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.
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.
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!
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?
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…
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...
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.
