Saturday, November 26, 2005

Yet One More Advantage of Opertaing a Business in a Corporation or LLC

Virginia Bankruptcy Court Ruling Underscores the Importance of Giving Thought to the Form of Business You Choose To Operate Under


A provision of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which took effect on October 17, 2005, can have a large impact on what forms of businesses are preferable to operate. The act requires and individual to seek credit counseling before they qualify as a “debtor” and are therefore eligible for bankruptcy protection. This requirement also applies to bankruptcies that are filed by sole proprietors seeking relief from business debts. However, the requirement does not apply to bankruptcies filed by “artificial” entities such as corporations or LLC’s. In the Virginia Case, Timothy C. Watson filed an individual chapter 11 as he was facing eviction from his business premise. Watson filed in his individual capacity citing that he had obtained the lease as a sole proprietor. The court denied his petition citing that he failed to obtain the required credit counseling as required by the statute. Watson appealed claiming that the statute was unconstitutional because it denied him equal protection because he chose to operate as a sole proprietor instead as a corporation or LLC. The court disagreed citing that many state laws allow single member LLC’s or single shareholder/director corporations, and that congress’s decision to exempt “artificial” entities such as corporations and LLC’s from the credit counseling requirement had a rational basis and was therefore constitutional. This is yet another reason why forming a corporation or LLC to operate a business is a good idea and can provide some extra advantages over operating as a sole proprietor. For more information on the different types of entities available to run a business in Colorado check out the discussion on our website at http://lld-law.com/ColoradoBusinessEntities.html

Monday, November 21, 2005

Americaninventor.tv

Apparently, ABC will be broadcasting an inventor contest reality show in 2006, and you can be one of its stars. The grand prize is a one million dollar advance against royalties. Open casting calls are December 1st in Denver.

I reviewed the website for the show and it is honest and well written. If you got a great multi-million dollar idea, you may want to consider trying out.

But I would be remiss if I didn't give you a couple things to consider if you do not already have a patent application on file:

1. If you disclose your invention to the show, you will probably start a one year clock running in which you will have to file the patent application in the United States or lose your patent rights altogether. This, of course, assumes you have not made a public disclosure or offer for sale of the invention earlier.

2. Perhaps more significantly, if you make a disclosure of the invention, you will likely lose you right to file for a foreign patent in most major nations. Honestly, for most independent inventors this is not a big deal, but it definitely should be considered before proceeding.

3. The one way to overcome the potential disclosure and the negative effect on your foreign filing rights is to file a provisional patent application before December 1, 2005. As my clients are familiar, I am not a fan of provisionals but given the timing, there is no other alternative: utility applications take too long to prepare. And to be completely honest, I can't guarantee a last minute provisional will be sufficient BUT it may be better than nothing if you have any thought that you may want to foreign file and you want to try out.

Anyhow, if you read this and attend the audition, please give us an update here.

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Wednesday, November 16, 2005

A Quick Book Review

A month or so ago I mentioned in the future I would be writing about various books I have read concerning inventing, starting a business and/or patents. While I have finished my first book since then and here is the review:

The book: Turn Your Idea or Invention into Millions by Don Kracke

To be honest, I expected very little from this book based on its title alone. When the book arrived from Amazon, my initial fears were confirmed: How could a book with a reflective gold cover and a big “$” symbol on the front cover be anything but junk. BUT remember the old cliché, “don’t judge a book by its cover”, and in this instance the cliché is 100% correct. In short, this book is a must read for any independent inventor and I give it four out of five light bulbs (talk about clichéd!).

What impressed me most is that this very successful independent inventor didn’t sugar coat things. Making money from inventing isn’t easy and to succeed an inventor must spend a significant amount of time and even money to have a chance. In fact, I was pleasantly surprised on how closely his view on the inventing game so closely follows mine. The invention of a great new device or process is only the beginning and a lot of hard work is ahead. Further, Mr. Kracke’s advice is backed up by his considerable experience. He provides us with many examples of “how to” and “how not to” do things based on his trials and tribulations. He has both succeeded and failed many times over and his book endeavors to pass his life lessons in the world of inventing.

The biggest complaint I have with this book is its cheesy cover that is actually a disservice to the really useful advice and information contained therein.

Additionally, the book is a bit dated despite a 2001 update. Mr. Kracke has been around awhile and many of his techniques predate the infiltration of technology into every aspect of business. Nevertheless, almost all of the author’s points are still universally valid, the astute reader just needs to consider how email, the internet and computers have affected things in the past 10 years and apply the modern equivalents.

So if you are an aspiring entrepreneur or inventor, get this book, read it and let us know what you think right here.

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Thursday, November 10, 2005

Letting a Multi-Million Dollar Opportunity Slip Away!

First off, this article is not what you think it is. In fact, it has absolutely nothing to do with intellectual property, patents or business law. Rather, this is less of an article and more of a story: a funny story that I can laugh about now but while it was happening, I was a bit terrified. And perhaps this is a bit of commentary concerning our litigious society. So enjoy…

Back in the late eighties and early nineties long before becoming an attorney, I was a composite materials engineer with Martin Marietta. During my five year tenure at Martin, I had the opportunity to travel to San Diego several times including once to attend the annual meetings of the Society for the Advancement of Material and Process Engineering (SAMPE) at the then new convention center. I was fortunate to have a room in the hotel right next to the convention center. The hotel is currently a Marriott but I don’t remember if it was a Marriot then. Here is a link with pictures of the hotel. I was given a room near the top of the high rise with a very nice bay view.

Anyhow, one evening I came back to my room after the conference sessions had ended and decided to snap a few shots of the bay at sunset Since it was getting dark, I took a cheap inexpensive tripod I had packed onto the balcony with me to hold my camera steady for the long exposure shots. It was a bit nippy (around 55 degrees or so) but since I was going to be outside a mere 5 minutes or so I didn’t bother with a jacket.

I shot a few pictures, decided the lighting or composition wasn’t that interesting and decided to return to the warmth of my room rather than waste anymore film. I turned to open the sliding glass door and guess what, it wouldn’t open. It had become locked! I was locked out on the balcony at 150-200 feet above the ground! Ok, some of you are wondering why in hell I closed the door in the first place. Yeah, I was wondering that then as well as: I guess I was trying to conserve energy. And it seemed almost immediately after I couldn’t open the door that the temperature dropped another 5-10 degrees although that may have been me.

Apparently, the latch was loose and slid downwardly when I closed the door behind me. Anyhow, my frantic jiggling of the door probably only made the latch more secure. Why in hell do they need locks on balconies 15 or more stories above the ground anyway!

I looked over to the rooms to the left and right of me and they were dark. Perhaps their doors were unlocked but because of the way the balconies were recessed into the building’s exterior, there was no way to climb to them without risking a life-ending slip.

I looked below and saw a number of people milling about the entry to the hotel. “Help, Help, I am locked on the Balcony!” No one heard me! They just kept going about there business. The temperature seemed to drop even further and I thought I saw snow. People have told me since that it doesn’t snow in April (or ever) in San Diego but I swear I saw it.

Again, I looked at the neighboring rooms. Their lights were still out! What if those rooms were empty? There was a small gap between the edge of the balcony and the wall of the room where I peeped down at the room below me. Its light was also out!

As a rare once in a millennium April ice storm descended on San Diego, I was trapped on the balcony hundreds of feet above the ground. Could I last the night, I wondered. As I buttoned the top button on my polo shirt, it hit me: I could break the glass on the sliding glass door and gain entry to my room, warmth and safety. But the glass seemed rather thick and how could I break it. And if I did, would the hotel charge me for the damage. They shouldn’t I thought since the locking door was theirs. If I broke it, would shards of glass descend upon me? After all to break the thick seemingly bullet-proof glass, I would have to lie on my back and slam the bottoms of my shoes into the glass. The risk of a large piece of the pane falling downwardly at my legs and chopping them off seemed all too real. I decided to wait a little while longer.

And then I realized I was hungry too! I had not eaten dinner yet! The darkness enveloped me. As drifts of snow began to form next to where I was seated on the frozen concrete balcony floor, a beam of warm inviting light shot up from the room below indicating the source of my salvation. The occupants were home. Hallelujah! At first I yelled at them through the small gap between the balcony floor and the room wall but they did not hear. Perhaps, I was not to be rescued after all.

In harrowing and difficult circumstances, people have the ability to rise to an occasion to save themselves or those around them. An epiphany came to me at that moment as I hit bottom: take the tripod; stick it through the gap; and tap on the door below. I don’t know how I summoned the strength but I crawled over to a drift of snow and dug out the tripod from where it had been buried cutting my frost bitten hands on shards of ice. I lowered the tripod and I tapped it. I tapped it with every ounce of strength in my worn and ravaged body.

And the door opened. I was saved!

Very soon after, hotel personnel opened the sliding glass door and pulled me to safety. I was just glad to have survived those never ending 15 minutes exposed to the elements. Miraculously, The clouds outside blew away, the snow and sleet stopped and the air temperature warmed to about 60 degrees. Grateful, I thanked my rescuers and went out to a nice seafood dinner.

What made me recall this difficult and trying time that I had all but blocked from my memory? Recently, a person in Colorado filed suit against Home Depot for being glued to a toilet seat in the store’s bathroom and Home Depots employees did not respond quick enough. And what does this victim claim the waiting (about 15 minutes), the humiliation, and the suffering worth to him: 3 million dollars. Some commentators and media personnel have wondered whether the whole thing is a hoax. I just can’t figure out how one would become glued to foreign toilet seat in the first place. Who in their right mind sits on a toilet seat in a store restroom without looking first! Shouldn’t he have seen the glue? And given background as a materials engineer, I cannot think of an adhesive that would remain tacky for any period of time and then set immediately when coming into contact with an ass.

Anyhow, what if I had sued the hotel because the latch on the balcony door was defective? If a butt glued to a toilet seat is worth three million what would my experience be worth: 100 million or more. Instead of being a humble patent attorney writing this blog article, I could have been sunning on my personal south pacific island. But truth be told, I never considered suing. It didn’t even cross my mind until yesterday.

And to attorneys that wonder why our profession has such a bad reputation; I present to you as exhibit A the attorney representing the aforementioned Coloradan.

Tuesday, November 08, 2005

How to choose a patent attorney

Below is an updated version of an article I had published about a year and a half ago at www.Troubleshooter.com. For those who have not read the original enjoy.

And in one of my future posts, I will offer some additional pointers on choosing a good patent attorney. Unfortunately, I have found that after leaving the big firm environment and working primarily with small companies and individual inventors that a significant portion of the practictioners who work with individuals do not provide a work product that I consider satisfactory.

So here is the updated article:

In this article, I will answer the question: How does one choose a good patent attorney who will draft a patent application that is more likely to issue into a good patent? Unfortunately, the question does not have a simple and easy answer, but I can provide you with a several pointers.

First, since even a high quality patent application for very simple invention takes about 18 hours to draft and file, be very wary of an attorney who quotes you a price that indicates he will prepare the application in less time. To figure how long an attorney will probably spend on your application divide the attorney's quote by his hourly rate. Remember that the claims, the most important part of the application, are the most likely to suffer if the attorney does not spend enough time writing the application. A general rule of thumb is to avoid attorneys who say they can draft your application for less than $3300.

On the other end, you probably want to avoid very high priced large firm attorneys. They are usually very good, but they bill at extremely high rates ($250-$420 an hour). A significant part of the premium goes to funding overhead services that a small company or independent inventor will probably not utilize. Another significant portion of the premium goes into the law firm partners' pockets as profit. Additionally, the large firm lawyers are not likely to give you very much personnel attention, as their primary focus tends to be on their large corporate clients. I speak from experience: until relatively recently, I was a large firm patent attorney. One of the reasons I left was so that I could work with more small companies and individual inventors. Many patent attorneys at the large firms recognize that working with individual inventors is not a good fit and they will refer you to good solo or small firm practitioners. I regularly receive referrals from my former colleagues. Ultimately, if you are going to error on one side or the other, I recommend you error in hiring a large firm attorney over a low cost provider.

You should also avoid invention promotion companies or anyone that works with them including attorneys. In my opinion, the primary purpose of the invention promotion companies is to part you from your money and not to help you maximize the potential of your invention. By Federal law these companies must provide you with certain information concerning their success at helping inventors before they can accept your money. This information is almost always provided in small print since their success rates are either zero or extremely small. If you are interested, get some information from one or more of these companies and read their promotional materials, and you might be surprised that they really don't offer to do much of anything for you in terms of commercializing your invention. But be careful when contacting them, because if you give them a phone number, they may call you several times to express great interest in your product and encourage you to proceed. Usually, the first step with these companies is to prepare what some of them call a "patent portfolio". In my opinion, the "patent portfolio" is essentially useless. The portfolio typically contains SIC codes for your invention, a drawing of your invention, a rather generic market study and a preliminary patent search. I have seen a couple of these "preliminary patent searches" and it seems to me that what they really mean when that add the term "preliminary" to the phrase "patent search" is "worthless". Now, given the questionable practices of these companies, why would an inventor ever use an attorney they recommend? Always remember that any attorney you hire is obligated to work on your behalf and to your benefit. However, I strongly suspect a patent attorney with a symbiotic relationship with an invention promotion firm probably has a greater loyalty to the invention promotion firm than his/her clients.

So what specifically should the individual inventor or entrepreneurial company look for when hiring a patent attorney? Look to patent attorneys that are either solo practitioners or are affiliated with a small firm. You should expect hourly billing rates between $175 and about $250 an hour. A good place to identify these attorneys is by contacting local inventor or entrepreneur support organizations in your area. Suitable patent attorneys may be members of such organizations, and if not, the members can probably point you to patent attorneys they have used. And, of course, you should always consult the Troubleshooter Referral list.

Once you have identified one or more patent attorneys, you should meet with or have a phone conversation with him (or her). Ask the attorney about the potential breadth of protection you can receive for your invention. Quiz him/her on how easy it would be for someone to copy your invention by making insubstantial changes to the invention. And here is a big one: gauge whether he/she truly understands your inventdoesn'tand if he doesn't after you have made a reasonable effort to explain it to him, move on. Ask him/her about the total cost to get a patent. Does he hem or haw? Typically, the cost to get a patent to issue is about as much as the cost to file the patent application in the first place. Ask him/her about Office Actions and whether he thinks most of your claims will be rejected by the patent office initially. The answer typically should be "probably" or "yes", because the Patent Office does not like to grant broad claims before the patent attorney clearly distinguishes them over the prior art by filing an Office Action response. In other words, if you attorney thinks the claims will not be rejected the first go around, they are probably too narrow and would not provide you with sufficient protection against infringers.

In the end, you have to gauge whether the responses to your questions are satisfactory. Believe me, if you go to a few attorneys, you will get an idea of who is likely to provide the best service and highest quality and who is just after your money. And perhaps the most important word of advice: if you are not comfortable with an attorney after you have interviewed, don't use him. In the end, if you choose wisely, you will have a much better chance of ending up with a valid, enforceable and sufficiently broad patent that will prevent others from making, using or selling your invention. After that, it is your job to market your invention with or without the help of a reputable marketing company and see where your endeavor may lead.

As an entrepreneur who has invented products and formed a company to manufacture and sell those products, the most important advice I can offer is to have fun and enjoy the process of bringing your invention to fruition. After all, life is the journey and not the end result. Good Luck!

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Wednesday, November 02, 2005

The Rocket Science chronicles

INTRODUCTION

Prior to becoming an attorney in what now seems like a previous life I was an entrepreneur. After leaving my first engineering job out of college, I started the Denver Bicycle Design Center, Inc., which designed, manufactured and produced high end mountain bicycle components. These products, namely a ultralight aluminum/graphite/epoxy handlebar and stem, were sold under the Rocket Science Mountain Bike Components brand from 1992-1994. The company had snippets of success along the way but in the end we just tried to do too much without enough financial backing and the doors closed on or about Christmas 2004. . The company owed numerous suppliers money and my personal finances were a mess. We really should have closed the doors a year earlier but when a company is your brain child, it is difficult if not impossible to let it just die without a fight.

For the longest time even thinking about the company depressed me. But as time has passed I can now look fondly on the past and recognize what I learned from the experience. And like I said above, I am so far removed from this past that discussing my experiences seems more like describing a dream than something I actually took part in. Further, I find that I am beginning to forget some of the details of the past as this first entrepreneurial experience slips in importance relative to other life experiences, such as those of my wife and twin girls.

So to memorialize this past life of mine these Rocket Science chronicles are born. In the coming months, I will describe my experiences related to product conception, product development, marketing, sales and business management in this multi-part blog series . Hopefully, those interested in inventing and development of their invention will find my experiences helpful and illuminating. These writings are somewhat rare in that they are about a business that did not succeed; whereas, most books focus on successful ventures. Ultimately, I hope you can gleam useful tips from how to run your business in terms of both what to do as well as what not what to do.

Stay tuned...

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Tuesday, November 01, 2005

Client Spotlight #1

Every once and a while we will be spotlighting the products or services offered by our clients.

The first client we are spotlighting, Wheel Riders, has been with the firm since the beginning and with me since I went into private practice nearly 3 years ago.

Wheel Riders make bicycle wheel holders that mount to the frame of an associated bicycle. The primary use of their products is to hold the front wheel of a bicycle while it is secured in a roof top rack for transport.

The company is in the process of building an impressive and strong patent portfolio relating to their product line and hold several trademark registrations as well.

Check out there website at http://www.wheel-riders.com/.

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