Wednesday, June 22, 2005

Research find Patents are Worth It

As reported in Businessweek SmallBiz Summer 2005 edition, Ronald Mann, co-director of the Center for Law, Business & Economics at the University of Texas School of Law (does that title even fit on a business card?) found that indeed patents were worthwhile.

Mr. Mann found a strong correlation between the pursuit of patents and the later success of startups in software companies. Startups WITH PATENTS are FOUR TIMES as likely to go public than those without and they are half as likely to fail. Software companies with patents received on average 11 million dollars more in financing than those software companies without patents.

The trends were similar for biotech companies with those with patents fairing much better than those without.

So what can we take from this: patents aren't going to help a company with bad ideas, concepts or products. They are not a panacea. However, patents will make companies with sound business models, products and services more attractive to potential investors. And with more money a company is better able to whether the ups and downs of launching a new venture thereby increasing its ultimate chances of success.

Ciao

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Is ANYBODY Listening?

ah... I mean reading this blog. My partner have poured our blood sweat and tears into this Blog and we are wondering if it is worth it.

OK, we have not shed any tears over the blog. At least I haven't, you have to ask my partner about that one.

You got me: I have not really shed any blood over the blog either!

And yes, our offices are air conditioned so perhaps I have not sweat much if at all concerning this blog.

Anyhow, none of that is the point and I am sorry I used that terrible cliche in the first place.

If you are reading this blog and you appreciate (or don't appreciate) the content, let us know. Email me at kurt@lld-law.com and tell me what you think. Also, you can email my partner at peter@lld-law.com. Now, if you email Pete, I suggest you tell him that you want to see more entries from him (he has only posted 2 in two months).

Ok, now I am going to sit back and watch the emails fly in... Till next time.

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Wednesday, June 15, 2005

The Incestuous Love Triangle of Entity Names, Trade Names and Trademarks

The Incestuous Love Triangle of Entity Names, Trade Names and Trademarks - How to Avoid Being Caught With Your Pants Down
(Part I)

“What is in a name”
“A Rose by any other name would smell as sweet”
Juliet from Shakespeare’s Romeo and Juliet

“What is in a name?” the lovesick Juliet ponders as she gazes out her window. Would a rose really have the same appeal if it was named “Stinky Plant”? In today’s society, recognizable names can be worth a lot of money. For example, in a recently announced deal, guitar giant Gibson Guitar Corporation agreed to pay $14 million for the naming rights to Universal Studio’s Universal Ampathearter. Likewise, entrepreneurs often place great time effort and value in the name that they choose for their company, or trade name that they operate under. Although most business people place great value in the names of their companies, very few actually go through the process that are required to ensure they will have the right to operate under their chosen name. This is the first in a series of entries that briefly examine the interplay between state business registrations (trade names, corporate and LLC names) and federal and state trademark rights, and how a business owner can steer clear from being prevented from using their corporate name in commerce.

Entity Names

When I speak of business entity names, I am referring to the name registered with the Colorado Secretary of State during the process of creating a separate legal entity to operate a business in commerce. Specific examples of business entities include corporations, limited liability companies and certain registered partnerships. All of these entities contain some sort of liability protection that shields some or all of its owners personally from the obligations and liabilities of the company. Currently, in Colorado the Secretary of State will register a name as long as it is not identical to a name already in the data base. The important thing to note is that the state does not conduct any substantive evaluation whatsoever as to the legitimacy or legality of the company’s use of the name in commerce. Therefore, the Secretary of State’s acceptance of the name is not an affirmation or endorsement of the company’s right to use the name in commerce or under some other theory of law. Furthermore, it does not inherently grant the right to prevent some other company from using the same or similar name to describe their company, products, or services. Therefore, a corporation with the name of XYZ, Inc. could be prevented from using that name if another company or individual has a prior or better right (i.e. trademark rights) to the use of the term XYZ in commerce. This could happen even if the other company is out of state and doesn’t do business in Colorado. Likewise, just strictly looking at the law surrounding entity names, our friends at XYZ, Inc. could not prevent the use of XYZ, Corp., XYZ Incorporated, X.Y.Z., Inc. or XYZ, LLC form being used as a company name by another party – even a direct competitor.

In part II of the series we will examine trade names, trade marks and some strategies business owners can use to protect their company names and avoid being caught with their pants down sometime in the future after they have invested time and money in creating consumer awareness and brand recognition.

Sunday, June 12, 2005

Control Protect and Leverage, Part III

And here it is... The newest installment in what was intended as a three part post but is threatening to become a book! I hope not!

Having covered protecting patents in Part II, we will consider protecting Trademarks in this entry.

Unlike patents, the Federal government does not grant you a trademark (or for that matter a copyright). Rather, they merely register the trademark or copyright putting everyone else in the nation on notice of your mark. The only way to obtain trademark rights is to actually use the mark in commerce. That is, to sell good or services that are identified by the mark. And if you stop selling the goods or services associated with a mark, you lose the mark.

So if you automatically gain rights to a mark the minute you start using it in commerce (assuming of course that no one else has senior rights to the mark over you), why register the trademark Federally? Well, there are several advantages of Federal registration: (1) you gain nationwide scope in terms of your exclusive right to sell your goods under the registered trademark; (2) you can make your intent to use the mark in the future for a particular class of goods or services known prior to ever using the mark thereby pre-emptying others from using the mark in commerce before you; and (3) you gain access to the Federal courts to enjoin or sue someone who is infringing your mark. I will write about the first two advantages.

Nationwide Scope of Protection:

With Federal Registration, you can prevent others from gaining use rights to your mark anywhere in the United States in a field of use similar to yours even if they have no knowledge of your prior use. Without Federal Registration, your protection is limited to the geographic area in which you operate.

So, for example, if you have a restaurant chain with restaurant locations in Colorado and Wyoming, you can only prevent others in that state from using your restaurants name. But with Federal Registration of the name as a service mark, you can prevent anyone nationwide from using the name, and that may come in handy if you want to expand the scope of your business.

Intent To Use Registration:

Normally, trademarks rights only accrue when the mark is used in commerce. If one had to rely on actual use, he/she might spend substantial sums of time and money preparing to launch a product only to find out at the last minute that someone beat him/her to the punch and started to use the mark first. Depending on the size of a product or service rollout, the cost could be staggering and difficult to recover from.

Fortunately, the Federal government allows one to file an application for a mark they intend to use in the near future, and with the filing accrue senior user rights over anyone who starts to use a similar mark thereafter. Accordingly, you can be more assured that your marketing and rollout budget will not be in vain.

Now, for less important trademarks, many opt not to Federally register them. Nonetheless, they are protected under common law in the geographic area of use. The key when dealing with secondary marks is to always acknowledge them as your mark by putting a superscript SM (for service mark) or TM (for trademark) when they are used.

Part IV of this series is next and finally we will be discussing the final topic: Leveraging you intellectual assets. Unfortunately, if the next installment takes me as long as the time between the second and third installments, you might have to wait a little while. Lets hope this is not the case.

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Saturday, June 11, 2005

SOLA - A New Twist in Invention Promotion

Anyone that knows me knows I am not a fan of invention promotion companies (and that is putting it diplomatically). You know the companies that advertise on late night TV and the secondary channels, such as the Invention Submission Corporation and Invent Tech to name two. First, before I write anymore perhaps I should provide a disclaimer: everything I say in this entry is my opinion. In general, these companies tend to operate within the law if just barely. As the law changes to regulate them, they just modify their practices enough to comply. Here is my real problem with these companies: they do not provide good value for what they charge. Anyhow, this entry isn’t about your run of the mill invention promoters, but a new kid on the block, SOLA.

Who is SOLA (an acronym for Sale Of Licensing Agreements). They appear to be a Texas based company that offers to help patent holders license their patented inventions to industry. And here is the kicker, they offer to do it for no cost to the patent holder, they just receive a percentage of any royalties received pursuant to the invention. I first became these guys when a prospective client came into my office with their materials and wanted to know if it was safe to deal with them. He couldn’t see the hook. But since SOLA was repeatedly calling him and enticing him to go forward with them, I figured there had to be a hook. The thing that really opened my eyes was the fact that in their personal letter to my client, they referred to his invention improperly: I believe they called his paint can cover a paint can label. All of a sudden I was sure these guys were in the same class as other invention promotion companies, but I needed to know the hook.

I read the materials and there it was: in order for SOLA to spend UPTO $160,000 of their money promoting a patented invention, they require the patent holder to prepare a list of companies that might be interested in licensing the patent. And it just isn’t a list of company names, but their addresses, the person in charge of R&D and his/her contact information, the company’s R&D budget, as well as a bunch of other stuff. Oh yeah, they requested the list be prepared by a Masters or Phd in marketing or business administration. How many of us have one of those degrees just lying around? Well, SOLA indicates in their materials that they have people they can refer you to that will prepare the list. That was it: the hook, the way they really make their money. The have an affiliated company that charges you to prepare the list. Once the list is done they spend some time contacting these potential companies (at least one would figure they do) and they do spend UPTO $160,000, but I suspect the real amount spent is a couple of hundred times less than the maximum.

Anyhow, a new prospective client came in the other day with SOLA letters in hand. They requested he send them a check for about $1300 made out not to SOLA but to Federated Documents Services, I presume for that company to prepare the list. For some reason, I suspect that SOLA gets a cut of the $1300 and that more money will be requested in the future but I don’t actually know this.

Based on this new information, I want searching for SOLA on the web, and what I found was a company that is selling franchises for somewhere around $73,000. Apparently, qualified franchisees will earn extremely high incomes rather quickly. In their FAQ section they state the franchise will become profitable in “your very first month”. WAIT, WAIT, WAIT. License Agreements take months to negotiate if not a year or more! How can they franchise be profitable in the FIRST MONTH unless they are getting money from the patent holder. BUT WAIT, SOLA’s website states, “SOLA takes all the risks and invests its time and money in marketing your product.” This just does’t add up does it?

Anyway, be forewarned: if you have a patent and you are an individual inventor, you might receive an email or letter from SOLA, and although they may tell you they are helping you out a no cost to you and that they will bear the risk, I just don’t buy it.

Oh yeah, if you want to buy a franchise that “will quickly yield extremely high personal income under all market conditions”, then check out this site: http://solafranchise.com/ . And if you have any information about this interesting new entry in the world of invention promotion, let me know.

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