “talk”, my state was in the throes of a tax bill that would not only raise taxes, but would introduce new taxes on professional services (since that time, the professional services tax has been stricken from the proposal). I was explaining what that meant as a lesson since one of the children is learning percentages in math class. We did the math and it was interesting to hear the banter back and forth between siblings.

The part my children thought was really fun to listen to was my explanation of personal income and tax rates. You can image the stunned look on my daughter’s face when she said, “Uh dad, you mean some people pay half of their income in taxes?” (Take that percentage of a weekly allowance in exchange for basic “services” provided in the house and watch the reaction.) “Yes,” I said, “but it’s different for you because you wouldn’t have to pay tax because you fall below the state and federal limit.” Without flinching, her response was classic. “But when I get older and I get a good job, will I pay half?” I gave my typical (non-classic) response—“Its depends.”

Recently there have discussions about revenue increases in a proposed California state budget. This is combined with a recent case which challenged the 50% exclusion on QSBS corporations, meaning that they pay only half the regular California tax rate on the gain (about 4.5 percent instead of 9 percent). This would be a crippling retroactive tax for business generators (read “job creators”) that are a vital piece of California’s economy. What’s even more troubling is that many entrepreneurs go for years foregoing market income (and in some cases, any income at all) and will have a massive tax event upon exit (think liquidation event, sale, merger, IPO, etc.) I have no idea what the current status of this situation is as it will likely be subject to litigation for some time as well. Even if you think that you have your tax structure in order, that isn’t necessarily the case. (Anything that has the word “retroactive” in it has to be looked at with some suspicion.)

It’s never too late to have “the talk.” As a matter of fact, if you haven’t had a review on your existing and future tax outlook, there is no better time. Many changes are on the horizon for you and your business regardless whether you are an entrepreneur in a pre-revenue company or an existing company that is facing new government mandates for health insurance. Or you could be thinking about selling your company in the near or distant future. Guess what? Planning now, even if a sale is not in the forefront of your mind, may be the best thing that you ever did for yourself, your company, your employees, your shareholders, your stakeholders—and maybe even that youth in the backseat of your truck who asks, “Dad, I have another question….”

Spring, Time for Some Real Competition?

2013-03-25T11:36:00.000-05:00

As detailed by my colleague and fellow poster, Max Bremer in his post about this time last year, one of the great competitions that commences in March (in addition to that minor basketball tournament happening about now—sorry for the reminder Gopher fans) is the Minnesota Cup.

In case you’re new to the startup scene in Minnesota (or have been living in a cave the last seven years), the Minnesota Cup is a business plan competition that identifies the top Minnesota-based start-up businesses in each of six different divisions: High Tech (a division sponsored by this blog’s favorite entrepreneurial service law firm), LifeScience and Health IT, Energy & Clean Tech, General, Social Entrepreneurship, and Student. You can submit your application to be named a top Minnesota start-up company beginning today and continuing through May 17th. For more information about the Minnesota Cup and this year’s event details, visit the competition’s website.

There are lots of reasons to enter the competition, and as Max detailed last year in his post, it isn’t just about the $25,000 in prize money. If you’ve been thinking about that next great “breakthrough idea,” maybe it’s time to do something about it. Who knows, you could be the next Florida Gulf Coast University...

The Book: Randall Robinson, Quitting America: The Departure of a Black Man From His Native Land (Plume Books, 2004)

2013-03-20T09:30:00.000-05:00

Why: From the pen of a self-exiled American, some thought-provoking insights into American culture. Do we drive progress or are we driven by it?

This time of year—and especially this year—a Minnesotan’s thoughts turn to warm and sunny places. The urge to get away from the ice and snow is nearly irresistible. Here in the northland, as soon as the last week of March or first week of April arrives signaling spring break time, offices empty out as we seek a preview of the summer weather that is—we hope—to arrive in just a few short months. (At this time last year, the high temperature in Minneapolis was 80 degrees so we didn’t really need to travel for such a preview.)

My reading this month concerned a leaving of a more permanent nature. At one point in my life, I lived abroad for a while as an expatriate. This was a wonderful experience, one that I would recommend to anyone (and, in fact, one of my children has opted for this life, at least for a year or so). But for me, this temporary experience was just that—a sojourn abroad followed by a return home.

I have always been intrigued by people who, for one reason or another, decide to abandon their native lands. Randall Robinson is a Harvard-educated lawyer who left the United States for life in the small Caribbean island country of Saint Kitts and Nevis. The reasons stem mainly from what he perceives as the pervasive racism of American society, but many of his observations about American culture generally are interesting and, for some people, may hit a little close to home.

Robinson bemoans, in particular, what he views as the “commercialization of everything from school to pew.” From this, he extrapolates that “everything about America is big except its people, who, unbeknownst to most Americans, are mere human beings, no bigger or smaller than human beings any place in the world.” He asks, “Could it be that in America, the unexcelled bigness of all things material has resulted in the concomitant relative smallness of all values nonmaterial?”

Alas, these views are nothing new, and have been with us for a long time, long before Eugene Burdick and William Ledererat wrote The Ugly American. Robinson is clearly disaffected, and condemns the United States with a broad brush. He does, however, leave us with something to think about: we Americans, he says, should “be more thoughtful about how we define progress and development, not just in terms of broadened material wealth but also with an understanding of how indispensable social arrangements are compromised when the market becomes the only voice listened to, its barometer the only measure of a nation’s health.”

One might argue that, without the market, progress and development is impossible, but the question of what should come first—progress or people—is a central tension within our culture, one we all encounter almost on a daily basis.

Random Thoughts About The World’s Youngest Billionaires

2013-03-13T15:58:00.002-05:00

I happened upon this recent list of the “World’s Youngest Billionaires” (yes, there are 29 under the age of 40, 11 of whom are from the US) in Forbes Magazine. It made me contemplate what an incredible world we live in where young “hoodie-wearing” tech entrepreneurs can (at least on paper) be worth more than a BILLION dollars—or, in the case of Zuckerberg, $13.3 BILLION, but who’s counting?

I didn’t bother scouring the list to see if I was on it—after all, I am a few years over 40. However, I had remembered during a recent Las Vegas journey to sample the fine cuisine at In-N-Out Burger (without even ordering off the "secret" menu), that (at least according to The New York Daily News and Huffington Post) Lynsi Torres, the heiress to the chain who is only 30 years old, was a billionaire . But she isn’t on the list.

Turns out that, according to this other recent Forbes article, she’s probably only worth about a half a billion dollars. That’s because she doesn’t yet own the entire company under some trust arrangements. The complicated case surrounding the ownership and related family intrigue detailed in the article is something I’ll challenge my fellow entreVIEW author, Anne Bjerken, to analyze for readers in a future post.

Once I stopped daydreaming about all the things I would do if I had a billion dollars (not to be confused with the Barenaked Ladies classic song about a sum with three fewer zeroes), it was time for me to attend Tuesday evening’s “Entrepreneurs Rally,” an event put on by the local chapter of EO, an organization for entrepreneurs. I had agreed (along with a few colleagues, two of whom are fellow entreVIEW authors) to serve as a mentor at the event, which is structured like “speed dating.” A group of 2-3 mentors and 7-8 entrepreneurs are paired up for 30 minutes to discuss issues and try to offer insights, ideas, and contacts to help the entrepreneurs with pressing issues.

As with the event last year, I was struck by how varied and vibrant the participating entrepreneurs (and mentors) were. Whether it was the guy “pedaling” kits for turning regular bikes into recumbent ones or the woman looking to “sew up” SEO for her online embroidery business, you can imagine the energy in the room with over 200 driven and engaged entrepreneurs talking about their business plans.

Wouldn’t it be great if a couple of the attendees ended up on the Forbes list in a year or two? There should be room for a couple more because Larry Page and Sergey Brin, co-founders of Google each worth about $23 billion, will be turning 40 soon….

Are You Ready for the Race to the Patent Office?

2013-03-12T09:02:00.001-05:00

On March 13, 2013, under the America Invents Act, the United States patent system will change from a “first to invent” to a “first inventor to file” system. This represents a dramatic shift in approach because when a patent application is filed becomes critical, as opposed to when the invention was conceived or reduced to practice.

While it is a significant change for US patent law, it harmonizes US law with most other patent systems around the world.

Under the new law, if you are seeking patent protection you should file a patent application (if even only a provisional one) as early as possible. You should do this even before any public use or attempt to commercialize the products embodying such inventions.

ON YOUR MARK-------- GET SET-----------------GO!

But, wait a minute. Before you rush off to file a patent application and start the sometimes expensive process of patent prosecution, make sure you have a business strategy and understand why the patent is relevant to that strategy.

Here are some lessons learned from a lawyer who has practiced intellectual property law for over 25 years (me). Be strategic and targeted in how you invest in the development and protection of your intellectual property.

• Not all patents are alike.

• Under the rule of deformation professionnelle, most patent lawyers will find something patentable in your invention.

• Patents are the gift that keeps on taking (through patent prosecution and maintenance fees).

• Patents do not give you the right to do anything except to prohibit others from doing something.

• Copyright, trademark, trade secrets, and contracts/licensing are often equally important elements in any well-developed IP strategy.

So, as you get ready to rush off to the United States Patent and Trademark Office with your application, take a deep breath and make sure that you have a business strategy that includes all forms of intellectual property and that this patent application fits within your plan.

Then again, you might have something as valuable as the Snake Walker, Motorized Ice Cream Cone, Sealed Crustless Sandwich, Gerbil Display Clothing, or Baby Tush Art. If you have any invention like these, run--don’t walk--to your nearest patent lawyer’s office and get that application filed before someone else beats you to the punch...

Thoughts on Raising Capital

2013-03-08T08:59:00.000-06:00

I was recently going through some old articles and cleaning out my office (it still needs a lot of love), when I found this article in a hard print copy of the Minneapolis/St. Paul Business Journal. I read almost nothing anymore that I can’t access online, but I don’t mind reading the Minneapolis/St. Paul Business Journal in hard copy form. It’s small enough that it’s easy to read on the bus (my preferred mode of commuting), and I usually get through it very quickly (there’s something very satisfying about finishing the paper, recycling it, and then crossing it off of my “to do” list).

Apart from the paper in which it was published, I like this article because it highlights that there is more than one way to raise capital and fund operating costs for startups. As a lawyer for entrepreneurs, I get asked frequently about how to raise capital. The short answer is that it’s hard, and it depends on your circumstances and what you need. Articles like this reinforce that raising capital isn’t always easy, but there are many ways to do it. For example, bootstrapping won’t work for every business, as some businesses are just too capital intensive to fund through founder resources and working capital. But, for the right business, bootstrapping is an ideal way to build value to the enterprise without diluting the founder’s (or founders’) ownership, especially if it doesn’t come at the risk of stifling growth.

I thought a couple of interesting things from this article were worth noting. Luke Shimp, the owner of Red Cow, who obtained SBA funding to help launch his restaurant business, describes the importance of having a business plan. Having a good business plan is certainly important for businesses that intend to obtain debt financing from a sophisticated financial institution. I also think the process of developing a business plan is important for entrepreneurs, whether or not you are seeking debt capital. It forces you to think through issues, such as go-to-market strategy, operating capital requirements, customer acquisition timing and costs, management skills, and other critical business factors in a way that you aren’t required to do if you aren’t trying to articulate them on a piece (or several pieces) of paper.

But, as my colleague and fellow entreVIEW author, Dan Tenenbaum, noted in a prior post, investors (as opposed to lenders) don’t really want to review a full blown business plan anymore. Investors expect that you’ll know the answers to the questions that might otherwise be described in your business plan, but they are not interested in reading through a lengthy plan. For companies looking to raise equity capital, I find that they have much more success using a short pitch deck to help identify potential investors. While the business plan is a useful tool for developing your actual business, it may not be quite as useful for attracting investor capital as it once was.

The story about Interrad, which raised money from several angel investors, offers an insight into a possible problem with raising money from too many investors. If you need to raise capital, and small investors are the only sources that are interested in your opportunity, then that’s who you will likely partner with. It would be silly to set some artificial number of investors that you won’t exceed. If you need the money, then you take it wherever you can get it.

But having lots of small investors can be a distraction and divert the CEO’s time. While the Interrad CEO doesn’t seem to complain about the quarterly communications he has with his shareholder base, it undoubtedly takes time to prepare those communications (and answer phone calls) that could be used adding other value to the company. The more investors you have, the more people you need to answer to. If your investors don’t have a lot of resources, the investment they made in your business could be very important to them. As noted in this prior post (also by Mr. Tenenbaum), having proactive and frequent shareholder communications, as the Interrad CEO does, is a good way to maintain positive relationships with your investors. Of course, successfully growing your business is an even better way to maintain positive relationships with your investors.

The Code 42 piece highlights the importance of running a lean operation. It also highlights the importance of identifying the right partners to take on as investors. The right investors bring more value than just the checks they write. They also bring connections and industry expertise that can be invaluable to helping your business grow. They should be vested in the success of your business, as they ultimately stand to benefit from that success.

All these stories highlight that there are many ways to raise capital and fund operating capital needs for early stage businesses. However you decide to fund your business, know that it takes hard work, patience and discipline (and a little luck) to get it done. If you are willing to put in the work, and can be patient and disciplined throughout the process, your chances of success will be significantly increased.

“Silicon Prairie”: The Increasing Entrepreneurial Draw of the Midwest

2013-03-06T09:30:00.000-06:00

A few months ago, my mother forwarded me a link to an article in our very own Minneapolis Star Tribune entitled “Tech New Frontier: Silicon Prairie.” (Yes, my mom may be overly engaged in what I do for a living, but I do owe her for inspiring this entreVIEW post.) The article described the emerging high-tech startup community in the Midwest, emphasizing the home-grown roots of entrepreneurs in the area and the increasing attention – and money – paid to these businesses over the past few years.

The moniker “Silicon Prairie” intrigued me, so I decided to dig a little more deeply into the origin of the phrase. It turns out that our nation embraces a few different prairies of silicon nature – an area in Texas north of Dallas, an area in Wyoming, an area surrounding Chicago, and our very own “Midwest,” which loosely encompasses Iowa, Nebraska, Kansas, North Dakota, Minnesota, Missouri, and South Dakota – the states bordering I-29. Each area boasts somewhat of a different start-up focus, with Texas named chiefly for the concentration of information technology companies in the area, Illinois centering on research companies, and Wyoming being mentioned for its Web 2.0 startups.

But as the Star Tribune article emphasized, the Midwest has historically been known “more for its barns than its bandwidth,” and many of the burgeoning businesses in this space relate to agriculture, biotechnology, and manufacturing. Though the region currently reflects only about 6% of the country’s angel investment transactions, it is one of only two geographic areas that exhibited an increase from 2011 to 2012 based on a report prepared in connection with the Angel Resource Institute, Silicon Valley Bank and CB Insights. Because the history of the area reflects a “like on the farm” work ethic, those paying attention believe the region only has more room to grow.

There’s even a publication called Silicon Prairie News dedicated to recognizing and supporting the area’s “entrepreneurs, creatives, and investors through an emerging model for grassroots entrepreneurial ecosystem development.” I’m not sure how I missed this one, but will be adding it to my regular reading list, as well as paying heightened attention to how this Silicon Prairie we live in continues to make headlines.

New Minnesota Income Tax Developments—Is Everyone and Anyone Going to be Considered a Minnesota Resident?

2013-03-01T08:56:00.000-06:00

There is a new proposal from Governor Dayton that would change the landscape of how many people view their residency status. This is not official; I repeat—THIS IS NOT OFFICIAL. I don’t want everyone to panic and start driving south, but it is possible and we should discuss it.

The new proposal would make every person that spends 60 days (whole or partial) in Minnesota, and has a residence that is suitable for year-round use, whether owned or rented, a Minnesota resident and subject to Minnesota income tax. Currently, there are a number of factors that determine residency, the major one being the requirement that you spend at least 183 days in Minnesota. There is a major difference between spending 183 days in Minnesota and a mere 60 days (123 days, if my elementary school math skills are still working). The traditional “snowbirds” spend the summer here, and then migrate South for the rest of the year. A change to 60 days would mean less than half the “nice” months in Minnesota (not to be confused with “Minnesota Nice“).

What does this mean? Other than the expected outcry from those who love their lake homes and treasure the summer months they spend here, but also love the no income tax environments of Florida, Texas, Arizona, and others, this means major changes to our local economy. Well, at least in my opinion—I guess if you assume that everyone who currently does so will continue to spend more than 60 days in the state and pay additional taxes, then it may not be such a big deal.

Take one example: country clubs. Not that I think we need protective legislation for country clubs, but it serves as an easy example. The way country clubs collect membership dues to pay for the upkeep of the buildings and golf courses are broken up between food and beverage minimums, and monthly dues relating to peak season expenses. Peak season is usually April through October. Dues typically increase up to ten times during this period, and this is also the time members use their food and beverage minimums because they are using the facilities. Also, I would guess that the demographics of country club members are made up of quite a few snowbirds. If this new residency requirement goes through, a typical snowbird can only spend 60 days on Minnesota soil, and it won’t necessarily all be during peak golf season. I think country clubs may have a hard time keeping members, let alone getting them to pay for 5 or more months of peak golf season that they aren’t using.

Use the country club example and expand that to restaurants that cater to the summer months, rental summer homes, lake homes in general, and the local economies of the cities that our lake homes are located near (Brainerd, Duluth, Alexandria, and others). If it is going to require that snowbirds sell their lake homes, apartments, or other seasonal homes, the real estate market will be flooded and diminish values.

I don’t mean to be advocating a particular political position. I simply want to point out the major change that could be around the corner and get people, may even the state legislators who will need to take up this issue, thinking about it. After all, we are nearly 60 days in to 2013 now…

Elementary, my dear Holmes fans

2013-02-26T15:59:00.001-06:00

For a Sherlock Holmes fan, the last few years have been a real treat. The Robert Downey, Jr. movies, the PBS Masterpiece episodes Sherlock, and the CBS series Elementary have breathed new life into the characters and, in the case of the PBS and CBS offerings, have given Sherlock Holmes relevance in a modern world.

What’s more, for the last fifteen years or so, there have been new books written about Sherlock Holmes as a boy (Andrew Lane), Sherlock Holmes working with his female partner and wife (!) Mary Russell (Laurie R. King), untold stories from the files of Dr. Watson (Hugh Ashton), and even Sherlock Holmes in northern Minnesota at the time of the great Hinckley fire (Larry Millett).

I assumed that the extensive new material was the result of the expiration of copyright protection of the original works by Sir Arthur Conan Doyle. While new stories alone would generally not infringe the original material, the use of the characters would – as long as the original works were still protected by copyright.

A sometimes overlooked aspect of copyright protection is that granted to the literary character – not every character – but those given distinctive personalities that are developed to the point at which the character’s behavior is relatively predictable. While such protection is most easily understood for characters appearing in multiple volumes, such as James Patterson’s Alex Cross, Stieg Larsson’s Lisbeth Salander and J.K. Rowling’s Harry Potter, there are memorable single-book characters that would also qualify. Think Scarlett O’Hara, Holden Caulfield and Garp. But when the copyright on the underlying work(s) expire, so goes the copyright protection of the characters.

The character of Sherlock Holmes first appeared in publication in 1887, and anything published before 1923 is likely in the public domain. A good deal of the Sherlock Holmes material was published prior to 1923, so the fact that many of Conan Doyle’s works are now in the public domain would explain the plethora of new material utilizing the Holmes characters, right?

Not necessarily. A recently filed lawsuit in Illinois federal court suggests that most, if not all, of the recent film and television productions and books have paid royalties to the Doyle estate irrespective of the questionable copyright protection. Leslie Klinger, an author and recognized Sherlock Holmes expert (he served as a technical advisor on the Robert Downey Jr. films) brought the suit against the Doyle estate seeking a declaratory judgment that copyright protection has expired on Sherlock Holmes story elements that establish the essential traits of the characters (even though some of Doyle’s later works are still protected by copyright), thus releasing them into the public domain.

Klinger believed this to be the case with his earlier book, A Study in Sherlock, published in 2011 by Random House, but was apparently overruled by the publisher which entered into a license agreement with the Doyle estate after being threatened with litigation for copyright infringement. Late last year, Klinger was contacted by the Doyle estate which demanded a licensing agreement for Klinger’s new project, In the Company of Sherlock Holmes, and although the parties traded letters, no agreement was reached. Rather than wait for the estate to make a move, Klinger decided to force the issue now.

It is too early to speculate about outcome, but one could imagine the court parsing Holmes’ character to determine what aspects of his persona, if any, were introduced by Doyle in his later works, and thus arguably still protected by the remaining copyrights. Such a result would seem to be so difficult to apply that it could effectively maintain the status quo – reputable writers, publishers and producers would pay for a license rather than undertaking the arduous task of analyzing character elements.

And would that be all bad? So far, it hasn’t precluded new stories and just maybe the claim of the estate’s rights has directly or indirectly had a positive influence on the use of Holmes in the new fiction. One thing is certain—if Sherlock is found to be in the public domain, it won’t be long before we can expect to see him fighting zombies and chasing vampires.

The Book: Robert Lacey & Danny Danziger, The Year 1000: What Life was like at the Turn of the First Millennium (Little, Brown and Company, 1999)

2013-02-21T09:30:00.000-06:00

Why: It’s fun to imagine what the future will look like, but chances are some entrepreneurial inventor out there will come up with something that we can’t even imagine today.

Kermit Nash’s post earlier this week, touching on how the future looked to us in our youth, led me (via an interestingly circuitous firing of synapses) to think about what I will call the “history of the future.” How have past generations seen the future? Inevitably, the future at any given time must be seen in terms of the present, as some developments cannot be foreseen. The world of the Jetsons is merely an extrapolation on the world as we knew it in the mid-1960s.1

So what did the future look like in, say, the year 1000? As I cast my eye on one of my heaving home bookshelves, out popped The Year 1000, a book I impulsively purchased in 1999 at a Toronto bookshop before heading to the airport for a flight home. My trip was in February. Did I mention I was catching a flight from Toronto? Turns out I was glad to have this lively book to entertain me while my flight was subjected to repeated weather delays.

Anyway, let’s set the stage. In 1000, most adults died in their 40s; someone my age would be deemed venerable indeed. There were no buttons, so clothes were fastened by clasps or tied together. England was still an Anglo-Saxon tribal country, occasionally troubled by Viking incursions in the North.

Agriculture was the basis of the economy. Children were taught, “The ploughman feeds us all.” That’s not to say there was no trade. Trade in wool and other commodities brought wine from continental Europe and other more exotic goods from afar. There was one impediment, though. Numbers were still written in Roman numerals. Try doing multiplication and division using Roman numerals and you’ll immediately grasp the problem. And there was a perceived limit to how high counting could go. It was thought that 9,000—written as MMMMMMMMM—was just about the highest number (sort of the way we might think about a “Google” today). So accounting was pretty much a nightmare.

Enter a Frenchman, Gerbert of Aurillac, a savvy scholar, churchman and politician recognized as a kingmaker in his day. (Oh, and he also happened to be the Pope, known as Sylvester II.) He made innumerable contributions to the various worlds he inhabited, but entrepreneurs can be thankful for one in particular. He didn’t invent it, but he promoted the use of the abacus (along with Arabic numerals) in Western Europe.

To say that the introduction of the abacus was revolutionary is to give this development short shrift. The use of the abacus eliminated the need to write out figures and sped calculations, boosting the ability of merchants to conduct and track trade. The abacus became the model of the chequered table, which worked along the same lines and became the central feature of the counting house—otherwise known by the Brits as the Exchequer. As the authors of The Year 1000 tell us, “Its potential effect on the business, intellectual and scientific processes of its time was comparable to the impact of the computer today.”

Gerbert of Aurillac—virtually unknown today—was, in fact, “the first millennium’s Bill Gates.”

1 Unlike that young whippersnapper Kermit, I actually watched this program in primetime during its inaugural 1962-1963 season on ABC.

The Rise of the 3D Printer

2013-02-19T09:11:00.000-06:00

I grew up in the era of the Jetsons, Star Wars, and Star Trek—in other words, the modern Sci-Fi era. Our vision of what the future might be was shaped largely by what special effects artists could believably put on the large and small screen.

Ironically, many of the Popular Science and Popular Mechanics magazines that I read back then were continually looking back to the Dick Tracy comics to benchmark how far technology had advanced. We, by comparison, had Roger Moore playing James Bond, which by comparison to the “Star-themed” fiction presented plausible technology. (Who couldn’t envision a watch with a homing beacon?)

The chasm between our ability to envision futuristic inventions and our ability to make them reality was largely the result of the unavailability of tools for making the technology. Now, the advent of the 3D printer finally may bridge that gap and lead to a surge ahead in technology.

For the uninitiated, here’s a crash course on 3D printing. We have all watched the cool commercials where gigantic machining bits zip at fast speeds around a large block of clay or polymer to make, by subtractive process, a model of some sleek new vehicle. The 3D printing process is completely different: the printer recreates images in small layers, building detail to recreate the exact form/image of the design that has been loaded into the printer. (For evidence of the unequivocal truth of my description, see Wikipedia; it’s never wrong…) While I recognize that proper design, engineering and precision is needed to format a 3D printer to make a truly authentic object, the ability to replicate that object quickly and with precision is what is so fascinating.

The growing captivation with 3D printers reached the global stage last week when President Obama mentioned it in his State of the Union address. Not surprisingly, shares of 3D printing companies spiked (and then fell again on the heels of the POTUS bump.) Companies producing these printers have also elicited some scrutiny because their product can more quickly reverse engineer technology by using more precise 3D and 4D laser measurement tools. Not surprisingly, the prospect of rapid replication has put some manufacturers into a cold sweat and patent litigators into a state of heightened anticipation (Newton’s 2nd law…) These printers have even received some national security attention because of speculation about what else they may be able to do (the creation of certain banned accessories for weapons).

Alas, the era of putting a 3D printer in the basement or next to your coffee maker isn’t quite here yet. Personal 3D printing is still cost-prohibitive and no company has yet to crack the market with one that you could get with your Best Buy RewardZone™ points. There is, however, at least one start-up company looking to do just that. In the meantime, I found one on eCrater at a bargain price of $34,800.

Whatever Happened to the Pets.com sock puppet?

2013-02-13T09:30:00.000-06:00

Just a couple of weeks ago, we added the newest member to our family, Max, a 2-3 year-old Boston Terrier that we’re adopting through the Minnesota Boston Terrier Club Rescue. As a result, I’ve been spending an inordinate amount of time (and money) at places like Petco. As many pet owners realize, the pet business is really big (over $10 billion annually in the U.S according to one source) and growing. Further evidence of this trend can be found by the expanding and deep pet supply sections of stores like Target and Walmart.

Because I can’t help my brain thinking about such things, it got me wondering about whatever happened to the famous sock puppet owned by Pets.com. If you don’t remember Pets.com, it was one of the highest flying and biggest crashing examples of the dot.com bubble in the late 90s.

The online business was founded in 1998, raised over $300 million in capital, including investments by Hummer Winblad and Amazon.com, went public on NASDAQ, and was in liquidation less than a year later! Not that my investment instincts are always right (I have plenty of capital loss carryforwards to prove it), but I remember at the time thinking that an enterprise focused on selling 40-lb. bags of dog food on the internet and delivering them people’s houses didn’t seem like a business with sound fundamentals. I guess I was right on this one because the stock fell from an initial public offering price in February 2000 of $11 per share to just $0.19 per share 9 months later.

The fundamentals may not have been sound, but everyone agreed that the sock puppet used in the Company’s advertisements (in a campaign designed by TWBA/CHIAT/DAY) was probably the best thing to come out of the entire venture. The puppet made many appearances on national television (including on “Good Morning America” and “Nightline”) and even had a balloon version in the 1999 Macy’s Day parade. You may remember that there was even a trademark infringement lawsuit with Robert Smigel, owners of Triumph, the Insult Comic Dog, but I’ll leave that to a post by one of my fellow entreVIEW authors, Lori Wiese-Parks or Mike Cohen, who are experts in intellectual property.

So whatever happened to the puppet?* It was purchased by an auto loan lead generation company, BarNone (1-800-BarNone), and used in a few advertisements—the Company’s slogan is “Everybody Deserves A Second Chance.” When it comes to making sure your business has sound fundamentals, I’m not sure that the slogan applies…

*By the way, the domain pets.com was purchased by PetsMart.

Top Ten Technology Quotes

2013-02-11T09:31:00.000-06:00

This past week Bill Gates appeared on the Today show. They showed a 1992 interview with Tom Brokaw where Gates predicted that “electronic mail” would become one of the “next big things” and expressed surprise that it had not happened sooner.

Here are a few of my favorite technology related quotes including two others from Bill. Try to match the quote to the person (answer key below):

1. Any sufficiently advanced technology is indistinguishable from magic.	A. Jean Arp (sculptor, painter, poet)
2. It has become appallingly obvious that our technology has exceeded our humanity	B. Dave Barry (columnist/humorist)
3. Getting information off the Internet is like taking a drink from a fire hydrant.	C. Arthur C. Clarke (science fiction author)
4. Bill Gates is a very rich man today... and do you want to know why? The answer is one word: versions.	D. Albert Einstein (smart guy)
5. Be nice to nerds. Chances are you’ll end up working for one.	E. Bill Gates (Harvard drop-out)
6. All of the books in the world contain no more information than is broadcast as video in a single large American city in a single year. Not all bits have equal value.	F. Bill Gates (See above)
7. The typewriting machine, when played with expression, is no more annoying than the piano when played by a sister or near relation.	G. Mitchell Kapor (founder of Lotus)
8. Soon silence will have passed into legend. Man* has turned his back on silence. Day after day he invents machines and devices that increase noise and distract humanity from the essence of life, contemplation, meditation.	H. Carl Sagan (astronomer/author)
9. Men* have become the tools of their tools.	I. Henry David Thoreau (author, poet, philosopher)
10. Intellectual property has the shelf life of a banana.	J. Oscar Wilde (Irish writer and poet)

* What about women?

Answer Key: 1=C, 2=D, 3=G, 4=B, 5=E/F, 6=H, 7=J, 8=A, 9=I, 10=E/F

Lessons Learned from HealthXL Selection Day Event

2013-02-05T09:03:00.000-06:00

Last week, I had the good fortune to participate as a mentor in the HealthXL startup boot camp selection day event. HealthXL is a European-based accelerator program for startups in the health care space. Startups at the event I attended in Minneapolis were competing for spots in the accelerator program in Dublin, Ireland.

As part of the selection process, each of the teams gave a four-minute pitch of their business plans. They then had individual 30-minute meetings with each of the mentors. At the end of this process, the mentors rated the teams based on concept, technology, potential market, team and other factors. The top teams, based on those rankings, will be invited to Dublin for the three-month accelerator program.

The event was a great opportunity for the companies that participated, as they were able to present to several leading investors, entrepreneurs, business executives and other experts in the health care space. Even for those companies that don’t get accepted into the accelerator program, that experience and exposure to industry leaders is valuable.

The event must have also been quite grueling to the company participants. The mentor meetings, which lasted for much of the day, not only involved positive feedback and helpful insights, but also challenging questions about business plans and go-to-market strategy. A willingness to have your business dissected and critiqued at that level is one of the reasons I have such great respect for, and enjoy working with, entrepreneurs. The best entrepreneurs are always challenging themselves and their teams to make their businesses better.

After having witnessed all the company pitches, and having sat through many mentoring sessions, I noted a few things that are important to remember when presenting to investors (or anyone else for that matter):

1. It is important to be able to concisely describe what your business does, and why you do it. While the initial pitches were only four minutes long, and not nearly long enough to explain all the facets of your business (market opportunity, executive team, competition, etc.), that should be enough time to explain, succinctly and in simple terms, the problem your business addresses and how it addresses that problem. If you can’t do that in four minutes, you are not likely to be able to do it in 15 minutes, or 30 minutes, or an hour. Most of the presenters did a good job of explaining their business and getting me hooked in that short four-minute period. There were a few though, where after the presentation concluded, I had no idea what the business did. Even with more time, I likely would have lost interest and started focusing on other things (such as what I was having for lunch or the errands my wife wanted me to run on the way home). We all have limited attention spans, and if you can’t capture someone’s attention in a few short minutes, you’ve likely lost it forever.

2. Make sure you can explain your business to people who are not experts in your industry. While most of the mentors at the event were health care experts, I am not. I work with enough companies in the health care space that I am generally familiar with the issues facing the industry. But I get lost in the technical jargon common to health care industry experts. You, of course, need to be able to understand all of the technical aspects of your business and address questions and concerns raised by other experts, and discuss their concerns at the technical level they want. Your presentations, though, should not assume that your audience has the same level of technical expertise you have. Just because I don’t have that same level of expertise doesn’t mean that I wouldn’t be interested in investing in your company.

With those reminders, I will say that I was impressed by most of the teams at the HealthXL event, and think they are well poised for success. A few months in HealthXL’s accelerator program will help them refine the finer points of their business plans and help them get ready to execute their strategy. Thanks to HealthXL for creating this accelerator program, and best of luck to all the company participants.