Own It - the IP & Entrepreneurship Blog

Blog merged into "Entertainment & Entrepreneurship at http://lawbizbooks.com/blog4/

2009-02-22T14:44:00.000-08:00

I continue to experiment with appropriate blog support for my books and teaching. My latest approach is to create a single blog which will focus on issues of innovation, intellectual property, entertainment, media and entrepreneurship policy.

In today's business, the practices of media companies and more general owners of intellectual property have merged, and this blog comments on those trends.

Many of my columns are available at Gallagher, Callahan & Gartrell.

Please let me know what you think of the combined blog.

Making Do Without Credit — A Strategy for Business Growth

2008-10-23T06:06:00.000-07:00

As part of my participation in the law firm of Gallagher, Callahan & Gartrell, I often contribute to its monthly newsletter and other firm publications. This post provides the introduction to my most recent article. Given the current credit, I thought this article might be of general interest.

Making Do Without Credit — A Strategy for Business Growth

A guide to growing your business using credit alternatives including joint venture agreements, revenue sharing, and installment contracts

October 2008 will be remembered for years to come as the U.S. economic crisis redefines the commercial landscape. While many companies are facing pressure directly from their financial woes, many more are struggling to deal with the broader challenge presented to the credit markets. Potential home buyers with reasonably good credit are struggling to find mortgages, offsetting the opportunity created by falling real estate prices. Retail automobile sales have dropped to all-time lows as consumers await more fuel efficient vehicles and struggle to find credit.

For entrepreneurs and small business owners who provide non-luxury goods and services, the combination of tight credit and economic anxiety have made doing business as normal a thing of the past. In the absence of affordable credit, however, companies which provide counter-cyclical products should ride out the economic storm if they plan ahead.

The alternative to a fluid credit market harkens back to a commercial barter system. A good barter economy allows those who have excess products to trade those products with other producers that have excesses of other products. In the same way, for businesses struggling to grow, coordination of excess productivity may create new opportunities.

Alternatives to Credit: Joint Venture Agreements, Profit Participation Agreements, and Installment Contracts

Through joint venture agreements, profit participation agreements or installment contracts, companies can pull together to reduce part of their cash-flow burden and reduce the impact of poor credit markets.

Read the rest of the article

In Defense of Authors - A reply to Professor Lessig

2008-10-11T18:38:00.000-07:00

In the October 11, 2008 Wall Street Journal, Professor Lessig wrote an essay continuing his attack on copyright. Professor Lessig criticizes copyright and yet copyright also supports open source software, jam-band music, fan fiction and a host of economic models in which artists encourage others to share in the collaborative process. His real complaint is that copyright does not compel such a result. His frustration is with media giants struggling to find appropriate policies to balance their economic interests with the good faith they owe to their audience. But as his article admits, the law already provides the necessary remedy in many cases.

A few years ago I taught about copyright at my son's elementary school class. After having all the students draw a picture or write a poem for one minute, the cards were sent around the room and other students were encouraged to "add" to the cards. While most had fun marking up their classmates cards, some were visibly upset that their work had been changed without permission. These children instantly understood the purpose of copyright.

The purpose of copyright is to encourage and support authors and artists -- providing them the economic return to make a livelihood. Academics like Professor Lessig (and myself) have the luxury to have university patrons to pay our salaries and allow us the ability to write without compensation. Most musicians, poets, playwrights, authors, painters, and filmmakers have no such support.

Without copyright we would return to an era of professional works funded only by patrons. How much more power would the media giants have under such a regime than they have now?

iTunes is the beneficiary of the litigation against Napster and Grokster. Legitimate business models will transform the business strategy but only if we continue to hold true to our constitutional tradition of promoting our artists and authors.

Needless to say, I could go on regarding this subject at greater length, which I have done in my legal writing, but the heart of my disagreement with Professor Lessig is not the need for a robust fair use or the importance of participatory copyright, but his instance that the law must demand all authors and artists submit their works to his sense of their property rights regime.

I allow unlimited copying of my academic work and substantial copying of my commercial books. But I should not demand all other authors do the same. I now how difficult it is for an independent filmmaker to raise the funds to make a movie; how arduous a task to find distribution; and how long the road to financial response. Let these people give away their works if they so choose, but do not suggest they have no rights to their labor.

The only thing worse than copyright -- is the unimaginative world we'd have without it.

China Journey - In Preparation (1)

2008-10-02T11:04:00.000-07:00

Later this month, I am taking my family on an extended trip to China. I will be lecturing at universities, researching for my next articles on intellectual property development and trying to learn first hand about some of the most important influences coming to shape 21st Century economics and politics.

As I prepare for the trip, I recently came across a new study by the Boston Consulting Group based upon its analytical model, the Five Fazes of Intellectual Property., BCG has created an excellent summary publicly avaliable on China. (Because the report is so interesting, I'm printing the entire url: http://www.bcg.com/impact_expertise/publications/files/Beyond_Great_Wall_Jan2007.pdf)

I learned of the article from the monthly newsletter from the WIPO small enterprise division. WIPO provides a tremendous resource for entrepreneurs around the world, including the U.S.

The Five Phases identified by BCG include
1. Driving Growth through Exports
2. Climbing the Value Ladder
3. Paying the Price (Corporate producers become targets because their weak IP protection allows for take over of their business)
4. Getting Serious About Intellectual Property
5. Profitting from Intellectual Property

These five phases identified by BCG explain both the pressures that remain on China's growth and the optimal strategies to overcome those challenges. Not surprisingly, the overarching recommendation is to have the intellectual property protections begin to catch up to the trade. The model fits well for the experience of Japan and South Korea, so there is much to be said for it.

The model may not entirely take the role of a protectionist government into account. Patent protection provides a company strong protection for exclusive control of its products. Within China -- a tremendous market -- government regulation and tradition may play a significant role in providing this exclusivity as well. Outside the country, of course, only internationally recognized intellectual property can provide such tools.

Much has been written about China. I will be sharing the best of what I find and add a little from what I learn. If you have suggestions, please share them with me at jgaron@hamline.edu.

Shining a light on Chrome

2008-09-11T05:58:00.000-07:00

Last week Google launched a beta version of Chrome, a new software platform initially geared to operate as an Internet browser. Since Google is an advertising company which sells ads through its search engine, the question to be answered is why Google is providing the software to the public.

The easy answer is that Google enhances its brand through efforts to tweak Microsoft. Like Apple, the overwhelming presence of Windows makes it an easy target. The “other guy” approach to marketing has worked well for both companies in framing their brands, though not necessarily in expanding market share. Google has marketed the software through a comic book that focuses on the technology.

The more strategic answer focuses on Google’s business as the friendly advertising company. Anticipating increased push-back from users and the need to deliver ever-more highly targeted advertising, Chrome provides Google direct access to the consumer’s interests and behaviors. For example, the highly touted anonymous browsing protects the user’s computer from cookies, but it still allows the anonymous activity to be tracked for purposes of aggregated consumer behavior, just not tied back to particular individuals. This provides some benefit to users while allowing Google to retain its advantage.

The most strategic answer, however, comes from the platform-neutral Webkit software design, which will allow Google to provide a synched platform on computers, cell phones, portable media devices, and digital television set-top boxes.

The ability to control advertising across these four platforms will create the next media giant. Google may be very friendly – remember it launched the browser with a comic book – but it has precisely the same ambitions as Microsoft (or The Brain).

The goal of taking over the world, or at least the platform of every media device may also explain the poor timing of the Chrome launch. Admittedly a beta product, the software has been reviewed as much less ready for the market than most of its other products. But the moves by Microsoft and Netflix to use Xbox and by Sony to use the Playstation as video platforms as well as Apple’s updating of iTunes has pushed the timing of Google’s entry.

While the premature delivery has taken a bit of the shine off of Chrome, the anti-Microsoft has plenty of supporters and this should give it time to deliver a high quality product that will give it at least a toehold in the climb to the top of the platform wars.

The beachhead has been held. Now the battles begin.

Fortune Gets the Facts but Not the Strategy

2008-08-02T17:10:00.000-07:00

Amazon’s move to number 2 in online music distribution is another example of their reintermediation strategy proving successful.

As reported by Fortune Magazine, Amazon’s download music business has overtaken most of the competition. “Amazon (AMZN, Fortune 500) has overtaken competitors like Wal-Mart (WMT, Fortune 500) and RealNetworks' (RNWK) Rhapsody to become the second biggest online store after iTunes, according to market research firm NPD.” Fortune highlights the tremendous gap between iTunes, which controls over 75% of the download market and Amazon, which has yet to achieve a 10% share.

But the article misses the core of the Amazon strategy. Amazon has taken second in the download business and is at least in the top four for the sale of physical CDs. Add to this its ability to sell print-on-demand products and a rumored deal with MySpace for integrated sales, and you begin to see a strategy that may trail Apple but will leave every other music retailer behind.

The reintermediation strategy of both Apple and Amazon pushes content and affinity. The companies assume that consumers will frequent the same stores for commodity purchases – and for Amazon, those commodities include CDs, DVDs, consumer electronics, software, toys, and occasionally even books. The strategy is easy to understand when one looks at the low-ball pricing strategy for much of its music catalog, daily e-mails to its customers that create the digital equivalent of candy at the check-out counters, and proprietary software that improves the customer interaction and brands that interaction for Amazon. Apple has the same strategy, but limits its products to its own brands of consumer electronics and software, along with a more selective list of digital-only content.

Fortune’s article describes the steps Amazon is taking, but tries to place them in a retail paradigm. Until companies understand the software and contracting tools needed to create consumer affinity, they will see their marketshare decline to Amazon, Apple and other retailers who treat customer relations like social networks.

The New Hollywood Studios

2008-07-16T19:27:00.000-07:00

We knew it was only a matter of time before the Hollywood Studios hegemony would give way to the new media titans, but I think few saw that the path of their demise would come from the successor to Pong.

At the E3 Media & Business Summit in Los Angeles, Sony and Microsoft each announced strategies to expand motion picture distribution directly to the consumer using their videogame stations. In the case of Microsoft, the Xbox 360 will stream Netflix’ on demand movies and television shows directly from the console. Xbox owners will be required to have a Netflix account beginning at $9.90 per month and subscribe to Microsoft’s owners "gold" membership, at $50 annually.

Sony, which has maintained a Hollywood studio strategy since it acquired Columbia Pictures in 1989, has entered the market with a non-subscription model. Rental content will range from $2.99 to $5.99 while purchased content will cost $9.99 to $14.99. In addition, Sony’s films and televisions can be transferred to a PSP (PlayStation Portable), allowing the PlayStation to compete with Apple’s iPhone and iPod touch.

Apple’s iTunes store and line up of video and audio players make it another viable Hollywood contender. Netflix, Nintendo, and Amazon remain potential rivals to Sony, Apple, and Microsoft. In each case, these companies maximize strategies emphasizing reintermediation – creating necessary interaction between the company and the consumer.

Hollywood has been losing market share and relevance in this battle because it has no relationship with its consumers. Fox has developed a strong editorial brand under Rupert Murdoch’s ownership, but the brand bears no relationship to its movie studios. Warner Bros., Paramount, and Universal all suffer from the same lack of brand or distribution relationship. Disney remains the exception. The tiniest of the old Hollywood Studios, Disney has struggled, but returned time and again to its focused, family entertainment shepparded by Mickey Mouse and Company. Warner Bros. never understood the importance of Bugs Bunny. The franchises of Harry Potter, Batman, and Superman will continue to drive ticket sales, but they don’t define the company or tell the audience anything about a Warner Bros. film.

Since focusing on content is a difficult strategy for developing a brand, the core relationship between Hollywood and the consumer will be the distribution strategy. Netflix use of social networking builds a strong audience base, and to the extent that consumers can rely on the recommendations, it will have an important place in the living room. The arrangement with Microsoft nicely benefits both companies, increasing Netflix reach and allowing Microsoft up from the kid’s basement or out of the office and into the living room as well.

Apple’s strategy begins with children when they are in school, introducing them to their proprietary brand of computers. It has added a brilliantly integrated technology platform and proprietary content store. Together, these steps represent the most effectively integrated approach to reintermediation, contrasting its business plan with the commodity-based PC computer manufacturers.

The new Hollywood will be reluctant to become studios, but as the need for high quality and expensive content continues, they will have the funds available to assure that expensive content and tent pole entertainment brands are developed. They may have learned from Sony that companies should not embrace Hollywood, but they will also have learned from Sony that Hollywood is essential to their strategy.

The curtain on the latest saga is about to rise. Who knew what Pong would bring?

Reintermediation – Rethinking Disintermediation

2008-07-13T10:06:00.001-07:00

In Philip Evans and Thomas Wurster bestselling book, Blown to Bits (Harvard Business Press 1999), the authors documented how the Internet’s informational flow fundamentally reshaped the relationships between consumers and retailers. (I’ve previously written how this phenomenon affects professional service companies and business market niches.) Described as “disintermediation,” they postulated that the inverse relationship between the richness and reach of content was eliminated by the extremely low transaction costs associated with providing consumers highly rich content through digital media. The Internet eliminated the need for middlemen to provide expertise. The book anticipated and highlighted the erosion of intermediary service providers, and its projections have largely proven correct.

Over the past two years, companies such as Apple, Amazon, Netflix, Google and Second Life have looked beyond the physical distribution of their products to identify opportunities to expand both richness and reach, significantly increasing the relevance of these companies to their customers. In each case, these companies have adopted reintermediation strategies, focused on creating an essential role for the business beyond serving as a source of the product of service. Reintermediation strategy utilizes contracting strategies, consumer data information, and structural business approaches to encourage additional steps in the consumer transaction which build an ongoing relationship between the enterprise and the consumer.

While reintermediation is predominantly a business strategy designed to overcome the pressures of Internet commoditization and digital piracy, the practice will have significant influence on privacy policy, intellectual property law, and contracting practice.

The most recent example of Google’s reintermediation strategy called Lively, a beta 3D virtual environment platform. Although behind Second Life, Google has a history of catching up. Moreover, the platform’s browser-based approach will allow it to insinuate itself into small and large application – putting Google between the consumer and the advertiser in a host of new environments.

Given the ubiquity of Google, consumers tend to think of it as a utility rather an advertising platform. Just like “free” broadcast television, however, Google’s strategy is simple: Be the first choice for consumer interaction and sell that interaction to advertisers. Google’s tools are not free; they are advertiser supported. Under this business model, the extension into virtual worlds represents a natural extension of its reintermediation strategy. And given the strategy, the extension into virtual worlds will grow, expand, and move from a curiosity to an essential tool because Google cannot afford to allow any other advertising company to gain a foothold.

Is Making Available Enough

2008-07-08T08:58:00.000-07:00

Late last month, I joined a group of law professors led by University of Minnesota professor Tom Cotter in submitting an amicus brief in the copyright case of Capitol v. Thomas. The brief describes us as “scholars at American law schools who teach and write about intellectual property law in general and copyright law in particular,” support Thomas’ position. Because the case was heard in Minnesota, representatives from Hamline University School of Law and William Mitchell College of Law joined Professor Cotter in the brief.

The Duluth case was nationally known because of the jury verdict of $220,000 to the RIAA The defendant, Jammie Thomas, was found guilty of willful copyright infringement and charged $9,250 each for 24 songs she downloaded and made available online.

The case was reheard because a number of jurisdictions are asking whether the existence of MP3 files on a computer drive made available for others as a source of uploading is copyright infringement. The Wired Blog covers it well. The brief explains that copyright law does not recognize the making available for copying a separate act of copyright infringment. To be liable for copying, a party must copy.

But the anti-RIAA public should not see this as a route against the music industry. In a civil lawsuit, where the standard for proof requires that it is more probable than not that the defendant is guilty, the evidence provided by a computer drive filled with MP3 files which has been made available to bittorrent or other peer-to-peer software networks may well be sufficient evidence for a jury to reasonably conclude that the owner of the computer copied files to the drive and other copied files from the drive - all without the purchase of lawful copies.

Two years ago, this controversy did not exist because the presence of the MP3 files was itself evidence of copying. Now that MP3 files can be readily purchased, having a computer filled with the files simply reflects that you are a music fan.

The recommendation provides a modest correction in the evidentiary issues surrounding copyright infringment.

Own It - The IP & Entrepreneurship Blog

2008-07-05T08:21:00.000-07:00

Own It - The IP Entrepreneurship Blog focuses primarily on the themes developed in Jon M. Garon, Own It - the Law & Business Guide to Launching a New Business through Innovation, Exclusivity and Relevance. The blog also includes more general topics of innovation, intellectual property, and entrepreneurship policy.

The Coming of Virtual Worlds

2008-04-02T08:57:00.000-07:00

The start of the 2008 Virtual Worlds Conference provides an excellent moment to consider the importance of Second Life and other environments beyond the hype of digital utopia or socially disconnected dystopia that often accompanies the topic.

Virtual Worlds are not just toys and games.

Perhaps the most important lesson about the future of virtual worlds — or immersive interactive multimedia channels — is that they are not merely computer games. Admittedly, Worlds of Warcraft, Webkinz, and Pirates of the Caribbean are examples of virtual worlds that earn their attendance because they are computer games or extend game brands. But despite the genre’s origins as a gaming platform, the attributes of the platform to inform, educate and change behavior are not limited to games.

Production centers, international maps, design processes and every other conceivable industrial process can be modeled and rendered in a virtual world space.

Commercial developers can easily use virtual renderings of their properties to market space; allow customers to explore customization; and encourage investment.
Multi-campus organizations can use virtual campuses for cross-team trainings.
Security (and police) can use the visual tools to model risks and strategies for risk assessment.
Math, physics, and engineering education and industrial modeling can incorporate three dimensional renderings of efforts and collaboration.

Virtual Worlds are Also toys and games.

So perhaps business executives unfamiliar with graphical renderings of models see these exploits merely as games and toys. Well, they are. As games and toys, they engage users far more than static reports and printed content. Just as Wikipedia has transformed the experience of encyclopedia users, making most print versions obsolete, toys that don’t do anything will fill an increasingly small portion of the toy shelves.

Toys build tremendous brand loyalty. Companies like Webkinz have tied the purchase of stuffed animals to the interactive social environment. Participants in Club Penguin will always expect social, online experiences. Bicycle companies, motorcycle companies, sporting equipment manufacturers and many others have the potential to build social communities around their products.

These social networks are not limited to consumer goods. Churches, nonprofits and NGOs, political organizations and many other environments will also benefit from the social networking aspects of the virtual worlds.

And these brave new worlds are already here.

And as the Internet decade gives way to the Wii generation, new consumers and employees raised in this immersive interactive content will respond best to this medium. It was not that long ago that the toll-free number was the primary method of customer service. Notions that the Internet or e-mail would supplant this service were ridiculed. But a customer sitting in front of a computer is slow to pick up a telephone. Soon, a consumer already in a virtual environment will not want to be forced to switch to e-mail or log into a new website.

How to participate.

My personal confession is that I find Second Life boring and uninspired. I like my son’s Wii a bit more, but I am an old-media lover of radio theatre and stage plays. In Own It, I describe a number of ways to identify opportunities for innovation.

So despite my personal preferences, this new media is critically important to business —

Companies that can utilize social networks and graphical displays will benefit the most.

Companies that can utilize either social networks or graphical displays should build a virtual world strategy or risk being left behind.
Training and education (an industry utilizing social networks and graphical displays) applies to every company, so all companies should look to virtual worlds for their internal processes.
Business that can support, simplify, or enhance virtual worlds will create dramatic new opportunities in the future (think Google and Yahoo, but also remember CompuServe).

And remember that everything I’ve said about virtual worlds is probably already out of date.

Be Cautious but not Fearful in using Free Contact Resources on the Web

2008-02-01T08:56:00.000-08:00

The Internet is quickly becoming the ubiquitous repository of nearly everything. Google Book Search and Microsoft Live Search Books provide dramatic tools for books in the public domain and limited portions of books under copyright. I prefer Microsoft’s opt-in approach to copyrighted materials, but Google’s service is easier to access and allows PDF downloads. Since I think these services serve to rescue the potentially irrevocable loss of public domain materials decaying in underfunded libraries across the nation, I’m thrilled there is competition by the two corporate titans.

In addition to books, many other documents are now being culled and collected across the Internet. In his weekly I/P Updates, attorney Bill Heinz collected a number of useful sites for finding such documents in “document sharing communities:

http://www.docstoc.com/
http://www.scribd.com/
http://www.edocr.com/
http://www.thinkfreedocs.com/
http://www.insightory.com/

There is also a document search engine at http://searchdocs.net. I am not endorsing any of these sites, but they provide an excellent tool.

The key to using free documents from the Internet (or books for that matter) is to understand that they were written for other people in different situations. Even when completing similar transactions, I typically need to rewrite every document to take the concerns of the parties to a particular transaction into account.

So does this mean that you should avoid using the form agreement? Of course not. But use them cautiously. First, they serve as excellent checklists to be sure the important topics are covered. Second, by reviewing at least three sample agreements on any particular topic, you can begin see different approaches to address particular problems. Unfortunately, you cannot know the economic or other pressures that gave rise to this particular solution.

Don’t send the forms to your lawyer. I generally find that handing an Internet form to an experienced lawyer will increase rather than decrease the expense. The lawyer will take time comparing your document to the document with which your lawyer is much more conversant. Instead, use the document heading and write down the goal you hope to achieve under each heading. This will inform your lawyer and result in a much faster — and cheaper — process.

Finally, if you don’t understand why particular provisions are in the form agreements, be sure to ask. While this takes a bit of time and costs a bit of money, those questions can help you avoid trouble down the road.

Used in moderation, these forms provide an excellent business planning tool.

Lessons from Second Life’s Bank Run

2008-01-26T08:55:00.000-08:00

There are a few lessons to be learned from the Second Life banking debacle, which occurred last week when an allegedly fraudulent bank, Ginko closed down rather than pay its customers the promised 40% interest rates.

First, participants in Second Life should stop being stupid, greedy, or both. (I’ll avoid calling them players because the platform is being used for activities that bear little relationships to games.) The interest rates in virtual worlds cannot significantly exceed those in other markets or else the funds from those markets will flow to the higher rates. Interest rates can vary slightly from country to country – particularly if the government of that country subsidizes the rates. But they do not vary significantly because the investment pool is sufficiently liquid to move to the higher rates. To believe in ridiculously high rates requires the investor to be willfully ignorant of the risks. Only a combination of stupidity and greed can generate blinders that big.

Second, the Second Life market is worth protecting, and the protection should come from outside the contract with Linden Labs. The credibility of the leading virtual world’s ability to attract transactions between parties depends on the reliability of the platform. As soon as the platform includes the ability to exchange any nation’s currency with fictional money, the potential for fraud begins. If deposits are guaranteed or interest is paid, then the activity is either a banking function or sale of securities. If these were merely pre-paid gift dollars, purchasing Linden Dollars but not being able to be sold for currency, the “game” analogy might apply. If instead, an anonymous avatar can trade in various currencies using Linden Dollars; offer unregulated interest rates; and sell financial products without ever disclosing the identity, then most state and federal regulators can find a statute or two which applies. Linden Labs is far better off having regulation than finding itself the subject of lawsuits from various jurisdictions within and outside the U.S.

As anyone who has worked with financial products knew, the collapse of the Second Life banking sector was inevitable. The more important question is the collateral damage it will cause to Second Life and the many activities using Second Life as their platform.

So the third and most important lesson learned is that Second Life is a prototype for a virtual world platform, not a solution itself. Universities should be building an entirely noncommercial, academic platform which includes a terms of service agreement comparable to the student handbooks found on every public university. Open to any accredited university, but without banking or gambling. Mall operators should be providing retail spaces for their customers; hotel and convention companies should be providing the same type of services for their customers; and adult entertainment providers should be creating areas that are explicitly adult oriented so there is little confusion. J-Date should have the Virtual Jewish Community Center, with theatre, lectures, social events like the brick-and-mortar JCCs. If I so chose, I could do my banking with a federally regulated bank at Financial World, knowing that regulations generally prohibit those banks from letting me be anonymous.

The lessons from the bank run are that the days of the Virtual Wild West are coming to an end. While we will be giving up the open plain, we should be gaining the universities, culture, and economic stability that makes society run. With that, the virtual world is moving ever closer to the real world.

After the CES/MacWorld - A Year of Consolidation

2008-01-20T08:55:00.000-08:00

I had the opportunity to attend CES this year. Walking CES and reading the announcements from Macworld, some clear trends have emerged. First, this was not a year of great innovation. It is a year of consolidation. The holiday "buy" of the year was the Nintendo Wii – a product which came out last year; CES showed hundreds of manufacturers playing catch-up to Apple's iPhone with new integration of GPS to the suite of phone, browser, MP3 and Video players; Apple itself had the biggest innovation the re-enabling of iPhone software on the iPod Touch.

For business built on innovation, this is a year of catching breath and consolidating distribution.

The second trend emphasizes the interface not the activity. For every technological innovation, there are a multitude of manufacturers. The differences are the user experience – the box in which the product exists, the screens on which it is viewed, and the buttons for interacting. Apple's second announcement was a significantly thinner laptop. It adds a "wow" factor to an otherwise boring field. At CES five companies have ultramobile laptops – under two pounds with full functionality and a price under $500.00. For any of these to be successful, the machine must be comfortable to use at an acceptable price.

The most significant part of this trend is the screens. Samsung won CES as the most innovative of the major brands this year, showing a host of products that push the consumer experience forward. Samsung demonstrated some use of OLED-based products with eye-popping visuals. Sony will also benefit as the developer of this technology. OLED screens are significantly better than plasma or LCD - but expensive and difficult to manufacture.

Similarly, both Sony and Amazon are pushing the book readers. Sony's Reader is benefiting from Amazon's Kindle to encourage attention to the platform. Both are limited by a single source for the screens, however, so until more manufacturing capacity grows, the price and innovation will move slowly. If the ultramobiles can catch up, then the book readers will be eclipsed, but only time will tell.

In the alternative, an even lighter ultramobile with the long battery life of the book readers will win the market. The Kindle and iPod Touch are both nearly ultramobiles – so next year’s innovation could be the combination of these products, so long as the screen and interface make it exciting rather than awkward.

Get busy – next year’s shows are nearly upon us.

Transcending Race in Cyberspace – So Much to Do

2007-12-15T08:54:00.000-08:00

A colleague of mine forwarded a link to “Transcending "Race" in Cyberspace? Yeah, Right!” which highlighted the extension of racism and stereotyping into Second Life. As Anxious Black Woman comments “if we're going to treat online environments like Second Life as a ‘game,’ I would at least like to envision the space being able to be more progressive and more transcendent of the real-world politics that so many of us deal with.”

My initial reaction was sympathetic but not particularly helpful. “To the extent that virtual worlds allow people to reduce their social constraints,” I commented, “it is inevitable that they are environments of worse social interaction rather than better social interaction.” But is it inevitable? I think the answer is both yes and no.

If we want to create a more transcendent environment, then we need to take a few steps to accomplish this.

First – reduce the barriers to entry. Many commentators have complained about the lack of non-white and non-sexist avatar templates. Both the corporate organizers of these sites and the programming denizens need to make FREE tools available for a wider array of skin color, body types, clothing, and characteristics.

Second – encourage greater difference in the avatars we choose for ourselves, our children, our employees, or our students. Those who are fans of Ralph Ellison should recognize the need to walk in other people’s shoes.

Third – we must personally guard against erosion of certain social constraints. Virtual worlds need not be places where crass or cruel behavior has a home. There are real humans acting through their avatars, so we must remember to treat them as people rather than computer generated stock characters.

These three steps will not change the virtual worlds into utopia, but they must surely be a better response than “boys will be boys.” Let’s see what we can do.

Doonsbury Takes on Bottled Water

2007-12-07T08:51:00.000-08:00

The December 2, 2007 issue of Doonesbury in the Sunday comics (http://www.doonesbury.com/) included an excellent indictment of the bottled water industry. As “entrepreneur Chad Severnson” explained in the strip, “bottled water is a triumph of perceived need over reason – the greatest marketing coup in history.”

In Own It, I describe the market influence of bottled water:

Public concerns about the quality of tap water (possibly fueled by bottled water advertising and marketing) suggest that fresh water is scarce. As the scarcity increases (at least in consumers’ minds) the bottled water becomes more relevant. Brand names provide an exclusive difference between the competing bottlers, so that the most well respected name in water will become the most successful.

Bottled water serves as a prime example of the interaction between [scarcity and relevance] because water is essentially a commodity throughout the United States, not significantly superior in quality or taste to most of the free tap water available. Nonetheless, the market continues to grow as the public becomes increasingly willing to buy the product.

As bottled water becomes more and more relevant in the minds of the consumers, some retailers have stopped providing free paper cups of water. Bars, movie theaters and concession stands have increasingly stopped providing free water because the public is no longer offended at being forced to purchase something that should be free.

Relevancy can transform market practices and public perception. Just as the producers of bottled water have changed the social relevance of an unnecessary commodity into a prized symbol of status, other commercial vendors, politicians, and community activists seek to shape public norms and create relevance in their message or merchandise.

We regularly play out the bottled water debate in my home because the notion of paying for plain, bottled water offends me. But it does highlight how important it is to develop the perception of relevance for a product or service. While I hate promoting bottled water, anyone who agrees that bottled water is a wasteful practice must also recognize implications of its marketing success.

The Farnsworth Invention - An Ode to Innovatio

2007-12-02T08:52:00.000-08:00

Why does a blog on entrepreneurship and innovation focus on a play? Because no play has ever captured the drama of innovation better than The Farnsworth Invention soon to be opening at the Music Box Theatre in New York.

It’s 1929. Two ambitious visionaries race against each other to invent a device called “television.” Separated by two thousand miles, each knows that if he stops working, even for a moment, the other will gain the edge. Who will unlock the key to the greatest innovation of the 20th century: the ruthless media mogul, or the self-taught Idaho farm boy?

The answer comes to compelling life in The Farnsworth Invention, the new play from Aaron Sorkin, creator of The West Wing, directed by two-time Tony® Award winner Des McAnuff.

The promotional materials suggest that this is a battle between the last individualistic inventor and the most voracious corporate raider of the early Twentieth Century. That might be true in part, but anyone who has worked to bring new businesses and products to success knows that you need brilliance in both the technology and the marketplace. The tragedy for both these men was that they battled rather than collaborated. Why that was true is one of the subtle messages of the play.

As the promotional material explains:

In 1928, Philo T. Farnsworth demonstrated electronic television from his lab in San Francisco, using a cathode ray tube on the receiver end. On the camera end, he used an “image dissector” to record an image electronically, one tiny portion at a time. The image dissector would later become the cornerstone for further electronic television development. Meanwhile across the country, Vladimir Zworykin was working for RCA to develop his “iconoscope,” a similar model for scanning images electronically.

In contrast, David Sarnoff understood the power of the technology to transform the lives of the audience. The Time 100 has an excellent biography of Sarnoff:

Sarnoff … saw the potential of the iconoscope, a proto-television patented by Vladimir Zworykin in 1923. Within five years Sarnoff had set up a special NBC station called b2xbs to experiment with what came to be known as television. In 1941 NBC started commercial telecasting from station WNBT in New York City, but once again progress was delayed by war. Sarnoff served as communications consultant for General Dwight D. Eisenhower, who later named him a brigadier general. The title stuck. And in the halls of 30 Rockefeller Plaza, Sarnoff became known as "the General."

Both Sarnoff and Farnsworth were driven, titanic leaders. Aaron Sorkin’s brilliant script cheats in his narration to make the audience feel better about the predictable outcome from the clash of these cultures. This is a wonderful play, with brilliant dialogue and strong performances. For any entrepreneur who has struggled to be understood by friends and family, the Farnsworth Invention is a must see.

Support literate theatre and the beauty of innovation. See this play.

KZSU Hearsay Culture now on Podcast

2007-11-25T08:50:00.000-08:00

I had previously posted about KZSU-FM (Stanford University) radio interview show and podcast “Hearsay Culture,” hosted by Dave Levine, Resident Fellow, Center for Internet and Society at Stanford Law School (CIS). The episode based on “Own It” has now been posted.

From HearsayCulture:

Show #54, October 17: Dean Jon Garon of Hamline University School of Law, discussing his forthcoming book “Own It - The Law & Business Guide to Launching a New Business through Innovation, Exclusivity and Relevance.” Jon’s new book is aimed at the entrepreneur who wants a concise and readable overview of the IP law issues related to starting a business and building it (at least in part) on IP. Because Jon and I differ on some issues (although we agreed on more than I thought we would), we had a conversation that ranged from open source to software patents.
Show #55, October 24: Prof. Rebecca Tushnet of Georgetown Law School, discussing copyright and trademark law. Rebecca is a prolific scholar so it was relatively easy to discuss a number of issues. Rebecca’s treatment of fansites and their impact on how we view IP is very important work.

I have included the link to Professor Tushnet’s interview as well because Rebecca is a gifted, thoughtful scholar who brings a great deal of insight into the issues surrounding intellectual property policy.

The Hearsay Culture program is a real treat and I encourage everyone to subscribe.

The required personality for the No. 1 Entrepreneur

2007-10-22T08:49:00.000-07:00

In the October 22nd Wall Street Journal, Phred Dvorak wrote an article about the different personality required from the CEO – even when the CEO had previously been an officer elsewhere in the company. (A Different Animal Seeks the No. 1 Post; Often, It's Not No. 2

by Phred Dvorak.) The same phenomenon occurs in start-up enterprises as in their fortune 500 counterparts – the Chief Enterprise Officer has different demands than everyone else in the start-up business.

For established businesses, the greatest surprise comes to the insider who is elevated to the chief office. “The buck stops here” includes a host of customer complaints (both founded and unfounded), personnel concerns and the attendant personal lives of the people who comprise the institution, complex strategic decisions, and trivial but emotionally charged operational decisions. The CEO is backstop to every process and department in the enterprise. Leaders in other aspects of the business are exposed to only a small portion of the mix. For new businesses, the challenges are somewhat different, but the experience is the same.

In Own It, I emphasize that being comfortable with risk is not a prerequisite to starting a business. The common wisdom about entrepreneurs being risk-takers is misplaced. So what are the attributes that are required of a start-up CEO?

First, the CEO must bring the vision to the enterprise. This includes both the concept and the ongoing commitment to that vision despite all the challenges, pitfalls and rejections from people who do not share the vision. The CEO must have a tenacity for the vision that need not exist in any other member of the start-up team.

Second, the CEO must find the ability to balance a clear-eyed understanding of the challenges in front of the organization with an unflagging enthusiasm for the business and its ability to succeed. While not cheerleader-in-chief, the CEO must guard against exposing the start-up team to frustration and doubt. Once the CEO has given in to frustration, everyone else on the team will join on the bandwagon, often sending the start-up into a quick downward spiral. As a result, the CEO must be more judicious in criticism and more expansive in praise.

The emotional toll taken by shielding one’s emotions can be high. To succeed, the CEO needs someone outside of the enterprise with whom the daily frustrations can be shared. A healthy friendship, marriage, or social network is an important part of the enterprise planning that does not appear on the balance sheet.

In one unique situation, the information can be shared on the inside of the business. Successful leadership sometimes comes from co-founders who can share their feelings and concerns behind closed doors. While it is obvious that a team approach makes sense in terms of getting the work done, the more important aspect of having co-founders is the ability to share the emotional burden and buoy each other.

However the burden is managed, the start-up CEO must find a way to keep the focus on the vision, manage the balance of day-to-day demands, and support the others in the business so they are always looking forward. This is not a job description for everyone, but it is essential for the enterprise to have success.

Listen to a talk about the book – Hearsayculture.com interviews Jon Garon

2007-10-17T08:49:00.000-07:00

I just completed an interview on KZSU-FM at Stanford University for the interview show and podcast “Hearsay Culture,” hosted by Dave Levine, Resident Fellow, Center for Internet and Society at Stanford Law School (CIS). As described by Hearsayculture.com, “each 45-50 minute show is designed to cover modern technology/Internet issues, but not from a purely law or geek perspective. … An interview talk show that focuses on the intersection of technology and society. How is our world impacted by the great technological changes taking place? Each week, a different sphere is explored.”

The show is #54, October 17: Dean Jon Garon of Hamline University School of Law, discussing his book “Own It - The Law & Business Guide to Launching a New Business through Innovation, Exclusivity and Relevance.” It will be podcast in late October. Hamline will also be adding it to the Conversations in Law series. (For older programs on Hamline’s intellectual property, listen here.)

While most the guests focus on the intersection of intellectual property on popular culture and society rather than on commerce, the conversation was fun a lively. Let me know what you think of the show.

Directors' Impasse - thoughts from the Midwest IP Institute

2007-10-07T08:48:00.000-07:00

Last week sported both the publication of Own It and the 2007 Midwest IP Institute. The program is always interesting, with comprehensive panels and an audience capable of very sophisticated conversation.

At the Own It session (Garon on Counseling the Start-Up on the Use of IP), one of the more interesting topics was the use of an independent director to help settle disputes between the corporate directors.

While the conversation was quite far-ranging, the tension on how best to manage corporate disputes remains one of significant concern to the participants. So what can an entrepreneur do?

The first step is to reduce the potential for disputes by specifying key terms and decisions in writing between the owners of the enterprise. Specify that the intellectual property will be owned by the business rather than in a holding company and how those rights will be redistributed upon dissolution. Also specify the primary business objectives; agree to a rough (but realistic) time-line for milestones to take place, and include steps for further approval, so that if milestones are not reached, the enterprise does not drift, but rather the participants are compelled to make decisions on how to proceed.

The second step is to specify a process for breaking significant deadlocks. No one can anticipate all the problems that will arise in a start-up business, and few entrepreneurs have either the stomach or budget for solving all those problems. However, if the enterprise is a two-person (or four-person) group, tie votes can create significant issues.

One suggestion presented by a participant at the session called for an outside director to serve as a tie-breaker. Most of the participants, however, were quite uncomfortable with this popular approach because the risks inherent in relying on someone who has a small stake to remain impartial, to remain engaged, and to provide useful, objective guidance over time. While there are examples of such approaches working, both sides in the enterprise are staking a tremendous amount on the qualities of this impartial individual.

Instead, the participants promoted other suggestions. At the outset, the entrepreneurs are well advised to seek the advice of non-owners (key staff, legal and business counsel, etc.) to help the evenly divided participants find common ground. This is usually informal, but whether informal or formal, it will help both sides better understand the situation and the alternative solutions.

If these outsides voices still do not help the parties reconcile, then the parties should utilize binding arbitration. A properly drafted LLC should provide for binding arbitration in the event of an impasse, since the selective use of a qualified neutral is far better than the destruction of the enterprise due to an impasse.

I suggest that the arbitration provision require the arbitrator to utilize “baseball” arbitration rules.

Under baseball arbitration, the two parties each separately identify the problem and craft their proposed solution to the impasse. The arbitrator must then decide which solution is the more appropriate solution. The arbitrator cannot impose a third solution. This system requires that each side present a solution that is reasonable or risk the other side winning the arbitration, even if the other side was more culpable in causing a problem. The goal of the arbitration is for the enterprise to overcome the impasse and move forward. Quite commonly, the need to draft proposed solutions results in the parties narrowing their demands to the point that they can find compromise without the arbitrator ever rendering a determination. But if a determination is needed, the arbitrator’s decision is binding and the parties must adhere to it.

Baseball-style arbitration has the benefit that the arbitrator cannot craft a compromise solution to merely split the difference between the parties. Whenever a decision maker becomes known for selecting the middle point between the two alternatives, the parties are encouraged to make their demands more extreme. Baseball arbitration solves that primary flaw of external decision making. The parties can also invite the arbitrator to suggest a non-binding intermediary position, if they think the additional guidance would be helpful in crafting a compromise, but the entrepreneurs must understand that unless they agree among themselves, they are bound to the position presented to the arbitrator which was found most appropriate.

Comment on this suggestion or raise an Own It question of your own.

Own It - The Law and Business Guide to Launching a New Business through Innovation, Exclusivity and Relevance

2007-08-07T08:46:00.000-07:00

This book first focuses on the legal and business attributes of exclusivity and relevance to highlight how bust to build market share and maximize profitability. Chapters on relevance and innovation focus on how to identify the opportunities for changes in processes and markets. It contrasts market relevance from social relevance, explaining the strategies of creating and marketing must-have products. Using simple descriptions and numerous examples, the book explains how intellectual property assets can improve customer satisfaction and maximize profits.

Because the relationship between entrepreneur and investor is critical to success, the book shows how to align the interests of investors and employees with the entrepreneur. Together with nuts-and-bolts information of the start-up phase of business, this book provides the keys to building an economically stable business and a secure financial future.

The blog will continue this focus, looking a news and trends in the intersection of intellectual property and business.

Feel free to visit www.lawbizbooks.com for additional information on law and business resources for entrepreneurs.

Own It - the IP & Entrepreneurship Blog

Blog merged into "Entertainment & Entrepreneurship at http://lawbizbooks.com/blog4/

Entertainment & Entrepreneurship - Newest blog

Entertainment & Entrepreneurship

Making Do Without Credit — A Strategy for Business Growth

As part of my participation in the law firm of Gallagher, Callahan & Gartrell, I often contribute to its monthly newsletter and other firm publications. This post provides the introduction to my most recent article. Given the current credit, I thought this article might be of general interest.

Making Do Without Credit — A Strategy for Business Growth

A guide to growing your business using credit alternatives including joint venture agreements, revenue sharing, and installment contracts

Alternatives to Credit: Joint Venture Agreements, Profit Participation Agreements, and Installment Contracts

In Defense of Authors - A reply to Professor Lessig

China Journey - In Preparation (1)

Shining a light on Chrome

Fortune Gets the Facts but Not the Strategy

The New Hollywood Studios

Reintermediation – Rethinking Disintermediation

Is Making Available Enough

Own It - The IP & Entrepreneurship Blog

The Coming of Virtual Worlds

Be Cautious but not Fearful in using Free Contact Resources on the Web

Lessons from Second Life’s Bank Run

After the CES/MacWorld - A Year of Consolidation

Transcending Race in Cyberspace – So Much to Do

Doonsbury Takes on Bottled Water

The Farnsworth Invention - An Ode to Innovatio

KZSU Hearsay Culture now on Podcast

The required personality for the No. 1 Entrepreneur

Listen to a talk about the book – Hearsayculture.com interviews Jon Garon

Directors' Impasse - thoughts from the Midwest IP Institute

Own It - The Law and Business Guide to Launching a New Business through Innovation, Exclusivity and Relevance