Sunday, May 22, 2005

Uzed.com

I read about this company in the Denver Business journal this past week and thought what a great business idea. What do they do? Simply, they buy your used CDs and resell them to used CD retailers. But that isn't necessarily the innovative part. They maintain a database of CD titles and the price they are willing to pay for each title and that database is linked to an online reverse shopping cart. I also imagine the price they will pay for a CD is automatically updated based on realtime demand an their stock of the a particular title.

A person wanting to sell his CDs just sits down in front of his computer; types in the titles he wants to sell; is given a price for each; decides whether to keep or sell each title; and when he is done prints out a shipping label to place on the box in which he packs the CDs. They pick up the shipping charges. Once Uzed receives the CDs and verifies their condition, the proper amount is deposited in the seller's Paypal account or he is sent a check. Uzed then sells the CDs to used CD shops.

It seems to me that is a company that has demand on both ends of its transactions. One it provides a convenient manner for people to sell their used CDs and it provides a used CD shop a convenient manner in replenishing stock.

OK, so why am I writing about this company? Well, the company is looking for additional financing from either Angels or venture capital firms. And I suspect they will get it. But the thing that immediantly popped into my mind was whether or not they have pending or issued patent protection for their method of doing business. I don't know whether they do or not. I am not affiliated with this company in any way. It strikes me, however, that the opportunity to invest in this venture would be so much sweeter if they had patent protection. Patent protection would prevent the big boys in music retailing from simply copying their concept and methodology and forcing Uzed out of business. Even a company backed by well healed venture capital firm is not going to be able to compete with the likes of Amazon if Amazon decides to launch a similar service. Who do you think would win the battle Amazon with their hundreds of millions of dollars or the small fry Uzed even with a multimillion dollar war chest.

Now if Uzed has or is pursuing patent protection, the landscape changes drastically. In such a situation, Amazon or any other music retailer would not be free to use Uzed's methodology. In fact, if a music retailer wanted to enter Uzed's space, they would have to either buy Uzed or license the technology and methodologies. In either case, the investors would likely see a handsome return.

And there you have it, the point of this post: patents can (1) greatly increase the chance at obtaining venture funding, and (ii) increase the value of the associated enterprise. Also, if you have a stack of CDs you longer use, check out Uzed.com and sell them for a few bucks.

Coming soon: Part III of my Control Protect and Leverage series. I have started writing it so expect it any day now.

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Thursday, May 12, 2005

A Rant about Buying a New Computer!

Ok, I warned you in the original post that occasionally I might talk about things other than Intellectual Property and here it is...

I recently decided that I needed (OK, wanted) a ultraportable laptop that would be easier to carry than my 7.5 pound laptop. I researched a number of brands and came to settle on a nice, relatively inexpensive AVERATEC laptop that weighed in a a respectable 4.5 pounds and offered about a 4.5-5.5 hour battery life.

It so happened that CompUSA had the best price anywhere, $1050 after rebate. So I want to my local store by Park Meadows and informed the salesman of my decision.

The salesman questioned my decision. To paraphrase, he said that Averatec is a low end product like Emachines and that I would be better off with a higher end notebook. What I heard was: Some of the products CompUSA sells are junk and we only carry them so that we can get you in the door and convince you to buy a higher margin product.

I stuck to my guns and affirmed my desire for the Averatec laptop. I know that computers have largely become a commodity item wherein the components comprising the laptop are all relatively similar. Averatecs are not less expensive because they are junk but rather because the company is new and is trying to built brand recognition. There is one large downside to this brand in my opinion however, their customer service needs improvement. But since I almost never use customer service, I was not too concerned.

Next, the salesman strongly suggested I get the extended warranty which would cover damage for three years even if I dropped or damaged the computer. The price was $195 or was it $295. What the consumer should always keep in mind is that the reason electronics stores push these warranties so hard is that that are HUGE money makers for them. Simply, they hate to have a product leave the store without one. The fact of the matter is that only a very small percentage will ever need or use the extended warranty. In fact during the first year warranty issues are covered by the manufacturer, so in essence you are paying for the second and third year of ownership. With computers, most problems occur early on in the first few months and if they do not present themselves then they likely never will. For the most part, extended warranties are nearly pure profit for the store. Anyway, I said NO to the extended warranty.

Finally after what seemed a very long time with the salesperson, he retrieved the computer. It should have taken all of two or three minutes but instead it took about 15 minutes. To be honest, I almost walked out on several occasions. I paid for the the computer and left.

Normally, this would be the end of the story, but then my post would be of a reasonable length and those of you who may become devotees of this blog will soon learn brevity will probably not be a strong suit of mine when it comes to posts. Sorry. Back to the story: When I got home I opened the box and proceeded to charge the battery. I didn't start up the machine. I started thinking perhaps I should take another look at Dell. Perhaps the salesman's words resonated with me afterall.

To make things short, I found the Dell 700m fit my requirements if I ordered it with the extended battery. It was about the same weight of the Averatec with the extended battery and it had a better screen. Then I remembered about the large number of Dell Coupon Codes that are regularly floating around the internet. I typed Dell coupon code into Google and found a site that listed a Dell code for $750 off a laptop with a prediscount price of $1999. So I customized, the 700m adding 1gb of memory instead of the acceptable 512mb. I went for the 80gb hard drive instead of 40gb. I added the 1.8 ghz Intel Centrino instead of 1.6. I added the DVD writer instead of the CD writer. I added a second battery. Finally, my price was $2015 and with the coupon applied at checkout a mere $1265 with no sales tax and free shipping. The Dell cost about $150 more than the Averatec in the end but I got much more in terms of the memory, the hard drive, the batteries and the processor.

So the moral of this story, be wary of salesman at big box computer stores and before making a decision be sure to check out the specials online at places like Dell and Gateway. Here is a URL for the site where I got the coupon code: www.techbargains.com. Now, I am just waiting for the Dell to be configured and shipped. I hope it does not take too long...

Tuesday, May 10, 2005

Control Protect and Leverage, Part II

A few weeks ago I posted an entry concerning controlling your IP. This entry pertains to protecting your IP.

PATENTS

By obtaining patents for your inventions, you can prevent others from making, using or selling them. Inventions aren't just mechanical or electronic devices, but include methods as well. Under the current laws, methods of doing business can be patented and computer software can be patented. Simply anything under the sun made by man can be patented so long as it is "useful". And usefulness is measured very broadening. For instance games and novelty items primarily for amusement purposes are typically patentable.

What does a patent do for you? Simply, it gives you the right to make, sell and/or use your invention as defined by the patent's claims. If the coverage provided by the patent is of sufficient breadth, it can impart a significant competitive advantage to its owner or a licensee of the patent.

individuals should only patent those inventions that can be protected broadly enough such that the patent cannot be easily designed around. This way if the individual goes into production of his/her product, the competition (especially those with deep pockets) cannot make a competing product that undercuts your efforts. Patents are often the great equalizer for startups over their well heeled competition. And if the intent is to license the invention to a company already in a particular industry and generate a royalty from the license, a company typically will not license a patent if its competition can easily design around the patent, because such a situation would put the company at a disadvantage relative to the competition to the extent of the royalty it must pay the patent owner. However, if the patent is both sufficiently strong and broad, a company licensing the patent can afford to charge more than the amount of the royalty since the competition cannot make, use or sell an invention similar to that covered by the patent.

One thing for the inventor to always keep in mind when pursuing patent protection is that patent applications are not commodity items. Going for the cheapest patent application will usually get you what you pay for. If you truly want a patent that is strong and hard to get around shop carefully and consider things other than price. What is more expensive in the long run: (1) a patent that ultimately costs $10,000 and generates a regular royalty income from being licensed to a company; or (2) a $5,000 patent that hangs on your wall but won't licensed because it was too easy to design around the patent? I can easily draft patent applications for $2000-2500 as some of my online competition by cutting corners, BUT I won't because the resulting product will not be something I am proud of. Our firm offers quality and value and we believe we could deliver neither if the proper amount of time is not spent preparing your patent application. It really is that simple.

Companies should be concerned with all of the factors discussed above for individuals, but other factors should also enter into their patent strategy. Specifically, many if not most companies that make and sell potentially patentable products or services would be best served by pursuing a patent portfolio instead of a single patent. The reason is simple: more patents are more difficult for your competition to design around. Accordingly, any one patent may not be extremely broad or strong but in combination with a number of others, the portfolio will be a formidable obstacle for your competition. While the costs of pursuing a patent portfolio strategy can be expensive, the benefits in terms of your competitive advantage in the marketplace will often more than makeup for the expense especially when your product or product line is generating hundreds of thousands to millions of dollars in annual revenue.

Another advantage of a patent portfolio is that it may make you less susceptible to being sued by a competitor for violating one of their patents. This strategy is employed by many of the larger high tech companies such as IBM, Microsoft and Intel. Consider what would happen if your competitor accused you of infringing one of their patents, perhaps a patent you did not know they had: (1) if your company has its own portfolio, you could examine the accuser's product line and hopefully find one or two patents of your they might be infringing and the two of you could sit down and cross license the respective patents to each other and avoid an expensive litigation; or (2) if your company does not have a patent portfolio to assert defensively against the accusing company, you will either have to settle with the accuser or litigate.

Wow, this entry is getting a bit long and I haven't even got to Trademarks. Well that will have to wait until Part III.

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