Color Me Successful

In 2008, Wisconsin-based Wolf Appliance, Inc.was granted a U.S. trademark registration for the red knobs used on its gas and electric cooking appliances since 2000. In early 2010, Wolf was successful in obtaining a preliminary injunction against competitor Viking Range Corporation for offering a “Red Knob Kit” as an accessory for its own cooking appliances (otherwise equipped with black knobs). In its defense, Viking brought a counterclaim to cancel Wolf’s red knob trademark registration. All claims and counterclaims in the action were voluntarily dismissed without prejudice in July 2010.

Also in 2008, but before the issuance of the Wolf trademark registration, Christian Louboutin obtained a U.S. trademark registration for lacquered red soles of footwear. Earlier this year, Louboutin brought suit against Yves Saint Laurent America, Inc. for infringement based on YSL’s offering of red-soled shoes. And like Viking’s defense in the Wolf case, YSL counterclaimed to have Louboutin’s trademark registration cancelled.

Unlike Wolf, Louboutin was not successful in obtaining a preliminary injunction against YSL. In denying the preliminary injunction, the judge in the Louboutin matter stated that Louboutin is unlikely to be able to prove that the red outsole is entitled to trademark protection. That same judge also indicated that he was willing to grant summary judgment cancelling the Louboutin registration, but agreed to hold off on that determination pending Louboutin’s appeal of the preliminary injunction refusal.

I think the judge in Louboutin is wrong and hope that Louboutin is successful in its appeal. Color has been considered protectable as a trademark since the 1995 U.S. Supreme Court decision in Qualitex Co. v. Jacobson Products Co., so long as the color has achieved “secondary meaning”—essentially the color is of primary significance to the public as a recognized feature of a product. Wolf and Louboutin each arbitrarily applied the color red to an otherwise generally ignored aspect of their respective products and then told customers to look for that unique feature. In both cases, the owners of the trademarks established what I believe is sufficient secondary meaning to support their trademark claims.

When my husband (the cook) announced that he had bought a new Wolf range (yet to be delivered), I gave him a blank stare until he explained that it was the stove with the red knobs. The light went on and I immediately knew he had chosen something of quality—or at least so I had learned through my subconscious attention to him, other kitchen fans, and advertising. I don’t own any Louboutin shoes, and likely never will, but recently, when watching a movie with my nieces, saw Jennifer Lopez wearing red-soled shoes and immediately questioned how (and why) a pet shop owner would spend that kind of money on a pair of shoes. In both cases, I immediately recognized products by their distinctive use of color. That is the essence of a good trademark.

But now, if Louboutin loses, and YSL is successful in cancelling the Louboutin “red sole” trademark registration, will Viking once again try to cancel Wolf’s “red knob” registration? (Remember that Viking voluntarily dismissed its cancellation counterclaim without prejudice, meaning Viking is free to re-institute the claim at any time). While the loss of Louboutin’s trademark rights would not affect me, I would sincerely hate to see red knobs on just any range and diminish my husband’s joy in possessing that immediately recognized kitchen appliance that signals the home of a serious cook.

Belly Putters and My Thanks to Entrepreneur Charlie Owens

With Keegan Bradley’s recent victory at the PGA Championship, “belly putters” (or “long putters”) have been a hot topic of discussion amongst the golfing set. This label is attached to almost any putter that is held by anchoring one end at the player’s chest, belly, navel, etc.

Even though the USGA refused to ban the belly putter, it works so well for many golfers that some pros are calling for it to be banned by the USGA and the R&A, which administer the rules of golf.

If this works so well, who invented it and did he or she make any money with the invention?

Evidently the late Paul Runyan first came up with the idea while playing in the 1936 Belmont Open in Boston. He anchored the end of his putter to his belly in an attempt to stabilize himself in the strong wind. In a 1966 article that he wrote for Golf Digest, he said that “an advantage I hadn’t expected is that this system minimizes the adverse effect of nervous tension.” In other words, it helps with the “yips!” This is like finding the Holy Grail for putters!

Enter Charlie Owens, who was the first to popularize the belly putter by winning two Senior PGA events with his 50-inch “broomstick” model in 1986. As is the case with many entrepreneurs, necessity was the mother of invention. In a 2007 interview with Golf Digest, he admitted that he “…had the yips so bad that [he] would freeze up on a two-footer.” He experimented by welding two shafts together, using various weighted putter heads, and even designing a brass putter head which was custom-machined from a brass bar. The result was a 3.5 pound putter that he named the “Slim Jim.”

After some success with Slim Jim, Owens made a deal with Matzie Golf for the commercialization of his design. Owens didn’t protect his invention because he didn’t think it would catch on. But Matzie still makes and sells a number of belly putters, and every major manufacturer of golf clubs has joined the trend.

Owens is in his early 80s and lives in Tampa, Florida. He says that he’d just like a little credit where credit is due. So, here’s to you, Charlie Owens! Thanks for your creation and your entrepreneurial spirit. It won’t bring world peace but it just might cure the yips. So, try it and thank Charlie.

Its Baaaaaaack! The American Jobs Act of 2011 Proposes to repeal capital gains treatment for Carried Interest in funds

Many readers will recall the battle preceding the passage of the Dodd-Frank Act where the fund world fought a proposal to tax carried interest as ordinary income rather than as capital gains, which is currently the law. A collective sigh of relief was heard from venture capital, private equity firms, hedge funds and real estate developers across the US when the proposal didn’t make it into law. The proposal is back and is a hallmark of the American Jobs Act of 2011

Carried Interest (fight back the yawns, people…) is a key source of income to general partners in funds as they participate in earnings (either from profits of the company or exits). It is also a major incentive to perform well because it ties the income of fund managers to the success of the investments made by the fund. The current proposal would eliminate the capital gains treatment of those earnings and would tax them at ordinary income rates because they would be treated as income for services. Ordinary income is subject to rates of up to 35% (39.6% as of 2012) verses 15% for capital gains (20% after 2012). Its easy to see how fund managers and venture capitalists can get wound up, given the spread between the tax rates.

The proposed changes will help fund the Act and which will likely escalate the debate about the interests of employing the unemployed and who will pay for those initiatives.

The irony in the discussion of how to fund employing the unemployed is how government views “job creation.” A significant percentage of entrepreneurs receive funding through investments from angel investors (individuals and funds) and venture capitalists. The National Venture Capital Association cites data suggesting that venture capitalists help create new jobs in critical high tech industries that would not exist without both the financial backing and human capital contributed by venture capitalists.

Through a study back by the NVCA, they found that in 2010:

• Venture backed companies accounted for 11.9 million US jobs ( out of 107.3 million US private sector jobs) which is equivalent to 21% of US GDP.


• 10% of total US Sales ($3.1 trillion out of $30 trillion) is venture-backed revenue.


• $23 billion of capital was injected into the US economy by venture investment into 2,863 companies.


• The percentages of venture-backed jobs in major industry sectors (90% for software; 74% for biotechnology; 72% for semiconductors and on and on).

It is noteworthy that a significant number of the companies that received venture dollars were not necessarily large companies that already have many employees. Many of the investments were in emerging companies seeking growth capital which has a direct correlation to either hiring employees or hiring third parties (who in turn have employees) to further develop their products and services for the market. Many people equate “venture” with investments in the hundreds of millions of dollars, which in fact is the exception rather than the rule. Venture funding is a the heart of new job creation which is hard to find in other sectors of the economy.

This debate is likely to very quickly get very hot!

Curbside Dining Thrives as Economy Sags

Like thousands of other downtown Minneapolis workers, I continue to be surprised and delighted by the proliferation and popularity of food trucks on our downtown streets during the busy lunch hour. Besides the tasty food many of them are serving, I love how the food trucks bring office workers out of our skyways and back down to the street for at least a few months out of the year. Some, like the Smack Shack, have even garnered national acclaim for their dishes.

This trend has recently taken off in Minneapolis, just as it has in many other parts of the country where food trucks have not been part of the traditional cityscape. In April of this year, the Minneapolis City Council voted to increase the number of food trucks allowed in the city (after issuing just 10 licenses in 2010), as well as to allow food trucks to operate in neighborhoods of the city beyond downtown. Restaurant industry associations have taken note. The National Restaurant Association cited an increase in mobile food trucks as one of its highlighted findings in a recent study of industry trends. A couple of months ago, Entrepreneur Magazine also published an article describing to entrepreneurs how they might go about starting a food truck.

I have a personal interest in the hospitality industry, so I read blogs and other local and national media about restaurants and hotels. With food trucks being such a dominant national trend over the past couple of years, I have read many articles that, not surprisingly, assert a correlation between our economic downturn and the marked increase in food trucks. The vast majority of the articles I’ve read focus on this correlation from the consumer’s side—essentially, that food trucks have grown and prospered during this time of economic hardship because consumers have less disposable income and/or are more reluctant to spend money on luxuries like dining out.

While I’m certain that consumers’ financial stability (or lack thereof) has played a role, in my mind it is only part of the story. To me, the lack of access to lending and investment capital is just as important a factor. These are two sides of the same coin. The food truck is where a chef’s inability to raise the several hundred thousand dollars it costs to launch a new restaurant meets diners who are unwilling to spend the $20 they used to spend on lunch and want to spend $10 instead for comparable food. Diners needed ways to satisfy their desires for restaurant-quality food, and chefs and restaurateurs needed a way to start their restaurant businesses with less capital required up front.

If there is such a thing as a silver lining in the context of the global recession that has taken a serious toll on our wealth and psyche, it’s innovation inspired by changing conditions. Entrepreneurs are forced to adapt, just as consumers are. If there aren’t investors or banks willing to lend as much capital as is necessary for an aspiring restaurant owner to lease a space, furnish and decorate it, to hire several cooks and front of the house staff, and to develop a complete menu, maybe the entrepreneur can scrape together just enough to buy or rent a food truck, hire one or two additional staff, and make a limited menu of high-quality specialties. When would-be entrepreneurs in an industry are feeling more risk averse than they might in times of economic growth, food trucks are a great example of how they figure out a way to dip their toes in the water without diving into the deep end head first. The result is a greater diversity of products and services that satisfies more diverse consumer needs.

A Post by Alyssa Hirschfeld, Guest Blogger

Innovators: A “sometimes legacy” of the “usually misunderstood” [or “Don’t be a Juicy Contradiction.”]

As we approach the finals for the Minnesota Cup, let’s pause briefly to honor those innovators who, while often misunderstood, conquer “blue waters” with new products or breath new life into existing ones that make our lives better. Consider Jeff Bezos, CEO of Amazon, who, during a recent shareholder webcast, made the case for “misunderstood innovator” being an acceptable label. “We start with the customer and work backwards. And, very importantly, we are willing to be misunderstood for long periods of time.”

This, from the often-quoted Bezos, would lead a reader to believe that Amazon is continually spinning off remarkable new ideas that are akin to Archimedes’s “Eureka moment.” While Bezos will attribute some of Amazon’s initiatives to luck, for the most part the contrary is true. During the same presentation, Bezos observed, “Ninety-plus percent of the innovation at Amazon is incremental and critical and much less risky. We know how to open new product categories. We know how to open new geographies. That doesn’t mean that these things are guaranteed to work, but we have a lot of expertise and a lot of knowledge. We know how to open new fulfillment centers, whether to open one, where to locate it, how big to make it. All of these things based on our operating history are things that we can analyze quantitatively rather than to have to make intuitive judgments.”

Julian Birkinshaw, Cyril Bouquet and J.-L. Barsoux, in “The 5 Myths of Innovation,” look at this another way: “Most companies are sufficiently good at generating ideas; the ‘bottleneck’ in the innovation process actually occurs a lot further down the pipeline.” In other words, innovation without an adaptable process for development will die.

Case in point—the Minnesota Cup demonstrates how the innovation community has responded by rewarding implementation as well as good ideas. The Minnesota Cup requires all applicants to supplement their description of a product or service with a market assessment, an operating plan and sales and marketing plan. This practice sets the bar higher for applicants to develop strategies that not only test the assumptions of innovation, but will pull the innovation through a process to achieve realization. Without the necessary plan and process to drive the innovation to the market, you may only find that “it’s a juicy contradiction.”™