Intellectual Properties

Patents, Copyrights & Trademarks
October 4, 2005

Robert A. Spira

Patents have become increasingly omnipresent and for the most part an ever more confusing undertaking. However, this hasn’t stopped the ever increasing cascade of people attempting to bring themselves riches beyond imagination by grabbing the golden ring that is offered to those insuring their ownership of critically important concepts. U.S. Patent Number 5443036 is a sterling example of man’s ingenuity and the Patent Office’s willingness to grant an exclusive license to distinctive and misguided concepts:

Method of exercising a cat
A method for inducing cats to exercise consists of directing a beam of invisible light produced by a hand-held laser apparatus onto the floor or wall or other opaque surface in the vicinity of the cat, then moving the laser so as to cause the bright pattern of light to move in an irregular way fascinating to cats, and to any other animal with a chase instinct.

We are certain this is an idea that required substantial reflection and was more than likely delivered to the patent authorities with a working model. Not long after the ct exercise mobile was approved, the ever prestigious Harvard University was able to receive official notice that they had earned the right to a patent on a live mouse. Today everyone that is not asleep at the switch in the technology chase, but there are some proficient losers that are not hard to identify.

Here at Chapman, from a venture capital point of view, we attempt to separate the intellectual wheat from the chaff; our people establish which projects of the many we scrutinize are worth funding. This is a sort Caesarean “Thumbs up/thumbs down” process of financial engineering with numerous nuances to consider. Probably the most vicious of all of the pitfalls that can deprecate a patent is the simple fact that someone may have filed for a similar patent a matter of days before you did and this wins the lottery. Worse yet, you will probably no even find that out for a least three years, during which time, you factory will be turning out these widgets in massive numbers only to find out that every single one of them violates the rights of another inventor.

So, this issue is not only whether the ideas is worthwhile or not, the more important and unanswerable question is, were you the first in the door? These are the decisions that we are forced to make every day of the week and the fact that a very thorough patent search is conducted has little to do with the final outcome. Sadly, the search is only going to tell you whether or not a similar patent has already been granted but it will not give you a clue as to whether or not, the concept is in the pipeline.

We feel that our instincts are first rate in this ultimate game of chance but we have proven to be far from infallible; after all, we at Chapman are seriously among those who said Federal Express couldn’t fly, that Baskin Robbins would not be able to sell ice cream in the winter, and that McDonalds could never be able to vend hamburgers using mass production techniques. (this was before the “have your way” concept originated by one of their competitors). Although we’ve passed up such choice morsels as the above, we are still worth talking to, because we’ve had our share of winners as well, and we are among a small cadre of firms doing early stage funding. Although our competitors tell us counting on the issuance of a patent is akin to playing Russian roulette with all of the guns chambers fully loaded; we have always tried to be on the leading edge, and we hope that over the years, that is where we will stay, côute que côute. Nothing ventured, nothing gained.

Moreover, in the process of getting intellectually beaten up, we have developed a useful bestiary for the less survivable corporate species that frequent Wall Street. As bankers, our own survivability depends upon our skill in recognizing these corporate mutations. Our skill in classifying them is the result of dangerous and bizarre experiences which we were, in younger days, ill-equipped to grasp. As we have become, older, wiser and more gray, we have learned not to give serious credence to web-weaving visitors who have become proficient at blaming their economic misfortunes on the acts of others or those who are convinced that there is someone just around the corner attempting to pervert their concept. These phantoms of the night are omnipresent to them and we have often had to reassure these hopeless souls that our quarters are really secure.

Another equally thrilling problem is the tendency of numerous people to come up with the exactly same concept at the same time. During the period of one-week we were approached by exactly four different companies that told us that they had patented a concept for using a CD to both act individually as a magazine and connect to a particularly site on the internet that would elucidate on the subject in more detail. These folks came with purported contracts from advertisers and in reality I didn’t find any reason to doubt any one of them. They were all extremely creditable. However, if we had not known better we would have been entrapped by two issues. The first is that filing a patent and receiving an “issued” one are two dramatically different concepts.

The patent office sometimes takes over three-years to let you know whether or not your concept is going to make the grade. In the meantime, you are held in sort of a deadly limbo unaware whether your are going to hit the intellectual property jackpot or not. All four of the groups when questioned in more detail admitted that they had not as yet received a patent but had only submitted their concept. We attempted to figure out which patent application was the earliest filed but gave when we realized that if these four all had the same idea at the same time, there were probably another dozen out there that had done the same.

It appears to us that there is an intellectual energy force that causes people to gravitate towards certain disciplines simultaneously. While we call this the lemming effect, it is a very logical that based on simultaneous technological advances, people will want to combine the best of them and thus hopefully cash in. While this is a very noble ambition, the world has become intellectually sophisticated and for every new idea, there are numerous people that are hoping to combine it with something else before the pack gets onto it. Sadly, this does not happen very often. Moreover, there is a sort of Moore’s Law operating in the intellectual property arena. Ideas, especially in areas of intense research or those seemingly offering endless economic riches are becoming overcrowded with a massive number of pure opportunists that are attempting cover the bases before the hoarders get there.

The victory doesn’t necessarily go to the brilliant or the swift. People become more knowledgeable regarding intellectual property, they can play it the same way one would play the lottery put with potentially an even bigger payoff. Once you get the hang of it, you can knock out third-rate job in less than a day, maybe even three or four hours. The cost is next to nothing. However, even a solid patent on a great idea may only be an opportunity of litigate and spend what little money you have left, if you don’t have gigantic pockets and a brother that is a litigator.

Seriously though, over time, we have also become skilled at spotting managerial mutants who have unquestionably created a potentially sizzling product, but who adamantly refuse to share their secret because they are sure we are no more trustworthy than their shadow adversaries. We classify this species “homo sapiens paranoius.” Intrinsically suspicious of potential rescuers, they trust those who lack the time, the money and the instinct to become involved in their world-shaking concepts. This species is characterized primarily by its incapacity to relinquish equity to its own investors. Its motto is: “Trust me,” but its members trust no one. While it would be easy to dismiss this class as frauds or con-artists, its members are only confused, and spend their mature years guarding the little sanity that they have left. They imagine that they are preventing extinction of their species by hiding it from the world.

Almost 50% of the bearers of early stage concepts fall into the class of homo sapiens paranoius. We recognize this as an endangered species, but also recognize our own inability to salvage it. The species is doomed because competitor species will inevitably sideline them by acting with impunity.

In spite of the fact that the above group has proven to be highly resistant to common sense and for the most part are present in small but vicious clans, venture capitalists fear another species even more than the paranoius. The particularly dread members of a clan somewhat akin to the now famous Jutes of England, who were so laden with genetic imperfections that they accomplished nothing. Our sociologists and paleontologists call them homo sapiens mañanus. Generally, they are not highly educated, and while many count manure carriers among their ancestors, these folks do have interesting concepts now and again. They suffer from diseases, such as tomorrowitis, I’mnotgoodenoughitis or itwon’tworkformeitis. These people think that they have something great within their souls and are not shy about telling their friends at the local pub how great their concept would be if only someone worthwhile would listen, but they would never venture out into the real world. If only this breed of homo sapiens had arisen from the primordial goop, we would still be trolls.

We tend to take anyone that has a concept seriously. These are the works of many years and they are very dear to the people that have come up with the concept. Some of these ideas though are like the intellectual property from hell. We give as sterling example the intellectual property that was filed in the British Patent Office.

SMG’s woolly patent failure by Perry Gourley

Published: Aug 19, 2002

A WOOLLY attempt to trademark a pair of socks by the media group SMG has unraveled in the latest in a series of bizarre moves to safeguard everything from a football chant to a whisky bottle.

The two sock characters, one wearing a Rangers scarf and the other a Celtic one, emulate the famous ITV-Digital monkey, and feature in a television advert to promote the coverage in the Evening Times of the Old Firm teams.

An application by SMG was made to the Patent Office to protect the socks from unwelcome advertising predators but the trademark was not granted.

A spokesman for SMG said it had decided not to proceed with the application after the Patent Office “came back to us with some comments.” She stressed that it may decide to reapply in the future

Applications can be refused for reasons including lacking the “distinctiveness” expected, or if a similar image had already been registered by someone else.

The trademark would have enabled SMG, headed by its chief executive Andrew Flanagan, to protect the socks for use on products including bed covers, umbrellas, pencil sharpeners and even underwear.

While we would certainly give the SMG Group a solid “A” for effort, their abortive patenting attempt shows that at times people “out to lunch” when filing. However, while most of those attempting to tie down intellectual property of both serious and thoughtful, sometimes a red-herring is placed in with the caviar by this small but highly vocal group. This sect is a sub class and has been given the nomenclature of homo slothopiens. These are folks that are more interested in wasting the time of others rather then do some serious thinking when it comes to inventing.

The last category of those that we see are those that want to take our money from us without giving anything back. Even the Nigerian’s have entered this arena in a vengeance.


I am writing you of a wonderful business oppertunity in nigeria. my father was gumbo
aiduiuda creator of the patent for e-commerce.

i am the rightful heir to the fortune that has become him. but being persecuted by the regime of douy, cheetum and howe, i cannot move th money out of nigeria.

in exchange for the use your bank account i am willing to share 20% of the sum of $3 billion dollars. Please kep this in condenser and send bnk account numbers.

gumbo aiduiuda junor

So, we have run the gambit from the lazy, the paranoid, the criminals, dim-witted and the useless. We will only deal within this article the serious applicants in spite of the fact that they may be highly misled and confused for a variety of reasons primarily caused by the higher ozone level caused by global warming. These folks are characteristically similar.

Such companies present us with voluminous non-disclosure agreements that forbid us from giving investors enough information to fund the product. Frequently the same lawyers who draft these complex documents fail to tell management about patenting concepts, software and business methods. Instead, counsel just advises managers not to discuss their program with anyone who refuses to sign an airtight non-disclosure. Counsel tells the inventor, who does not know the difference between patent counsel and Santa Claus, not to trust anyone and then probably charges an arm and a leg for the advice.

Secrecy is OK if you are living in a vacuum in outer space, but is a recipe for disaster on Wall Street. The United States Patent Office says that a patentable product doesn’t have to have strange looking wires hanging out from its tentacles or give off a bluish sheen during electrical storms. It can be just a novel way of getting from here to there by foot. It can also be a unique ring for the telephone, a new dial on a space heater, or new hair styling method.

Thomas Edison was certainly a bright sort, but in spite of what we have been led to believe, was he really a great inventor? No that the evidence is starting to come in, it appears that he was not. However, that is isn’t to say that he didn’t have aptitude for advancement and substantial knowledge of his surroundings and how they operated. It would appear that he had a tad more than workman-like knowledge of science but real Edison’s forte was his thorough understanding of how the patent office really functioned.

He utilized this somewhat constricted window of knowledge and applied to his unique talent of knowing in the field of science was working on what to beat his competition to the cash register. Edison was able to manipulate the intellectual process to degree probably never before seen either before or since to make himself both rich and famous. Not only did Edison manipulate the patent office like it was a greased accordion but his staff produced public relations proclaiming his greatness that would have put P. T. Barnum to shame.

Great scientists such as Tesla, who was a truly amazing physicist, were forced to take a back seat in to Edison as it relates to their own inventions and ideas. Edison, was a scientific second story man that directly stole other inventors’ ideas and then had them issued to him in his own name by slapping his name on those concepts and filing them in the patent office. When push finally came to shove, the inventors couldn’t even use their own inventions without paying the street-brilliant Edison a toll. Worse yet, most of his competition died both anonymous and broke with nobody ever knowing who they were or what they had accomplished.

The days have long since vanished when one man could totally dominate and manipulate the U.S. Patent system but it is still little understood and insurance in the form of patent protection is still not the most important part of an invention in many people’s minds. Interestingly enough, an inventor would hardly be without some sort of health or life insurance to protect his family and yet, when it comes to the protection of his livelihood, he is more often than not, asleep at the switch.

We have recently become a much more sophisticated society in which information is now at everyone’s fingertips through numerous sources including and most importantly, the Internet. A filing for almost everything that is conceivable is now available on the web; usually in the most simplistic of formats. Moreover, while Edison had to travel to Washington by carriage to do in his co-inventors, intellectual property insurance can be purchased at a very low cost right from your living room. In today’s society, to some degree there are certain protections available for everything you can think of, fire, tornado, life and health insurance protecting you body and your home, derivatives that provide financial insurance and laws and statutes that protect your religious beliefs your, civil rights and your right not to have to testify against yourself. Indeed, everything is fair game to be protected; however, many folks spend a good part of their adult lives nurturing a dream, and then risk losing it because they didn’t know how to protect it. Paradoxically, they are willing to disclose everything to an attorney they have never met, but are unwilling to share the barest details of their amazing concept with people who may be willing to put up money to take the concept to the next level.

When these folks come in, we tell them to either freeze dry and shrink-wrap their invention and forget about it, or find themselves someone who can write it up and get it properly protected. This is not the perfect solution; there isn’t one, but if you can’t trust Uncle Sam’s Patent Office, who can you trust?

The patenting process does, of course, have its flaws. People have a real resistance to paying patent filing fees. This goes hand in glove with the normal paranoia about exposing their baby to the world. They are wrong on two counts: first, a legitimate law firm specializing in intellectual property does not charge outrageous fees to file a patent. Second, if people are really concerned about getting ripped off, they can file the bloody thing themselves. There are programs out there that will give you the basics and the Patent Office has become very user friendly. The cost is just some time and a minimal filing fee.

Talent scouts and investment bankers have a lot in common. I used to hang out with theatrical agents, and my friends who had gifted girlfriends would ask me to get them auditions. If they were close friends I would try to help them understand the process. The first question the talent agents would ask was, how old was the lady, and the second was, where did she live? The only right answers were: 19 or younger and living in New York. My friends often asked, “What kind of criteria are those?!” The answer was brutally logical: if the woman hasn’t found her way to New York by 19, they felt that she didn’t have the fortitude to succeed in show biz. Even if you are ultra talented, you have to be where the action is.

In the business world, you also have to show that you think enough of your own product to have covered the bases.. We review at least three different proposals and do at least 1 ½ “dog and pony shows” with inventors every day. There’s plenty of amazing stuff out there that is good enough to knock our socks off. We don’t need to buy neuroses.

Wall Street’s brutal midwifery favors simple financial arrangements, even when the product is ingenious. We worked with a fairly bright guy from Arizona who came up with what we still believe is an absolute cure for cervical cancer. However, he was so afraid of losing control over the formulation, that he created layers of trusts totally controlled by him that made any exit program usually required by unaffiliated investors absolutely unfeasible. When I objected to getting only shares in a trust that he controlled in exchange for a substantial amount of money, his comment to me was that “all Wall Street people are out to steal from the little people”, and he was not going to let that happen to him. I think that he died without ever funding the cure, and his invention died with him. He knew better.

The bottom line of this treatise is simply the fact that we do not want to really talk to people who require non-disclosure statements from us. We are fiduciaries and cannot properly represent and evaluate the product with our hand tied behind our backs. When we tell them that they say: “Well, that is what my lawyer told me to do.” Our response is simply, “have your lawyer put up the money your company needs then.” We would prefer to be neutral on the subject and to evaluate what actions the client is to take, to determine if his product has commerce applications, if it is protectable and a list of those lawyers that can help him do it, provide him a list of firms that finance notable achievements is the particular field of endeavor he has chosen and how to best negotiate with the money folks. This would indeed save everyone a lot of time.

We have formed an intellectual property consulting firm with this concept at the forefront. The firm is called Intellectual Concepts and has been formed as a Delaware Corporation. It will be able to call upon the resources of some of the most astute people in the field today. Moreover, it is our strong position that in a high percentage of the cases we will be able to take our clients to another level in this field by helping them create something far beyond what they had originally proposed. Our motto is simply that no client will ever leave this firm with a product that has not been substantially improved by our people. That, they will be enhanced for the expertise that we offer and hopefully will knock-them-dead with our help.