Tuesday, September 1, 2015

Twin Cities Startup Week

That noticeable chill you’ve felt in the air recently signals that summertime is sadly and quickly coming to a close.  It will soon be time for the State FairLabor Day, kids returning to school, football, and of course, Twin Cities Startup Week.  For those who don’t know, Twin Cities Startup Week (running from Tuesday September 8th through Sunday, September 13th) is a series of informative, fun and networking based events focused on the Twin Cities startup community.

Events include Beta.MN, which is a showcase of local startups identified by the Beta.MN team. There are no formal pitches at Beta.MN, just startups exhibiting their products and services, kind of like the exhibitors at the State Fair.  At the end of the evening, the audience votes on their favorite startup, and the winner receives the famed “Golden Ipod.”  This event is being held from 5:00 to 8:00 pm on Tuesday night of Startup Week (the 8th) at Target Commons on Nicollet Mall.

The MN Cup final awards reception is being held on Wednesday night (the 9th) at the McNamara Alumni Center on the University of Minnesota campus.  We’ve posted about MN Cup many times on this blog (including, most recently, here), so not much else needs to be said.  However, if you haven’t attended the final awards reception before, it’s a great event for Minnesota entrepreneurs and supporters of the entrepreneurial community.  The event is well-attended and is a good opportunity to meet and network with leaders of the entrepreneurial community and learn about some exciting new companies.

MinneDemo, which is a demonstration showcase for seven companies, is on Thursday night (the 10th).  Each of the seven companies will have seven minutes to show their work.  These are real demos, not powerpoint presentations.

The week’s events culminate in Startup Weekend, which begins Friday night (the 11th) and continues through Sunday afternoon (the 13th).  On Friday night, any participant can pitch their idea for a startup.  Teams then organically form around the ideas they find most interesting.  The teams then spend the rest of the weekend creating a business plan and developing a product.  On Sunday evening, the teams give demos and pitches to a live audience.  Real companies have come out of Startup Weekend, including hidrate and QONQR.

There are several other events throughout the week, which can be seen on the schedule listed here.  I’ll give a quick pitch for my colleagues Doug Ramler and Kate Nilan, who will be hosting the first in a series of quarterly presentations on legal issues for tech companies.  This event will be from 8:00 to 9:30 Friday morning (the 11th) at our office in downtown Minneapolis.  At this event, Doug and Kate will be discussing how to launch a new tech venture, terms of use/privacy policies, and the top five tech law developments you should be aware of.  There will be lots of good information, checklists and sample documents, and an opportunity to connect with others in the tech community. 

It will be a great week for the entrepreneurial community in Minnesota.  I hope to see you at some of these events.

Thursday, August 27, 2015

‘Banana Peel’ ruling trips up Wyndham in FTC battle over data security

Franchisors and privacy professionals have been closely watching a case in which Wyndham Hotels has challenged the authority of the Federal Trade Commission to regulate data security practices. While many doubted that the FTC would be stripped of its power as the great poobah of privacy enforcement in the United States, I was mildly hopeful that we might get some guidance as to what constitutes adequate data security.

Watch those banana peels! 

On Monday, a federal appellate court ruled against Wyndham and determined that the FTC does have authority to regulate corporate data security practices. The FTC may now continue its claim that Wyndham’s computer system “unreasonably and unnecessarily” exposed consumer personal data to unauthorized access.

This ruling will likely embolden the FTC to pursue similar claims against businesses that experience cyber-attacks and other data breaches. Talk about adding insult to injury.

Wyndham, already dealing with the aftermath of a data breach in which Russian hackers accessed credit card and other information from more than 619,000 consumers and ran up more than $10.6 million in fraudulent charges, must now also defend itself against the FTC.

Wyndham argued that the FTC failed to provide adequate notice as to exactly what is required to achieve adequate data security and suggested that to allow the FTC such authority was akin to allowing the FTC to regulate hotel room door locks or suing a supermarket that failed to sweep up banana peels.

In response, Judge Ambro wrote, “a supermarket leaving so many banana peels all over the place that 619,000 customers fall hardly suggests it should be immune from liability.”

So sweep up those slippery banana peels and make sure that your computer systems are safe and secure from cyber-attacks.

Tuesday, August 18, 2015

What: Harry Beckwith, Selling the Invisible: A Field Guide to Modern Marketing (Warner Books, 1997).

Why: A satisfyingly quick read that will improve your marketing skills.

I’m currently struggling with the decision whether to attend my 40th high school reunion. Not that this was a terrible time in my life (as, apparently, it is for many people), but I wasn’t exactly a cool kid. (Cue the knowing looks from my colleagues.) I got good grades, which tended to lend a certain geekiness to my reputation, although I was also mildly athletic and something of a politico. Like many of the people I deal with on a day-to-day basis, I really didn’t come into my own until my college years.

So here’s me cracking open this book to see how I can improve my business development skills, only to stop short at the following passage: “College…seduces us with the notion that real life will be an oasis where sheer talent is what counts….Life is like high school.”

This does not come as great news to someone whose grand slams in life came after his high school years.

Luckily, Harry Beckwith—local author and consultant—explains why this is true, in a book composed of short and quickly digestible chapters aimed at helping those of us who missed the memo about life skills. Much of his advice is predictable and in fact pretty basic (especially for a successful entrepreneur), but where Beckwith shines is linking the ideas together and presenting the ideas in very accessible form.

Wednesday, August 12, 2015

Seed Capital reVIEW—It’s Survey Time (again)!

Having our Seed Capital reVIEW report for the second half of 2014 (which analyzes seed and angel capital raised by early-stage companies in Minnesota) in the rear view mirror can only mean one thing—it’s time for us to start collecting data on deals completed during the first half of this year.

As you may recall, Seed Capital reVIEW is our compilation of data regarding what types of companies are raising early-stage capital in Minnesota (typically between $100,000 and $2,000,000) and the terms relating to that fundraising activity. I know, it isn’t quite as fun as taking a survey to find out which character from the movie Inside Out you are (easily the best movie of the summer, if you ask me). For the record: according to the survey, I’m Joy and I’m living with Anger and Disgust.

We did add a few new questions to the survey to try to gauge emerging trends like crowdfunding
(including equity crowdfunding, which is almost legal in Minnesota). Of course, the key to making the data meaningful is to have broad-based participation to ensure the data provides an accurate reflection of seed capital activity. 

With that in mind, please CLICK HERE NOW to help us out. Please also send this link to others who you know were involved in seed and angel capital raising in the first half of the year. 

As added incentive to respond to our survey, the Gray Plant Mooty Foundation has pledged to make a $10 donation to MEDA, the Minnesota Economic Development Association, for each survey completed. MEDA is an organization that provides business development services, business financing, and access to market opportunities to support entrepreneurs of color.

Thanks for helping us collect some data of interest to entrepreneurs and investors.

Thursday, July 30, 2015

James Bond Musical Faces Copyright Quandary

Our resident musical theater guru, Dan Tenenbaum, passed along an interesting news item about a musical in the works based on James Bond.  Although I’m having a difficult time picturing the debonair spy breaking out in song when confronting a villain or tap dancing at a roulette table, just imagine the lyrics for a number by Q demonstrating his latest gadget, or a dance number called “shaken, not stirred” performed by Oddjob and all of the Bond women.  But my creative musings were not the reason that Dan called this production to my attention.

The article noted that the official 007 Facebook page questioned the legality of the production claiming that the producers of the musical had not acquired the necessary rights.  Danjaq LLC and Metro-Goldwyn-Mayer Studios Inc., which apparently control the live stage rights to the Bond brand (presumably as licensees of Ian Fleming Publications Ltd, which owns and administers Fleming’s copyright interests), confirmed that they have not licensed any rights for the proposed musical production and stated that their permission is required for the stage production.

The executive producer of the musical claims that they don’t need any permission from the rights holders because the production is to be a “parody.”  So who is right?

The proposed musical is to have an original storyline – not based on any of Ian Fleming’s books or any of the subsequently written Bond novels authorized by the Fleming copyright owners.  But available information suggests that the stage production, entitled James Bond: The Musical, will use Fleming’s characters, including the Fleming names.

It is generally held that unique or distinctive, well-developed characters are protected by copyright.  One need not delve into the legal analysis of this issue to conclude that many of the iconic characters in the Bond novels would qualify–not British spies, government bureaucrats, evil villains or beautiful women, generally, but the specific Fleming-created personages.  (If they are not entitled to copyright protection, what characters would be?)

But even strong character adoption, if used in parody, can constitute fair use under copyright law. 

Broadly speaking, parody covers a work (story, song, poem, film, theatrical presentation, etc.) that makes fun of, imitates or comments on another work, or the subject, author, style or other aspect of the work.  A classic example is the Carol Burnett sketch “Went With the Wind!,” with Carol portraying "Starlet O’Hara", Harvey Korman as "Ratt Butler", Dinah Shore as "Melody" and Vicki Lawrence as "Sissy", in a scene at "Terra" Plantation.

Even if you haven’t read Gone with the Wind or seen the movie, you could appreciate the character parody, but you may not entirely appreciate Carol’s green dress fully equipped with a curtain rod.  Despite the obvious references to the original work, the sketch does not appear to have been the subject of any claims of infringement.  On the other hand, Alice Randall’s book The Wind Done Gone  (the same basic story told from the slaves’ point of view) was the subject of a preliminary injunction by a trial court finding that it likely constituted copyright infringement.  Although the appeals court subsequently held that the book might qualify as commentary parody, the case was settled before a final determination.
The risk with anything such as the proposed staging of James Bond: The Musical is that qualification as parody can’t really be determined until after the work is completed.  It might be capable of analysis based on the book (script) and song lyrics, but the theatrical presentation of the written word could be equally important in judging whether or not the work should be considered parody.  Given the statements of the parties that are acknowledged to possess the live stage rights to Bond, it seems that the musical producers are taking a big gamble.  James Bond would be proud.

[Editor’s note: The editor incorrectly changed the names of the characters in the Carol Burnett sketch in an earlier version of this post.  This has now been corrected.  Our humblest apologies to the author.]

Thursday, July 23, 2015


In this recent post, I reported on the upcoming Supreme Court consideration of the long-held rule established by Brulotte v.Thys Co. prohibiting the payment of royalties based upon patent rights after the patent has expired. On June 22, 2015, the Supreme Court, in Kimble v Marvel Entertainment, upheld Brulotte.

Stephen Kimble, the inventor of a popular Spiderman toy that shoots pressurized foam string, lost his battle to obtain continued royalties based upon his agreement with Marvel.

Marvel had agreed to purchase Kimble’s patent for the Spiderman toy in exchange for a lump sum plus a three percent royalty on future sales. The agreement set no date for when royalty payments would end. As the patent term was about to expire, Marvel discovered Brulotte and obtained a declaratory judgment that it could stop paying Kimble royalties. This judgment was affirmed and Kimble looked for relief from the United States Supreme Court.

Despite arguments from several amici that Brulotte stifles technological innovation and commercial agreements, the Supreme Court upheld the Brulotte decision, from more than 50 years ago, that held a patent holder cannot charge royalties for the use of an invention after its patent term has expired. Even if the parties specifically agree in writing to permit such payments, the obligation may be void.  In Brulotte the Court had held that a post-patent royalty provision in an agreement was “unlawful per se” because it continued “the patent monopoly beyond the [patent] period” and, in so doing, was in conflict with the long-held patent law policy that granted the public unrestricted rights to make or use a patented invention once the patent expires and is in the public domain.

Invoking one of several Spiderman references in her opinion, Justice Kagan states, “Indeed, Brulotte’s close relation to a whole web of precedents means that overruling it could threaten others,” and argues that Congress is the place to set patent policy and not the courts.

Justice Kagan could not refrain from slipping in several more references to Spidey, including the following to the 1960s Spiderman cartoon theme song: “The parties set no end date for royalties, apparently contemplating that they would continue for as long as kids imitate Spider-man (by doing whatever a spider can).’’ She also quotes Stan Lee and Steve Ditko’s Amazing Fantasy No. 15, the 1962 comic where Spiderman first appears: “[I]n this world, with great power there must also come–great responsibility”. Finally Justice Kagan reminds us that “Patents endow their holder with certain superpowers, but only for a limited time.”

So we are now left to negotiate agreements under one of the most widely criticized intellectual property and competition law decisions of the Supreme Court. Economic arguments that Brulotte suppresses innovation and the freedom to contract failed. It is now up to Congress to act.

In the meantime, Spidey has some practical advice for how you can avoid the evil reach of Brulotte. If appropriate, use a hybrid agreement that establishes ongoing royalties for trade secrets. The Marvel Court specifically mentions that “post-expiration royalties are allowable so long as tied to a non-patent right –even when closely related to a patent.” Such hybrid licenses and other creative approaches to licensing can help you avoid the web of despair when patent royalties come to an end.

Judgment: Affirmed, 6-3, in an opinion by Justice Kagan. Justice Alito filed a dissenting opinion, in 
which Chief Justice Roberts and Justice Thomas joined. 

Tuesday, July 14, 2015

What: Harry Mount, My Brief Career: The Trials of a Young Lawyer (Short Books, 2004).

Why:  Some insight for entrepreneurs on their lawyers, including how legal education probably has very little to do with creating a successful and satisfying life as a practicing lawyer.

It is no secret that the Great Recession dampened the hopes of many a young would-be lawyer fresh out of law school. Fewer jobs, in turn, have led to declining law school enrollments. We have even begun to see some consolidation of law schools as they struggle to survive in the “new normal” environment. Some commentators have even suggested that law school itself is an outdated concept, and that it should be replaced by a shorter academic course followed by on-the-job training of the kind found, for example, in England.

Enter Harry Mount, whose memoir of his year spent as a pupil in a London barrister’s chambers is particularly illuminating along these lines. His is an engaging and often humorous story, told as one might expect by someone who ultimately abandoned the law for a successful career as a journalist.  

He had high expectations. He came to the legal profession believing that any lawyer could shape society through his work, that he “might be responsible for changing the law...by creating a legal precedent.”

What followed was a frustrating year as an apprentice during which any excitement he felt about the profession was leached out of him by inattentive tutors and repetitive work. “When man is capable of the funniest, saddest and most exciting acts of imagination,” he writes, “it is hard to be one of the few members of mankind who are forced to read, day in, day out, paragraphs like ‘Reasonable financial provision—s.1(2)(b) such financial provision as it would be reasonable in all the circumstances of the case of the applicant to receive for his maintenance.’”

As Mount notes, “Law is one of the great and necessary disciplines of a civilized society.” But it most definitely is not everyone’s cup of tea. Someone who imagines herself a modern-day Perry Mason may, through practical exposure to the day-to-day workings of a legal career, discover that “real legal life is mostly about the dreariest bits that happen before the trial begins, that are more often than not about trying to stop the trial going ahead altogether.”

Unlike Mount, many of us—and I’m thinking here in particular of my colleagues in the Entrepreneurial Services Group here at Gray Plant Mooty—have succeeded in finding meaning in such day-to-day tasks by focusing on results, by interacting with interesting clients (who often become friends), and by trying to add value to the enterprise however we can. I doubt such things can be taught, whatever system of legal education you embrace.